As always Jeff Belonger brings up pertinent, challenging and informative topics. He also generally goes straight to the public, meaning his posts are open for the world to see. I really like that.
He posted this http://www.activerain.com/blogsview/555729/It-s-not-the , which violates the AR "Keywords-in-the-first-4-words of the title" rule, but Jeff is doing alright without those nice little tricks.
The topic is ethics in mortgage originators, but probably could be applied also to real estate agents, appraisers, title companies, ... .
Jeff's post asks consumers when they shop for a loan, what criteria do they use? The biggest name?
Jeff's point is "No matter how big nor small may that company be, we all get our money from the same place when all said and done. With that said, you should seek out a mortgage professional. One who is honest and ethical. By not doing so, could cost you thousands of dollars in the long run."
It is like the bottle water companies that sell tap water. We all get the money from the same place.
Jeff's suggestion is that consumers find an honest and ethical loan officer.
Some comments in that blog indicated that most unethical originators are by now out of the business. I do not think that is true, but given the focus of state audit I just went through last week, at least in Tennessee, unethical originators will be on the run.
My basic question is "what are ethics in a mortgage originator?"
Close on time, accurate documentation, understanding the customer, reasonable fees, basic competence, no surprises at closing, explain process, pressuring the appraiser for value, to omit minor repairs, telling the realtor to leave that detail off the sales contract
Second, how would a consumer who is shopping for an originator, using internet, newspaper, recommendations, yellow pages, and basic research, decide on which originator is ethical?
What early criteria should let a consumer identify the ethics of the originators she is considering?
Low quotes, disclosures provided, explain the process, questioning about the consumers circumstances, website, established business, recommendation
Part of the context of Jeff's post is that the originator, who was recommended to the customer, did not act in an ethical way towards the customer. So this story kind of makes recommendations not to be the great measure of ethical business people.
It certainly is not advertising. In Chattanooga there is a car dealer whose name is Big Hearted Smitty. If I am looking for a big hearted car dealer, is the business name or a tag line that says I am an honest dealer the best way to choose?
Do all consumers even want an ethical originator? I have been told many times by a customer when they call initially that they are looking for someone who can be creative? Or can we call this a second home? Or yes I am going to rent my free and clear $300,000 home on the river and move into the $85,000 house downtown because it is closer to work and I want a smaller home. (BTW, FYI prices in TN may be a little lower than in other parts of the country.)
What does ethics in mortgage origination mean?
How does a borrower identify the ethics in an originator when they are initially shopping?
Udate One thought that came from Laura's comment below - the consumer can ask test questions, or evaluate the originator's reliability by setting up a "follow up" test. Give the originator a time to call back with some information. And evaluate the quality and promptness of the follow up.
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It seems that underwriting is the big road block at the moment Richard. Many of the loan officers I work with here in Texas have problems with underwriting, particularly with the conforming market. The rules seem to change by the minute and they are looking for a reason (underwriters in general) to deny a loan. Are you seeing the same issues?
Choose a broker that has been around with great refrences. Look for longevity in the market. Look for a earner and someone that knows the ropes.
Steve,
Always great to hear from you. I think that we are seeing a return to basic underwriting principles. Many brokers who do not go back to the manual underwriting days may struggle to learn some of these principles, having grown up in the business with automated systems.
The thing that I have seen that is new, other than actual program and policy changes, is the lender's evaluation of appraisals. We very often have to work to justify comp selection and grid adjustments. I am only using appraisers that I consider very good. Not sure how a new appraiser can break in today, except under close supervision I suppose.
It used to be that an underwriter might allow some income calculations to be done in a more favorable way, or to be less critical of sourced funds.
Loan officers need to know documentation, the old school documentation. They need to learn it quickly, and possibly spend more time paying attention to the bare details of their file.
Me too.
Steve, I noticed your blog on the most subscribed list. Congratulations. It is amazing to realize that you have only been on AR for a short period. Quality rises.
Richard
I tend to agree with Steve to an extend. Since the market is constantly changing, underwriting has to keep up with the constant changes. It is not only with the conforming programs, but all loan programs. How does a customer know that you are not ethical when they were referred to you by a mutual interest? You can explain a program to a customer as something you believe you can do based on this morning's guideline only to receive an email from the product dept. moments after you accept the loan, that the program is either not available anymore or that the guideline you premised your pre-approval is no longer available.
Laura,
Longevity and references are good objective criteria.
Someone who is an earner, not sure how a consumer can know that. Real Estate agent production can be checked, not sure how to check originator production.
Knowing the ropes, also, does not seem to be an obtainable objective criteria for selection.
You as an agent can make a recommendation, based on your subjective measurement of that originator's knowledge, but a consumer who is just shopping the yellow pages cannot.
It might be a good idea, though, for consumers to ask a test question. And add the answers to the evaluation.
Thanks,
Richard
Great information! An experienced lender, one who's been around the block many times, makes a tremendous difference!
As a Realtor, I find that often times my client already has a lender of their choice, and it is my understanding that I cannot 'steer' them toward a different lender.
Any thoughts?
Han,
100% loans, stated loans, risk based pricing, lenders dropping wholesale lending, lenders closing, MI guidelines coming into play more than previously, etc.
It is a lot.
I am working on the permanent financing for a jumbo new construction. The builder got their own financing. Scores are borderline, but I have an approval, if it holds until the home is completed.
The borrower fully understands. It is full doc. We are on a plan to improve the scores and to save assets, in case the program goes away and also to improve the pricing options.
Another new construction, we are taking advantage of an Accept Plus finding. It will expire in a few weeks. They know this and supposedly are working diligently to meet my approval deadline.
All we can do is document, and get the file to the lender quickly, register and lock. That should give some protection to our customer commitments.
Thanks,
Richard
Angie,
I do not claim to be a RESPA expert, especially with regard to the real estate agent side of things. Does the broker offer any guidance?
My understanding is that most buyers listen to their real estate agent, as their trusted advisor, for the financing, for the insurance, for the home inspection, for the appraiser, for everything.
Wow, that is quite a responsibility you are shouldering.
I think it would be reasonable for you to meet your ethical responsibility to you client to inform them of your experience or lack of experience with the originator. Without steering it might be good to suggest some more comparison shopping.
They may not want the extra credit inquiry, or to go through the hassles of applying again.
But as an originator, I would have no problem with listening to what the borrower has been told by another LO, to see if it at least makes sense.
Who knows the new originator may be a great fit for you? You can at least speak to their orginator to make an evaluation yourself of their competency and the reasonableness of their promises.
Great point.
But what criteria as an experience real estate professional would you use in your recommendation? How can that criteria be translated in to useable criteria for a consumer?
Thanks,
Richard
Thanks, Richard, for your thoughts. I encourage every client to talk to at least one mortgage originator face-to-face before making their decision. Ultimately it''s all about fit. You may be a better fit than me for some people and vice-versa. The problem in our industry is the short-term thinking by some. They're transactional by nature. If everyone were relational, the client would be better served. Have a great day!
Paul
Paul,
That point is so good. Thank you.
After we have found ethical originators to select from, we go with the one we like the best.
Still though we have not established what is an ethical originator and what are the objective criteria for a consumer?
Jeff has made the point that it should not be the size of the lender, and he established that even a referral recommendation may not be reliable.
What is a consumer to do?
Richard
Here are some criteria that I have used in training classes for LO's.
How do you select who you do business with?
Price, professionalism, knowledge (if this is separate from professionalism), follow up, personality/likability.
Maybe these categories can help us start with establishing objective criteria for our consumer.
Thanks,
Richard
Richard,
There is no clearing house to check ethical standards of originators anymore than there is of a stock broker or an insurance agent, or a real estate agent. The truth is none of us really know much about anybody in any industry, except through the network of friends, professionals, etc. that we surround ourselves. Word of mouth and referrals is the most effective way to be assured of quality and consistent service. The power of a recomendation of ones services or products is the surest way of maintaining a high level of integrity and quality not just for the consumer, but for ourselves. When we are accountable to our customers and their friends and acquaitances, the added pressure of doing the best job possible rests directly on our shoulders and the person we received the referral. And really, it is not that much pressure when we treat everyone with the highest amount of respect. Ultimately ethics is a function of doing the right thing every single time and letting our customers and their particular experiences do the talking.
Great question! and great comments. Thanks for helping raise awareness.
Richard - thanks for the polite mention. To me, the ethics part would be that loan officer that is honest in their answers and doesn't play the bait and switch game. A true professional.
Now, the true professional part, in my opinion, would be the ethics part and someone that knows their business very well. On top of their game.... knows their products, one who is responsive, and communicates.
And in regards to a set of questions that the consumer can screen the loan officer with... to see what they know or how long it takes for the loan officer to get back to the consumer? Well, I usually ask enough of the important questions and educate the consumer in the first 15 minutes, that they usually don't have any questions. As I preach, I first ask about payment (what they are comfortable with), will go over their income, assets, and credit.... and go over rate and monies needed. One other thing that I go over.... goals.
Overall, in regards to referrals. Some have mentioned that this is the best way for the consumer and I disagree. I have seen some loan officers get referrals, and I wouldn't trust them with anything. Some people are just good sales people and that's it. In this business, I call them order takers.
On a side note.... you said this.... "....which violates the AR "Keywords-in-the-first-4-words of the title" rule, but Jeff is doing alright without those nice little tricks." Not really sure what you meant about this. But again, thanks for the mention and compliments.
Jeff,
Thanks for commenting. My reference to you was intended to be more that a polite mention. This is your topic. In case anyone failed to follow the initial link. Here it is again - Jeff's post on ethics.
Regarding the violation of the AR "Keywords-in-the-first-4-words of the title" rule, that is probably too obscure as a tongue-in-cheek reference for this post.
There has been some discussion about AR blog titles in the SEO groups. This thread is lead by IMNJ and he has started the group SEOQ&A.
The essence of the thread is that the URL for AR blogs uses the first 4 words in the blog title. My point, intended as a compliment to you, was that the blog title for your initial post is "It-s-not-the" rather than something like "consumer choices LO ethics." You are doing OK without worrying about how your blog titles appear in the URL.
Anyway, thanks for the initial post and for the follow up comments.
Richard
Richard -
The biggest thing I preach to new originators and remind seasoned pros --- COMMUNICATION!
Without communication the rest of the equation means nothing. If you can't do a deal, tell them. If a loan has an issue arise, tell them. If the rate was not locked, tell them.
This is such an easy business that so many people make complicated.
Jeff and Lewis,
Thank you for commenting on this. It is difficult to define ethics and to provide some tests that a consumer can use to ensure that they are selecting their loan officer from a group of competent and ethical options.
What is a consumer to do? The check the Better Business Bureau. OK, fine.
They hear or read advertisements. OK, fine. Some of the ads may even put forth the claim to be ethical or honest.
We have determined that referrals are not dependable, yet most borrowers use referrals as their main selection criteria.
Do consumers even want ethics or professionalism? Or do they want promises?
I have a here again gone again customer that has been misled by a local broker since January. He has asked for basic disclosures and does not get them. I have asked if that makes him confident in the promises being made. He says no, but he still waits for that broker and those vague promises.
What can a consumer use to evaluate ethics as part of the selection process?
Communication is so critical to customer satisfaction, but it enters the process after the loan officer has been engaged.
Is there a way for a consumer to select an ethical originator? Is it just gut feeling and chance.
Let me change my thinking on Lewis' point - communication can enter into the decision process in the beginning.
Jeff says he conveys information and asks questions and qualifies the buyers' goals within 15 minutes.
Communication can be one of the criteria of professionalism and ethics - how does the loan officer listen, ask, understand, and even follow up.
That is one measure a consumer can use. Are there others available to measure ethics early on in the preliminary selection process?
Richard