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Asking the Question

Yesterday, I reported that Zillow featured an article I had written.

Puddles and Pools. The article was an attempt to explain the complex world of Mortgage Backed Securities. Lenders don't just create mortgage rates willy-nilly.

I found this video from CNBC with Steve Liesman explaining in simple terms how the Sub Prime Puddles are combined into larger Pools. This is more about how Pools are then divided so that different investors can take "ownership" of different facets of the Pool.

Good Job Steve!

When you watch a video on YouTube as it ends, they list other videos that may relate to the one you just watched. After watching that one, YouTube served up one of my favorite journalists, Bill Moyers.

I first became a Bill Moyers fan when he did an in-depth series with another person I really admired, Joseph Campbell. That series turned into a PBS special "The Power of Myth"and ultimately a book. I still have the book, and somewhere I have my home recorded VHS tapes. I wonder if they even work? I wonder if I even have a VHS player that works? I digress.

Naturally, I was initially attracted to see what Bill had to say. So I watched this video. Now I am a Gretchen Fan! Gretchen is a Pulitzer-prize winning business reporter for the New York Times.

Key Points start at around three minutes into the first video.

Part One:

3:30 How Wall St. has packaged these and Lenders are more worried about collecting fees
8:15 Who's supposed to be minding the store? Lack of Mortgage Broker Regulation. (one of my pet peeves)

Part Two:

:20 "What's the good of getting people into a home if they can't afford it?"
1:10 "Is this Mortgage Product appropriate for you?" Regulation? We need it!

This topic of doing the right thing for the client was also on a post I read on Inman News about OfferAngel.com. OfferAngel has a good but flawed idea. Unlike LendingTree who sells your name to countless (not just 4) hungry unscrupulous mortgage slimeballs, you the consumer will have the ability to select who you want to receive a quote from. Almost a good idea. The problem is, and relates to Gretchen's question of who is going to ask,

"Is this Mortgage Product appropriate for you?"

I commented that if I had a pain in my side would I want to start shopping Surgeons for the cheapest Appendectomy?

While it's true that I might find the cheapest or the best way to remove my appendix, it may also be true that I died before I got to the table because it was in fact a ruptured spleen that caused the pain.

Does the borrower always know what they need? Key emphasis on NEED. They in fact don't. They come to us telling us what they want. That's the flaw I see in AngelOffer.

The flaw in the mortgage system as a whole is too many loan officers will do the loan that the borrower thinks they want without doing the due diligence and presenting (based on their professional opinion), loans that the borrower will be better off with (if at all). These are what the borrower NEEDS.

The fact remains that too many loan officers, loan hacks, brokerages, lenders, and even institutions have been chasing the money with no thought as to doing the right thing.

Today is the deadline for the Carnival of Content.

While the topic is going to be Fixed Rates vs. ARMs, and each loan officers attempt to explain the differences between the two to that hypothetical borrower, one thing will stand out.

That one thing, is the personal ethics of each and every loan officer here. Read the entries. You can literally hear the loan officer asking that all important question.

"Is this Mortgage Product appropriate for you?"

Posted by Mike Mueller on 07/27/2007 09:48 AM

Comments (16)

the right thing, responsible lending, ethics

Originally posted at: Mike Mueller, Social Media.ist: Asking the Question

16 Comments on Asking the Question

JUL

2007

Mike... this was excellent. Well put together and well written. I just wrote a post the other day about lenders and how they advertise. In several of your statements, the key point should not be what the client wants, but the due diligence in regards to what is good for the client. The first will always out way the 2nd, because loan officers, not all, are afraid to lose a client if they disagree with them. Besides, it's easier for them to agree and takes less time. Another problem that I have with this industry.

I haven't watched the videos which I will do this evening, but again, an excellent post. And I gave this post a 5 and flagged it just for content alone...

jeff belonger

Well written, youtube video's are great things

Mike... I went back to listen to all 3... #1 was a great explanation in basic terms for even those outside the mortgage industry. But in regards to #2 and #3..... I couldn't hear them. The volume is very low. And yes, I turned it up all the way, both on the video and my computer. thanks

good info... I think that the appendix information is priceless...

Thanks Jeff! The sound is low on 2 and 3, I had to turn my computer and the YouTube control up to full as well. When I did, I could hear it (but it was quiet)

It isn't anything I have control over. But thanks for the 5 Star!

Hey Mike - I'll have to wait until I get home to watch and listen to the videos. I'm a big youtube guy myself. Good mix of content and video.

David - Thanks for the visit and the nice comments.

Jason - No speakers at work?

No speakers at work Mike. New computer, works like a charm, but the speakers aren't installed or something. No matter, I shouldn't really need them at work anyways.

Mike,

What a great post, I found it very interesting, I can use any new information that relates to our business whenever it comes around, and as for you commenting on the Carnival of Content, your very nice in the faith that you have for us brokers here on the Rain, I know I have read good thing about you..

Take Care,

Tom Weiss

Thanks Thomas!

I'm waiting on my submission. Later today...

Mike,

I will watch for it, can't wait.. :0)

Tom Weiss

Tom - You were one of the first were you not?

I keep my poker hand close to the chest, if you know what I mean...

Hello Mike,

I thought I would formally say "hello" and thank you for taking a few minutes to check out our site and for providing feedback on our service. I am in complete agreement with you that borrowers often times apply for mortgage loans without knowing or understanding the many options available to them and thus it is up to experienced mortgage professionals to learn more about the borrower and their financial goals. I have a lot of respect for mortgage professionals that take the time to ask borrowers questions because a mortgage loan can be the vehicle that helps them achieve their goals.

I do want to help clarify what I think to be a misunderstanding on what OfferAngel.com does for borrowers. You mentioned our system is flawed because the borrower decides what loan they want, not the loan officer. I want to make it very clear that with our service, it is more important that a loan officer asks the borrower questions, finds a suitable loan and structures it appropriately. We help the borrower see the big picture rather than just the lowest rate, making the appropriate loan more important over the lowest competitive rate. We are not looking to encourage back and forth competitive situations because it usually leads to loan products that meet a "great rate" with terms that will bite them down the road. Rather than spend 30 minutes explaining why the loan another lender is offering is not suitable for the borrower, show the borrower.

You had a post back in February venting your frustration with a competitive situation. The borrowers you mentioned just wanted to know they were getting fair deals and you were frustrated with the lack of information the other lender was providing them. I also shared in the same frustration. The Offer Challenge was created with this scenario in mind. I am open to answering any of your questions. I am willing to call you to discuss it further. Thanks Again, Meg Burns

Mike,

I had actually written my post and was told to enter it, after I posted it, I didn't know about the Carnival, But I like your way better, your probably really good at poker :0) I still would love to read yours, it's probably really informative...

Take care,

Tom Weiss

Hi Meg - Wow what a comment! I am very happy that you are stepping up and answering these critiques straight on. That's triple double kudos to you. I didn't know you were even on AR.

My post wasn't a slam against the company. It was just a coincidence that the topic had come up more than once in a matter of a day. My point was that the

You could have put a link back to www.offerangel.com, I wouldn't have minded. Here, I'll do it for you!

You've done your homework, you've read some of my posts. I did check out the site, specifically...

http://www.offerangel.com/?v=howitworks
http://www.offerangel.com/samplereport

What I couldn't find, and I would love to have you fill in the blanks is exactly how the borrower DOES NOT predetermine what they are looking for. That was where I see the flaw.

I do like the Good, Caution or Bad symbols. I like the red inked explanaition why (I think), as long as the factors are indeed relevant.

I'll give you two examples from today.

Rob says he wants a quote to refi his SFR, Primary Residence, Owner Occupied, No Points No Fees. Robs present rate is at 6.75% and he has no other debts, great credit, and so on. Rob wants to live in his house for the next 30 Yrs. He says he's never going to move.
Jill called and wants to buy a new home. She also has great credit. For her down she wants to either draw 20% from her present home (soon to be rented, she has lots of equity and will have plenty of positive cashflow), or she wants to do 100% Financing. To make matters more fun Jill has 30,000 in credit cards! She also has a $800 payment on a new car but it's at 0% financing. She plans on being in this country another ten years at which point she'll retire back to her home country. (yes she is legal and perm.)

I can easily see how the system would work wonders for Rob. While Jill is real and scenarios like Jill's don't happen everyday. Please explain to me how Jill would get the right loan product(s) for her? I talked to Jill for an hour today. Talk about complex mortgage terms... Jill doesn't understand the simplest!

Now I know the best answer for Jill. Many people here do as well.

That is where I see the flaw. I'd love to continue this conversation! Thanks for the comment.

Thomas - Believe me - never played Poker. But I did like your post! Good Luck!

JUL

2007

Hi Mike,

I appreciate you welcoming my comments on your blog and I appreciate you taking the time to write your concerns and provide me with examples. It helps me understand where we need to better focus our message which is extremely important when you are presenting a new business model and service that hasn’t been done in the past. One our biggest challenges as a new company is communicating how unique OfferAngel.com is for consumers and lenders which can be difficult when people want to fit you into a “category” and assume you are just a spin off of other companies already on the market. Thank you for allowing me to use your blog as one method of communicating why we are not like Lending Tree, Bank Rate or any other online company that is consumer driven.

Now, to answer your questions (very good questions btw). I think we are clear that OfferAngel.com works great for Rob but you want to know specifically how do we work for Jill. Clearly, Jill is a unique situation and as her loan officer/broker you have explored her financial situation to the fullest and have found that she actually has a few options for financing her property. If in the scenario, Jill did come to OfferAngel.com and she added You as a lender, you would receive an online form asking detailed information about the mortgage loan that you are offering her. You can submit 2 detailed offers to her through this form. OfferAngel.com asks simple questions of Jill, like approx home value, what type of interest rate she wants, approx how long she plans to live in the house, approx when she will retire, etc. You can actually see the questions if you do the free sign-up.

So how do we help someone like Jill? Jill can come to us at anytime during her loan application process. If you fill out our online form for Jill, you are only capable of doing this because you have spoken to her, taken an application and most likely already explained the type of loan you will offer her and gained agreement from her that the loan fits her needs (you wouldn’t offer a borrower a loan that they don’t want, right?). OfferAngel.com is your tool to give her every detail about the loan. We do not tell any borrower which loan is best for them for the very reason you outlined in Jill’s scenario (some situations are more complicated than others). If she chooses to purchase the Personalized Mortgage Report, we will compare her profile to the loan that is being offered and we will draw her attention to specific TERMS that MAY be unsuitable. Jill will not receive advice from OfferAngel.com but she will notice if there is a 3 yr prepayment penalty and in her case, that ppp works to her advantage providing her a lower rate.

To some it up, rather than say an entire loan is “good” or “bad”, we pinpoint certain terms that should be highlighted while the borrower is considering their loan options. It is always between you and the borrower, we are the vehicle to get answers to questions they would not think to ask you or any of the other lenders they are considering.

Think about how many times you have asked borrowers, “what type of mortgage is the other lender offering you?” only to hear the borrower say, “it’s a 30 yr fixed”…and you know it’s not. We help borrowers get all the information about how a loan is structured and how they are being qualified so loan officers/brokers that are trying to provide suitable loans can help borrowers better compare and become more effective shoppers.

Here are some examples on other blogs (hope you don’t mind) of L.O’s that are frustrated because their borrowers are not asking every lender the same questions and they are basically “rate shopping” rather than considering the whole package:

Leo Namiot
“I have a list of about 10 questions I offer shoppers to ask each lender they contact to make sure they are shopping apples to apples.”

Kim Murphy “It is important to give each lender you speak to the same important information to compare apples to apples.”

Jeff Belonger “I have semi lost my sister's friend to Bank of America's no closing cost deal. This client is not comparing apples to apples.”

Apples to apples, it's a term that is used frequently but most times not possible when a borrower is shopping. How can a borrower compare apples to apples when they are not asking lender the same questions or making each lender quote the exact same program with the same points, pre-pay, etc etc? It is very difficult and unlikely a borrower would be able to do this on their own. How much time do you spend refuting a loan from another lender? Or trying to explain why your offers are different? I remember times where I felt like I was turning blue in the face trying to educate, sell and gain commitment all in one conversation, sound familiar? You have a statement on your blog "Service isn't about what you say. It's about what you do!". Often times you can "say" all you want but it's what you "do" that shows how you conduct your business. OfferAngel.com is for doer's.

When I was originating (I left to start OfferAngel.com), I was most frustrated with losing a deal to a borrower who just simply did not shop effectively. I was able to accept them getting a better loan but I wanted to pull out my hair when I knew they were not getting a better loan. OfferAngel.com is not only for consumers to better understand their loan terms, it is also for the frustrated loan officer that is trying to do the right thing. Sometimes saying you are honest or spending an hour on the phone trying to convince a borrower they are not getting a 30 yr fixed from another lender is not enough. That is why we created the Offer Challenge. The more they know, the more you know making it easier to help the borrower understand their loan is much more than a “great rate.”

I hope this answered your question about Jill. Please feel free to ask more if I wasn’t able to clarify properly. Sorry I wrote a book on your blog!

Thanks Again, Meg Burns Co-Founder OfferAngel.com