I spoke to a good friend of mine the other day. Mike and I each started in the business more than two decades ago. Mike pursued a career as a loan originator while I always preferred the research oriented work found within title companies. Mike has an extraordinary knowledge of lending guidelines and practices. He's been around long enough to know everything and everyone. During the course of our catch up session, I decided to ask Mike to join Active Rain. The guy would make a wonderful addition to the community.
His answer was startling. Mike, who like me is in his mid-forties, doesn't feel that internet marketing is a worthwhile activity. In fact, he's using the same strategies to develop new business that we both used in 1985. Now ... I'm extremely happy that my friend is successful, but I was unable to conceal my shock at his response. Like you, I'm a great believer in social networking as a glimpse of the future. I see a need to embrace the practices that worked in the past, but ... hey ... it's a new day and a new age.
I sent Mike an invitation to join this network and I guess we'll just have to wait and see what happens. 
The conversation with my old friend got me to thinking about the interaction between technology and the housing crises that we now face. Keep in mind that I consider foreclosure statistics to be an accurate benchmark of fraudulent activity within housing markets. Mortgage fraud, to my way of thinking, is the diabolical and cynical cousin of predatory lending. The two forms of fraud share more practical attributes than not. I've seen graphs representing foreclosure activity from the 1950's through the mid 1990's. The line is essentially flat with occasional spikes corresponding to negative economic factors. In other words, prior to 1995, or so, the foreclosure rate in this country was a statistical anomaly. From that time forward, foreclosure numbers have accelerated rapidly and steadily.
The application of technology to the loan origination process has obviously increased efficiencies, but there have been unintended consequences as well. We typically think of the mid-1990's as the advent of sub-prime lending and its associated problems, but it also marks the introduction of extreme automation by the lending industry. Processing activities, in many cases, have since been removed to regional or national centers where the consumer is reduced to a faceless, ambiguous name on a computer screen. In the past, loan originators conducted business in the same communities in which they lived. There was an organic relationship between lender and borrower. There was a first hand familiarity with the condition and value of the homes being sold or refinanced. The success of a lending institution was, in large part, decided by referrals from past customers who were essentially neighbors. We cannot negate the fact that fraud flourishes when business is transacted from a distance. Many of the “tell-tale” indicators of mortgage fraud are extremely subtle and require direct observation. There is no substitute for human contact in matters of fraud prevention.
The title and mortgage lending industries are poised to suffer the greatest losses resulting from fraudulent activity in housing markets. Inexplicably, there’s been little initiative to solve the problem beyond the scope of technology that’s failed in the past. The two industries subscribe to a misguided belief that mortgage fraud is containable by profiling high risk individuals and properties based on information aggregated in databases. While the practice has an overall beneficial effect on loan quality, it ignores the broad reach of human cunning and is therefore counter intuitive as a stand alone approach. A mathematical algorithm is no match for the human intellect. The purely technological approach to mortgage fraud mitigation didn’t work in 2006, or 2007, and it won’t work in 2008. The scenario is remarkably reminiscent of the story of the proverbial fly crashing repeatedly into a pane of glass.
Again, I am the greatest advocate of technology, particularly in matters of marketing and transaction management. Still, I can't help but feel that automation has actively contributed to the convoluted mess confronted by our industry at this time.
What do you think?
Ed Rybczynski
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Your case is most convincing. I would venture to say that the effect technology has had on the lending industry is spilling over into real estate agencies as well. We have a listing in our market that is represented by a cut-rate company that put the listing on the MLS and is supposed to set up showings all by phone and internet. I tried to get my clients an apt. to view this home and to no avail. I couldn't get the agent to call me back and the home has been on the market for at least 6 months. In this case, technology has not enabled the client to get better service. The commission savings is hardly worth it if you the seller is not going to sell their home.