What does suitability mean? If your a financial planner and you've passed your series 6 or 8 license requirements, you know that suitability can apply on many levels with each client. I was speaking to one of my neighbors who happens to be vice president of one of the largest insurance groups in my state. He told me that he fully expected mortgage brokers to eventually receive the same scrutiny that most of his colleagues faced in the securities industry. He told me that many of the products were now merging into each others markets, and little did he know about the August mortgage crisis, but his theory is playing out all over the country.
States and national agency's are reacting finally to the thousands of cases of fraud. From miss stated income to out right forgery the list of crimes is staggering! The other factor is that very few consumer suites have been originated, and the mortgage industry as a whole has dogged the major litigation that sieges other industries, but this is temporary and law suites will flow after the government gets done prosecuting!
One way that financial planners and insurance agents have over come this problem is through massive regulation and education. They are also very careful in terms of whom they sell their product, and if they do the mistake of selling to the wrong investor, then the consequences can be disastrous to that agent, from prison to massive fines! Selling securities requires professional demeanor and skill sets, half baked agent's won't cut it selling securities, which should be the case in the mortgage industry as well.
I know this isn't popular with most real estate agents, but mortgage planning is a subject you need to understand! Mortgage planners are a step above the average originator. They are usually trained or certified to consult with borrowers about their mortgage and how to manage it. The day's of walking into your local mortgage agent and having them crank out a loan in less then two or three days is a thing of the past. The mortgage industry is changing rapidly to a process that is refined and thorough. No longer can you just have a pulse and qualify for a loan. Your really going to have the income and assets to qualify. The problem is your average mortgage loan officer isn't trained or do they have the ability to think strategically. On the other hand, a properly trained and certified mortgage planner can provide much more of a service to a potential buyer then any average mortgage loan officer. Sometimes you'll have to wait longer before selling this buyer a home, but this buyer will be properly positioned to purchase many more properties in the future. Furthermore your buyer will be much happier with the overall process, from finding the home to closing. Furthermore you client's will refer more business your way then ever before.
I guess we were so busy for a time that most of us were in the habit of turning and burning, instead of building relationships and working deep with our clients. Now we have a opportunity to take a breath, and some of us really need to develop a referral base of happy clients. It starts when the client thinks you really care more about them then the potential house your going to buy or sell for them. It's time to work deeper with each client, and that may take extra effort, but the rewards can be enormous.
So find a mortgage planner, and find out what they know about credit restoration, equity management, and if they have any certifications. Then make sure each of your clients is interviewed by this planner before they even make their first offer. If more business does not motivate you, then remember the word "suitability", it's one that will not only haunt mortgage officers, but it's going to be one that haunts real estate agents as well. You sell someone a house they really can't afford, it's not going to be just the mortgage lenders fault, it's going to be yours as well.