Here is a great post by Rick Soukoulis about what is happening in the mortage industry and what we can expect in the future. Thanks Rick for keeping us all up to date.
What the heck is going on here? Washington Mutual has closed virtually its mortgage
lending centers. Countrywide is being sold to the Bank of America. B of A says it will
eliminate many of Countrywide's programs. Getting a loan seems like it's no longer as easy as
it used to be.
Again, I ask, what the heck is going on?
First, getting a loan is going to be different, but it's going to get easier.
The big players are running for the exits, it shouldn't be all that surprising. Many of them
were overly aggressive, ignored service and thought they could still get plenty of business by
simply lowering their standards.
They were partly right. They got plenty of business by giving loans to people who would
never be able to make the payments. They made some money upfront, but they're now
taking tens of billion in losses as these borrowers default.
I could have told them: You can get plenty of business by that old fashioned thing called
service.
So what's next, what the heck is going on?
Second, there will be fewer choices. And that's probably okay. A person buying a home
doesn't need 20 page rate sheets. Most buyers will do just fine with a traditional ARM, a
thirty year fixed, or perhaps a loan that is fixed for five years.
At some point, too many programs just confuses everyone.
Third, the regional lender will probably re-emerge as the mega-lenders exit the business.
The regional mortgage banker will know the local markets, be more involved with local
realtors, and will offer a service level that hasn't been seen for decades.
One effect I hope will return will even be the regional mortgage banker getting back into the
loan servicing business.
It used to be that borrowers could drop their monthly payment off at the local bank that
made them the loan. Over time, companies such as Washington Mutual and Countrywide
bought up all this local servicing, and they now service portfolios well over a trillion dollars
in size!
Borrowers now mail their monthly payments to some anonymous post office box in a city
they never heard of.
What's worse is trying to resolve a problem.
When people's loans were serviced by the local bank or mortgage bank, a borrower could
always go down there in person to talk to someone. This all but ceased in the 1990's because
of outsourcing, and if a borrower was able to somehow get out of Voice Mail Hell and
actually speak to a human, it was often someone half way across the world.
While they might sincerely wish to help, communication was never the same. Borrower's
frustration was rampant.
But as the mega lenders are retreating from the business, and as regional players return, I
believe we will once again have borrowers going back to the model of yesterday, when they
could talk to someone at a local servicing center who could actually solve their problem.
There will be many other ways the regional mortgage bankers will make life easier for buyers
ands realtors alike. It's hard to know what these will all be, but I think that they will all be
positive.
Rick Soukoulis
Chairman and CEO
Intero Mortgage
408.578.8700
rsoukoulis@Interomortgage.com
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