My daughter and I finally got to see Batman a couple days ago. It's a great show by the way. It got me thinking that our industry is missing a true hero. You know ... the one that steps in when all hope is lost by fighting adversity. The one that seizes opportunity for the betterment of all! Yes, we seem to be missing Bat-Bank!
It sounds silly but very true. I am talking about a Lending system and network that is afraid of its own shadow right now. It seems to me that the Banks and Investors all move like cattle in a direction and it's usually the opposite one they should be headed in. They are reactive versus proactive; focused on damage control versus solution solving; dwelling within the box versus outside the box.
Almost all Banks are licking their wounds from the careless lending practices and the "keeping up with the Joneses" lending competition that was held the last few years. But, it appears to me they have gotten it wrong again. They are focusing on the wrong thing. They are controlling damage, instead of reinventing the future. They should be embracing the one thing that can get them out of this mess... the consumer, but they are not. They should be offsetting their losses by hedging themselves on the down market by investing in their clients and in this nation, but they are not. It is clear that many of these institutions will most likely collapse because of it.
Creativity can be good and it can be damaging if used for the wrong purpose. It seems to me that the creativity was fantastic over the last few years but it was used incorrectly. The "creative lending programs" didn't really have any stop gap measures in place because everyone got caught up in the excitement. The tipping point was based on greed, unsound business decisions by bank management and some unscrupulous originators, and a failure of "checks and balances" in our system by industry leaders and federal leadership at all levels.
Lenders rode those reckless loan programs and "turn your head the other way and sign" loans...into some of the highest annual appreciation markets in the history of our country without blinking an eye. Instead of starting to be cautious of rapid appreciation they embraced it as if it couldn't stop. In fact, they decided to make it even easier for the credit deficient folks and the naïve to buy homes not just for the purchase price, but well above the price so they wouldn't have to bring any hard earned money for something as silly as a down payment. As a matter of fact, "Let's make a 1.25% start rate and tie it to something that sounds really smart but is difficult to understand like the MTA index. Then lets make it a negative amortization option so you maximize your money and maybe even buy another one or two. Obviously the market's only gonna keep on going up from here!" Right? "People will buy them in bunches. If you don't have any credit we will use one of your utility bills. If you're self-employed just tell us what you make!"
It was kind of like taking a spaceship flight to the Sun for the ultimate tan and shedding your ship's armor as you get closer and closer, because it's just so hot out there. The hotter the market got, the looser the corporate lending guidelines became. The more vulnerable they were. Big, smart, ancient investment institutions all got sucked in because "everyone was doing it". They all focused on the profits, their competitors, and Wall Street's approval.
Now we sit here wondering.... why are they punishing us? They are requesting 10, 20, and 30 percent down minimums and penalizing even the good FICO score owners. They give us customer service reps instead of loan officers. We get a different person each time we call in and have to re-explain ourselves. Sometimes they are servicing us from a whole different continent and dialect. They have eliminated all programs that were helpful and replaced them with basic programs and more hoops to jump through. They raise mortgage rates as the Fed eases the Fed Fund Rate to encourage Buyers to buy trying to recuperate some losses. They have it all backwards.
And so we just sit here in idle as we await some kind of a spark. We try to block out the ridiculous negativity in the media and the unbelievable excuses from everyone... so, I go see Batman.
It has never been clearer to me, that a new Bank or equity firm must step up to their moment in the light and seize it. Realize that there are countless people ready to move if we could only build a little excitement and a little hope. Create something spectacular. Free up the purse strings and open up to a new, more educated consumer. Opportunity abounds all around. In truth, a mortgage has never been a safer investment for a lender than right now. Prices are down and people love owning real estate. We just can't get the market to free itself up. People are scared and Lenders are throwing up road blocks. We just need a Bank to take that step.
Create new programs. Believe in the majority of the Mortgagees (Over 95%) that pay their mortgages on time, every time. Understand that it is the right time to invest. Lend with consciousness. Consider better working Bridge Loans. Don't make refinances so difficult. Quit making appraisers so fearful of valuation. Allow refinances for those that have had there homes on the market within the last 6 months but need to rent it out. See that the rental market is great in many markets. Immediately seize running customer service centers in foreign countries and help employ your own consumer instead by doing so. Hire more help and train them better. Fund on time. Streamline the approval process. Get creative and get it done.
Sometimes hero's come in unpredictable packages. Where are you Bat-Bank? We need a spark!
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