Sorry for the long pause----been on retreat contemplating the effects of TRID on the real estate market with my friends Myers and OJ….I think we will be fine if the customer and realtor does what we say on time…..and that always happens, so it will be a snap!
It looks like we are 48 year lows for percentage of Homeownership here in America. Good thing? Bad thing?
Our hangover from the way-overserved housing boom years is still out there, affecting more than one generation of homeowners. We had to go back to rediscover the base reasons for ownership. This Spring we have seen Millennials come into the market in a strong way, calming that fear of “a lost generation”.
But the “don’t ask questions, do what your parents did” attitude of past generations is not the mantra of this group or maybe of generations to come. Too many flaws were found in the behavior of their elders, such that respect has been lost and doing the opposite would be a better decision. The good news is that as this generation comes into their own they are beginning to make the decision on homeownership, and quite strongly. It’s true that they may live for today not tomorrow and their choices of career paths are different (less money focused—likely to switch jobs for happiness--which does have an impact on loan qualification); when it comes to raising family they do realize the power and control of homeownership.
That being said, in our coastal markets prices have risen too fast in most areas. This new generation will not chase in all income segments. The very well off will in that ‘live for today—gotta have it” attitude, but the rest of the world won’t chase it. This approach will result in a slow-down from the nice buying spike we saw this spring and drag the market down this fall, especially where we have seen the market gap away with emotional bidding.
We have already seen lots of consolidation the past year; that expected slowdown with a raise by the Fed should trigger another wave and a new change in the lender landscape.
The battle of banker vs mortgage banker vs broker model is firming up again. The Broker, meaning the sole proprietor with no Los working for them, is gaining some steam so that some of the brokers who were forced to abandon ship and join net branches or maybe some unnatural homes like banks, are hanging shingles again. If you were raised a Broker it is very hard to convert to another model. It’s rare as a Broker – a borrower advocate—that you can ever imagine not believing your client as not guilty, meaning if they want the loan your job is to get it. It’s not your role to use Ability to Repay logic. If you can find some greater fool to buy it you should be able to sell it to them and get your money. It’s not like you are on the hook for it—that’s what the wholesaler gets paid for. If the wholesaler miss prices or makes a mistake and can’t sell the loan, sucks to be them. Fortunately many lenders have filled the void left by larger institutions and many of them don’t know what they don’t know. So Brokers can continue to tap into new veins of unwise short term thinking for the benefit of their client; hopefully their borrowers can afford it and not just want it. Such is the crazy world of too many Brokers and the wholesalers that enable them. So the answer is “Yes, the wholesaler is the guiltier of the two because they should know better as they hold the risk”. It will be interesting to see how the new audits go for both parties and whether it’s Groundhog Day or a new reality…..To be clear it’s the structure and institution of the Broker model versus the people that I debate as there are many ethical professional brokers who get it.
The way the regulations are playing out, being a sole proprietor who can write a decent amount of loans and can hire a good assistant or two can have a nice run. What will happen if you’re sick or assistant is sick or if family issues take you away from the business? (Speaking of family most sole proprietor models try and drag their kids into the business. Usually doesn’t work as your kids are different than you. Or especially the ones like your spouse!)As the industry morphs product wise it’s hard to keep up with technology, products, laws (TRID??) and it’s easy to be blindsided; so you live either in ignorance or fear. But the model is firming up to be a legitimate alternative, especially to those who just can’t work for others and have a strong sense of being right. You need that kind of blind confidence to navigate the world on your own.
On the other hand you have the banker who is ruled by compliance and fear. All roads tend to run through compliance and risk at a bank; not that it’s not more than warranted in today’s world. It’s just the difference between having a key seat at the table vs being the head of the table. The base assumption in banking is that the customer is the institution’s not the originators’ and that there is an endless flow of customers. Given that flow your bank policies and procedures, developed by compliance and risk, come first no matter what they do to the customer experience.
As mortgage bankers we don’t have that luxury. The customers are our loan officers. If we don’t make their customers happy we have no customers. We cannot afford to be that arrogant. But we also can’t afford to be non-compliant or take unnecessary risk. We make loans with our funds and own the risk. So we walk that balance of serving the customer in the form of the borrower, the investors and the regulators every day. Many days in that dog eat dog world we are wearing milk-bone underwear, but there are more days that all parties get what they want and you go home satisfied.
What model is right? Only a person with an accurate view of themselves can determine that fit. Purchases are back and will continue their slow climb back to health. Those companies and right matching individuals who can satisfy the purchase market best in their worlds will be the ones to survive and thrive.