Bankers’ Hours column: How mortgage loans have changed over the years
A while back, I received an email from Bill Wright, a retired Realtor and a good friend. He wondered how the mortgage loan process had changed since he had left the business, much of which involved assisting borrowers in finding financing for their home purchases.
It was an intriguing question, and I replied that it would be a good subject for a column; thanks, Bill.
Home loan production has, indeed, changed since the latter part of the last century, when Bill and I both were in the daily business of funding home loans, each from a different perspective. Today, the consumer is offered, or subjected to, a completely automated application, approval and closing process. Without question, it streamlines a procedure that was complicated enough in, say, 1989 and has become more complex with the addition of layers of federal and state compliance regulations
Back when Bill was berating me for turning down a perfectly good loan, the majority of home loans were funded by financial institutions, mostly thrifts (savings and loans). Every step of the journey from completing a raw application, in pen, to the closing table was done by hand; an IBM Selectric and a calculator were just about the limits of technology.
Now, mortgage lending companies fund and service the majority of residential mortgages. Six of the top 10 lenders are mortgage companies, and only one bank, Wells Fargo, is among the first five; Quicken Loans and United Wholesale Mortgage are one and two.
Most of the non-bank loans generally are not originated by company employees but by mortgage brokers, who take the application utilizing the lender’s software package, and shepherd the deal until the loan is funded or declined. The mortgage broker is the initiator of the product that makes a lot of money for a lot of people.
Of course, you can go directly to a lender; Quicken Loans, and its subsidiary, Rocket Mortgage, which is the division that perfected the lender’s automated processing platform, run a robust direct media marketing campaign, as anyone with a TV knows. But enterprises like Quicken and United Wholesale are focused on the caring, feeding and expanding of the broker pipeline. They spend a lot of time and money in training and supporting their broker partners, because those partners produce a lot of loans, and they do it professionally. It’s the most cost effective way for one of these mortgage manufacturers to create volume and maximum revenue. And consumers like working with brokers, because they get competent guidance in a difficult journey, from app to closing.
The broker’s value to a lender is demonstrated by the announcement by Matt Ishbia, the CEO of UWM, that brokers who work with his company must sign an agreement not to do business with Rocket Mortgage, or they’ll be liable to monetary sanctions, a tactic right out of the pages of Vito Corleone’s “Guidebook for Godfathers.” It’s easy to see who ranks at the top of Matt’s customer list.
When a borrower goes to a broker for a home loan, they pay no more than if applying directly to the lender. Today, brokers are well-trained, competent and highly ethical. However, the borrower is the client, or “customer,” of the broker, and the broker is the customer of the lender. After funding, the borrower is still not a customer as you are in your neighborhood bar where, when you walk in, the bartender asks how the kids are and has the usual in front of you before you open your mouth to brag about your daughter’s last goal. Rather when your loan enters the land of loan servicing, you become the consumer who must be treated in strict accordance with the laws and regs that today tightly control mortgage loan servicing. The lender has obligations, and you have rights and recourse. But when you go into your lender’s servicing platform, digitally or by phone, it isn’t like walking into Paddy’s Bar and Grill. If you don’t believe me, dial up your lender.
So, Bill, something hasn’t changed. When I got out of the Marine Corps in 1961, I needed a job and responded to a help wanted ad for an “mtg trainee.” “Mtg” meant “mortgage,” but I didn’t know it. However, the first thing my boss said after my hire, before I learned anything else, was, “Always remember, the Realtors are our customers. They bring us the loans. Never forget that.” At that point, I had an idea of what a mortgage might be; deed of trust and promissory note were way beyond my ken.
In those days, there were, literally, no consumer protection or privacy laws. I had spoken directly with the Realtor about problems with a purchaser’s loan request, and was confronted by the borrower: “Why didn’t you talk to me, am I not your customer?” He had me there, because the honest answer was, “No.”
As the Preacher says in Ecclesiastes, “There’s nothing new under the sun.”
Pat Dalrymple is a western Colorado native and has spent more than 50 years in mortgage lending and banking in the Roaring Fork Valley. He’ll be happy to answer your questions or hear your comments. His email is email@example.com.
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