Beyond the transaction – theMReport.com

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In today’s hot buying market, buyers find themselves competing for a limited number of homes, resulting in record levels of home price appreciation. As a result, many home buyers are excluded from the market and pushed aside.

According to a report by the National Association of Realtors, sales of existing homes fell for the fourth consecutive month in May 2021, while the median selling price of all types of existing homes jumped 23.6% from a year over year in the same month.

It’s understandable that consumers who hear about these trends focus intensely on the current transaction. They focus almost entirely on who offers the lowest interest rate or the lowest fees. They don’t think about 10, 20 or 30 years later and how to effectively manage the mortgage debt they are committing to today.

This is where we, as mortgage experts, should come in. We have the opportunity to explain to consumers why it can be beneficial for them to have a holistic and long-term view of their real estate investment and how their home plays a key role. in the larger picture of their overall financial health.

Knowing how to effectively manage cash on hand and cash flow is a skill that translates directly into the way we manage our credit. Effective mortgage debt management is an important part of building a solid financial foundation, but it is too often overlooked. Explaining in layman’s terms to a consumer how they manage their mortgage debt and how they can leverage their home equity into this major asset, in my opinion, does a deeper service.

By drawing parallels between their mortgage financing decisions and their long-term financial goals, borrowers can better understand how and why a mortgage should not be considered in isolation. We can help clients think through all of their potential debt and understand the need to have a savings cushion when facing financial difficulties.

Think about the peace of mind borrowers will have if they take the opportunity to educate themselves about the debt they incur and create a financial safety net for their home and family when faced with a loss. of income. This is the impact our industry’s mortgage expertise can have when we (and consumers) think beyond a single transaction.

Make no mistake: our # 1 job is to put people in secure and financially viable housing over the long term. Our work doesn’t stop and shouldn’t stop after a loan closes. Too often, however, this is exactly what happens.

How mortgage unbundling broke lenders’ relationships with borrowers
It is no secret to us in our industry that origination and after-sales service have become unbundled. Unless your business manages the loans it makes, those loans are sold (and potentially resold) to other managers. Over time, we lose this connection with the borrower. We move on to the next loan application, the next business.

As we move forward, however, we end up missing opportunities to help guide former clients after they have left the closing table. For example, look at what happened during the COVID-19 pandemic. After the economy closed, millions of people struggled to meet their monthly mortgage payments.

As of May 2020, 4.2 million U.S. mortgages were in forbearance – the highest level during the pandemic, according to a Freddie Mac research analysis of Mortgage Bankers Association estimates. At the time, that represented $ 1 trillion in mortgage debt and about 8% of all unpaid home loans.

Some news articles have revealed that some homeowners have dealt with conflicting information about loan forbearances and that they did not always understand the terms and conditions of their forbearance agreements. Many were desperate, fearful, and did not know what to do. Even homeowners who have weathered the pandemic and could benefit from using equity or refinancing can wait for economic turmoil because they don’t have expert mortgage advice when they need it. need it most.

Many of these borrowers were orphaned by their original loan officer or broker because their loans were transferred to another company for management. This is why, in my opinion, our industry should reconsider bringing together origination and management assets under one roof. I am sincerely convinced that the unbundling of these services has not produced good results for some consumers.

When originators keep the service in-house, it means they need to be able to offer advice and assistance to borrowers. Whether they want to speed up their mortgage repayment strategy to build wealth, or have questions about mortgages – about loan modification, forbearance, or how to leverage their home equity – we can proactively guide them through all of those situations where loans stay on our books, and we can take a look at what’s going on under the hood.

Mortgage debt management training starts with the first loan application
When the housing market normalizes again (and it will), ask yourself this question: will you be the first person past clients call if they decide to move to their next home, refinance, or to take out a second mortgage? If your mindset is still stuck in Single Transaction Mode, then probably not.

Think about your role as an expert in the context of the consumer journey. How can you become the go-to resource for mortgage decisions at various stops along this journey? What advice can you give to help them maximize what is possibly their biggest financial asset? And how do you communicate the continued value you offer beyond the first loan closing?

It all starts with how you establish and build a lasting relationship with your customers. The initial consultation with borrowers is especially important and covers the basics – explaining how their credit rating and history, debt-to-income ratio (DTI), debts, assets, and savings all impact loan decision – is a standard rate. We must go beyond the expected.

Take it to the next level. Find out the financial goals of borrowers. Explain how their savings plans for retirement, a child’s school fees, or other goals might be affected by their mortgage decisions (and vice versa). Dig even deeper by educating a borrower on their DTI ratio, so they understand what is available to them to save and spend.

This is what I mean by showing borrowers the holistic view of mortgage lending and how it relates to their long term mortgage debt management. A trusted mortgage advisor should be prepared to discuss financial goals and provide sound advice on how to achieve financial well-being. There aren’t enough mortgage professionals out there, and borrowers can tend to get carried away by the emotions and urgency of a home purchase.

If borrowers only look at the price of the house, interest rates, and fees, they are focusing on the wrong things. The question they need to ask themselves is: “Who can I trust to help me understand the process and offer me suggestions for managing and maximizing my real estate investment.”

Guiding mortgage borrowers on the path to financial well-being
As mortgage advisors, we provide an important professional service as we educate and advise borrowers on their greatest financial asset: their home.

It’s easy to focus on closing trades and moving on to the next trade when the pace is strong, and we have more volume than hands on the bridge. But as homebuyers take a break from the chaos – as they do now – that’s when we need to get back to basics of our profession. It comes down to relationships. It’s about cultivating confidence.

We are mortgage educators. Let’s be proactive, rather than reactive, in showing borrowers the awesome power of how their real estate investment can be another arrow in their quiver of financial well-being. To set yourself apart from the competition, become the benchmark mortgage expert in your market who looks after your clients’ financial health and their long-term needs.

Editor’s Note: The views and opinions expressed by Bill Dallas are his own and do not necessarily reflect the views of American Corporate Finance or Finance of America Mortgage LLC.


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