As published in Scotsman Guide's Residential Edition, February 2009.
A new F-word, "foreclosure," now haunts millions of homeowners. Real estate professionals of all types can't help but take some of the blame for that. For those of us planning to stay in the business, we must improve our practices and ourselves if we want to survive.
So how can mortgage brokers improve their businesses and their service?
Thinking about this question often reminds me of the time my daughter, then 24 years old, and her husband wanted to buy their first home. They lived in the Dallas-Fort Worth, Texas, area and had a solid income and modest debt. In evaluating their situation, a loan officer qualified the couple for a $135,000 loan.
My daughter freaked. She couldn't believe it. In her eyes, there was no way they could buy that much house. In fact, when they calculated their budget, she and her husband figured they could afford about half that much.
Fortunately for them, they knew the importance of budgeting and of understanding what they could truly and reasonably afford. Although they heard they could buy a more expensive house, they prioritized fiscal responsibility. They also didn't want to harm their credit scores or their economic security by getting behind a mortgage they couldn't repay.
Because of these things, they ultimately bought a $65,000 home that they will always remember fondly as the first place they owned.
What did I tell my daughter when she asked my advice during this time? Some of the same things that mortgage brokers should make sure to tell their clients:
Don't buy more house than your budget allows.
Don't overpay for fees.
Don't make any unnecessary purchases during the homebuying process.
Do pay for a home inspection.
Do make sure that the escrow account is calculated properly and won't come up short.
Do understand all of the terms on every loan document.
I would like to say that helping my daughter with her home purchase taught me something important about how to deal with clients. In reality, it's just the opposite. The things I learned during two decades in the real estate finance industry taught me how to help her.
Maybe that's the secret: Treat everyone like the people you care about most, and you'll never find yourself leading people into loans they can't afford. Mortgage brokers who are willing to start there can help end today's financial nightmares and begin to return a sense of pride to the American dream. Maybe then we can forget about this new F-word and get back to what we do best -- help people buy homes.
Gary Lacefield is president and senior consultant of Risk Mitigation Group, a financial- and regulatory-compliance firm that specializes in fair-lending and fair-housing issues. The company's expertise includes forensic mortgage audits, quality-control audits, compliance, insurance and the Real Estate Settlement Procedures Act. Reach Lacefield at (817) 472-1100 or firstname.lastname@example.org.