2022 will be a bit of a different year for the mortgage industry. A good year, but one that likely looks a little different than the past two or three. A lot of good may come from that, in fact.
If you haven’t seen or aren’t familiar with the 2005 comedy/drama, The Sisterhood of the Traveling Pants, (based on the novel of the same name) it’s an entertaining tale about four teenaged best friends who buy a (we later learn) magical pair of pants that fits each of the girls although they’re all of different sizes. While the story is really a focus on love, growth, loyalty and being true to oneself, our own industry could learn a lot from those pants.
You see, all too often, especially during times of high volume, we try to fit borrowers into the same bucket—usually, the cheapest, easiest-to-produce bucket—when it comes to product fit. Need a HELOC? Right you are! One cash-out, FHA refi coming right up! Sometimes, we’re at our worst with this when volume is at its greatest.
It’s not always the loan officer or account rep who’s to blame on that, either. As we’ve discussed before, far too many lenders (and maybe even brokerages) have pressed on front line originators for volume and revenue over brand and client retention. LOs don’t have the time, the training, or the incentive to take the time with prospects and borrowers. They don’t have the chance to truly learn their needs and wishes. There are all kinds of fantastic mortgage lending products that sit idly on the proverbial shelf or even get punted from a lender’s product mix because they don’t have the best margin. Even if they are the perfect fit for certain kinds of borrowers.
The consequences can take years to manifest, but not always. Fall out rates increase. Default and foreclosure actions tend to be more common where the loan never fit the borrower in the first place (2008, anyone?). Referral and retention, to which we often pay more lip service than actual attention, fade away when a borrower has a poor experience with a poorly fit mortgage.
The reasons for this failure are fairly obvious. Not enough time. Volume is too high to devote productivity on the frontlines to lower profit products or higher risk borrowers. Not enough training. Not enough incentive to consider and offer alternative products. Not enough willingness to find greater volume by recapturing those borrowers who don’t fit the one-size-fits-all mortgages.
Well, even though 2022 should still be a very good year for our markets, we’ll have more time and more inclination. Let’s see if the mortgage industry is more willing to take the time to find a better fit.
Happy holidays to those of you celebrating, and best wishes for a healthy, joyful and successful 2022 to all! We’ll be back again very early in the new year.
Got an idea for a future Deeper Thoughts or LLL? Let me know at firstname.lastname@example.org.