Monday, March 12, 2007

Salespeople Flogging Mortgages

A key difference in the world of retail mortage over the last 15 or so years, I think, is the emergence of an "active sales" model. 18 years ago, when we got our first mortgage, two things were different. One was what it took to qualify--I remember being right on the edge of qualifying to be able to borrow what we thought we reasonably comfortably could afford, to buy the condo we wanted. Now, what the originator would be willing to lend me, as a percentage of income, is downright scary--they do not care if I eat, as long as I can make the payment!

The other thing that is SOOO different is the role of the mortgage broker. When I needed a mortgage, I checked a few newspapers ads, called a couple of banks, picked the one that seemed to have the best rate, and made an appoinment with a loan officer. They asked some questions, and then told me how big a 30-year fixed loan I qualified for.

Nowadays, many people have "their" mortgage broker like they "their" insurance agent. The industry has gone this way for various reasons, but the relationship with the broker had been heightened by the prolonged period of declining interest rates, during which many, many people (wisely) re-financed 2 and even 3 times over the course of a half-decade or less.

Nothing against mortgage brokers, there are plenty of good and ethcial ones. But--there are some who aren't. And they are pushing mortgages at people. They even adopt the lingo of a used car sales salesperson: "I can put you into X house for X payment".

I know, I know, nobody held a gun to the homebuyer's head. But I do believe that some substantial number of people were, to some extent, enticed into mortgages--albeit of their own freewill--that they would not have walked into in the old model. I'm not saying "there oughta be a law"; it is just an observation on the state of affairs.

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