The Importance of Reputation
It is old news that the mortgage brokerage industry suffered a large reputational set-back as a result of the 2007-2008 U.S. subprime mortgage/housing crisis, occurring subsequent to the 2005 U.S. housing bubble. And, it is generally accepted that, although lenders irresponsibly originated large numbers of high risk sub-prime mortgages in anticipation of continued home value appreciation, mortgage brokers were also blamed for endorsing poorly or fraudulently underwritten loans (which, in many cases, were based on artificially high property values).
Not surprisingly, the mortgage brokerage industry was detrimentally affected from the housing crisis insofar as borrowers’ appetites to engage mortgage brokers significantly declined. Since that time, however, the U.S. government has tightened the rules and regulations over licensing/reporting requirements, accountability, and information transparency. The industry image has improved, but there is definitely a lot more room for progress to be made.
But regardless of the reputation of the mortgage brokerage industry, there are still trillions of dollars of loans that are either maturing or require restructuring attention. And, there will always be situations where a homebuyer or real estate investor will benefit from the services of a seasoned, trustworthy mortgage broker to source the most optimal loan available.
While many real estate owners/borrowers have now taken a more proactive approach to addressing their financing needs, there will always be those who are:
- generally unwilling or unable to take the time to source or manage their own loan,
- more comfortable outsourcing their financing needs for economic or efficiency reasons,
- unhappy with their lender, mortgage broker or the terms of their loan, or
- unaware that their lender or mortgage broker could be providing better advice or terms.
In addition, there will always be a significant number of capital sources/lenders who:
- are relatively unknown to real estate owners/borrowers,
- have credit programs that may appear to be unclear, inflexible or too restrictive,
- have risk management policies and/or time constraints that prevent them from thoroughly analyzing more complex lending terms or amendment requests, or
- are presently more focused on the non-performing loans within their portfolios, as opposed to having an ongoing dedicated program of sourcing borrowers for new loan placement.
In conclusion, the mortgage brokerage industry must make “reputation” their number one priority to re-gain the confidence of the borrowing public and therefore remedy the “disconnect” between unsatisfied borrower needs versus the need for lenders to grow and optimize their credit programs. Since the prevailing view is that greedy, apathetic and relatively unregulated mortgage brokers were among the biggest contributors to the U.S. housing crisis, it is up to the mortgage brokerage community to address this issue – and the effort should be lead by the most experienced, reliable, diligent mortgage brokers by demonstrating the kind of integrity that both borrowers and lenders expect and deserve to receive.