In the past year most of us have listened to, or expressed our views, on the need for the mortgage industry to make changes.  Why has so much collective interest in making something happen failed to produce any meaningful results?
I am inclined to think that in many ways we are making things harder than they need to be when it comes to effecting change and fixing the systemic problems in the mortgage industry.

Imagine a car manufacturer who determines that the public is asking for certain things in a vehicle and as a result, builds a mini-van.  But when completed, the public looks at the mini-van and says, "That's not what I wanted (or needed).  I really want a motorcycle."  Is it better for the car manufacturer to try to make changes to the mini-van or should they start from scratch and build a motorcycle the right way?

That's the situation which the mortgage industry finds itself.  It needs to be re-designed but it's attempting to do so by simply reconfiguring the parts (systems and concepts) that were used when it was first created.

I think it is safe to assume that there have been plenty of products and systems created which efficiently facilitate the creation of a mortgage backed asset (i.e. originating, processing, pricing, underwriting, closing and delivering etc.).  What hasn’t changed (some would say it’s changed for the worse) is the point-of-sale interaction between the consumer and the LO.  
The point-of-sale act of originating a loan is a singular step within the mortgage industry and is something that front-line originators own.  True change in the mortgage industry (i.e. improving consumer confidence and regaining our credibility etc.) begins with the loan originator.  Together we can contemplate whether the way we do it is a function of how we were taught, or the way we really think it should be done.  What if we were to start from scratch, on a blank white board, and completely re-invent the process of originating a mortgage?  What might that look like?
What if the origination step supported the premise that the client, the loan originator/mortgage company and the mortgage industry are better served when the mortgage strategy seeks to put the Borrower in the safest possible position?  What if the act of getting a mortgage began, and ended, with the question…“Is this loan good for the client?”

The question then become’s, what would the origination step look like if it provided a measurable system (which everyone could agree on) that was a standard by which every loan can be compared and which clearly ensured that the Borrowers financial safety is being protected.

Such a system might ask…

  • Does this loan position the Borrower to better manage a financial set-back or avoid putting their financial safety at risk?
  • Does this loan give the Borrower greater financial choices and flexibility?
  • Will this loan create a strategy to eliminate non-mortgage debt and/or improve cash flow for saving and investing?
  • Will this mortgage facilitate the Borrower’s ability to stay current and help put them in a position to pay it off sooner?

Such a system would throw out the standard parameters by which a mortgage has traditionally been originated (i.e. ratios and credit history etc.) and would measure the quality of the mortgage strategy by assessing the Borrowers financial foundation and then designing a mortgage strategy that improves it.  

You might be thinking that this sounds great, but there’s a problem.  Everyone in our industry is so close to the situation, and we’ve been doing it this way for so long, that we can’t even imagine how we could do it differently.  It’s like being stranded in the middle of the ocean.  No matter how hard you try, all you see is water.  Until we can step back and truly get outside the box it’s unlikely that there will be substantive change.