The Mortgage Go To Guy!!

Right now, pretty much anyone in Residential Lending is on the hot seat.  Government Oversight is the demand du jour to rectify the problems in the current economy.  The problem is that there is no fixing the people that are already hurt in their credit… and there is a Teflon sheen on many of the worst culprits out there.

Sure … there are bad loan officers and horrible mortgage brokers whose avarice led them to put people in a bad scenario and that makes for great headlines.  The current government administrations are definitely making a plea for Bottom-Up culpability - that the originators are the most responsible for this mess. 

I think that Bottom-Up business theories are fantastic when analyzing a corporation for profitability.  Profitability starts in the field with the Salesforce and goes up the chain of command through management to the CEO.  It is a great way to increase productivity and customer service and responsiveness to market trends. 

Since when, though, do Top-Down agencies like the US, State and Local Government get to flip the paradigm of their own operating philosophies to analyze an industry that they now want to clamp down on with Governmental Oversight and Universal Licensing?

The most obvious signs that bottom up is not the right methodology is that the biggest advertisers of bad loan programs are still untouched in the media!  Maybe because the media can’t afford to lose the ad revenue from Quicken Loans, LendingTree and DiTech.com.

US consumers are without-a-doubt influenced by great ad copy, especially on TV.  Dieticians, Physicians and Dr. Phil are all testifying that putting sugary cereal commercials on Saturday Morning TV is why so many kids are growing up obese.  People watch TV with their guard down and eat up all the ads for “Two all-beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun” until they believe that they’re impervious to the ill  effects of the advertiser’s wares no matter how damaging they can actually be.

When you tell the consumers in a fancy TV ad campaign that the “Secure Advantage Loan” is how they will save money without mentioning that this is the Negative Amortization loan that has gotten so many people in trouble in the first place!  But it is on TV and it has to be “Grrreat!”, right?

Entrusting your financial life to a TV ad is stupid at best. 

It is the American way though.  Better to call that 800# and talk to Marty McStranger about whether you can afford a big house rather than sit down with someone totally qualified to understand the financial risks that YOU will face given your unique situation. 

There’s a T-shirt that I’ve seen with a big greasy hamburger on it that reads “If American’s will eat this, they’ll eat anything…”  The truth that this T-shirt spells out is that American’s need oversight for their protection just like the Government suggests… but what specifically needs to be overseen??

I would start at the TOP and work my way down. 

• How many loan officers of low moral fiber will get the leads from the naive consumer that just bought the whole “When Banks Compete” load of malarkey if LendingTree was forced into more disclosure or just robbed of its right to advertise this way?
• How many consumers would  believe that a loan advertising “$100,000 for $400 a month” will be a good idea if they have had full disclosure about negative amortization from the get-go?  Yet it is still advertised in SecureLoan and SecureAdvantage commercials… secure?
• How many loan officers will the big names need if their phones aren’t ringing because they can’t lure in consumers with false promises?

Top Down in this case would mean start with the most visible and work down through the proper channels. 

• If a loan officer is scamming people on the phone against the directive of their company, then Management needs to curtail the activities and self-report the incident.
• If it is a rogue loan officer working on Long Island, the State of New York should step in with their licensing authority. 
• If it is on National Television - it is a National Government problem and the Federal Government needs to enforce their laws.

It can’t just be people at the bottom either.  If there is a company whose business model is advertising and misleading the client - no matter if it is a broker or a bank - that company needs to be dealt with.  There is culpability at all levels but some just don’t want to accept that fact.

Top Down will scare off the little guys while the big guys take their licks. The best way to send a message is to go after one of the big names in the industry, not the solitary loan officer that is only known by those who did loans with him.

Oversight would mean that the government would Oversee…. what’s more visible than TV ads and the banks than can afford to advertise that way?