Find out how you can avoid and learn from the industry’s past missteps
By Brad Cooper, coach and trainer, Loan Officer Publicity, and manager, Leader One Financial
As goes the famous quote
from George Santayana, “Those
who cannot learn from history are
doomed to repeat it.”
By forgetting its financial past, society
has tripped over many of the same mistakes. The only way to get back on track
is to learn from that past and correct the
Lenders must continue to tighten their
practices and make sound lending decisions. Consumers must receive education
on the terms, commitment and cost of
loans, even when interest rates are low.
Most important, brokers must realize
how we got here and what we can do to
help solve today’s problems.
Lenders soon tightened their guidelines, with mortgages only available if
taken out against a husband’s income —
only 25 percent of which could go toward the monthly payment. When World
War II soldiers returned with no credit
history or employment, the federal government stepped in to guarantee their
high-risk loans for lenders, loosening
This move increased loan applications,
with terms growing from seven to 30 years,
and allowed people to afford larger homes.
Thus, housing prices increased dramatically — and homeownership became a
From then on, whenever the market
hit a lull, the lending industry would create new products to serve consumers who
had “fallen through the cracks.” Loans
came on for people with bad credit, no
downpayments and questionable credit
history, ushering in the era of balloon
payments, variable interest rates and interest-only payments. Loan terms grew to
60 years, and homeowners could borrow
against their home equity.
But as the cycles turned, people again
were unable to pay off their loans. Home
values dropped. And again, we now see
the federal government speaking up about
stepping in to fix the situation.
What to do
To survive today, brokers must change
the way they do business to increase trust
and to protect consumers and lenders.
■ Spend more time educating consumers
about different loan programs before making any recommendations.
■ Identify consumers’ goals and match a
program to their needs, not wants.
■ Turn away business and be honest with
consumers who want to purchase or refinance when it’s not in their best interests.
Explain to them why they should wait.
■ Host educational seminars in your area
to teach consumers the steps of purchasing
and refinancing a home. Solicit and answer
■ Align yourself with key referral partners — Realtors, accountants, etc. — who
can help educate consumers and boost your
■ Keep in touch with your clients and
prospects at least monthly. This helps
keep them updated on current affairs and
never lets them forget you are there for
future business needs. This creates referrals for life.
■ ■ ■
How we got here
U. S. home mortgages have been around almost as long as homes themselves.
Before the Great Depression, lenders
offered loans on all kinds of purchases.
Margin purchases, where consumers
could buy shares of stock by putting down
just a portion of the costs and paying up
if the stock dropped below the purchase
price, were common until the stock market crashed. This took many margin-pur-chasers with it.
There is still some good news in the mortgage industry. Interest rates are still at record lows. Buyers are still eager and able
to enter the market. It’s just that everyone
must proceed with some common sense, a
sense of history and a lot of caution.
Brad Cooper is a nationally recognized mortgage expert, coach and trainer with
Loan Officer Publicity and manager of Leader One Financial in Farmington, Mo.
He has more than 16 years’ mortgage experience. His blend of customer care,
financial expertise and experience is the driving force behind his success. For
more information and to receive a complimentary CD titled, “How to Receive
$1,000,000 Worth of Free Publicity,” visit www.loanofficerpublicity.com/freecd
or e-mail Cooper at email@example.com.
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