I had a conversation with a local real estate agent at a Broker's Open House. A Broker's Open House affords local real estate agents the opportunity to preview homes that have been recently listed for sale. During our conversation, we discussed interest rates, market trends etc.
The agent made a comment to me that I think is revealing as to the changes in the marketplace over the last three or four years. If you have been reading this column for a number of weeks, you would have noticed that I have written about some factors of the loan qualification process. I commented on credit scoring, sub prime lending, credit, credit repair and honesty, among other criteria in the loan approval process.
For many years the typical loan agent would visit real estate offices and distribute loan rate sheets to the agents. This information was for the agents and their clients about where rates were for the typical borrower who was in the market to buy a home. Also as loan agents visited real estate agents, one of the first questions asked was, "What is the rate, today?" It seemed to be a standard and sometimes mandatory question even if the agent did not have a buyer at the time. Even if a buyer were lurking, would the rate quoted and program offered be the one best suited for the borrower? Did we know at the time the buyer's credit, income source, downpayment and/or employment history? Probably not. We quoted a rate because it was rather clear cut.
We had a simplistic program. Yes, there were 15 and 30-year rates and adjustables. We also have some variations on the theme with 3, 5, 7 and 10-year fixed. The major reason we could quote rates and not deviate much from the norm is that most buyers/borrowers were round pegs able to be placed in a round hole. Today, the rules of the lending game have changed.
The agent's comment to me was telling since she recognized the changing pattern that we have seen. She said, "You wouldn't believe the credit problems that my buyers have." And quickly added, "Oh, I guess you know better than I." We do. With so many lifestyle changes, prior layoffs, downsizing, loss of one wage earner in a built for two budget, and home equity plunge, a major change in credit position has evolved. What was a conforming borrower entering into a preset program now becomes a borrower who has "customized needs."
Today's loan programs must be geared to the individual. We would be doing a disservice to borrowers and buyers alike to quote rates that may have no relevance to their situations. Questions must be asked and programs must be explored to best meet the needs of the borrower.
I think that when people have problems they would rather talk to a person to determine what would be a proper solution. I am a fan of the Internet. I use it for research and communication. I think it opens to people a world of information. Some lenders are aggressively marketing on the Internet. It is the place to be. I also know that most borrowers, today, are not going to fit into the round holes of the Internet loans. Once we get beyond the "A" paper loan, we need someone to walk us through the options and alternatives of the "B" and "C" paper loan products, if we happen to be that square peg.
Borrowers want to know what steps are necessary to correct past problems and move up to the next credit category and reduce their monthly mortgage outlay. This business is still a people business. Rapport, trust and straightforward information are needed when a person is planning for possibly the largest investment of his/her life. Information is available from a computer but the uniqueness of an individual can only be appreciated by another human being. Copyright © 1999, jjrmf.com