TheMReport — News and strategies for the evolving mortgage marketplace.
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24 | M R EP O RT FEATURE I n today's red-hot purchase market, homebuyers find themselves competing for a finite number of homes, which is driving record-high levels of home-price appre- ciation. As a result, many homebuyers are being priced out of the market and pushed to the sidelines. According to a report from the National Association of Realtors, existing-home sales fell for the fourth straight month in May 2021, while the median sales price for all existing-home types jumped 23.6% year over year in the same month. It's understandable that con- sumers hearing about these trends become intensely focused on the transaction at hand. They zero in almost entirely on who's offer- ing the lowest interest rate or the lowest fees. They're not thinking about 10, 20, or 30 years down the road and how to effectively manage the mortgage debt they're committing to today. That's where we, as mortgage experts, should come in. We have the opportunity to educate consumers on why it may be ben- eficial for them to take a holistic, long-term view of their real estate investment—and how their home plays a key role in the grander picture of their overall financial health. Knowing how to effectively manage cash on hand and cash flow is a skill that translates directly to how we manage our credit. Effective mortgage-debt management is an important aspect of building a sound finan- cial footing but is all too often overlooked. Explaining in simple terms to a consumer how they handle their mortgage debt and how they can leverage their home equity in this major asset, in my mind, performs a deeper service. By drawing parallels between their home-financing decisions and their long-term financial goals, borrowers can better understand how and why a home mortgage should not be considered in a vacuum. We can help clients think about all their potential debts and understand the necessity of having a savings cushion when they face a finan- cial hardship. Think of the peace of mind borrowers will have if they take the opportunity to become educated about the debt they are taking on and create a financial safety net for their homes and their families when faced with income loss. That's the impact our industry's mortgage expertise can have when we (and consumers) think beyond a single transaction. Make no mistake: our No. 1 job is to put people in housing that's safe and financially sustainable over the long haul. Our work doesn't and shouldn't stop after a loan closes. All too often, how- ever, that's exactly what happens. How Mortgage Unbundling Has Fractured Lenders' Relationships with Borrowers I t's no secret within our industry that origination and servicing have become unbundled. Unless your company is servicing the loans it originates, those loans get sold (and potentially resold) to other servicers. Over time, we lose that connection to the bor- rower. We move on to the next loan inquiry, the next deal. In moving on, though, we wind up missing opportunities to help guide past clients after they've left the closing table. For example, look at what's happened during the COVID-19 pandemic. After the economy shut down, millions of people struggled to keep up with their monthly mort- gage payments. In May 2020, 4.2 million U.S. mortgages were in forbear- ance—the highest level during the pandemic, according to a Freddie Mac research analysis of Mortgage Bankers Association estimates. At the time, this represented $1 tril- lion in mortgage debt and about 8% of all unpaid home loans. Some press reports have revealed that some homeowners dealt with conflicting informa- tion about loan forbearances, and they didn't always understand the terms and conditions of their for- bearance agreements. Many were desperate, fearful, and unsure of what to do. Even homeowners who've weathered the pandemic and could benefit from tapping equity or a refinance may be waiting out the economic tur- bulence, because they don't have expert mortgage guidance when they need it most. Many of these borrowers have been orphaned by their original loan officer or broker because their loans were handed off to another company for servic- Beyond the Transaction For many consumers, the mortgage process is boiled down to a transactional experience focused on the lowest rate offers. Taking the longer view may yield a better outcome for borrowers. By Bill Dallas