TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/145103
Feature will no longer be considered a preferred vendor of choice. So how do providers and partners establish relationships engineered to last? The consumer must be put front and center in designing how the purchase process will operate. Providers and partners must work together to integrate their purchase, financing, and related processes for smooth closings and happy customers. And, of critical importance, the relationships must be structured to be compliant with Real Estate Settlement Procedures Act (RESPA), Truth in Lending Act (TILA), and all other federal and state requirements. What Consumers Want B eyond the obvious desire to secure a competitive interest rate at a low cost, consumers want the home purchase, financing, and related processes to be made easier to understand and simpler to perform. They want transparency and choice in what they purchase and who they use. Indeed, transparency and choice are key components of consumer protection. For example, upfront disclosure requirements provide a consumer the opportunity to compare interest rates and costs among competitors before communicating the "intent to proceed." With recent changes to regulations, originator compensation rules effectively remove the incentive for loan originators to play interest rate or closing cost games to the detriment of a consumer. Buyers also want to know what to expect throughout the purchase process. Most important, they want convenience (one-stop shopping), coordination, predictability, support, and a smooth closing at a good value. In a 2004 Weston Edwards & Associates homebuyers' survey, 91 percent of those polled said they were highly likely, likely, 24 | The M Report To achieve maximum results, the parties to a strategic relationship must be disciplined in planning and designing a cooperative process that will be most beneficial to all. or somewhat likely to use the services of one-stop shopping. A 2006 CapAnalysis Group study concluded that title premiums and related settlement closing charges are not higher when affiliated businesses are involved compared to when they are not. In order to routinely achieve what consumers want, partners must integrate their business processes in a way that puts the consumer first and creates the most efficient and effective real estate settlement service experience for all parties to a purchase transaction. The Strategic Relationship Engineering Advantage A s stated earlier, strategic relationship engineering can create structures and processes to the mutual benefit of all participants to a transaction. Strategic relationships make communication more direct and convenient for all parties involved. By their nature, these structures coordinate activities that improve the timing of a transaction and the convenience of working with multiple parties throughout the process. In addition, the integration of the purchase and financing-related processes can reduce the cost of a transaction, which can be passed along to the consumer. Strategic relationships must be in compliance with section 8 of RESPA, prohibiting the giving or accepting of fees, kickbacks, or "things of value" in exchange for referrals of customers who are purchasing settlement services such as a home mortgage. Examples of arrangements for attracting partners and integrating processes, if properly structured, include desk rentals, marketing services agreements, and Affiliated Business Arrangements (ABAs). HUD recognized the potential benefit of ABAs in its proposed RESPA regulation: "One-stop shopping may offer consumers significant benefits including reducing time, complexity, and costs associated with settlements." In the case of a desk rental, a mortgage company may lease space from a real estate broker to place a mortgage consultant inside or adjacent to the real estate office. Being located close to the real estate agents can enhance the ease and convenience of a mortgage consultant working with the agents and their buyers. In a marketing services agreement, a mortgage company or title company may pay a real estate broker, homebuilder, or other party for providing legitimate, actual advertising and marketing services on its behalf (e.g., messaging, branding, and advertising the mortgage company's services to potential direct customers and referral sources) measured at a fair market value. These marketing services are distinguished from a direct sales pitch to a particular buyer who is encouraged to consider use of a particular provider . . . something HUD