TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/145103
Feature deemed non-compensable in 2010 interpretive comments. Mortgage companies and other settlement service providers routinely pay others to market and advertise their services to the community. Marketing of a mortgage company's services through a real estate broker, builder, or similar parties who frequently come in contact with a community of prospective buyers—who may need a mortgage—can be a very cost-effective marketing approach. When a mortgage or title company can accomplish an important, routine activity in a more cost-effective manner, consumers may well benefit from more attractively priced services. An ABA is, in layman's terms, a situation where at least two parties have common ownership of a settlement service provider. An ABA enjoys a "safe harbor" under RESPA from the referral fee prohibitions if the ownership relationships are properly disclosed, the consumer is not required to use the ABA, the profit is distributed to owners solely based upon the financial interest in the entity (real capital invested), and the entity passes a "sham analysis" offered by HUD, which considers 10 key factors in assessing the validity of the ABA. A mortgage company and real estate broker may establish a new mortgage entity, properly capitalized, licensed, established, and operating as an independent bona fide mortgage company in the marketplace. In a highvolume transaction environment, an ABA can be an excellent platform for integrating purchase and financing processes for the benefit of all. The Integration of Purchase and Financing Processes A n integrated platform that simplifies and improves the home purchase, financing, and related processes adds value at each customer touch point. Ways to accomplish this can include: 01 Obtain consumer authorization to share key status information between the real estate broker and mortgage company, which helps trigger dependent activities and keep the process on track (this is needed for much of the following to be permitted due to financial privacy laws); 02 Coordinate buyer orientation of what to expect from both the real estate company and the mortgage company throughout the transaction; 03 Communicate key mortgage pre-approval information (e.g., cash at closing constraints, with the real estate agent, to be used in negotiating seller-paid closing costs); 04 Alert the mortgage company of the execution of the purchase agreement for immediate ordering of the appraisal; 05 Enlist real estate agent, as needed, to encourage buyer to provide documentation and respond to inquiries and requirements on a timely basis; 06 Work with title and escrow companies for the early creation of the Preliminary Settlement Statement for quick review and correction of any errors or issues to avoid closing delays; 07 Share transaction status with all parties in a systematic way throughout the process to minimize unnecessary telephone calls and emails and keep all parties on track; 08 Receive coordinated and convenient feedback from buyers regarding their experience with the providers, the value of the services, and their willingness to recommend to family and friends. The Proof Is in the Pudding E nvironments where the service relationships are unfamiliar and haphazard ultimately underperform. Most long-time industry insiders have seen home purchase processes where the home buying, financing, and related activities are well designed and planned. It follows that the most convenient, predictable, and timely closings for consumers typically came from carefully selected, complementary service providers and their partners. Real estate settlement service providers who do a good job of structuring relationships with others, such as real estate brokers and builders, are able to establish a long-term, mutually beneficial flow of business, as the partner closes more homes on time and satisfied consumers rave about their experience to others. With results like these, agents and sales representatives take note and get on board with a solution that helps them get paid quickly and generates customer buzz. One long-time mortgage affiliate of a large, regional northwestern real estate company engineered an integrated home buying and financing platform years ago that has resulted in a 94 percent "would recommend" rating from its borrowers. These kinds of relationships are important examples to the industry of how strategic relationship engineering can work. Walking the Talk W hen a friend or family member who is in the market for a home asks this author who they should use for a mortgage company, the questions asked in response have become routine: 01 Do you have a real estate agent with whom you are pleased? 02 Does the agent have a strategic relationship with a mortgage company? 03 Does the agent like the mortgage company, the competitiveness of its rates, and the ease of the process? If the answer to each of these questions is "yes," then this author makes the following suggestions: 01 Apply with that mortgage company. 02 Use the 10-day shopping period to confirm the interest rate and cost is competitive. 03 Commit to proceed if you like what you see and hear. Yes, We Can C omplementary relationships, among companies with common goals, objectives, and motivations can lead to the most effective and efficient solutions. 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. Consumers should shop for competitive interest rates and costs, while weighing the expected levels of service from competing providers to assess value (quality of the service for the price). Integration of home purchase and financing processes is one of the most effective ways to provide value to the consumer and all parties to a transaction. The consumer, agent, broker, mortgage company, and all other participants in a smooth and timely home closing are the winners. The M Report | 25