How The Mortgage Industry And American Consumers Team Up To Inadvertently Harm Each Other

I was speaking with a buddy today about how mortgage professionals are taught to sell mortgages as opposed to taking on an adviser role in the refinance process. We both started out in this industry at the same company, which, by the way, if there were a more dishonest company, its owners couldn’t possibly have avoided jail up to this point, but that’s beside the point. I mentioned to my buddy that every tip I’ve ever heard from anyone in this business on how to be more successful has been focused on selling the client using any trick you can dig out of your sleeve. I’ve only heard a handful of people actually mention building relationships and trust as a means to becoming more successful. We were talking about why it is that dishonesty and the “hard sell” are so prevalent in this business. We came to a few conclusions.

Why Are There So Many Mortgage “Salesmen?”

First of all, the vast majority of mortgage companies pay commission-only. Loan Officers at these companies generally have no idea how long it actually takes before they’ll receive their first paycheck, and it’s usually quite a bit longer than they had anticipated. By the time they finally do get paid, many of them are near the brink of financial disaster. They end up feeling a lot of pressure, not only because of this, but also from their superiors, to close as many loans as possible as quickly as possible. Unfortunately, and I’m still not sure why this is, the quickest way to close deals is to be pushy, but at the same time, slightly aloof, and purposefully withhold information. When you’re new to the business, you just don’t have the knowledge it takes to wow a prospective client with a thorough presentation. Also, and this is something I still don’t like to think, but it’s true; the truth alone is not enough. Let me tell a brief story to illustrate why…

A Frustrating Personal Story

When I first got into this business I started working with a client who wanted to refinance and take some cash out. The guy already had a mortgage payment that he couldn’t afford, so I asked why he wanted the cash; guess what his answer was? To buy his wife a new car. This guy was working a side job, getting paid under the table to live in a house he could barely afford, and he wanted to increase the payment on that house to buy his wife a new car. Being the respectful young man I was, I told him that I was a little worried that he was already overextended and cashing equity out of his house would be one step closer to major financial problems. I could tell my concerns were falling on deaf ears, so I finally decided to help him do what he wanted. After putting together a Good Faith Estimate I sent it to him.

Now I already knew this guy was rate shopping to save his life, and as I cover in my posts about rate shopping, it’s nearly impossible to accomplish effectively. So, after spending about 4 hours of my time working to get this guy into the best loan possible, he hits me with one more curve-ball; another broker is offering him the same loan program with a 1/2% lower interest rate and the same costs. I tried to explain to this particular client, to no avail, the difficulties of rate shopping. And, though I was fairly new to the business, I knew damn well 1/2% lower interest rate was impossible in that market. Days turned into weeks and this guy still hadn’t made a decision yet. I remember our last conversation, during which I explained to him that the rate he was being quoted was impossible, that rate-shopping in general was impossible, especially when you drag it out over several weeks. I really thought I had gotten through to the guy, and I was pretty proud of myself for remaining honest telling it like it was. The next day I had a voicemail; he decided to move forward with the other company.

The Experience of A Newcomer To The Mortgage Industry

For a new guy (or girl), this can be incredibly frustrating. Here you are being totally honest and upfront and you’re losing business to someone who flat-out lies to the client. This happens so much in the beginning you start to think every homeowner is out of his or her mind completely, and your view of the world and other people really does start to change. You begin to question whether everything your mom and dad told you about honesty being the best policy is really true. You figure, “This must be the way to succeed in business. I may not like it, but I’ll get used to it.” I can tell you without a doubt that this is one of the single most important factors causing a lot of Loan Officers and Mortgage Brokers to become shady characters.

Experiences just like that one had a major influence on my decision to start Truthful Lending dot Com, and experiences like that one are the major reason Mortgage Professionals are taught to sell mortgages and not become advisers.

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