On Friday of last week Brandy and I met a couple who were first time home buyers. They called on one of our listings and we met them on Friday at Madison Place a subdivision where we have an exclusive listing. Which mean we are the only Realtors who list out there. Well they were interested in one of our houses but they had been pre-approved by their Realtor who was also a licensed mortgage broker. Needless to say we felt this was a conflict of interest in the other agent, was he going to look out for their best interest in getting the best loan possible? Of this I doubt. When we got back to the office we found out that this same Realtor had done a loan with my broker last month and on the loan the lender had put in a yield spread which is a little noticed line on the HUD document that is where the Lender makes a large chunk of change that most buyers never notice but you as a buyer do pay for it. I feel that this is one area where your Realtor earns their commission to look out for you and your best interest. This is called a back end charge and if you do not know what you are looking for you will not see it. All Attorneys represent the Lender and they will smooth right over this fee. Do you want an agent who will make money off of you in two way on the same transaction or would you rather have someone watching out for you? Because these purchasers were not our clients we were not allowed to tell them what we found out about their agent.
Below is a blog that talks about all the new ads you are starting to hear on the Radio about no doc loans and great fees in loans. I will tell you what my father told me there is no such thing a a great deal. Watch for the YS on the HUD and find a great Realtor with a good track record one who you trust and don't believe everything you hear on the radio or in print usually if it sounds to good to be true it usually is.
Jillayne Schlicke RE Educator
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Because of the enormous amount of deceptive direct mail, Internet, and email spam advertising currently taking place in mortgage lending, for this blog article, let’s focus on radio advertisements.
Every city I visit, loan originators and brokers complain about deceptive radio ads running continuously, making claims that may or may not be true, slamming the competition, and barely if not at all complying with advertising requirements set forth in the federal Truth-in-Lending Act. When I was in Vancouver WA recently, LOs told me there’s an ad running that says something like this: “If your mortgage broker charges any fees at all, they’re predatory lenders.” Since we all know how “no cost loans” work, this statement brings great harm to everyone in the mortgage industry.
To say business is tough out there right now is a gross understatement. When people get desperate, they tend to be able to justify desperate actions. Expect false, misleading, deceptive, and bait-and-switch advertising to get worse right now, not better.
Solutions? Well sure, there are lots of solutions. Here are four; if you have other ideas, let’s hear them.
1) Contact your state regulator and file a formal complaint;
2) Contact the offending company’s owners and point out the false, misleading; deceptive, or illegal portion of the advertisement;
3) Do nothing;
4) Create respectful, responsible, and honest advertisements, with hopes of drowning out the competition.
One at a time, let’s analyze each possible solution.
1) Sure, you can go down this path. But folks who advocate this position cannot also complain about more and higher government fees.
2) People tell me they would never do this. Reasons range from: “I don’t have enough time,” “that’s not my job,” “I don’t want a confrontation,” to “nothing would change.” So whose job is it to regulate an industry? If your personal answer is “not mine,” then we’re back to solution number 1. Interestingly, when I ask this question: “If you ran a radio ad that was questionable, would you want your competitors to call you first, or your regulator?” 100% of the time, the mortgage broker/LO would want a competitor to call him or her FIRST. If we would want this for ourselves, why wouldn’t we want the same for others?
3) The solution of doing nothing means the radio ads will continue and get worse. If this is your choice, then whining is not an option.
4) Not every company is so well situated that they are able to spend thousands of dollars creating and continuously running radio ads. After running the ads, someone has to be paid to answer the phone. The ads are so expensive to produce and run, that a brokerage has to either pay their LOs a less-than-competitive split, which results in high turnover and low-quality LOs, or they end up running a very small, tight ship with the vast majority of leads coming headstrong at only 2 to 3 originators, with overworked processors doing the majority of the work.
Compare mortgage brokerage to that of other professions. Do we hear deceptive, false, misleading, and borderline illegal radio ads out there from doctors, lawyers, dentists, CPAs, engineers, or accountants? Not likely. These groups are regulated internally, by their professional associations, which provide a supporting foundation for responsible, respectful and honest advertising. Anything less than, is brutally self-regulated. Subsequently, government intervention is low.
The largest trade organization for mortgage brokers, NAMB says in their code of ethics “members shall provide accurate information in all ads and solicitations.” I guess that means competitors can bad-mouth each other, as long as what they say is accurate. When a competitor or consumer has a complaint, what does NAMB do? It points us to a list of state regulators. A code of ethics without enforcement is the same as having no code at all.
Let’s face it: when it comes to advertising, mortgage brokers are running around largely under regulated. Government never has nor will they ever have enough money to regulate every piece of advertising created by every single LO/Broker in every single state. Government was not designed to do this. Government was designed to go after only the most egregious violators. The rest is up to us. Self-regulation is a sign of industry maturity and growth. When mortgage industry members agree that consumer respect (of its members) is highly valued, perhaps we see conversations spring up in this area. If self-regulation is not something you’re interested in, please don’t complain when your family, friends, new prospects, and existing clients do not trust you and shop you based on rates and fees.