Home Loan Focus

Archive for October, 2007

One of the questions that seems to be coming up over and over again as we advance through the mortgage crisis, is the concept that the industry is leading consumers into and possibly out of the crisis.  Similar arguments were made in regards to the credit card mini crisis a few years ago when bankruptcy legislation was the popular topic on the hill.

Its a question of personal responsibility vs the power of marketing.  Can home owners and buyers stop themselves from paying attention to the marketing campaigns that come out of Madison avenue and other marketing hubs around the world?  Can we say no to the latest 0% interest credit car offer?  Can we say no to an interest only mortgage offer?  Can we say no to the deal that puts us into a McMansion for a monthly price equivalent to the rent that we paid in college on a run down hovel?

I can not answer those questions.  At a personal level there have been times when I personally have been able to say no and there are many times when I was unable to say no and took those deals knowing that they were too good to be true.  As a consumer educated in finance and home buying if I can’t say no then how can someone without the benefits of my education, understanding and experience say no to these fantastic mortgage deals?

One company through better information has some of the means to guide the industry through its current self destructive run.  The company is Red Clay Media.  They provide essentially marketing intelligence driven products from unsexy things like direct marketing mailing lists to products that provide mortgage brokers with mortgage leads.

The Mortgage Marketing Rub

Here’s the issue, their tools are just that tools.  They are a technology that can be used for good or bad, just like any form of intelligence or information.  They are to their credit trying to guide the industry to use their products and services in a way that does not cause the self destruction of their own market base of customers.

That’s the thing, the mortgage industry has the creative power to create financial products that anyone can buy up front but no one can afford on the back end.  Furthermore, the mortgage industry has the marketing connections to also create marketing campaigns that are about as irresistible as crack is to a crack addict.  The issue for the industry is that when they provide these products that harm their own customers, they are essentially wiping out their own future market and possibly harming the economy in which they do business themselves.

The Opportunity

Now, I come from a background that lends me to believe that if given enough knowledge, people will more often than not use that knowledge to do something good rather than bad.  By definition almost, that makes me an idealist and I recognize the pitfall in that perspective, but that is my cross to bear and not yours.

The point is that I believe that the mortgage industry can also utilize these same products and services provided by marketing intelligence companies to help identify customers that are ready, able, willing and capable of using the right mortgage product at the right time.  Mortgage brokers and realtors do not have to hook their customers on a Cadillac at Kia price point.  They need instead to focus on finding the right package all around for their customers.  The house that fits, snugly and the mortgage that fits not only this year but over the next 30 years.  They need to avoid teaser rates that pull people in and sucker them into problematic financial products that they have to flip out of in 2 years time as they progress in a downwards spiral toward financial destruction.

The mortgage industry has the power to avoid running the country into ruin.  I am hopeful that they will act to save their own industry from calamity.  I expect them to act out of their own self interest and desire for success or at a minimum self preservation.  One thing that the mortgage scandal has taught us is that many of the companies that chose to be extra greedy ended up going out of business or getting consumed by larger smarter, and safer rivals.  This industry has to realize that opting for a quarterly profit number as opposed to long term financial viability for themselves and their customers is a zero sum game.

With the collapse of the sub-prime lending markets over the summer, many homeowners have found themselves up the creek. The jury is still out in regards to any “predatory lending” claims however many of the prime suspects have boarded up their shops and left for higher ground. Questionable practices aside, affected homeowners now find themselves locked into overbearing financial commitments.

Many homeowners who are faced with the prospect of foreclosure tend to hit the panic button without taking a look at their options, yes there are options. The first option I would suggest is to contact your lender. You have to remember, banks and credit unions DO NOT want to have an extensive property portfolio. A foreclosure can look just as gloomy to your lender as it does to you. My second recommendation is to contact a local Realtor or licensed professional. Enlisting the help of a professional is never a poor decision especially when searching for foreclosure information. Remember, even if you choose to go it alone, most Realtor’s offer free consultations and have extensive contacts in the lending industry.

Whether you are a homeowner facing California foreclosures or a potential buyer looking for distressed or Florida foreclosures, remember that there are many hazards and pitfalls associated with a purchase and sale of foreclosed property. There are many licensed professionals who have the experience and expertise to help you, take advantage of their knowledge. As I mentioned earlier, there is generally little to no cost associated with a consultation, but there can be a lifetime of cost in an uninformed decision.