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Commentary by Bill Cary

RISMEDIA, Feb. 2, 2008-In the current environment, the three most important words in real estate, “location, location, location,” may have been replaced by “Know thy lender.”

As the mortgage industry shifts-like an economic version of an overactive geologic fault line-it is critical that real estate brokers maintain control of the financing and home-purchase customer experience.

Changes in the Mortgage Industry

It is incomprehensible to many seasoned industry professionals that the results of past lending practices now are impacting current mortgage applicants in extreme ways. Potential borrowers with excellent credit, stable employment, solid income and robust savings are being impaled by a pendulum that is making a corrective swing. As a result, many well-qualified home buyers are struggling to secure financing to purchase a new home.

In addition, Fannie Mae and Freddie Mac are reacting to some of the risky lending practices that have been promoted by investors and lenders over the last decade. They are taking steps to ensure that the loans they purchase beginning in March 2008 will be priced to mitigate risk. This means additional costs and fees.
Premiums are being placed on all loans, regardless of a borrower’s credit history; loan-to-value ratios are being restricted in areas where market values are declining; and surcharges are being added to loans when a borrower’s credit score falls below agency benchmarks. With these sweeping changes, the actual buying or selling of homes may become a simple task compared to the process buyers must go through to secure the financing. Control
If you do not offer a competitive in-house financing option for home buyers, you need to make sure you are dealing with seasoned mortgage professionals that can prevent your buyers from becoming trapped in the quagmire of change that is occurring daily in the mortgage industry.

More than that, it is critical to understand the importance of being in control of the mortgage experience. For example, if your business has an affiliated mortgage company in which you are not the majority partner, ultimately, control of the customer experience is not yours alone. On the other hand, if you own the mortgage company outright, the control is all yours.

Traditionally, real estate brokers have viewed an in-house mortgage company as an ancillary business. However, home buyers do not view any aspect of their home purchase continuum as ancillary. They expect their real estate agents to handle the sale from beginning to end. This means two things: first, it is important that your mortgage provider can offer buyers multiple financing options; second, it is critical that your mortgage provider understands, anticipates and responds proactively to changes in the industry.

Be an Expert

Buyers and sellers look to their agents as experts in all things real estate. This includes the financing process. By owning and operating your own mortgage company, you can ensure that your mortgage team has the expertise to deal with an evolving industry and to communicate those changes to your agents. By keeping your agents well informed, their buyers will be more likely to qualify for a home, and your sales will close as expected.

Opportunities Exist

Today’s real estate market is challenging, but opportunities exist. In order to take advantage of those opportunities, however, control cannot be shared with anyone whose interests go beyond the scope of your business. The responsibility for providing legendary service rests with you. You do not share the responsibility-neither should you share control of your customer’s experience. 

Bill Cary is chief operating officer of Fidelity National Information Services’ HFN division. HFN manages the setup, licensing, recruiting, staffing and complete mortgage fulfillment services for real estate brokerages.

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