What Can The NAMB (National Association of Mortgage Brokers) Value Proposition Be?
Mortgage brokers are taking a lot of hits since August 2, 2007 (the day the mortgage died). Former BloodhoundBlog contributor, Morgan Brown, predicted the death of the wholesale lending channel a few months after that, on Blown Mortgage:
If you don’t see the change, it is because you are blinded by both the slow, silent moves of the attack and your own hopeful optimism of a return to normalcy. But there will be no return; for the mortgage broker’s days are numbered. The forces are aligning now, the outcome is certain, the only question that remains is the timing of the fatal blow
Lower interest rates and contracted lender staffs have kept the mortgage broker alive this year, after an arduous 2008. The plain fact is that mortgage brokers, for all of our faults, still offer the best chance for a borrower to get unbiased advice, from a mortgage consultant with a fiduciary duty. Why, then are we getting hammered? Morgan Brown predicted that, too:
Why the change? The answer is two-fold. First and foremost, investors that buy the securities will pay for the protection that a retail origination provides them in assuring a quality underlying asset in those securities. They will pay less for the risk involved in a loan origination made from a removed party. Studies have shown that wholesale originations perform worse than retail; and while you can argue all day that it is the same bank underwriting the loans, in the end investors will buy what they feel confident in – and that is retail originations. Banks won’t waste time or effort to sell an unsellable product at a loss; and that is exactly what is happening with wholesale originations.
Second, the court of public opinion will demand a fall guy for this mess; and probably more than one. While everyone is pointing out Angelo Mozilo, watch for the mortgage brokers to take the brunt of legislative changes and regulatory action that will shut that channel down.
Morgan’s predictions proved to be spot-on accurate. Where was NAMB while this happened? As it turns out, NAMB was fighting the Banks, the Press, and the Regulators, all of whom were looking to lynch someone for the credit crisis. The problem? The Banks had more money to lobby the Regulators and hire PR firms to influence the Press…as Morgan Brown concluded:
Surely, not the large banks and lending institutions who developed and sold the ridiculous products; paying mortgage brokers massive kick-backs to push them on to poorly-informed customers. Not them, for they have donated too much money and have hired layers of legal counsel that can stymie any chance at a quick and public trial and execution.
No, it will fall in to the laps of brokers, the small business owners, the 3 man mortgage shops. They will be strung up like the boogeyman (that some surely are) and eliminated from the lending framework. And when that is done the public will rest at ease, and the lenders will get back to making their millions and all will be right with the world…except it won’t.
Today, mortgage brokers are frustrated. Recently, one floated the idea that NAMB had their lunch handed to them (and subsequently recanted), by a Congressional Committee, debating H.R. 1728. Facts proved that nothing could be farther from the truth. Read this fifteen-page transcript of the testimony of NAMB Governmental Affairs Representative, Denise Leonard. Ms. Leonard argued the case for:
- fairness in licensing standards among all originators: bank, brokerage, or retail lending sales representatives
- more consumer-friendly disclosure documents
- suitability in loan recommendations
- lenders offering a variety of loan products without the threat of reprisal due to opaque regulations
- increased borrower scrutiny of high-cost or “sub-prime” loans
- abolishing (or suspending) the Home Valuation Code of Conduct so that consumers’ loan settlement costs won’t rise
Why are mortgage brokers upset then? NAMB is clearly representing our interests as is evidenced by the testimony of Ms. Leonard. It is my opinion that NAMB is suffering from an identity crisis. Rather than “Fight City Hall”, I think we, as mortgage brokers should embrace and capitalize on much of the unfair legislation imposed upon us and advertise our superior value proposition to the public. Let me outline my thoughts:
I don’t want fairness in licensing standards. If regulators believe that independent mortgage brokerage originators must be licensed, let’s promote the fact that mortgage brokers have the distinct advantage of education and fiduciary duty. What a unique opportunity we have to differentiate ourselves from “the inferior qualifications bank sales representatives have” and the “one-sided relationship lenders offer the borrowers”.
Don’t wait for HUD or the Fed to impose simplicity in disclosure, offer it now. Certain federal disclosure forms are confusing but a NAMB generated form, similar to the expected disclosure form positions us as the transparent choice. Be proactive in the consumers’ eyes.
Offer a NAMB suitability questionnaire, complete with budgeting forms and first-time home buyer education courses (can be done online) with each loan submission. Document the consumer education and care we provide.
Embrace the software solutions Loan Magic and Mortgage Coach offer to educate consumers on the REAL cost of credit, figured to an expected holding period. Demonstrate how the current APR formula, as determined by T-I-L-A, is an inferior disclosure item.
Partner with Mortgage News Daily, MSS, or MBS Quoteline to offer real-time MBS market data to NAMB members. Encourage that partner to promote the higher standard of care a NAMB-accredited originator provides. Integrate that knowledge into educational courses and promote, promote, PROMOTE that NAMB-accredited originators are better executors of rate locks than the bank sales representatives.
Streamline the NAMB-education courses so that initial designations can be earned without mandatory participation in NAMB Chapter activities. Make initial designation education available online so that any originator, member or not, can experience the value; the Association membership will follow.
Pursue an aggressive promotional campaign online. Eyeballs and advertising affordability are on the internet. Build a “brand” akin to the REALTOR “brand” online. Hire a social media manager to promote that brand and remind consumers that NAMB-accredited mortgage brokers are the superior choice.
Encourage local chapters to promote the value of the designations to respective REALTOR associations and local government housing agencies. Distinguish our superior consumer education and agency relationship, from the inferior bank sales representatives, to the “gatekeepers” of the transactions.
Finally, engage rather than preach to non-member originators. The recent encounter about the rumored (and false) failure of NAMB’s testimony to Congress resulted in an appearance of frustration by the NAMB President. His comments suggested that mortgage brokers worked at the pleasure of NAMB’s efforts and that non-members were not contributing to the support of our industry; he won the battle but risks losing the war.
I’m not convinced that NAMB is the answer for the mortgage brokerage professional but I’m not convinced that it isn’t. Mortgage brokers were sucked into the vortex of the credit crisis by the circling of the industry, media, and regulators’ wagons. I still believe we are a consumer’s best choice and I’m certain that the folks at NAMB do, too. We were first into the soup, let’s be the group to lead everyone out of it.
NAMB can take leadership by telling the consumer our value proposition. In the end, the consumer is the only one who matters.
Point of Disclosure- I’m not a CAMB member so I don’t enjoy the membership in the parent organization, NAMB. I was a member of AAMB when I lived in Phoenix. It is not my intention to embarrass NAMB but to invite them to public discourse about how we, as an industry, can effectively promote to the consumer what we know to be true; mortgage brokers are the true professionals in the lending industry.