There is too much risk to mortgage originators in dealing with clients who do not understand what to expect in the home buying process as well as not knowing what they need to do after the deal closes.
At the Mortgage Bankers Association’s National Secondary Market Conference held in New York during May, attorney Mitchel Kider said the ability-to-repay standards and qualified mortgage definitions issued by the Consumer Financial Protection Bureau leaves the consumer with little or personal responsibility for their actions.
And while he was speaking about shifting the burden of proof for this to the lender, there have been those in the business who have been working to increase consumer knowledge of the mortgage process.
Are these programs enough to help shift that burden back to the consumer if something were to go wrong? Only time will tell. But the resources are out there.
In March, AllRegs, the Eagan, Minn.-based firm known for having put secondary market guidelines available online, announced it developed a consumer-facing education training program.
AllRegs is working with HomeFree-USA, a homeownership development and Department of Housing and Urban Development intermediary on this resource. It is available through www.homecoach-usa.com and includes curriculums on homebuyer education, home owner education and financial literacy.
Dan Thoms, executive vice president of AllRegs, noted this is the company’s first efforts in the B2C space. But it is approaching it from two directions. The first is the HomeCoach website where the consumer can take training directly from AllRegs.
It is working with counseling agencies to bring their clients to the site. AllRegs is also working with the Realtor community for them to pass the word out about the site to consumers.
The other strategy is to work with mortgage originators to provide to clients or potential clients “straightforward training that meets HUD requirements,” he declared. The training is not aimed at converting these consumers into customers.
“We think lenders need to be providing training to consumers,” especially given that the Dodd-Frank bill established an agency dedicated to consumer protection and the whole aim of the legislation is doing the right thing by consumers, Thoms said.
The consumer is able to click a link on the mortgage originator’s website to have access to this training at no cost to them (because the lender is paying for it).
But it will still help generate a lead for the mortgage company because the consumer went to its website, saw that this company offers the service whereas its competitor doesn’t. Thus Thoms pointed out, it makes the company that offers this training website’s “stickier” and it helps with search engine optimization.
Plus the lender gets the name of someone who is so interested in buying a home that they were willing to take a course.
There are servicers that are interested in the homeownership courses, which cover things like creating a budget and other skills needed to keep a home, especially in tough times, Thoms said.
Lenders can make some customizations to the courses and platform for lender-specific content.
These courses are written for the average consumer, he said, noting that not Americans have more than a high-school education (if that), yet they are still people who can and do buy homes.
“We want to try and engage them using media and other things, while giving them a strong message that meets or exceeds the national standards” set up for homeownership education, Thoms said.
In the end, this tool will help reduce consumer complaints to mortgage lenders and meet the CFPB’s mandate to mitigate these complaints, he said. More importantly, it is something that will help the consumer understand the process so well, they will not be calling to complain in the first place.
A famous commercial tag line from a New York-based clothing retailer (now defunct) named Syms went: “An educated consumer is our best customer.” Thoms quoted that, and continued declaring “that is not a bad model for the mortgage industry. An educated consumer is their best customer. So how do you that?”
But for many lenders, providing education is not something they are proficient at.
However, San Francisco’s Bank of the West has a series of educational videos, known as “Mortgages in Brief” where consumers can access from the company’s YouTube channel. These new videos compliment a series of consumer-oriented mortgage videos released last summer.
Topics include downpayments, credit scores, loan costs and documentation.
They feature Karen Mayfield, who heads the bank’s mortgage team. She answers such questions as: What should I know about my credit score? Do I have enough for a downpayment? What if I don’t have the cash to put down 20%? What documents will I need at closing? What closing costs should I expect?
“The housing market has really become a seller’s market, so homebuyers need to prepare themselves as much as possible before they start shopping for a home,” Mayfield said.
Besides the videos, Bank of the West has created an infographic, called “No Place Like a New Home.”
“We wanted to provide information that consumers shopping for a home find interesting and useful. This infographic has fun facts—like the time it takes in San Francisco to save for a downpayment—and it has valuable consumer information, such as some of the key steps in the home buying process,” Mayfield explained.
New American Funding was going the mass media route in seeking to educate consumers. The company earlier this year hired Tim Conway Jr. (son of the actor/comedian and a media personality in his own right) to host Mortgage Hunters America, a radio program airing in Los Angeles, San Diego and Riverside counties in California, and in Denver.
The program, which listeners can call in, seeks to educate consumers on financing and ownership. Rick Arvielo, president of New American Funding, is scheduled to be a guest speaker.