No way to regulate the mortgage industry? - By: Andrew Bloom, Posted on: 2007-02-03

Both Federal and State governments are on a bit of a tear lately to impose more regulations upon the mortgage industry. Easy target I suppose. Of course this happens every time foreclosure levels increase. And, it’s not going to be over for a while yet. I’m not saying that this can’t be a good thing, but usually passed regulations only result in …

Lenders being forced to:
1. Incorporate more forms (that no one ever reads anyway)
2. Tighten their lending standards (denying many people loans resulting in a depressed housing market)
3. Increasing their overhead and expenditures (especially the compliance department)

Someone has to enforce these bills —- more bureaucracy. And, who do you think the increased costs will be passed on to?

DESPITE what I just wrote I do give great credit to all those that have passed meaningful legislation. The consumer has benefited tremendously. Regulators still have an important role in monitoring the banking industry. The lure of money always brings out the occassional scheme and criminal. However, we are now at a point where legislation can not make effective broad sweeping changes because the real problem is this:

1. Unfavorable terms result in higher compensation (the more unfavorable the more money lenders and brokers make)

2. The government can’t affix a price for a product or service (all they can do is make a ceiling —- right now a sort of universal law among wholesale lenders is the most they will compensate a broker or their retail arm is 5%.)

3. The real estate industry has a death grip on 6% for buying / selling a home.

The good people of America have, through their representatives on the Federal and State level, decided that this is too much money to pay (someone making $15,000 for providing a loan on a $300,000 property). But, like I said…. their hands are tied. Why are percentages used in determining the “value” of the services provided? Shouldn’t the value of providing a mortgage be the same for a $100,000 loan and a $300,000 loan?

So, Here is the Next Paradigm Shift in the Mortgage Industry
The internet is fast becoming the solution to the problem. One of the real problems in the mortgage industry is the cost of advertising. Because there is so much money involved there are currently over 500,000 mortgage professionals nationwide. With that much competition you must be agressive in your advertising. Want to know the cost of advertising (that must be passed on to you)? The average between direct mail, internet leads, radio commercials, telemarketing is between $1,500 and $3,000 per closed loan.

So let’s say $2,000 per closed loan for advertising, $1,000 per closed loan for the loan officer (the human element in the chain), overhead, insurance, employees, copiers, faxes, supplies, computers, desks, rent, etc…. Hey, these guys NEED to make $7,000 or $8,000 in order to make a decent profit. But then again, isn’t that a ridiculous price to pay for a service? ….. Isn’t It? …….

This is where the internet steps in. There is a spam-free site at http://www.freeloanadvice.net that has a FREE guide available called “The Ultimate Mortgage Shopping Guide”. Free Loan Advice basically offers 3 things:

1. Establishing the “value” of providing a mortgage regardless of credit standing, loan amount, whatever.

2. Providing a FREE tool available to everyone called the Rate and Fee Analyzer which estimates total compensation on a particular proposal.

3. May offer to provide a loan at the established “value”. Depending upon the state of course. Currently they have arrangements to cover around 35 states.

Plus there are literaly hundreds of articles available on the site covering virtually every aspect of the mortgage business. Additionally, there is a section to ask any question that may be on your mind. Maybe the best part is the fact that the information is there for you to use — or not use — it’s always up to you. The site is completely Free of any charge and your information will be held strictly confidential and will not be sold to anyone for any reason.

Isn’t this the way that business should be conducted???? A mortgage is a product like anything else. And as a product should have a “value” attached to it. Eventually, you’ll be happy to pay a premium to deal with a good company that offers great service —- but only a premium and NOT Thousands of dollars more.

As web sites like this become more mainstream you will witness decreased advertising through the Mail, Phone, TV and Radio. People will get much better deals on their home loans which will decrease the need for ever increasing regulation.

Yes, there is a way to regulate the mortgage industry!

Article Source: http://www.southerncaliforniarealestateagent.com/submit-real-estate-articles

With over 20 years experience in real estate / mortgages, Andrew Bloom has agreed to reveal the ONE true way to get the best deal. Get the FREE "Ultimate Mortgage Shopping Guide" found at the Spam-Free site www.freeloanadvice.net You are free to re-print this article but only if the resource box remains intact. Copyright 2007 andrew bloom

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