Mortgage Matters

Flying from Quantity to Quality

2008-04-08T08:50:00

The mortgage business is changing. Slowly but surely the adage "less is more" rings louder and louder. Lenders are "flying" to quality rather than quantity. Quantity worked when home values were strong. When the collateral is strong and increasing in value, then it is very difficult for lenders to get hurt. House appreciation was the rule nationwide. Now house appreciation is the exception.

What does it mean when the industry moves from quantity to quality? I believe in this case that quality has multiple meanings. Quality means credit, collateral and financial wear with all. These are the basics of good lending. In other words, lending to folks that actually can afford to be in debt and actually plan on paying you back on time. This premise is the basis for our entire banking system in America. Yes, it is time to get back to the basics.

Home appreciation is not a right. Home appreciation is not something that you plan or should expect to build into your net worth. Maximum leverage of an asset is not good business, especially when it may be a person's only asset. The emphasis on quantity has been hurting the American consumer. It may be painful but the move to quality will help the American consumer. Like shedding a few pounds it might be painful at first, but this entire mortgage crisis will make America even stronger.

New Challenges in the Mortgage Business: Options vs. Solutions

2008-03-20T09:13:00

With every new challenge, there is always a new opportunity. For the last decade, the consumer has been given a plethora of options when shopping for their home financing. In fact, if an option did not exist for a borrower or a group of borrowers, then a new option was invented. The theory was, "If Wall Street will buy it then it must be fine." Instead of qualifying for a particular product, banks and mortgage companies (backed by Wall Street), felt obligated to find or even invent a product for the consumer. In the end, it was the demise of the industry.

With every good collapse or failure, an opportunity pounces to the forefront. Rather than seeking a product that a customer needs to fit, how about this noble thought, "Let’s find a solution that best serves the customer." Maybe the solution is to rent for another year until the necessary down payment is accumulated. Maybe the solution is to buy a lesser house, build some equity and then trade up in 3 to 5 years. I would argue that today’s consumer needs to be treated like a client rather than a customer. A customer is always right. For the past decade, the lending industry told their customers that they were always right. A client is not always right. A client is told the hard truth. Sometimes you have to tell a client something that they do not want to hear. Sometimes a client goes somewhere else. However, they will be back when they realize that you had their best interest at heart.

Not only was the customer thinking in the short term over the past decade but the industry was thinking short-term as well. What is in the best interest for your client in the long term? The consumer needs to ask themselves what is in their best interest for the long term as well. If the industry and the consumer slow down long enough to ask themselves those two questions, then the industry and the housing market will rebound. Our work force is being challenged to look-out for the clients and advise them properly. Someone has to make the first move and National Bank Of Kansas City is willing to take that first step.

National Mortgage Recovery Is Here!

2008-03-06T11:44:00

Our country is in a real crisis right now. We are suffering from an over-built, over-leveraged, and "over-credited" industry. The housing market has carried the economy for the last several years. Home ownership has been at an all-time high. Builders, developers, bankers, mortgage companies, finance companies, etc. have all benefited from this surge in home ownership.

However, this "great run" has come at a price. In an effort to "feed the monster", the consumer was given more options than ever. The consumer that was maybe two or three years away from purchasing a house or the consumer that was maybe two or three years from purchasing their dream home was given an immediate opportunity. Suddenly, delaying gratification was a thing of the past. There are currently millions of consumers in a house that they simply can not afford and the house they currently are living in may be depreciating as they speak. Suddenly the dream home is a nightmare and the first time home buyer will soon be looking to rent an apartment again.

In an effort to undo this crisis, National Bank Of Kansas City has formed a division called, National Mortgage Recovery. The bank believes the consumer needs a loan that they should have received in the first place. We also, believe that the consumer should be educated and put back in the driver's seat. Our National Mortgage Recovery Team is currently working with current holders of mortgage notes in an effort to "work-out" a better solution for their borrowers. It is our hope that we can turn the nightmare back into a dream and to instill pride, not shame, back into home ownership.