In a recent episode of “The Loan Officer Podcast,“ hosts Dustin Owen and John Coleman sit down to expose common mortgage industry myths that can impact everyone from the media to recruiters and branch managers.
To start the episode, Owen dives into media misconceptions concerning the Federal Reserve’s interest rate cuts and their impacts on mortgage rates and home sales. He and Coleman agree that there is no direct correlation between benchmark rate changes and mortgage rate fluctuations, despite common beliefs to the contrary. Owen explains that the Fed can impact the trading of mortgage-backed securities (MBS) by purchasing them, which drives up the prices of the bonds while lowering yields and mortgage rates.
“What’s sad is to see so many mortgage companies, lenders, real estate agents, or talking heads on TV use that as clickbait,” Owen says. “But it’s improperly educating the consumer because they’re left to believe that one leads to the other.”
The second myth addressed involves what they call the unnecessary adoption of 30-year mortgages in the housing industry. Both hosts share a bit of background on their homeownership history, highlighting the fact that neither of them have owned a home that warranted a 30-year mortgage commitment. Owen says that your home is a five- to 15-year decision, while a mortgage is a five- to seven-year decision.
Most lenders, Owen says, will use potential savings to sway buyers into 30-year mortgages. But these savings are not consistent enough to use as a basis for choosing a 30-year loan. Therefore, the consumer is being misled.
Next, the third myth targets the one-size-fits-all mortgage. Owen shares that all loans and interest rates are created based on 21 factors that differ depending on the individual lender. He says that mortgages should be specifically tailored to each consumer, putting them in the best position to buy a home.
Next, the conversation shifts toward recruiter red flags that mortgage professionals should look out for. Owen mentions recruiters who bash other lenders in an effort to sway loan officers into choosing them for employment. The duo agree that recruiters should focus on syncing with candidates on five- to seven-year goals, and they should look for commonalities between a candidate’s career goals and the lender’s long-term growth trajectory.
Furthermore, misleading pro forma statements in the mortgage industry may also cause issues with recruiting. Pro formas are standardized financial projections that predict a company’s performance over a set period of time. In the mortgage industry, lenders use pro forma statements to attract talent with favorable numbers. Owen points out that some branches fail to account for variables such as expenses, new salaries and other elements that impact their finances. He advises lenders to offer accurate pro formas and avoid bad-mouthing other branches to boost recruitment potential.
The last red flag involves a practice that Owen relates to personally. According to Owen, every branch manager should be available, invest in their LOs, have a great sales culture, maintain systems that a new LO can tie into and set an example of professionalism for their staff.
If a branch manager does not push a new hire to improve professionally, then they are doing a disservice to any new hires. He urges managers to determine the best ways to relate to new hires and teach them in a manner that is unique to them.
“What made them work, what made them tick, might not work for you,” Owen says. “The way I love may not be the way my wife likes to be loved. Management and being managed works the exact same way.”
