Apr
07

Process Versus Service In The Mortgage Industry

My mentor, tutor, and broker John Bargis from Mortgage Edge brought to light today a differentiator that is clearly emerging in the mortgage industry.

Do you process or service your client?

Are you, as a client, looking to be serviced or just to be processed?

Here’s what I mean exactly illustrated by a real-life example.

I have these great clients who have been engaging with me on every facet since January. We have developed all sorts of different scenarios for them: Keep condo, sell condo, refi condo, buy a house, max down payment, minimum down payment, amortization scenarios, everything under the sun. This is where I present to my clients the true value of working with someone who participates in the service-type of mortgage brokering. I not only love what I do but I know what I do very well and come up with every possible angle, down-fall, or crack in the deal to come up with an answer to make these people feel confident in what we have going on because a lot is at stake: Deposit money, emotions, relationships even.

Compare this to a process-type of broker. “Hey there! I’ll offer you the best rate, but the worst service”. Of course they don’t say this explicitly but it’s really the case when you read their google reviews. Do they care to compare different terms and the break-even effects of going shorter-term vs long-term? no. Do they discuss penalties, portability, and other clauses? Maybe, but rarely. They just want to get you in the cheapest car on the lot so you can get to and from work every single day knowing you got the cheapest car on the lot. Sometimes it’s a good used car, sometimes it isn’t. They don’t care. Their game is volume.

Then what happens?

Fast-forward 2 years when the short-term mortgage is due and lo-and-behold rates are higher. Should’ve thought of that? No. It’s your broker’s job to do so. Now at renewal time your options may be more limited, the market may have corrected or changed, and the rules may be different. Now you’re potentially left holding the bag on a half-million-dollar-mortgage with higher payments you didn’t expect because you went for process versus service.

I get it. Price matters. Psychologically there’s a reason why everything at the store is prices at $x.99 and not $x+1.00. Example $3.99 not $4.00. Our brains are wired to think that $0.01 is cheaper and therefore a better “deal”. Don’t fall in that trap when it comes to borrowing money though. That $0.01 today will not necessarily save you the money you think you’ll save.

Eventually our business will become automated, I get that. However our business is also very old-school It’s relationship based. I work with underwriters, lenders, funders, lawyer, and many other stakeholders and no algorithm will replace that. I also feel that relationships with clients are crucial to build and to have a long-term discussion of what options lie ahead to plan effectively. That’s why I choose the service-side of the equation versus the process-side.

Thanks for reading. I welcome all comments.

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