Guest Post by N. Mitchell Feinstein
I write this article from my perspective of more than fifty years in the mortgage lending business, a perspective that seems to me as if I were staring down to the Colorado River from the rim of the Grand Canyon. It’s been a long time baby.
I’ve operated in this milieu from the first day I practiced law, through the boom of the 70’s, the Savings and Loan Collapse, the equity run up in the eighties, the subprime churn of the 90’s into the 21st century, and the most recent crash and boom.
Through this all I’ve observed and participated in the survival skills of one of the most resilient of creatures, the Mortgage Broker.
I’ve seen the broker shed skins multiple times. In the 1960’s and 1970’s, I saw the brokers take advantage of the shortage of lenders in the inner city. When the federal government forced banks in the area and when other’s saw profit there, the sneaky guys moved into funding larger loans by creating the multi lender transaction allowing them in the 70’s and 80’s to fund entrepreneurs betting on the rapid rise of real estate values in California.
I watched in amazement as they changed funding techniques creating pools, collateral debt, subordinated debt and other vehicles to fund the transactions.
But what I observed most of all is as these brokers switched from game to game, their focus was first on sales and second on performance. What I mean by this is that these types ran from product to product, copying any idea they could, often without understanding the full implication of their actions. They disregarded the fine points of new transaction in order to pursue pure profit.
Often their rapid changes brought mayhem to their borrowers and lenders.
But during this maelstrom it always appeared to me that those who had the longest experience served their clients the best.
In today’s market the latest “deal of the day” for the past short burst was financing the business of financing house flips, much like the deals shown on HG TV. But as in the past, the market has become overcrowded and more importantly more efficient lenders have reduced the prices so the inefficient and hungry brokers can compete.
So what have they done? I have observed that once again the snakes have shed their skin and now put on the clothing of trust and probate experts. They try to gain market share by underselling the long time providers, but at what price? As before the new players concern is for sales in the short term, not long term reputation.
So using a new broker for a loan for an estate or trust, may save a few dollars, but is the risk worth it? The new players lack experience, often don’t provide the level of service necessary for the benefit of the trust or estate and can make mistakes.
As always, it’s better to deal with a known broker who has spent his entire career serving the probate community then betting on a snake with a new skin.