In a recent post, I lamented the inefficiencies I saw in the mortgage process. Red tape, confusing questions, obscured data and dragging one's feet is all-too-common in the loan origination business. My main question I sought to answer today is 'Why?' With a purchase so large and significant, I would hope that the market provided a better answer, but, alas, here we are.
Would you like fries with that?
I can best compare my struggles with this question with my experiences when I go to McDonald's or any restaurant for that matter. I can pull up to the drive-thru, order my #9, pay the cashier and then within moments I have a servicable, predictable if not bland but dependable sandwich for the exact price that was promised to me. I enjoy the dependability and consistency, if not the incredible service and amazing turnaround time. The aspect of this transaction that fascinates me the most is that this is common in the industry. Everybody has a horror story of going to a restaurant and being made to wait 45 minutes (GASP!). It reminds me of Louis CK's bit on waiting on the runway.
Mortgage industry take note!
Let's compare this to the mortgage industry:
- Closing costs don't come in until a Good Faith Estimate, which still has a margin of error
- There are no guarantees on delivery time (compare to Domino's 30 minute or 45 minute guarantee!)
- The rate is an estimate that is not secured until you PAY to guarantee it for X number of days
- All of this is dependent on a third party appraiser and your own inspector to ensure that your purchase is up to standard (now that I think of it, not a bad idea for fast food either)
- Surprise fees, last minute faxes, horror stories of a courier being sent to collect 17 cents and wire transactions abound, and nobody seems to be complaining
Sidenote: think innovation is done in fast food process excellence? I for one think this is a fantastic idea, leading to specialization, cost-savings and order accuracy, but if you disagree, let me know in the comments: McDonald's is outsourcing its drive-thru operators!
How many mortgages do you purchase in a lifetime?
The best explanation I could come up with is the sheer volume of transactions you partake in a lifetime. Because I didn't bother to research, I will estimate that the average American eats at a restaurant two times a month. This may be high or low, I don't care. That means in a ten-year span, your average person visits 240 restaurants. This includes aurport restaurants, visiting different cities, ordering in, all the different options you have that you are able to sample. After a while, everybody develops their own preferences for what types of food and what types of service they like.
An example that shows how picky, spoiled and pretentious I can be:
When I am at a restaurant and I order coffee I take careful note of my cream/sugar ratio (for those who call me a Yankee, I don't care). If I am halfway through the cup and the waiter fills it right to the top, the entire balance is thrown out of whack and I have a lesser experience. It does not ruin the experience, but it certainly irks me a little.
Compare that anecdote with a mortgage. Do you think I would be able to even begin to explain the slight nuances in process that I prefer when it comes to originating a mortgage? The whole concept is extremely foreign to the average American so slight improvements or innovations are largely unseen or unrecognized. This also means that there is little incentive to innovate. If your average citizen will put up with an ordeal of a process because there's no other option then why not just continue business as usual? Especially if it's profitable and it's expensive and risky to innovate.
Answer below in the comments!
This led me to think of how many mortgages I will originate in a lifetime. Will I be able to distinguish between better and worse customer service? Will I be able to distinguish among the best and worst companies? I put my number around 8 for a lifetime. This will include moving, rental properties, refinances, etc. It may be a little high, but I am willing and able to hop around the country or world so I thought I might hedge toward the high end of the number. How about yourself?
How many mortgages have you originated in your lifetime? How many do you expect to? What parts of the process do you find most irritating? Was there any innovation you have seen recently that was refreshing?
Cheers,
Cameron Daniels
