(Elizabeth Warren is the Harvard Law Professor chosen by President Obama to launch the new Consumer Financial Protection Bureau.)
Dear Ms. Warren,
Congratulations on being hand-picked by President Obama to form and head the new Consumer Financial Protection Bureau.
I’ve been closely monitoring the upcoming regulatory changes, within the Frank-Dodd Financial Reform Act. I’ve also listened to your statements and opinions regarding financial reform and what you hope to accomplish.
As I’m sure you already know, most people working within the financial industries are honest, responsible, and consistently deliver what’s best for their clients. We all agree that clarity and transparency within the financial industry is beneficial to the consumer.
However, some of your comments trouble me. For example:
You were recently quoted (USA Today, weekend magazine, January 16, 2011) as saying. “Shopping for a mortgage should be as straightforward as buying a breakfast cereal.” Although this makes for a great sound-bite, the truth is, the analogy is far from accurate –and treating a mortgage like a commodity is in fact, dangerous.
We’ve all compared a box of corn flakes with the generic brand sitting next to it on the store shelf. We’ve eaten both and know they taste the same. The nutritional content is the same. The volume of cereal contained with the box is the same. The only difference is the price. But with all due respect, financial services (and a mortgage is absolutely a financial service) is nothing like a commoditized box of cereal.
Allow me to propose a more accurate analogy. If heaven forbid, you ever needed of a cardiac surgeon, would you compare surgeons simply based on a one page disclosure that outlined their fees? Certainly not! You would:
- Ask for recommendations from your family doctor or another trusted medical advisor.
- Consider their education, level of experience, and surgery success rates.
- Interview the surgeons and choose one that’s knowledgeable, even renown in his field.
- Ensure his bedside manner matches your needs, that he explains the procedure to your satisfaction, and that he’ll be there for you before, during and after the “transaction” (surgery).
When your health and your life are on the line, shouldn’t you ensure you have the best person for the job taking care of you? Isn’t your financial health just as important?
- Work with a true professional to help them choose the most appropriate financial instrument (whether that be a mortgage, an investment, or insurance policy) that best meets their short term and long term financial needs?
- Choose a mortgage professional based on his success rate, ability to deliver accurate information, and bedside manner?
- Choose a mortgage professional that’s available when needed, before, during, and after the transaction?
A mortgage is often the most expensive financial transaction in a person’s life. I can show you countless examples where working with a petty mortgage salesperson has resulted in poor choices for the consumer. The loans may close (though often they don’t). But poor guidance has resulted in tens of thousands of dollars in additional costs to the consumer over the loan’s term, sometimes resulting in the loss of their home! With the stakes so high, why should consumers work with anyone but the best Mortgage Planner?
And you know what? Here in New York State where I practice, the bulk of a borrower’s closing costs are either charged by the State or local municipality, regulated by the State, controlled by the borrower’s attorney, or charged by third parties that I do not choose. At the end of the day, the real bank fees that a borrower hopes to compare will likely not vary by more than a few hundred dollars, regardless of the lender chosen.
I’m all for transparency and clarity within the mortgage industry. However, adding more layers of regulation and bureaucracy only add more complexity and longer transaction times, while in the end, always resulting in more costs – not lower costs – to the consumer.
Since 1992, Warren Goldberg has helped thousands of clients own their homes, refinance their mortgages, restructure their debts, and invest in real estate. Warren is known for his wide knowledge of mortgage products and wealth-creation strategies.