Homebuying is an inherently emotional experience and brings with it feelings that don't always serve our best interest in the heat of decision-making. That said, this emotional baggage doesn't just affect the individual home-buyer, but the industry as a whole.
Consider the 25 percent of Americans who are currently underwater on their mortgages. Some respected economists agree that it ultimately makes financial sense to allow those home owners to have their principals reduced to reflect current market value. The truth is that in many or even most foreclosures, lenders lose so much on the legal costs and depressed market values of the homes that it would be in their interest to lower mortgage balances so the homeowners stay in place and don't default.
Beyond a sense of emotional paralysis, there's a simple logistical problem to overcome. Put simply, mortgages don't just come from the traditional banks anymore, so it's not as if the CEO of Bank of America could call up the CEO of Wells Fargo and simply say, "Hey, let's fix this together." These same leaders also need to be aware of and adhere to the frequently shifting governmental regulations within the industry (especially those rules of late that were directed by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act), which makes these types of agreements nearly impossible. An innovation challenge to say the least. Not to mention the fact that most mortgages are sold and re-sold on the secondary market, or packaged up together in collaterized debt obligations, making it very unclear who owns what anymore.
The complexity of this industry is part of what feeds the negative emotions associated with buying a home, and even those in the very middle of it, seemingly its architects, are themselves frustrated and emotional. At my company Doorsteps, we have spoken to plenty of big lenders who are just as unhappy with the system as their buyers are, but very few are able to take any meaningful steps to move forward.
So I wonder -- How might lenders come together on this issue in a way that feels right for them? What do they need? What must change? I don't have all the answers, but that isn't stopping me from trying to figure it out.
There is some re-imagining needed on both the lender and individual homebuyer sides. Potential buyers rightly feel a great deal of anxiety when buying. Consider that moving alone is stressful, and this is likely the biggest purchase of person's life. Also, many first- time homebuyers especially have additional financial baggage that generations before them didn't have - massive student loan debt.
For those buying for the first time, the process can be confusing. It's not intuitive and it's often hard for lenders to know if and when a potential buyer is ready. Interestingly enough, at Doorsteps we've learned that first-time homebuyers are often interfacing with the lender first to better understand the financial implications of their purchase. But it's often difficult for the lender to manage the relationship with the homebuyer throughout the process -- creating yet another emotional challenge for both sides.
Our platform intends to ease the anxiety involved in the process and make it easier for buyers, agents and lenders alike. But what changes do you think need to made in the process? Let me know in the comments.