A quick note: I am a mortgage broker and banker so I wear both hats. I consider myself in the group below.
Seth Godin wrote a great post the other day simply titled “Responsibility” that focused on one key question: “Are you responsible for what you market?”
His answer was a resounding yes based on this premise: marketing works. If you agree that marketing works then you should agree that the idea of free choice is really not that free. Marketing influences choice. Godin cites the decline in cigarette smoking over the period since advertising has been significantly curtailed as one (of many) examples:
If marketing works, it means that free choice isn’t quite so free. It means that marketers get to influence and amplify desires. The number of SUVs sold in the United States is a bazillion times bigger than it was in 1962. Is that because people suddenly want them, or is it because car marketers built them and marketed them?
Cigarette consumption is way down. Is that because people suddenly don’t want them any more, or is it because advertising opportunities are limited?
This post led me to some new thinking on our embattled industry and the current round of finger-pointing up and down the money-ladder. The common refrain from mortgage brokers as a defense to the “predatory lending” accusations being bandied about by consumer groups and government entities is “We only sold what the banks gave us to sell” and “Brokers don’t underwrite the product.” These notions that depict brokers as impotent pawns in the mortgage game with little control over their actions-resigned to the whims of the banking world, forced to peddle whatever products were made available by the banks- is callous and dangerous. This position is clearly one that Mr. Godin would whole-heartedly disagree with; and I do too.
As brokers we’re responsible for the loans we choose to put our customers in. When we choose to put a retired person on fixed income in a negatively amortizing payment-option loan for maximum rebate with out clearly identifying their comfort level and understanding of the loan we must take responsibility for that action. The culpability rests with us for making greed-driven, customer-damaging decisions; regardless of what the program guidelines from the banks say.
Whether you as a mortgage originator choose to accept a fiduciary responsibility for your client or not-as a marketer you have another responsibility-to be responsible with the products you market. If you are a broker or sales person marketing negatively amortizing payment-option loans to people as a way to simply maximize your monthly income, you have not only failed to uphold any semblance of fiduciary responsibility, but you have also violated the consumer’s trust from a responsible-marketing perspective as well.
By choosing to market products simply based on the potential for profit and by the market’s desire for them you choose to not use the power of marketing judiciously and responsibly. You choose to maximize your own gain at the expense of the market and your customers.
Your choice to do this is unethical, immoral and plain wrong; regardless of where you think the true decision-making lies.
As Seth states:
My point is that you have no right to market things you know are harmful or that lead to bad outcomes, regardless of how much you need that job.
Along the way, “just doing my job,” has become a mantra for blind marketers who are making short-term mistakes in order to avoid a conflict with the client or the boss. As marketing becomes every more powerful, this is just untenable. It’s unacceptable.
If you get asked to market something, you’re responsible. You’re responsible for the impacts, the costs, the side effects and the damage. You killed that kid. You poisoned that river. You led to that fight. If you can’t put your name on it, I hope you’ll walk away.
I’ve walked away because it helps me sleep at night. I know too many in this industry who chose not to take responsibility; who continue to point fingers up the food chains to the banks that make the products available-who refuse to take responsibility for marketing and selling dangerous products under the pitiful guise of “just offering what the banks are selling.”
I hope that after the housing and mortgage market shake out that the professionals left standing are the ones who have been willing to take responsibility for the products they market in an effort to make our industry a better, more consumer-friendly place where the products benefit the people who use them-rather than disenfranchise them millions at a time.
Brian Brady says:
I agree with most of what you say, Morgan. There have been many greed-driven recommendations from unscrupulous originators.
However, the ultimate responsibility lies with the consumer.
It is the wise originator who will adopt a consultative sales approach from a fiduciary perspective. It is the wise consumer who values said approach and proceeds with that trusted adviser.
As long as the consumer continues to shop loans and not originators, he/she will get exactly what he/she seeks.
June 22, 2007 — 12:38 am
Jefferson Otwell says:
Brian’s right about the wise originator and a consultative sales approach, but I do not think that we should lay this at the feet of the mortgagor.
I have helped a client get a mortgage I would not have gotten myself, but I have never helped a client get a mortgage that made no sense for him (or her).
Perhaps the order-takers and salesmen find being their own moral agent too much to handle. If folks in the know kept saying “no”, then many of these situations would not have occurred.
June 22, 2007 — 9:51 am
Morgan Brown says:
Brian – I agree that in the end the ultimate responsiblity remains with the consumer. Smoke too much? It is your own fault. Same with other vices.
On the other hand is it the smoker’s fault that the cigarette companies obfusicated the facts about the dangers of smoking, burried reports of adictiveness and potential health problems?
Is it the smoker’s fault for buying in to a promise (the promise delivered by the Marlboro man, Newport Lights and others) that is false?
I believe that consumers make decisions based on information and they do their best to synthesize and make decisions from the information that comes in from all sources – including marketing.
If they weren’t considering marketing as a valuable information source then businesses would not waste the money. It is precisely why brokers and other retail lenders are responsible for the false promises that are made through our sales and marketing.
You and I Brian can sift through the inch-and-a-half thick set of disclosures and documents to figure out if what we’re getting is what we’re told we’re getting; but I’ve met plenty of judges, businesspeople, and doctors who can’t do it. I don’t believe that missing skill makes them solely at fault.
June 22, 2007 — 10:01 am
Jim Gilly says:
To say the ultimate responsibility lies with the customer, is in itself an irresponsible assertion. To imply the average consumer is aware of how the mortgage industry works and that it is up to them to make the right decision is plain nonsense.
I spent over 20 years in the financial services industry and it was not until after I retired, that I became aware of what a sordid business this really is. It’s time for those who originate loans to place the blame where it needs to be placed and I can tell you it is not with the customer.
To make an informed and wise financial decision, you first need to have ready and open access to information you can understand that will help you make a sound decision. You need to have ethical, knowledeable and licensed professionals available who will work on your behalf in a fiduciary capacity. You need to have enforceable laws in place to regulate and punish those who unfairly take advantage of the customer for their own personal gains.
Little or none of the above currently exists. To say otherwise would be a denial of the facts.
Morgan is spot on with his comments and I admire the stand he and others like Jefferson are willing to take. Unfortunately, they are in the minority and I see nothing on the horizon that is likely to change this in the near future. I am, however, encouraged to read posts like this showing there are a few willing to point out that all is not well with the status quo. It’s a start anyway.
June 25, 2007 — 10:43 pm
sonny says:
I would like to know the exact responsibilities in layman’s terms of a mortgage broker. Thank you.
September 1, 2008 — 12:48 pm