- - Thursday, December 13, 2012

A survey in the news recently concludes that many Americans wouldn’t mind shopping for their next mortgage at Wal-Mart. According to a September survey by Carlisle & Gallagher Consulting Group, a third of the 618 consumers who participated in the online study said they would consider a Wal-Mart mortgage.

I don’t want to sound like a mortgage snob, but I’m afraid I can’t help myself. I turned half a hundred years this year, and my mortgage business is almost the legal drinking age of 21. I have stuck to my business plan since 1992, which is to offer competitive mortgage products to prime-credit borrowers and give expert advice and guidance.

Over the years, especially before the financial bust of 2008, mortgage originators came and went as if the industry had a revolving door. When rates went up, poseur mortgage loan officers exited in droves back to the used-car lot. When rates fell, I bet there was a shortage of used-car salesman because they were jumping back into the lucrative mortgage business.

My point is not to disparage the auto-sales industry or the big-box business model. My point is to explain that the mortgage-origination business has been rooted largely in sales. There’s nothing wrong with sales. They power the economy. But I can only guess that if Wal-Mart enters the mortgage-origination business, its primary objective will be to close loans with very little emphasis on “expert advice and guidance.”

In fact, although I have no statistical data, my experience tells me larger lending institutions typically hire young, energetic salespeople without, in my opinion, the in-depth knowledge needed to provide expert advice and guidance. Their job is to sell loans.

Here is a sampling of questions off the top of my head that any reasonably competent originator should be able to answer using only his brain and a pocket calculator:

What’s the total interest paid in month 38 of a 3.50 percent mortgage with a beginning balance of $200,000 amortized over 15 years?

How much extra must a borrower pay each month if he wants to pay off his loan 36 months earlier than the term specified on the note?

What is the annual percentage rate, and explain why it’s likely an inaccurate gauge of the cost of credit.

What circumstances might warrant the reduction of mortgage debt on a refinance?

Under what circumstances might a borrower take out an adjustable-rate mortgage that carries some risk?

There’s a big difference between selling and fiduciary advisement. Taking out the biggest loan of most folks’ lifetime requires the latter. I’ve said this hundreds of times to folks shopping around for a loan officer: If the loan officer sounds “salesy” or you get the feeling you’re getting a hard sell, hang up the phone.

Henry Savage is president of PMC Mortgage in Alexandria. Send email to henrysavage@pmcmortgage.com.