The growing popularity of the Internet has raised concerns that the REALTOR^® and the mortgage broker will soon go the way of the dinosaur.

Although the nature and breadth of the services for both of these entities has changed, many believe that the essential need for them has not. In fact, there is some evidence that the Internet will increase the need for consumers to obtain sound counseling from both real estate and lending professionals. One industry executive explains why the news of the demise of the mortgage broker has been greatly exaggerated.

Ross G. Bennett, CMB, executive vice president of Thomas Mortgage and Financial Services, Inc says, "No, lenders are not a vanishing species. As a mortgage banker and broker with 20 years experience in residential lending, I see the need more than ever for professional loan officers to explain the nuances amongst the dozens of loan programs that exist in the market place today." "Points or no points, prepayment penalty vs. no prepayment penalty, break-even points on refinancing at various rate combinations, credit issues, debt restructuring, financial advice, end-loan or construction perm, subordination agreements, road maintenance agreements, PUD reviews, condo project approvals....the list is endless and ever encompassing."

"It is a popular recurrent theme that technology will replace financial advisors in the home buying process. Those who think this process can be simplified so that the consumer can act as his own financial advisor in the mortgage process are unaware of the complexities of the business. Every lender still has its own set of guidelines for approval. Even experienced lenders have a hard time keeping up with ever-changing guidelines in order to obtain a commitment for a purchaser. Mortgages are traded in million dollar blocks on Wall Street, but for most buyers who need help in saving a down payment, clearing a delinquent account or restructuring their balance sheet, mortgages are quite positively not a commodity."

"Mortgages are originated one loan at a time. They are like snowflakes...no two borrowers nor two loan applications are exactly alike. Automation such as Fannie's Desktop Underwriter (DU) or Freddie's Loan Prospector (LP) really tell us what we as experienced lenders already know... good credit, adequate income and ample assets will always be approved by the lender. There may be welcome reduction in the amount of paperwork, but the process is essentially unchanged. These programs do little or nothing for those buyers who fall just below preset standards for loan approval."

"DU and LP do not know how to take a loan that is declined and turn it into an approval. These programs do not have the intuition to say, make a lower down payment on a home and use the excess cash to reduce the balance on an installment debt so that the debt is not calculated in the DTI ratios. They cannot suggest that an asset be sold to raise liquidity. They cannot suggest a co-borrower to help qualify, nor can it suggest borrowing against an asset such as a 401k plan for down payment. Automation cannot recommend that you close unused credit card accounts in order to increase your credit score. DU and LP can only approve or decline a loan based on the specific information input into the system. Garbage in...garbage out!"

"Buying a home is still an emotional, stressful experience. Trusting your future and your largest investment solely to a "black box" is beyond the capability of all but the strongest borrowers. Artificial intelligence in approving a loan is simply a tool, to help a lender to speed the process of product delivery to the consumer. From this perspective, it is a welcome addition to the industry. Technology helps trained loan officers decide the best alternative for each individual borrower. Technology by itself cannot determine the best loan for the borrower because it does not even know the right questions to ask."

Published: September 7, 1998

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