I. We recently had a one-star Yelp review
And it was brutal because we take so much pride in our service and our extraordinarily high % (almost perfect) of 5-star reviews.
The review stemmed from a misunderstanding, and it has since been removed (Thank God) – but there was so much to learn that I had to blog about it.
We Love Feedback!
First, despite the misunderstandings, they still had valid criticisms. And we immediately tweaked our systems (adding clarity to follow-up emails, ensuring all borrowers are always copied on all communication, no matter how minor, etc.).
This is also why we do mid-loan and post-loan surveys, and it is why we analyze our sales and marketing metrics (lead #s, conversion ratios, email open rates, social media engagement, etc.) so closely.
We meet as a team every week and immediately tweak our systems non-stop (with dozens of tweaks per week) in response to feedback and real-time data to improve our service.
This is one of the things that makes running a business both fun and stressful – the need to constantly improve never stops because the competition is relentless and intense.
The Government Does Not Get or Care About Bad Reviews
In 2015, the Environmental Protection Agency (EPA) negligently broke a debris dam near a mine in CO and released 3 million gallons of bright orange acid water full of mercury into the irrigation water of three states and onto the Navajo reservation.
And… nobody left the EPA a one-star Yelp review. In addition, despite the extreme negligence, nobody was fired or even docked pay.
And – even if somebody did leave a one-star review, the EPA would do little in response because they’d have little incentive to do anything – when their careers and compensation are not impacted by a lack of action.
The EPA, of course, is not alone in its negligence, as the rest of the government frequently says, “hold my beer…” Great examples include the Fed’s huge misses on the housing meltdown prior to 2008 and COVID inflation.
This is why expansive government does not and cannot work: it does not respond to market forces or feedback – both because it is difficult and there is no incentive to do so.
Lastly, consider the difference in service levels between a private business making dozens of improvements per week and a government agency that makes none.
After 6 months, the private business will be 100 times more efficient and effective as the tweaks add up. And after 6 years, the difference will approach infinity…
II. The New Fed: Huge Changes We All Need to Understand (Why Rate Hikes Will Lower Rates)
For years, whenever rates were falling, and borrowers started expecting a cut in the Fed Funds Rate, we’d email our entire database and plead with them NOT to wait for the Fed to cut rates before locking in a refi or purchase rate.
We would explain that the Fed controls only short-term rates (not long-term mortgage rates), and that the bond market (that controls rates) has already accounted for, or “priced in,” the impending rate cut.
The bond market could account for the impending cut because of the Fed’s policy of Forward Guidance: The Fed’s willingness to telegraph rate hikes or cuts before they happen.
The new Fed Chair (Warsh) is no fan of Forward Guidance (in place since 2008), and he plans to return to the old days of surprises.
This is partly why the next hike in the Fed Funds Rate will reduce long-term mortgage rates.
Two Reasons Why the Next Fed Rate Hike Will Likely Result in Lower Mortgage Rates
- The announced hike will likely be a surprise – so the market will not have already “priced it in.”
- The announced hike will be seen by the markets as a sincere effort to fend off inflation by Fed Chair Warsh. And given that today’s higher rates are almost entirely driven by inflation concerns, any sincere effort by the Fed to control inflation will likely bring down long-term rates.
