I took my 17 year old daughter on a “decay tour” of Detroit last summer. She of course hated it, but I found it fascinating.
From WWII through the early 1970s, Detroit was one of the mightiest industrial cities of the world, and it is now only a shell of its former self.
The City is dotted with huge abandoned factories, vast swaths of open space, and actual farmland b/c entire neighborhoods have been razed.
What happened to Detroit was competition of course. Foreign competitors were able to produce much cheaper cars not just b/c labor was cheaper, but also b/c their production was far more efficient.
One of the biggest causes of Detroit’s inefficiency was far too many middle managers who did nothing to improve quality or manufacturing efficiency.
These managers, numbering in the tens of thousands, were highly paid and they largely supported Detroit’s many luxury markets. When the managers lost their jobs, beautiful high-end neighborhoods collapsed into disrepair.
It was amazing to see mansions sitting vacant or selling for a fraction of what they would cost to build.
MORTGAGE INDUSTRY = AUTO INDUSTRY CIRCA 1972
1970s Detroit reminds me a lot of today’s mortgage industry.
This is b/c we also have too many middle managers collecting fees in various forms while not actually helping loan officers fund more loans.
I know many loan officers outside of JVM whose rates are much higher than they need to be b/c they have to subsidize a branch manager, a regional manager, a district manager, a marketing manager, etc.
Each of those managers might only command a “few basis points” but in the aggregate, the charges often increase a loan officer’s rates by as much as 1/4 percent.
B/c borrowers are more rate-sensitive than ever, I suspect a lot of middle managers will be looking for alternative employment.
WHY THIS MATTERS
This matters b/c interest rates matter – a lot.
If you are an agent referring loans to a loan officer who is subsidizing multiple middle managers, your clients will likely not be happy in this rate-sensitive environment.
If a loan officer is vying for your business, you might compare his rates to our “Tuesday Rate Quotes” or the rates we will soon be posting on our website.
Our rates are low not just b/c we have stellar new investors, but also b/c we have no middle managers.
