“Let the buyer beware.”

I just read an article on the New York Times’ site about Countrywide Financial and its current problems due to the sub-prime mortgage crash.

Interestingly, the author of the article blames Countrywide for what it implies are its greedy practices that–gasp!–didn’t have the best interests of its loan-purchasing customers at heart.  The customers who purchased these loans with horrible interest rates and terms are not held responsible for their actions.

It’s an odd thing to me, but something more and more common in our culture: people are given a free pass for their irresponsible actions and someone or something else is blamed instead: “big business”, oil companies, George Bush, etc.

When you are buying a house, it is clear that the mortgage company is not on your side.  Why?  Well, if they were, they would give you the loan for the house at 0% interest and let you pay it back as you were able to.  No one does that because a company couldn’t stay in business doing that.

Instead, mortgage companies compete with each other, and the average rate for a 30-year fixed loan nudges up or down depending on a billion factors.  Now those companies, like a car salesman, want to make the most money that they can on each loan they make, so they want to sell their product at the highest price that a customer will pay for.

When you go to a car dealership, you go in knowing that they will try to rip you off in about a hundred different ways.  Usually, they have come up with another 3 or 4 rip-offs tricks that you hadn’t learned about, so you have to stay on your toes, but you go in with “buyer beware” on your mind.

Why?  Because the car salesman has little impetus to give you the best deal from your end.  It is a zero-sum game with them: if you haggle a dollar off the price, that’s one less dollar in his pocket.  You probably won’t be buying a car again for years, so repeat business is not a big incentive.  There is no relationship here.

Neither is there a relationship with the mortgage company you get your loan from.  It is a commodity to them.  Complaining that the mortgage company tried to rip someone off is like complaining about a car salesman who did the same thing; no one should be surprised because that is what should be expected of such companies.

For me, this is a good reason not to be in such businesses as selling cars or mortgage loans.  I would rather be in a business that builds positive, mutually beneficial and enriching relationships between people.  Nonetheless, most of us have to drive a car and most of us, if we want to own a house, have to get a mortgage.

Because of that, you should learn all that you can before you look into getting a loan.  Check out multiple mortgage brokers and banks, just as you would visit multiple car dealerships and salesmen.  Buy two books on the subject: the $50 they will cost you are nothing compared to what you will save by just knowing one more fact about the process.

Finally, go in with the understanding that you as the buyer must beware.  You care more about your money that anyone else will, and though there are honest people in these businesses, the companies they work for reward them for giving you the worst deal.

May our Lord guide you in being a wise steward of your treasure and protect you from unscrupulous people!