For those of you who watched Super Bowl 50 you might have seen ads placed by Quicken Loans. These ads promoted easy home loans accessible from a mobile device. But wait, do you see anything wrong with giving easy money to people to buy a home without doing due diligence to determine if they are indeed qualified to repay those loans? Doesn’t this sound a bit like what happened in the most recent housing recession here in our country?
These “Rocket Mortgages” promoted by Quicken Loans were intended to get consumers to use an app to secure a mortgage but the underlying message sports an economic growth strategy based upon soaring consumer debt.
The Quicken Loans ad argued that more people getting mortgages more easily — with the push of a button on a phone while sitting at a show, for example — would set off a chain reaction leading to purchases of furniture and household goods and then more jobs for people who make those goods. A “tidal wave of ownership floods the country with new homeowners who now must own other things,” the narrator said. “And isn’t that the power of America itself?”
The hackles this raised among the economic commentariat was instant. For a while during the Super Bowl, certain segments of Twitter were dominated not by talk of Peyton Manning and Cam Newton, but by snark. “Rocket Mortgage: Let’s do the financial crisis again, but with apps!” tweeted Dave Weigel of The Washington Post.
The Consumer Financial Protection Bureau offered its own timely reminder that people taking out a mortgage should take their time and ask lots of questions. And by Monday more considered criticism and defense of the ad had aired.
Quicken Loans’s defense of the commercial is strongest on this point: Its product is about making the process of applying for a loan easier, not about lowering the standards for who can get a loan and on what terms. “It’s a far different world today than in 2006 or 2007,” said Jay Farner, president of Quicken Loans, in an interview Monday.
The wave of foreclosures starting in 2007 that dragged the economy into recession and triggered a global financial crisis was driven in large part by a collapse in underwriting standards. Lenders offered mortgages to people with wildly inadequate incomes or down payments or documentation. Lending standards are much tighter now, and the new mobile app does nothing to change that.
What do you think about these “Rocket Mortgages”? Would you suggest your clients secure one? We’d love to hear from you.
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