The mortgage industry's competence crisis

Rampant misinformation and incompetence among lenders are exacerbating the affordability crisis in today's housing market, compromising professional standards and consumer trust.

Since 2020, US home prices have surged 47%, while mortgage rates reached a two-decade high of 7.49% in late 2023, according to recent reports by NPR and PBS. This environment demands heightened lender accountability, yet fundamental errors and opaque pricing practices persist, often harming qualified borrowers.

Rick Davis (pictured), founder of Sullivan Home Loans in Indianapolis, understands the stakes personally. After losing $20,000 in a fraudulent mortgage franchise deal, Davis chose to rebuild rather than retreat

“I got scammed as I entered this business for over $20,000,” Davis said. “All I really had was this mortgage license. I thought I should probably go write some loans and get some of my money back and figure out my next moves.”

That early loss laid the groundwork for Sullivan Home Loans, which Davis launched in late 2023 after several years in retail lending. The Indianapolis-based brokerage is taking aim at what Davis sees as a broken industry - and a worsening housing affordability crisis.

“One of the things right now that I'm seeing in our market is affordability,” he said. “The cost of a home per the money that people bring in - it’s skyrocketing.”

Tight inventory only makes affordability worse. Buyers are forced to settle, often compromising on the quality or location of their home.

To ease the burden, Davis is turning to creative financing solutions like two-one temporary buydowns, which lower a buyer’s mortgage rate for the first two years. It’s a strategy designed to create breathing room.

“It allows them a couple years of runway here to let the economy kind of settle down so they can refinance into a lower interest rate long term,” he said.

Tackling incompetence and prioritizing transparency

But financing tools alone won’t fix what Davis believes is an industry-wide problem of low standards and misinformation. Incompetence, he said, is rampant - and dangerous.

“It absolutely breaks my heart when I see incompetent lenders out there falsely pre-approving people,” he said.

He pointed to a recent case where a borrower was rejected because the father’s child support payments weren’t court-ordered. Davis insisted the problem wasn’t the paperwork - it was the loan officer’s ignorance.

That gap in knowledge, he argued, reflects a bigger issue in the way lending is taught and practiced. Instead of helping people navigate one of the biggest decisions of their lives, too many lenders focus on their own bottom line.

Davis is trying to change that, starting with cost transparency. At Sullivan, keeping fees low is a core principle. The firm’s lean model avoids the bloated overhead of traditional brokerages. Thirty workstations share a single space, cutting costs and enabling Davis to pass on savings to his clients.

“Time and time again, I see us saving people on both their interest rate and their closing costs,” he said.

Another issue, Davis said, is how lenders often dangle low rates while concealing higher costs elsewhere.

“Too often lenders will go and sell a customer on the interest rate and not the overall mortgage strategy,” he said. “They’re being misleading; there’s a lot of these online companies that do that.”

His solution is to look beyond the numbers and help clients build long-term financial resilience.

“We need to make sure that they have some money saved back for their payments on repairs,” he said. “We are saving them right there.”

For first-time buyers concerned about rates and timing, Davis keeps it simple.

“There’s no right or wrong time to buy. It’s just whatever works for you,” he said. “I would not wait on one of the talking heads to save us to make a major life decision.”

He doesn’t hold back when it comes to calling out professionals who prioritize their commission over client readiness.

“It really pains me to watch somebody go and buy a house when maybe they weren’t ready because all the professionals that they decided to partner with are giving them advice based on their own personal needs,” he said. “Pick out a great real estate agent, a great lender and a great home inspector—they’re going to keep you out of trouble.”

Making the mortgage work for buyers

As for down payment assistance programs, Davis urged borrowers to scrutinize them carefully. Many are burdened with higher rates and conditions.

“There’s no such thing as a free lunch,” he said. “The closing costs are higher. The interest rates are higher [and] sometimes you have to pay that money back.”

One exception, in his view, is the Empowered Down Payment Assistance Program. It’s forgivable, and clients can refinance out of it after seven months of on-time payments.

Speed is also a key differentiator. Davis boasts of closing loans in as little as eight days - the legal minimum.

“We’re also closing a loan tomorrow in legally the fastest timeframe the government will let you close,” he said.

That kind of agility, he argued, is often the difference between winning and losing in a competitive market.

“If our buyers can close on it in eight days, and it doesn’t cost them a penny more; we now have this capability that will help them, without having to overpay for the house,” he said.

For Davis, the goal isn’t just efficiency - it’s impact.

“If my cost was, say, $3,000 to them and I showed them $15,000 in cost savings, I love it and I feel like I did my job right,” he said.