The mortgage industry can be frustrating, especially for originators who work in the broker or correspondent worlds. There are too many shades of gray when it comes to getting loans approved and closed, and not enough black-and-white absolutes.
Many lenders interpret guidelines differently and may or may not have overlays — which are never the same. These gray areas, however, can set you apart from other originators when attempting to help your clients find a mortgage.
When you get a call from an underwriter who is about to deny a loan request or the file is being referred by the automated underwriting algorithm, it’s game time. This is where the fun begins and the magic happens. This is the part where newer and less experienced (or less enthusiastic) originators are most likely to lose business. The seasoned grinders start setting the pace to the finish line.
Take an example from the accounting world. One accountant may let you write off a new pooch at your home office as a guard dog, while another accountant might say, “No way.” The fact is that you can write off the expenses of purchasing, training and feeding a guard dog.
Ultimately, it all comes down to one person’s opinion — the accountant’s. In this case, do they believe your dog is a guard dog or the family pet? It’s a gray area. Underwriters and mortgage guidelines aren’t much different. There is a ton of gray area. Hitting a bump in the lending process can be stressful if you don’t know how to work through it. The best thing about mortgages is, there is almost always a way to work through every shade-of-gray situation.
Mortgage maverick
How do you become the problem solver — the mortgage maverick? There are ways to accomplish your goal of being the originator who changes a gray area into something black and white.
For one, read the findings of your automated underwriting system and follow them. If there is one way to operate in black and white, it’s by using Desktop Originator and Loan Prospector, the automated underwriting programs that help originators understand whether a loan meets the respective eligibility requirements of Fannie Mae or Freddie Mac.
Originators get used to asking clients for the same set of documents every time: two years of tax returns, current pay stubs and W-2 forms, two months of bank statements, etc. If you are doing this, that’s fine, but don’t send all of this to the underwriter. First, look at what your findings are asking for and only send what is requested. You will save yourself, your borrowers and your real estate agent partners a lot of time and effort.
Your processors will come back to you and say, “But the underwriter always adds the extra pay stubs or W-2 if I only send a full VOE (verification of employment), so I would rather just send it all upfront.” The underwriter is wrong if they are doing this. Instead, you need to call and politely ask them why they are asking for things beyond the typical findings for your borrower with a 780 credit score who is putting 10% down and has had the same job for six years.
Let them know that you are interested in understanding their condition that requests pay stubs when the Desktop Underwriter findings only asked for a full verification of employment. Is there a new guideline that you don’t know about? Maybe you are missing something. Questions will always get you a lot further than orders.
Underwriters make mistakes. They get confused. It’s going to happen because there are thousands of pages of guidelines. You can help them. Make it easy for them to understand your borrower, the loan request and your goals as an originator. Before submitting a file, type up a one-page memo that explains your borrower’s history, what they are trying to do, how you calculated income and why it all makes sense. If there is one tip that will reduce the number of conditions and denials you receive, this is it. Present the story and the information.
Arduous process
Author and real estate investor Brandon Turner wrote about pushing a mortgage through to closing. In “The Book on Rental Property Investing,” he passes on the excellent piece of advice that follows. “Loan programs do not differ that much from lender to lender, but what does differ is the skill of the person behind the counter.”
He continued on to say that he was able to close significantly more loans than other bankers. This wasn’t because he was getting more leads but because he was able to work the loan files through the arduous approval process and have them come out on the other side.
Are you learning how to crack the code? If you get a refer recommendation with Fannie Mae, are you then able to try Freddie Mac? For example, on a second-home purchase, if there are no comparables with an accessory unit, Fannie requires the borrower to put down an additional 5%, but Freddie does not require a comp with an accessory unit. There are dozens of examples like this that you need to know to serve your clients.
Remember that “no” usually means “not this way, not with this person or this bank, or maybe not with this loan program.” There are many solutions and ways to work around these obstacles. Most people give up when they hear the word “no.”
You will be told no often in your professional capacity, but this isn’t the time to shrug and move on. This is the time to ask more questions, to make another call and to find another way. This is the time for persistence and determination. Maybe you can’t get the deal done with a specific person, bank or loan program. What other options do you and your client have? No does not always mean no. Do not give up.
Collective collaboration
Don’t be shy about asking for help. It doesn’t mean you are weak; it only means you are wise. If you cannot find an answer or solution, ask others for their opinions. Start with the underwriter first to see if they are willing and able to offer any suggestions. Get them on your team by inviting them to be part of the solution-finding process.
Another option is to ask the mortgage originators you work with or, even ask questions in an online group of other mortgage professionals. This is the power of collective collaboration. You can even reach out to appraisers you know for help on appraisals with low estimates or other issues.
Imagine, for example, that a new-home construction loan is appraised for $25,000 lower than the sales price. Call your favorite appraiser. Oftentimes, things get missed, such as comparables that should have been considered. Document these items and send them over to the appraisal department to see if they’ll take another look.
People love to help other people. Going forward, just make sure that you are offering answers and solutions to the people who are in the same position as you. ●
