Anyone who has their taxes professionally prepared knows the importance of gathering all of the pertinent documentation prior to meeting with their tax preparer. Imagine arriving at your accountant’s office and telling them that your income was somewhere between $85,000 and $115,000, that you donated about $2,500 to $5,000 to charity, or that your mortgage interest payments were anywhere from $8,500 to $10,125. Your accountant would probably say something to the effect of, “Get out of my office and stop wasting my time.”
No competent tax professional would ever consider preparing a client’s tax returns based on estimations. Doing so would be ludicrous at best, malpractice at worst. So, why do mortgage originators frequently accept loan applications based on estimates, with the borrower’s supporting documentation to follow? Often, it’s because they want to avoid inconveniencing the client and potentially losing the deal.
The initial goal of the client meeting is to take an application. The ultimate goal is to fund the loan. Many times, however, mortgage originators are so consumed with “getting the application” that they compromise the application’s integrity.
Their fear of alienating the borrower by holding them accountable — by requiring proper documentation prior to or at the time of application — often overrides their responsibility for submitting quality applications. Ironically, it’s the client who ultimately suffers when originators cut corners. This causes a straightforward application to become far more complicated than it needs to be and it takes far longer for the loan to consummate than it otherwise should.
For every estimate used in a loan application, additional documentation will typically be required when the supporting documentation ultimately arrives and the application is updated with accurate data. The ensuing ripple effect is almost guaranteed to spur irritating and unnecessary delays for the client.
By requesting that the applicant provide the loan originator with all supporting documentation prior to or at the time of the application, these forms can be completed accurately and will include the correct data that will ultimately be considered and verified by the underwriter. Originating in this manner avoids additional delays and detours. Even though this requires the applicant to exert some additional effort in the beginning, doing so will ultimately result in smoother loan processing and an easier, more streamlined transaction.
It’s important to recognize, however, that as a condition for receiving a loan estimate, no lender or loan originator may compel an individual to produce supporting documentation under the Truth in Lending Act and Real Estate Settlement Procedures Act, or the TILA-RESPA Integrated Disclosure (TRID) rule. By setting the appropriate expectations from the start, however, as well as by explaining to the applicant why it is critical that they have their supporting documentation with them at application, this obstacle can often be compliantly surmounted.
The initial goal of the client meeting is to take an application. The ultimate goal is to fund the loan.
From the start of the transaction, the mortgage originator must possess and display the confidence to take control of the interaction and guide the borrower. After all, the originator is the professional expert. A successful loan originator will never hesitate to fire a client if that client does not want to do what is needed of them.
If a borrower defects to an originator who isn’t as demanding, the client will most likely return to the original loan originator weeks later after experiencing numerous delays and setbacks, all resulting from initially cut corners. Setting the appropriate expectations involves being realistic when interacting with one’s client.
It is far easier for someone to recover from immediate disappointment than from disappointment incurred after a prolonged period of excited anticipation. From the very beginning, the loan originator should inform the borrower about what will be expected of them, in order to facilitate a fluid and efficient transaction.
Explain to the client that they should gather up and bring all of the necessary documentation with them to their application meeting (or provide it beforehand to the originator). Further warn that, if they neglect to do so, or if the documentation cannot be collected in time, the originator will need to reschedule their application.
Do not fax or e-mail the list of required documentation to the client. If you do so, there is a strong likelihood that the first time they review this list will be immediately prior to their appointment. By insisting that they write down a dictated list of the documentation they will need for the application, they will immediately know what is expected of them, and they will begin thinking about where and how to gather this material. Additionally, a dictated list can be personally tailored to the client’s specific circumstances and loan request. A personal touch always goes a lot further than a generic one.
The Uniform Residential Loan Application is the canvas upon which your masterpiece is created. The vast majority of underwriter complaints stem from sloppy, poor-quality applications. The difference between the successful and unsuccessful loan originator largely correlates to the quality of their applications.
Mortgage originators who take the time and effort to complete their applications accurately and thoroughly by using verifiable data typically have fewer problems, experience quicker closings, amass far more satisfied borrowers and ultimately receive more referrals. Originators who are quick to cut corners in order to initially make things easier for their clients ultimately experience longer closing times, a greater number of problems, the need to repeatedly request additional documentation from their applicants and often wind up with borrowers who don’t remember their name months later.
When underwriters fight over loan files because they know that the originator submits complete, thorough, accurate and high-quality files, success is usually automatic. Additionally, how likely would an underwriter be to approve a borderline file when the originator of that file is someone who typically submits exceptional, high-quality files, versus an originator who typically submits sloppy ones? When the loan originator makes the underwriter’s job easier, the likelihood is higher that the underwriter will be inclined to return the favor.
Commission-based mortgage originators who typically take sloppy applications rife with inaccuracies, missing information and estimated data can be easily identified as the individuals who experience “roller-coaster” income patterns. These patterns are typically caused by a month of successful originations followed by a much slower month, followed by another successful month, followed by much a slower one.
The reason why this occurs is because, after a successful month of originating, instead of continuing the momentum, the sloppy originator spends most of the next month extinguishing the fires caused by the previous month’s sloppy originations. After extinguishing these fires, the originator once again can focus on originating new loans, only to have the pattern repeat itself.
Mortgage originators who submit thorough and accurate applications from the start generally experience consistent income growth as more happy clients refer new business their way. These loan originators prove their worth by consistently pleasing their clients, rather than devoting valuable time toward cleaning up the mess caused by sloppy originations and the cutting of corners.
At the application, the successful loan originator will set the appropriate expectations and complete the winning mortgage application thoroughly, correctly, compliantly and completely.
A pleasant client experience is critical for ensuring borrower loyalty, satisfaction and the incentive to refer new business. Even if the client is expected to work a little harder at the start of the process by gathering up the necessary documentation prior to their application, their efforts will usually prove thoroughly worthwhile.
A successful mortgage originator will explain the importance of dictating the list of required materials to the borrower at the time that the application appointment is scheduled. The originator will then dictate a thorough list, tailored to that unique and particular transaction, while holding the borrower accountable by rescheduling the application in the event that the applicant cannot or does not collect everything that’s needed in advance.
At the application, the successful loan originator will set the appropriate expectations and complete the winning mortgage application thoroughly, correctly, compliantly and completely, utilizing the supporting documentation that the applicant provides. Doing so will minimize the likelihood of having to repeatedly contact the applicant to request additional documentation.
Applications completed this way will typically lead to highly satisfied clients who refer more business and remember the loan originator’s name when needing a mortgage in the future. In turn, this will afford the loan originator a far more stable income pattern while leaving the roller coasters in the amusement parks.