Special to CMT, By Karen Beattie, NEXSYS Financial
Last month I wrote about the challenges mortgage professionals are facing as a result of changes to mortgage underwriting guidelines. Based on the responses to the article, this topic clearly struck a chord. Some readers felt the
changes were long overdue while others were concerned about adapting to them.
To
address that latter point, I contacted some mortgage underwriters. The mission was to collect their advice on how to get deals
quickly approved in this new environment. I went in hoping to get exclusive
insider information but, not surprisingly, their advice turned out to be simple
common sense:
- Know the lender’s guidelines – Underwriters were
unanimous on one thing: too many applications are being submitted that don’t
meet the lender’s basic guidelines. This results in inefficiencies, delayed
response times and declined applications. Policies vary from lender to lender, including minimum square footage, rental income offsets and maximum
mortgage amount, to name a few. In the words of one senior underwriting manager: “Don’t
submit applications that you know won’t fit, ‘just to try it.’ Establish a
good reputation with the lender by being known as serious, competent and a hard
working agent/broker.”
- Know your client – Ask the right questions and the tough questions. For
example, why has the client had four jobs in three years? Why is the spouse not
going on title? If a client is unwilling to provide a satisfactory response to
a question or hesitates to provide supporting documents, this is a red flag.
Dig deeper in these cases because if you don’t, the underwriters will, resulting
in delays or declines.
- Be honest – Detrimental information should never
be withheld for fear of a decline. Misinformation is usually exposed
eventually, and can sometimes damage a broker’s reputation with a lender. If
new information is revealed just before closing, the clients and agent could be
left with no options for financing.
- Submit a complete application – Lenders and insurers require complete
applications for a reason. One area that’s known for incomplete information is
the client‘s assets. A senior underwriter put it this way: “The
client’s balance sheet is important. Omitting properties or assets
because [they’re deemed] not required for the transaction is a very bad idea.”
- Provide good notes – Good notes paint a picture of why the file should be
approved. Enter concise notes and make sure they’re relevant to the credit
decision. Underwriters often receive irrelevant details such as a client’s
family history, religious background, or appearance (seriously). That the
applicant is “the most gorgeous man ever”, a soccer coach or related to
the mayor is not going to affect the credit decision.
Efficiency
ratios are under scrutiny in the broker channel. Keeping the above principles
in mind will improve your service to clients and your status with lenders.
Karen Beattie is Business Development Manager at NEXSYS Financial Inc. Karen has been involved in the Canadian Mortgage Industry for 20 years, starting at the lender level and then working as a mortgage agent. She now specializes in underwriting and document validation.
These suggestions are just common sense designed to make a deal work for both lender and mortgage agent.
Each lender has their own broker manual or brochure that lists their requirements. BDM for lenders visit various broker offices or trade shows to discuss their products and requirements.There is no reason for an agent not to know a lender’s requirements If an agent is unsure about an application send an email to the BDM with the details to see if this is a deal they would consider. The last thing a lender wants is their underwriter’s time wasted.
The same diligence should be applied to the application. When you see the applicant(s) for the first time ask them to have all the relevant supporting documents ready for you. That allows you to verify their numbers as you work through the application. A little more effort at the beginning might save you a deal and income at the end.
Related to the mayor will likely get you declined in Vancouver, Toronto or any town in Quebec,,,,,
I have a tip for lenders. Put ALL your guidelines on a simple to use website. Half my declines are due to “unwritten” rules.
I can understand the importance of having decline or close ratios from a lender’s point of view.
Managing this number after 4 rounds of guideline changes in 4 years has has been difficult, since the decline rates are up and agents are looking for a new set of eyes on their deals.
Less deals to go around, and good agents don’t just give up on deals. Hopefully, the close ratios or decline ratios have factored in a sales quality known as “persistence.”
So I hope there is mercy and understanding shown to the agents that have a number that isn’t great to look at. Times are tough enough out there for mortgage agents.
agreed!
The article is good and yes common sense, however, lenders have made changes to their policies continually since 2008. Sometimes these changes are not disclosed until you send the app to them. Also, I have had two separate underwriters for the same lender who will have two different decisions for the same file and will advise of different policies. This is a problem. You can also have the BDM say the file should be approved and then have the underwriter turn it down for a reason the BDM says is okay. Maybe the next article should be directed at the lender which could be titled “How to assist in improving Brokers closing ratio’s” and the first suggestion could be a little consistency among the underwriters and knowing their own policies could be included. I have had to tell underwriters their own policies before to get the approval. The finger is always pointed at us brokers. The lender is as much or more of the problem with closing ratio’s in my opinion. The second could be…….continually keep the brokers updated on any and ALL policy changes and send them out regularly. Each lender seems to forget they only have to remember their own policies where we have numerous lenders policies we are trying to remember so having the policies updated, with all of their policies included and easy to access would assist a great deal.
The changes had to happen sooner or later. The things that occurred years ago in the mortgage space was crazy. The process is tougher now but people are getting loans that should be and not just because they have a pulse.
AGREED! You are so right, and I couldn’t agree with you more. It’s not always the brokers that just want to put a rush on things and get the deal closed. More often than not, it’s the lenders who aren’t aware of their own guidelines. It’s a frustrating problem, and one I never thought another broker would ignore. I agree with JB. Another article directed at lenders, and telling them how they can help us simply by educating themselves is a great idea!
The crazy loan approvals didn’t happen here. That was in the US. Flaherty introduced the new rules to cut back on household debt, not because we had too many defaults. People are getting loans that should be, but many deserving people are still being left out because lenders simply don’t know their new underwriting guidelines as well as they should. I don’t disagree with the rules. I disagree with lendrs who don’t care to learn them.