The CFPB Has Confirmed What Loan Officers Have Always Known

In a January 2015 study, the CFPB has confirmed what loan officers and mortgage brokers have always known, the first provider to engage with the borrower has the highest likelihood of acquiring the loan transaction. For about 77% of borrowers, the mortgage shopping process stops after their first application. That is significant.

The interest rate on a mortgage is one of the key components of the mortgage’s total cost, and offered mortgage interest rates vary across lenders, implying that consumers can potentially save a significant amount of money if they shop effectively. But interest rates are only one component of finding the right lender match. To shop effectively, a consumer must must know what features and benefits are available and what eligibility standards are applicable. Not all lenders offer the same loan products and not all lenders follow the same credit criteria.

Key findings from the National Survey of Mortgage Borrowers include:

      1. A sizable share of borrowers report that factors not directly related to mortgage cost, including the lender or broker’s reputation and geographic proximity, are very important in their decision making. Borrowers who express such preferences are much less likely to shop.
      2. Almost half of consumers who take out a mortgage for home purchase fail to shop prior to application; that is, they seriously consider only a single lender or mortgage broker before choosing where to apply. The tendency to shop is somewhat higher among first-time homebuyers.
      3. The primary source of information relied on by mortgage borrowers is their lender or broker, followed by a real estate agent.
      4. Consumers who report being unfamiliar with the mortgage process are less likely to shop and are more likely to rely on real estate agents or personal acquaintances.

 

The study goes on to ask consumers what characteristics – besides interest rates or other mortgage terms – may play an important role in their choice of lender or broker. While none of these characteristics were considered very important by a majority of the borrowers, these characteristics were very important for a sizable minority of consumers:

  • Having an established banking relationship
  • Reputation of the lender/broker
  • Having a local office or branch nearby
  • Recommendation from a real estate agent/home builder

 

For those consumers who had a tendency to shop, these are the primary characteristics that motivated them:

  • Lender/broker operates online
  • Recommendation from a lending website
  • Reputation of the lender/broker
  • Recommendation from a real estate agent/home builder
  • Recommendation from a friend/relative/co-worker
  • Spoke my primary language, which is not English
  • Having a local office or branch nearby

 

The bottom line is this… Consumer education on the mortgage lending process is critical for potentially saving thousands of dollars over the life of the loan.

Real Estate Agents Demand Local Lenders

contract

In an article dated August 22, 2014, Inside Mortgage Trends reports results from the latest Campbell/Inside Mortgage Finance Housing Pulse Tracking Survey to show that real estate agents strongly prefer local lenders and a Florida real estate agent was quoted as suggesting to the seller a requirement for all offers with financing contingencies to go through a local lender.

Agents report that closing delays are more common from a call center lender than from a lender with a local office due to a general lack of responsiveness, underwriting delays, lack of knowledge of local lending laws, and inaccessibility of lender contacts with settlements taking place after hours. When the time requirements of the sales contract are not respected, buyers are at risk of losing their earnest money deposits.

Tom Popik, research director of Campbell Surveys confirms, “Agents crave information and certainty of closing.” A Michigan real estate agent is reported to contact the buyer’s lender for access to information regarding the timeline of the underwriting process and expectations for meeting closing dates. To leverage against delays, he includes a contract addendum leaving his seller’s with “an out after a certain period.”

Selling agents are said to encourage potential buyers to avoid call center lenders altogether or as a safety net, submit a second loan application to a local lender. Additionally, when a listing receives multiple offers, sellers are encouraged by their agents to “shy away from offers financed by a call center lender.”

How can call center lenders do a better job upfront of calming all parties? By issuing true pre-approvals where credit, income, and assets have been reviewed and approved by a decision maker and by communicating clear closing expectations once a property appraisal has been received and reviewed.

Are Cost of Living expenses inhibiting top talent from joining your company?

benefits

Big cities want big talent, but recruiting efforts at top universities can reach gridlock when cost of living comes into play.  While you can’t control the cost of housing, there are many ways to leverage the opportunities at your organization beginning with a best-in-class welcoming committee to lead the way.  Your benefits coordinator can enhance the recruiting experience by proactively:

1. Arranging a cost-free package including:

    • Discounted memberships to the opera, museum’s, theatre, and the gym.
    • Rate reductions for insurance, commuter and parking services.
    • Purchase discount programs through retailers such as Apple, AT&T, Hertz, FedEx, Dell and Microsoft

2.  Removing the hurdles. Too many companies make the mistake of blocking solicitations from willing vendors. Make it easy by posting your submittal requirements online and welcome new opportunities. How else will you learn what’s available? An excellent example of this concept is the Employee Perks & Discounts offered at the University of South Florida.

3.  Avoiding exclusivity – It isn’t in your employees best interests to turn away new offerings because an established vendor is asking for exclusivity.  When entering into agreements with banks or credit unions, stipulate that you maintain the option to allow other financial institutions to complement their product offerings with expanded opportunities for your staff.

4.  Research local Mortgage Providers – Know which lenders can provide pre-employment financing with just an offer letter. Know which lenders have reduced down payment requirements for recent graduates. Know which lenders offer loan programs that exclude monthly payments on student loans when calculating debt to income ratio’s.

While opportunities for “No Money Down” mortgages are usually limited to persons earning no more than 80% of the median county income, some lenders offer specialty programs for higher income earners.  National and regional lenders offering low down payment programs with no mortgage insurance to doctors and lawyers are BB&T, Fifth Third Bank, BBVA Compass, Bank of America, Citi Private Bank, SunTrust, and PNC. Each having different program parameters (profession, maximum loan amount, maximum years out of school/residency, minimum credit score, partnership requirements, etc).

If you’re a recent college graduate (<3 years out of school/residency) in any field, and considering your housing options in either Florida, New York, New Jersey or Connecticut, contact me for a free consultation on fixed or adjustable rate loan programs, with just a 10% down payment, up to $2,000,000 with no mortgage insurance requirement. Offer letters allowed. Primary residence purchase only for US residents or permanent residents. Non-permanent residents can inquire about foreign national financing options with a minimum down payment of 30%.