William J. Lopez, director of mortgage banking, Wholesale Lending Online

As published in Scotsman Guide's Residential Edition, June 2005.

In the ever-changing mortgage environment, brokers’ jobs have matured. This not only is because of the economics of the market but also because of the evolution of the borrower, whose needs can be significantly different than they were just a few years ago. With access to hundreds of loan programs, brokers are challenged with bringing borrowers together with the right lenders to find the most-beneficial loan programs for all parties.

Brokers must be familiar with dozens of lenders and products. All lenders bring their own sets of underwriting guidelines and pricing to the table. From the borrower side, brokers must have the ability to distinguish between hundreds of loan packages — standard and nonconforming — to recognize the best program for each borrower. The economic landscape and industry have shifted. More nontraditional loan packages such as Alt-A loans are sprouting to satisfy a diversifying clientele with nontraditional loan profiles.

Ever-shifting definition
Alt-A loans, also known as alternative-documentation loans, are not new to the industry. In the past few years, however, their definition has become something of a moving target. The reason that defining Alt-A is so important is that flexibility in its definition leads to variability, and the underwriting and credit quality of Alt-A pools can vary. This can become an issue, particularly as the loan moves into the secondary market. The lack of a standard lender definition of Alt-A, combined with the prevalence of government-sponsored enterprises (GSEs) in this market, have blurred the line between Alt-A and prime collateral.

The Alt-A product is primarily credit-score driven, as its borrowers don’t have proof of income from traditional employment. The Alt-A loan alleviates the challenges associated with due diligence, such as providing income verification and documentation of assets. On the flip side, for this convenience, borrowers do pay a slightly higher interest rate, usually from a quarter- to half-point higher than traditional, fully documented loans.

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