As published in Scotsman Guide's Commercial Edition, May 2008.
The relationship between mortgage brokers and lenders can be tenuous. It is not unusual for brokers to view lenders as difficult, uptight and willing to kill every deal. Conversely, lenders often complain about mortgage brokers' lack of knowledge, disorganization and overall greed about commissions.
Of course, this is unfortunate because brokers and lenders need each other. Brokers bring deals to lenders that lenders cannot get in the retail market. And lenders provide the source of the capital that ultimately allows brokers to make their commissions.
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Because each party has different objectives, though, there will always be some amount of conflict between them. Conflicts can be minimized, however, if each party avoids certain behaviors. If you and your lenders take steps to not fall into one of the below categories, you could have a better relationship.
The unethical broker
No lender wants to deal with a broker who intentionally withholds information or misrepresents any material characteristics of a loan. Fraud obviously will not be tolerated under any circumstances, and brokers should know better. Many times, however, brokers think that if they disclose less-than-ideal information, it will kill their deal. So they withhold that information.
If they disclose the information, however, they may discover that many lenders will work around it. Instead, when the lender discovers that something important was withheld, not only will it likely kill the deal, but it also may assume the broker isn't credible. This could destroy any chance of future business.
The unknowledgeable broker
Brokers must know how their clients plan to use a loan's proceeds, what the property is worth or even what the property really is.
At a minimum, you should know the borrowers' credit score, intended use of the proceeds, the property type securing the loan, and the estimated value based on recent comparables or listings. It is also helpful to provide a general overview of the borrowers' business and how it is doing. This is generally not tough to obtain from borrowers, and it can prove invaluable to getting the deal approved.
The unrealistic broker
Every broker wants the best terms for their borrowers. That's OK, but you need to be realistic. If your borrowers have a low FICO score, expect high rates. If they can't produce documentation to establish income, don't expect a 90-percent loan to value.
Failing to accept these realities does a disservice to your clients because you end up shopping for a deal that will never happen. You may be scared to explain to your borrowers that their expectations are unrealistic, but it is not your job to be their cheerleader. It is your job to get them the best financing possible, even if it isn't exactly what they want.
The greedy broker
You get paid by commission; there is nothing wrong with wanting to earn one. But when that becomes your only objective, you are basically showing lenders that you are selfish.
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