Many qualified buyers are being shunned because of the changing rules. Restrictions on high-risk loans that didn’t consider income, assets or amortizations were and are necessary, but the clampdown seems to have gone too far. In some cases, the rules eliminate families with demonstrable ability to afford a home.

Further, restrictions on cash-out refinancing mean many homeowners can’t finance home-improvement projects, consolidate debt or finance other personal needs because home equity no longer represents a liquid asset. Second mortgages also have become difficult to obtain.

Brokers facing these new and varied agency and mortgage-insurance guidelines can do the following:

• Get as much detail from your clients as possible before providing a quote. Explain that many considerations can impact the accuracy of a quote in the current market.
• Check lender and mortgage-insurance guidelines early in the loan process.
• Be careful to run a detailed mortgage-insurance quote before completing the good-faith estimate. Most mortgage-insurance pricing engines require more information than they did previously, so don’t rely on rate charts.
• Prepare customers for the possible need to provide more documentation after the lender has reviewed the loan application.
• Establish a program to help potential clients improve their credit ratings and to encourage them to be patient in that process.
• Develop your marketing strategy in an effort to find better-qualified borrowers.

Despite the changes that already have taken place, additional tightening is likely. Along with higher unemployment, decreased income levels, damaged credit and an ongoing foreclosure epidemic, tightened underwriting standards will result in fewer qualified buyers. Brokers must be better in all areas if they want to find success this year and beyond.

Richard Smith is the retail manager with American Acceptance Mortgage Inc. in Chattanooga, Tenn. He has originated government, conventional and jumbo loans since the company opened in 1994. He supervises an origination staff of more than 15 loan officers in two offices. The company lends in Tennessee and Georgia. Reach Smith at (423) 899-6898, (888) 474-9920 or rsmith@aamonline.com. Visit richardsmithhomeloans.com for more information.

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