As published in Scotsman Guide's Residential Edition, May 2010.
Although the national economy shows signs of a turnaround, the mortgage landscape likely will remain altered for years to come. To adapt to these changes, write better-performing loans and grow their client base, mortgage brokers must forge lasting relationships with lenders.
As brokers seek to improve their business procedures, they should work with lenders to build accountability and meet increasing standards for lending responsibility. Relationship-building works both ways, and lenders seek partnerships with brokers who make it their business to establish, foster and maintain mutually beneficial partnerships.
Brokers should do more than deliver mortgage applications. They should offer lenders insights about their financial standing, industry experience, track record and credit history. By doing this, brokers can build trust and promote a mutual commitment to doing business together.
This is of particular importance in today's market, in which untold numbers of underperforming loans remain on many lenders' books. In many recent cases, borrowers with long-time jobs have found themselves unemployed. In these occasions, brokers should see an opportunity to connect borrowers and lenders in an effort to avoid foreclosure.
In many instances brokers were blamed for the mortgage downturn unfairly. Brokers and lenders must work together to strengthen the lending environment and the industry's reputation.
Evaluate lenders and yourself
One of the primary ways brokers can check on their partners is by evaluating default ratios. The Federal Housing Administration provides loan-performance data for lenders and appraisers -- as well as information for the general public -- via its Neighborhood Watch system (sctsm.in/FHANW).
When brokers' ratio of underperforming loans increases, especially in a short amount of time, lenders may choose to stop working with them or help them get back on track and strengthen their business practices. Lenders can do this by looking closely at brokers' approach to quality control and by offering ideas for improvement.
Brokers also can take a proactive approach by monitoring themselves and their loan performance before intervention is necessary. This can help brokers gain new clients and build trust with current and future lending partners. A rigorous evaluation of customers' income can help, and brokers can use Internal Revenue Service (IRS) Form No. 4506 to obtain borrowers' tax returns.
Although many brokers' clients have signed Form No. 4506 for years, brokers often haven't used the obtained information. In many cases, prospective borrowers could provide pay stubs, which brokers would accept as a true reflection of the borrowers' income landscape and ability to make timely mortgage payments. This became problematic when customers used overtime or other extenuating circumstances to qualify for larger loans than what they could afford.
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