When you think mortgage and home financing, I am certain that some of the first words that come to mind are rate, price and payment. Unfortunately this represents the post-housing crash lending landscape of low cost at all cost. As the market changed, loans became much more of a commodity than in the past. The huge amount of shopping tools and information on the internet has further eroded the perceived value of an experienced and skilled lending professional. In the scenarios where the client situation is cut and dried, this has little impact, but as a client situation deviates from the simplest situations, like divorce, this can have a dramatic and adverse impact.
Mortgages tend to be perceived as a black box type process where the lender collects the takes the application, collects the clients documents, renders a decision and closes the loan. While the steps are undoubtedly representative of the process, how the loan actually gets to the closing table can often include significant work on structuring and underwriting. From experience I can tell you that if you ask a room full of mortgage professionals a question, you can get a range of answers. Some would be similar with minor nuances while others will be drastically different. When you digest the fact that there are numerous loans programs in the market and all of them have a specific set of guidelines, this is understandable. Couple that with the unique situations of the borrower and you can see with full clarity that the process is as much art as science. This art only comes through training, education and most importantly experience.
Unfortunately, there has been a considerable loss of expertise in the industry over the past few decades. Marketwatch had a great article which demonstrates this reality. In the article, the author mentions that “well over half — 60% — of mortgage underwriters have been in their current position for two years or less.” This means that the person deciding whether or not to approve your loan may have limited skills and experience. The article went on to say that “the average experience of a loan underwriter has plummeted, in large part a hangover from the last housing crisis, when many mid- and senior-level employees fled to other industries.” Without a doubt there are still fantastic underwriters and other back office staff in many organizations, you don’t get to select who underwrites your file. You do, however, get to choose your loan officer and a seasoned, experienced one is worth the effort and potential cost to find one.
When asked about mortgages, I tell everyone to suppress the urge to go low for several reasons:
- It all starts with the loan officer. The loan officer will take the application, which is what sets the tone for the deal. Inexperienced loan officers will take the application as an exercise in data entry. They fill in the required fields, but they may not be asking the right questions to identify potential issues. Additionally, whenever possible, they will run any questions by underwriting staff to ensure that they structure and document a loan properly and questions asked and answered up front are always better.
- The loan officer sells the deal internally. By sell, I mean that they structure, document and annotate the deal in a way that an inexperienced underwriter will know exactly what is going on. This can even include annotating the loan guidelines pertinent to a client’s situation. In the case of an experienced underwriter, this approach allows the underwriter to quickly analyze and decision a loan which is also a huge benefit. As a Certified Divorce Lending Professional, I can tell you that clarification of certain guidelines specific to divorce is a regular exercise for me and, in many cases, it can mean the difference between an approval and a denial.
- The loan officer acts as your advocate. Even with a strong, well structured and documented file, you can run across challenges and problems. Sometimes it can be an inexperienced underwriter. Other times it could be that something changed during the process. Regardless, you need your lender to be the fighter in the arena making your case and defending your deal. In a fight like that experience and seasoning are what wins the battle.
So before you run to a lender aggregator site to find that ultra-low rate and price, think about the downside if the deal hits some complications. Many times the amount that a borrower thinks that they will save can get eaten up it mistake and problems and the expected return on aggravation is insufficient. This is especially the case if you are in a unique situation like divorce when getting the deal done is required by court order or self-employment when getting every penny of income accounted for can be essential. So put the right value on expertise that you put on the rest of the lending process. You won’t regret it.