Lenders Beware: HUD Steps Up Credit Watch Terminations

Lenders Beware: HUD Steps Up Credit Watch Terminations

May 31, 2004

L.O.S. for 2005: Lamentations, observations and solutions for mortgage brokersA'kos Kovachbusiness advice, success techniques, compliance, marketing
Not a day goes by without at least one phone call or e-mail
expressing a sad comment or serious expression of a difficult
challenge being faced by a mortgage broker. "Crunch time" is truly
facing many brokers more pervasively than ever before.
In my experience, and for those of us who have survived in this
industry over the past 10, 15 or 20 years, we know that tough times
are just one of the cycles in mortgage world.
The following are excerpts from some of the prevalent topics
troubling the brokers I have been in contact with lately:
"I don't have enough knowledge about how to process and
close loans."
Solution: Call three conforming lenders or three mortgage
insurance companies recommended by your state association or whose
information is provided on your association or National Association
of Mortgage Brokers Web site. These companies are supporters of
your association and many of them have produced terrific handbooks
and CDs to help train both processors and loan officers (LOs).
"I am sick and tired of training LOs only to have them
jump ship."
Solution: Write down your business plan and the goals for
your company. Include the fact that good LOs come and go. Life
happens! Plan for the changes so they are not so disruptive to your
flow of business. Know how to safeguard your database and create an
internal system that keeps a watchful eye open for fraud or
embezzlement. Get professional help in order to write a solid
employment agreement you can use for all employees, not just
"It is embarrassing not to know where to take a tough
loan scenario."
Solution: Team up with a mortgage mentor. Find a broker in
your state association, perhaps on the other end of the state, who
does not feel threatened by your questions and will candidly give
you answers and support. Finding a mentor can be mutually
"My business needs to grow into other states, but I
can't afford it. What do I do?"
Solution: Briefly, your choices are: look into net
branching opportunities, become a mortgage banker, or sign up with
a national lender that will close and fund loans in their name.
"Is there such a thing as an 'independent contractor' in
the mortgage broker business?"
Solution: This debate rages on. By definition, (and
sometimes by local state regulations) the litmus test for
"independent contractors" is being tested and questioned. To be
safe and sure, you must obtain the answer from someone whom you
trust has the legal and technical expertise to answer your
question. Most state associations have members or paid advisors who
have the answers for your particular situation, or they can at
least obtain those answers for you directly from local licensing
authorities, your state employment security office, etc.
"How can anyone keep up with all of the new rules and
Solution: This is a monumental task, but fortunately, both
NAMB and your local state affiliate have a notification process in
place to safeguard you. By keeping a watchful eye on new laws and
rule changes, NAMB and its state affiliates are well informed and
stay ahead of changes that could harm or affect you.
"What do you do when someone gives you advice that would
result in the violation of a law?"
Solution: Fortunately, this does not happen very often,
and most of the time we find that there has been a poor choice of
words used or other substandard communication issues. First, you
must know RESPA and be firm in your knowledge of this law. Second,
always be mindful of red flags, anything that seems out of step or
out of the ordinary. Use the standard rule: If it sounds too good
to be true, it probably is something worthy of extra scrutiny.
"How can I keep real estate agents and insurance agents
from stealing my loans?"
Solution: This is a classic question, one for all times.
Competition is stiff, no matter where you find it or where the
competition finds you. Knowing your products, setting yourself
apart by being the best at certain types of loans are just two of
the short answers. For more detail, read the excellent advice
offered by trade associations in their newsletters and magazines.
These sources will provide you with the ammunition to keep the
wolves at bay.
"What do I need to do to compete with banks and brokers
who low-ball their call-ins?"
Solution: First, do not stoop to those tactics. Be honest,
be candid and stay within the rules and laws that govern these
"casual" phone conversations. The "bait and switch" and other bad
faith tricks will always be out there, it is a fact of lifeso learn
how to "wag the tail" instead of letting the "tail wag you." Learn
how to take control of the call so that you can impress the caller
with your knowledge and expertise. Even savvy mortgage shoppers
admit that they make their choice by who was the friendliest, most
polite or most helpful on the phone. Be yourself, make yourself
available, return calls and maintain your professionalism.
"What can I do about a substandard appraisal or
appraiser matter?"
Solution: Every situation is unique, and each appraisal
is, after all, a subjective matter. We hope for, and most often
receive, objectivity from our appraisers, but it is their set of
eyes that inspected the home. The best advice is to get to know
your appraisers. Speak with the appraiser about problems you have
experienced in the past and ask them how they would resolve such
issues. Be candid with appraisersbe clear when ordering an
appraisal and always order appraisals in writing. If you still have
trouble or feel there are issues that need review, each state has a
licensing authority for appraisers. Organize your facts. Write down
what you believe is the basis of your question or problem and make
sure it conveys all of the facts and elements of your problem
before you file the complaint. They will appreciate your
thoroughness, and you will end up with a better chance for a
positive result.
By no means are these the only issues facing mortgage brokers
these days. Many of you have experienced these or other troublesome
challenges. Oftentimes, we may not have the skill set or experience
to handle the problem alone, which is why we band together and help
one another.
The solutions I offer to virtually every caller or writer is to
become an active participant in the process. Become a member of
your local state association, which in turn provides you membership
in NAMB. Although this is a great start, it is not enough. You can
get by without actually rolling up your sleeves and participating,
but is that a good long-term strategy? No, it isn't.
The legislative challenges we will be facing at both the state
and federal level during 2005 will not only place mortgage brokers
in the spotlight, but also the hot seat once again. Yet another
RESPA rule proposal is not far from the print shop at HUD. More
than ever, we need NAMB and our own local state associations.
This is not simply a pitch to join or renew your membership;
this is your future. This is an appeal to your professional
demeanor and a request that you review how you and your staff
represent the rest of us at your next loan closing.
The bottom line is that active members know the answers to many
of the common lamentations; they see, hear and learn the answers by
attending chapter meetings, conferences and conventions. When your
association offers classes or educational courses, make an effort
to attend each and every one, or send at least one person from your
office, because there is always something new to learn from each
educational opportunity. This is how you sharpen your skills and
stay competitive.
A'kos Kovach is president of the Oklahoma Association of
Mortgage Brokers. He may be reached at (405) 377-2200 or e-mail