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Lenders Beware: HUD Steps Up Credit Watch Terminations

National Mortgage Professional
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 LOs. "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 beneficial. "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 legislation?" 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 [email protected].
May 31, 2004
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