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Assessing sub-prime borrowers

National Mortgage Professional
Apr 26, 2005

Lender relationship management: A new and evolving lynchpin of broker successWilliam Alvarolender relationships, broker partner, lender selection Ensure success Mortgage brokers wear many hats in their quest to originate quality loans and manage a business pipeline efficiently while marketing their services on a usually lean budget. Although there is no magic bullet, there is a simple strategy that can help today's brokers excel in each role. Brokers that commit themselves to seeking, nurturing and leveraging powerful lender relationships will be like the swift ship adjusting its sails to catch an approaching wind current. Two relatively recent developments in the mortgage industry have converged to create a sustained jet stream of broker opportunity, the impact of which will linger longer than the refi boom. Proliferation of lender types First, the universe of lenders continues to proliferate and evolve to meet the diversity of America's homeownership opportunities. America's dream of homeownership has penetrated the psyche of vast emerging markets and spawned unprecedented mortgage lending innovation. Further, generations of the homeownership tradition have an appreciation for, and a deeper understanding of, the wealth-building potential of home equity. Lenders that embrace specialty or full-service models are making it easier for the broker community to find the products they need to serve high growth markets. The age of the broker Second, interest rate volatility combined with a more sophisticated understanding of profitability factors has inspired an "Ah-ha!" realization for lenders. They have reevaluated their sales models and recast the role that third-party originators are destined to play. If you need proof that the mortgage industry has entered the "Age of the Broker," pay closer attention to the industry trade publications and conferences. Wise lenders are making significant investments in new technologies that facilitate their broker channel and connect it with automated underwriting and decision tools. As they do so, youll also notice that lenders want brokers to feel valued, sought after and accommodated. These trends will continue, placing brokers and lenders in peer-to-peer collaboration. Brokers who want to build their business will acknowledge and capitalize on the brave new world in which selective lender relationships are a core strategy to manage their roles and achieve their goals. Factors to know Brokers should investigate and evaluate four specific factors when selecting a lender partner: broker-facing enabling technology, customer support and service, loan product variety and operational integrity. Broker-enabled technology Technology is the key to creating a scaleable mortgage lending business and as such, occupies the minds of mortgage professionals everywhere. An investment in broker-enabling technology is an indication of a lender's commitment to its broker relationships. Brokers stand to benefit from tapping into reliable and efficient technology that facilitates an increase in their loan pipeline and significantly improves process management efficiencies. Smart brokers will prefer 21st century lenders that have this innovative technology and make it easily available to their brokers. Lender technology has the potential to drastically impact brokers' businesses if correctly leveraged. If a lender offers an effective technology, it will lift the loan process management burden off the broker. Brokers who work with technology savvy lenders do not have to buy or implement a loan system, nor do they have to manage the technology. Everything is in place for the broker to simply close a loan and move to the next one. All these brokers need is a computer and good lender-provided training. However, technological benefits are more than a matter of convenience. Improved application quality and quick turnaround can have a profound impact on the bottom line. Broker-facing technology eliminates guesswork and ensures that the broker is submitting loan applications in the lenders preferred formats, thereby increasing the likelihood that applications will be accepted, quickly underwritten and funded in a timeframe that keeps the broker competitive. Before selecting a partner, brokers should research a lender's broker-facing technology infrastructure. There are several methods you can choose to evaluate a lender. Possible angles include: reading trade publications for stories specific to the lender and its technology, requesting information directly and investigating reputation and history. Broker support Lenders are increasingly focused on third-party originator customer service because they understand and value the impact that brokers have on their businesses. They are making customer service the centerpiece for strengthening broker relationships. In any relationship, personal or business, there has to be an understood level of support. Technology automates processes and speeds loan turnaround, but everyone still needs a personal touch and connection with a human. Brokers must be able to rely on their lender support team for fast response and strategic advice. Lenders that support their broker network proactively offer industry expertise that improves business and marketing. For example, they provide alternatives to normal loans (e.g., home equity products), relay industry trends and produce newsletters specific for broker development. Customer service is as important as technology infrastructure and is also worthy of evaluation before choosing a lender partner. Again, excellent sources of knowledge are the trade media, investigation, Web searches and simply asking the organization directly. Variety of products In an ideal world, brokers can look to their lender(s) as one-stop shops for loan products that match individual borrowers' circumstances and needs. Many lenders have made this possible by offering a variety of loan products that the broker can present to borrowers in multiple scenarios. With access to a wide diversity of products, brokers can deepen and expand outreach to borrowers. They can offer loans beyond first mortgages and refinances. Targeting specific needs with alternative products like alt-A, sub-prime, home equity and adjustable-rate mortgages will strengthen sales and bring in additional profit. Furthermore, brokers can position themselves as advisors for borrowers. They offer borrowers advice and solutions while supported by a lender's products. This builds trust and leads to repeat business and borrower referrals. Offering a variety of loan products has the potential to significantly increase business and is another lender factor that needs to be thoroughly researched. Digging deeper than trade publications, two quick and easy ways to find out about a lenders loans are to ask for a lender's product sheet and talk with other brokers. The best bet is word of mouth. Integrity A lender's reputation reflects their borrowers' reputations and vice versa. Fraud and mortgage scandals have played a significant role in damaging reputations within the industry. Brokers do not want their characters on the line because of a lender's questionable practices and processes. A lender partner needs to have a corporate culture built on integrity and demonstrate it from within its headquarters to each individual broker. Lenders must have processes that support their claims. Those that have invested in fraud protection can help protect brokers from inadvertent participation in individual or group fraud schemes. Compliance is another issue because brokers cannot afford to be caught off guard when lenders are penalized for noncompliance or questionable business practices. Lenders that keep brokers abreast of developments in compliance regulations will help impact brokers' businesses. An easy way to prevent a wrong choice is to research any predatory lending or compliance violations a lender might have. Although it may make complete sense and seems absurd to mention, without integrity, brokers do not have an honest business. When looking for right technology, products and support, do not forget to start at step one with reputation and integrity. Survive or thrive Brokers might survive without close lender relationships, but they will thrive by understanding and acknowledging the specific lender characteristics that will benefit them in the long run. Brokers need to develop a plan to build a beneficial lender relationship and commit themselves to proactively seeking the right partner. Pursue the lender as a potential customer that will ultimately impact loan pipelines and profitability. Meanwhile, position yourself as a profitable broker partner. Use the tools lenders provide and respect their processes. Remember the personal touch. Lenders are supporting brokers. Treat them as you would treat a borrower. Know the borrower, not only for their needs but also for the lender's needs. Close a loan specific for the borrower and present an application worthy of lender approval. Seek a proactive relationship that benefits both the lender and the broker. Enable the lender to benefit from your experiences while you take advantage of their full-service offerings. This will ensure a successful lender/broker partnership and a guaranteed competitive edge. William Alvaro is CEO of Melville, N.Y.-based Global Home Loans and Finance, a retail mortgage lender. He may be reached at (631) 393-0214 or e-mail [email protected].
Apr 26, 2005
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