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Assessing sub-prime borrowers
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].
About the author