Hindsight is always 20/20 - Tips for getting it done right the first timeElaine RoccioMortgage banking, Doc drawer, Funder
Six years ago, when I first started assisting brokers with their
transition to mortgage banker status, there was very little
tolerance for the emerging or small mortgage banker. No matter the
size of the company, everyone played by the rules of the big guys
and that meant lots of additional staff, expensive software
tracking systems capable of handling loan servicing (even when
unnecessary) and a bundle of cash to be able to meet the haircut
requirements of the warehouse lender. Mortgage brokers taking that
big step into mortgage banking knew virtually nothing about the
additional requirements such as Home Mortgage Disclosure Act
reporting, having a quality control plan, additional loan
processing requirements or any myriad of compliance issues. But
proficient or not, brokers trudged on in their quest for greater
control, greater profits and the ability to recruit and market the
company as a full-service lender.
In those earlier years, the profit margins were appealing, but
then came the question, How about cross-training my existing staff
and not hiring an experienced funder, shipper, doc drawer or even
an underwriter, for that matter? As a consultant, I can only advise
and then be there to help pick up the pieces when the experiment
fails. As a mortgage banker, you have signed reps and warranties.
You have a much greater responsibility to conduct your business as
a banker, not as a broker, and this is one time when shortcuts can
bring you down. All of the effort and money spent to achieve
success can be lost without those important lines of defense being
Your loan processors work closely with loan officers and they
have a vested interest in seeing that each of their loans close.
They work intently to make it happen for the borrower, for the
company and for themselves. Even with automated underwriting and
investor guidelines posted on the Internet, mistakes happen. Even
when a loan is submitted to a contract underwriter in a mortgage
insurance office, mistakes happen. The hiring of a doc drawer
and/or funder, either in combination or individually, are your last
set of eyes, your last line of defense in making sure that all is
correct and compliant with that loan before it is funded. An
experienced funder is often the one who catches mistakes with lock
deadlines, lack of prior lock confirmation, improper charging of
fees, incorrect interest rates, incorrect or insufficient closing
exhibits, the list goes on and on.
The answer to the question, Do I really need to hire additional,
experienced people? is a resounding yes. Mistakes equate to time
and moneymostly your time and money. Without an experienced funding
staff, you are the one who will need to stop and either correct an
error or find a scratch-and-dent lender that will not charge you a
fortune in discount to take the loan off your warehouse line. Then
you need to take the time to repair any credibility issues you may
have with both your warehouse lender and your correspondent lender.
Too many instances of not being able to properly fund a loan lead
to questions regarding your status as a valued account. Based on
performance, the more mistakes you make, the less you will be able
to negotiate better terms and conditions when your contracts come
up for renewal. If and when market conditions become adverse, only
those small- to mid-size mortgage bankers with perfect track
records will be able to continue in mortgage banking. The others
will potentially suffer the non-renewal of their agreements with no
other acceptable options available.
Questions are often raised about hiring experienced
professionals. How do you know if they are any good? What questions
do you ask in the interview process? These concerns are valid and I
suggest that if you resort to advertising in the classified section
of your local newspaper, you should be extremely specific about
your location, your recent entry into mortgage banking and your
need for an experienced, motivated self-starter who can help you
learn more about back-room functions (doc drawers, funders and
shippers). Typically, that kind of expertise is not found in a
person who has worked in a bank, credit union or savings and loan.
This person has usually worked for other mortgage bankers of larger
or comparable size and is aware of all of the aspects of
correspondent lending. The other alternative is to work with a
company that outsources personnel, either on a temporary or
permanent basis, with skills specific to the mortgage industry. The
SRS Group is an example of a company that specializes in this kind
of personnel placement. If you hire a doc drawer, funder, shipper
or someone with a combination of these skills on a temporary basis,
you will have the time to assess whether the selected candidate was
right for you personally and for your company in general. If not,
keep trying until you find the right fit for your situation.
It is important to venture into mortgage banking with the
capitalization available (based on your size and volume) to hire at
least one person experienced with the closing function requirements
of mortgage banking. What you dont know details of mortgage
banking, your experienced funder can help you better understand.
This is not the time to try and cross-train without the proper
expertise. Hire skilled people with previous experience in mortgage
banking and your learning curve will be far less painful.
Elaine Roccio is a mortgage banking consultant and founder
of Broker to Banker Consulting Services Inc. She can be reached at
(800) 509-5989 or e-mail firstname.lastname@example.org.