Florida Battles A Riptide Of Closing Problems

Florida Originator Magazine analysis finds Alligator State among toughest to close a mortgage

David Krechevsky
Riptide of closing problems

Blame it on the sand.


That was one of the reasons loan originator Nathaniel Bittman cited for why Florida was among the top five most difficult places to close a mortgage in 2022.

The Sunshine State ranked the third toughest state to close a loan last year, based on an analysis of 2022 Housing Mortgage Disclosure Act (HMDA) data conducted on behalf of Florida Originator Magazine by Richey May, a Denver-based financial services firm.

The analysis, which included reviewing first- and second-lien loans, determined that Texas ranked as the toughest place to close a loan, with just 46.33% of mortgage applications ultimately getting funded. Louisiana ranked second, at 46.75% of applications funded, followed by Florida at 46.98%, Mississippi at 47.75%, and Georgia at 48.13%.

That compares to a rate of 52.8% of loans funded nationwide. In addition to the 50 states, the analysis included data from the District of Columbia and the grouped-together U.S. territories of Guam, Puerto Rico, and the Virgin Islands.

According to the analysis, 21 of the 52 states and territories had rates of funded loans below the U.S. average.

Nathaniel Bittman
Nathaniel Bittman, loan originator
and regional manager, Jane Floyd
Team of NFM Lending, as well as
president of the Florida Association
of Mortgage Professionals

It is no coincidence that the top five toughest states to close a loan in were all located in the South; that was by far the toughest of the four U.S. regions, with just 49.38% of loans funded. The three other regions — the Midwest (57.62%), Northeast (55.44%), and West (53.41%) — all had funded-loan rates above the U.S. average.

Based on HMDA data, there were six reasons for a mortgage not to be funded:

  • The application was denied;
  • The application was approved but not accepted by the borrower;
  • The pre-approval request was denied;
  • The pre-approval request was approved but not accepted;
  • The file was closed for incompleteness; or
  • The application was withdrawn.


Nathaniel Bittman, loan originator and regional manager, Jane Floyd Team of NFM Lending, as well as president of the Florida Association of Mortgage Professionals

In 2022, nearly 2.5 million applications nationwide were recorded as denied and another 2.2 million were withdrawn, compared to 1.25 million for the other four reasons combined.

Talk to loan originators, though, and they offer a frontline perspective for why so many mortgage applications fail to close in the Sunshine State.

‘Sand States’

You might have noticed that none of the six reasons above for loans to fail mention anything about the beach.

That brings us back to Bittman, who is a loan originator and regional manager for the Jane Floyd Team of NFM Lending in southeastern Florida, as well as president of the Florida Association of Mortgage Professionals (FAMP).

Toughest places to close

Bittman said the South in general, and Florida in particular, are popular destinations for people relocating from elsewhere in the U.S., partly because of the great beaches. Of the top five toughest-to-close states, Texas, Louisiana, and Mississippi are all on the Gulf of Mexico, while Florida has a coastline on both the Gulf and, like Georgia, the Atlantic Ocean.

“We are one of the ‘sand states,’” Bittman said, “and … we have just seen a surge of consumers that are now buying properties here in our state.”

A report from Redfin backed up that claim, stating that Florida was the most popular destination for buyers who were relocating. In fact, Redfin said, five of the top 10 destinations for homebuyers who relocated were in Florida, including Miami, Tampa, and Orlando.

Easiest Places to Close

“As a result of that, you still see massive demand, even in a high-interest-rate market,” Bittman said. “But part of the challenge that we’ve experienced is that property values continue to rise, and interest rates are the highest they’ve been in a very, very long time. So, you just have difficulty from a debt-to-income ratio (DTI) [standpoint] in many cases for consumers to be able to qualify for residential lending.”

He also noted that many out-of-state buyers are purchasing either a second home or an investment property, which also can create DTI issues

Insurance & Taxes

There are, of course, certain affordability issues related to buying a home in Florida, whether the buyer resides within its borders or not. Emily Tolbert, a mortgage loan originator with Motto Mortgage Signature Plus in Daytona Beach Shores, cited the dramatic increase in insurance costs that have occurred in the state over the past couple of years.

Property insurance companies continue to drop coverage in Florida, in part because six of the 10 most financially destructive storms in U.S. history have hit the state and in part because of insurance fraud. According to Bankrate.com, Florida is home to 78% of the home insurance lawsuits in the U.S.

With fewer options for homeowners, insurers have boosted premiums. The Insurance Information Institute predicted earlier this year that property insurance rates in Florida could jump at least 40% in 2023.

Emily Tolbert
Emily Tolbert, a mortgage loan
originator with Motto Mortgage
Signature Plus

“Sometimes that number is so high that it bumps up those debt-to-income ratios,” Tolbert said. “So, I think that right there has been a big … increase in why people may not be qualifying.”

Mary Babinski, a senior loan officer with Motto Mortgage in Trinity, Fla., says she also has seen issues arise because of the cost of insurance.

Some buyers are “just too uncomfortable with the monthly payment, once they actually get a homeowner’s insurance quote and realize how much the property taxes are and what the total payment is going to be,” she said.

Bittman agreed that insurance costs, as well as property taxes, can become an issue for potential buyers.

Emily Tolbert, a mortgage loan originator with Motto Mortgage Signature Plus

“Taxes do go up because their properties get reassessed at the new purchase price, which in many cases could be substantially higher than what it was from the individual who sold the home when they purchased their home many years ago,” he said. “Insurance is definitely a challenge. Absolutely.”

He continued, “So when you compound property taxes, insurance, when you compound the interest rate that’s still very high — that does make it a challenge for several consumers to be able to buy here.”

Buyer Be … Educated

All three mortgage professionals agreed that the most effective way to shepherd a potential homebuyer through the mortgage approval process is to educate them.

Mary Babinski
Mary Babinski, a senior loan officer
with Motto Mortgage

Babinski said she has seen potential buyers, including but not limited to first-time buyers, who aren’t prepared to respond to the breadth and depth of information required to get a loan approved.

“Consumers kind of come into this with an expectation of still wanting to maintain a lot of privacy and be a bit guarded when it comes to their business affairs and their financial affairs,” she said. “The way the mortgage industry is now is … the borrowers have to be prepared to share it all.”

She continued, “I mean, anything and everything that could be asked about needs to be expected to be asked about, more now than ever. The guidelines and regulations are very black-and-white. And people have to just be prepared for that.”

Tolbert said that makes loan pre-approvals an important part of the process. “You’ve got to put in the upfront work,” she said. “And it’s not just, ‘Hi borrowers, this is what I’m going to need from you.’ It’s, ‘Hi borrower, this is what I’m going to need from you, and here’s why.’”

With first-time homebuyers, she added, it can be a mixed bag. “In my experience,” Tolbert said, “I’ve got some who they’ve really prepared ahead of time for the process. I’ve got some who, maybe they’ve been long-time renters, they have credit issues, and they think that it takes two minutes to get pre-approved for a loan, and that there’s all these programs out there that allow them to get something for nothing.”

Mary Babinski, a senior loan officer with Motto Mortgage

That makes it important, she added, for the mortgage professional “to deliver a positive message, but also a realistic message: ‘There’s work that goes into it and you should prepare in advance.’ And preparing in advance is going to allow you to proceed with confidence and come out with … a closed loan in the end.”

Babinski noted that even homeowners with existing mortgages may lack an understanding of the modern application process, especially if they’ve owned their home for a long time.

Closing rates by region

“If it’s been a little while, even a couple of years or so, I just think the technology involved in today’s world … to get anything done, but especially to get something like a mortgage done, is a bit mind-blowing for people,” she said. “They have to register, set up logins, go into portals, upload documents. … Customarily, we don’t see our clients face-to-face anymore like we did back in the day.”

“Just the process alone can be daunting for people,” she added, “even when they have all their ducks in a row.”

‘Sheer Shock’

Still, Bittman notes that pre-approval can be both a blessing and a curse, because many potential borrowers are shopping not only for a home, but for the best mortgage rate. That means even if they receive a pre-approval, they may not accept it or may withdraw their application.

“We have a lot of consumers that are approved in shopping,” he said. “Two challenges have arisen from that, if they do qualify from a debt-to-income ratio. Sometimes what may stall them is just the sheer shock that when they look at the price points of the homes that they want to buy, when they realize what that monthly payment is between principal and interest, taxes, and insurance and mortgage insurance. It’s so extremely high for them that it just, in many cases, stops them in their tracks and really stops them from wanting to go ahead and purchase.”

That leads to two options, he said. If the consumer stalls “and sort of goes dormant for 90 days,” the loan becomes inactive. “Or they just tell us ‘we’re not going to be shopping at this point right now,” and the loan is withdrawn.

Bittman said consumers also often discover there is a big difference between what they think they can afford and what they actually qualify for.

Comparison of loan approval data

“I do spend a considerable amount of time coaching and educating my real estate agents on what are some of the tactics that they could do up front to set the proper expectation for the consumer, “ he said.

When it comes to getting over the obstacles that prevent mortgage applications from closing, Bittman said, the work has to be done.

“Mortgage professionals, whether they’re brokers or lenders or even bankers, we all sort of fit in the same bucket,” Bittman said. “We’re mortgage professionals, and mortgage professionals that are on the front end of the process. For those that are committed to the process, we end up having a very in-depth consultation with a consumer.”

He continued, “There was a time, many, many moons ago, that people could get in for limited money down, with very little documentation to verify. That is not what the world is like now. Now you typically have to qualify for a mortgage, you have to have the ability to repay.

“And,” he added, “there are more guidelines about making sure the consumer has the ability to repay. So educating yourself on that process is really the best thing that people can do right now. And find a great professional … that can take the time to properly consult with you, review your assets, review your budget, [and] have a conversation.”

This article was originally published in the Florida Originator August 2023 issue.
David Krechevsky
David Krechevsky,
Published on
Aug 15, 2023
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