L.O. To The Rescue

Back in 2021, a veteran couple was buying their dream home and their appraisal came in $25,000 short of the contract price. Fillyaw was there.

“This national, veteran-centric lender refused to do a dispute for these clients on their behalf to the Region Loan Center (RLC), which is absolutely just asinine. Long story short, the client flipped over to us.”

He took the appraisal to the RLC with comps provided by the listing agent and had the property value raised.

“Unfortunately it added about two weeks to our closing time, but we were able to step in where there was a lack of knowledge and lack of understanding with another lender,” he explains.

There are still misconceptions about VA loans, even though the federal government has changed guidelines over the years to streamline this program.

“There’s this perception out there that VA appraisals come in under-value compared to a conventional appraisal. There’s no statistical data to support that. It’s actually the opposite,” Fillyaw says. “VA is the only loan program out there where we can dispute that value outside of the appraiser. The RLC has staff appraisers to listen to our dispute and review it as an independent party in the best interest of the veteran, to see if that value can be supported.”

Another misconception is that inspections are still stringent. An example could be a wall that hasn’t been painted, which might have been flagged as a necessary repair in the past. “The VA has worked really hard from the regional loan centers’ direction and guidance to the appraisers to modernize a lot of their thoughts and views on property standards,” Fillyaw says.

Properties are still required to undergo a Wood Destroying Organisms (WDO) report, which conventional loans don’t require.

But not every veteran qualifies for the program. They need a Certificate of Eligibility (COE) proving that they’ve met the VA’s military service requirement.

“If you’re doing VA loans, the first thing you should be doing is pulling a certificate of eligibility for your veteran and making sure that their service qualifies,” says Fillyaw, adding that this is a pet peeve of his. “The VA also uses a secondary income calculation called residual income, so you have to make sure they qualify with that as well.”

He started in retail banking while serving in the Marine Corps Reserve and became a full-time originator after returning from a tour of duty in Iraq.

“VA lending is near and dear to my heart because of my brothers and sisters that served as well,” Fillyaw says. “We pride ourselves on being an advocate for veterans. We tell people all the time, if you’re running into trouble with a VA loan, call us, we’ll help you. Obviously, we’d love to do your loan, but first and foremost, we want to help veterans and right the expectations and perceptions of the VA loan.”

An Investor, An Underwriter, And An Account Executive

Having the know-how when it comes to bank statement loans and investment properties has helped Mortgage Capital Advisors President Mark Dodson build his business.

“Back in my early career, when I first got into the business, the owners of a company taught me how to do [investment property loans] because that’s what they did,” Dodson recalls. “We did Elton John’s deal in ‘92 and ‘94. I just sort of got the niche for that and have been thriving ever since.”

One issue Dodson sees is self-employed borrowers often being turned down for home loans because they haven’t declared all their income sources on their tax returns.

“Two weeks from closing, the traditional lender will say they can’t do the loan. And then they call me in a panic to see what we can do. I’ve gotten those for so many years,” Dodson says.

A realtor-partner called him recently after an investor-client was denied by their bank. With 24 months of bank statements, he was able to get the client pre-qualified two days later and the loan closed within three weeks.

“Sometimes when the client calls us, they’ve just been turned down. They jumped through hoops trying to get this deal approved and they’re a nervous wreck because they have a closing coming up. You have to be confident knowing what you’re doing,” Dodson points out. “Even if it’s saying, ‘look, we’re not going to meet the closing date of the 30th, but we’re going to close it by the fifth.’ Let them know upfront what you’re looking at.”

That’s why it’s crucial for an LO to have good working relationships with investors, underwriters and account executives.

“You just have to get the word out. We have a great database. We do social media very well. And you have to be constant. It’s not going to come overnight.”

Lot O’ Lenders

Rafelky Cotto, who is a branch manager and MLO for NEXA Mortgage, dba Best Life Mortgage, closed her first loan in Nov. 2022. The following year, she met a client purchasing a $2.7 million property with a bank statement loan and another lender.

“They denied him because he didn’t meet tradeline requirements,” says the Georgia-based mother of three. “We work with over 100 lenders. So if something doesn’t work with one, it’ll most likely work with another one.”

That high-income client wanted to be in his new home by Thanksgiving, and Cotto had less than two weeks. “I interviewed a lot of banks and I found one that was able to close him the day before Thanksgiving and he did his celebration there,” she recalls.

Taking on a client who’s been through the wringer with another lender and saving their loan makes a client — and a referral partner — for life.

Cotto’s very first loan closed, which she detailed in an interview with Staff Writer Sarah Wolak in Mortgage Women Magazine’s Sept. 2023 issue, was with a client denied the day they were closing on their new home.

“As soon as I looked over the application, I kept wondering why the people they had worked with didn’t help them or present them with a better option. We got the client into a house in 30 days and this client continues to refer people to me.”

She’s closed more than 150 loans since then, and counting. You know you’re good when other LOs are calling with clients they don’t have the means to handle.

“They know that I work with a lot of lenders,” she explains. “I feel like each transaction is a different experience and I am blessed because I have a lot of other loan originators and closing attorneys that trust me and know that I’m going to work hard to get a file to the closing table.”

Realtor relationships are key, she adds. “Even if it’s not their buyer that I’m representing, they have a listing and they send buyers, who aren’t even their clients, to me to see if I can help them out and give them a better rate and close them quickly.”

The list continues with a referral from a closing attorney.

“They needed transcripts from the IRS and there is a workaround with this,” she says, adding that she was in Arizona at a conference and the borrower needed to close in a week.

“We closed her in a week and we didn’t need the transcripts.”

Cotto can recall a tax-ID borrower with a low credit score who was denied because of it.

“I took my time to re-score him just so that he can get better terms and I closed them in a week. This buyer came from another loan originator, from another bank that has known me for years.”

Another was a buyer with a complicated history of employment.

“The lender he was working with had a hard time understanding the staffing agencies,” Cotto explains. “I actually got it clear-to-close in three days, just in time because the sellers did not want to extend anymore.”

The Hard Ones

“You can be like everybody else and do basic deals and that’s fine. I mean, a lot of people made a lot of money these past few years doing that,” Dodson says. “But if you want to separate yourself, get good at bank statements and Non-QM. The key is having the right investors and getting a good account rep.”

LOs who have a difficult time sourcing large deposits may end up failing to be successful with bank statement loans, and he adds, “throwing them up against the wall.”

“They don’t know the warning flags to look for so you can address them before you submit. A good buddy of mine owns a broker company and we laugh about it all the time. People will go to another lender and we’ll say, ‘just give them 30 days and they’ll be back’.”

Dodson sends the requested 24 months of bank statements directly to his account rep to review and determine the individual’s income eligibility.

“If the income is not there, if the credit score is not there, I’ll know right away. Any things of that nature that do not look right, we turn it down right away. We’ve had a couple recently, the cash flow is coming, but it’s not there yet. So they’re going to revisit us in about six months.”

In April, Dodson wrapped up a $3.3 million deal for a well-qualified, high-income-earning individual whose young enterprises were showing losses.

“So the bank tells him they can’t do it, they refer him to me and we flipped it to a W-2 income using asset allocation because he had so much in stock,” he recalls, adding that they calculated the potential income and closed.

For borrowers with multiple investment properties, it’s typically not possible to qualify using tax returns. They don’t look at bank statements or income, W-2s or tax returns.

“We look at the market rent of that property per month,” Dodson says.

While Non-QM mortgages befuddle some, “all the brokers, we’re sitting here doing those types of loans.”

He warns borrowers against going to Non-QM newbies.

“Do not go to a person who’s just trying to figure out how to do these mortgages,” Dodson says. “I won’t pull their credit if I don’t have a deal.”

While other lenders will pass on certain deals, especially if the credit score is just too low, a difficult client can be a thankful one, and that’s good for business. Taking time to review all of their documentation is key.

“We have a little bit more leniency,” Dodson says. We put a lot of work into it to get them ready. Once we do that, we have a customer for life because they’re so appreciative.”

A daring escape from loan denial in the final hour — how mortgage heroes are made.