Don’t Be A Selfish Lender – Check Your Ego, Read Our Study & Focus On The Borrower

Summary:

  • Some LOs avoid better loan products and lenders due to document requirements instead of providing borrowers with options, realistic expectations, and transparency.
  • Many MLOs get banned from top pricing lenders because underwriting and closing teams are unable to process or approve their messy or incomplete submissions.
  • Digital tools and automation help eliminate pain points of document collection, review, and submit cleaner files to top priced lenders.

A little history, the origins of mortgage lending in the US were opportunistic and a foreign concept until the 1930s. Mortgages were introduced by the insurance industry to take advantage of borrowers during the Great Depression. Lenders made money by collecting interest, fees, and owning properties that borrowers weren’t able to make payments on. The available loan products were favorable to insurance lenders and not borrowers who were limited to loan terms of 50% of the home’s market value with 3-5 year repayment terms and a balloon payment in the end.

This predatory behavior didn’t last long. In 1933 FDR became president and implemented financial reforms under the New Deal program. It included changes to mortgage lending, which by then claimed hundreds of thousands of foreclosed homes. The reform also introduced 15 and 30 year loan products which, this time, benefited the borrowers by allowing them to leverage smaller monthly payments to become homeowners. 

The mortgage lending industry came full circle when the 2008 financial crisis exposed unregulated, abusive, and unfair lending practices. Reputable financial institutions and lenders were accused of practicing predatory lending, using unfair and deceptive tactics to convince borrowers to choose loans that benefited the lender. Loan officers targeted vulnerable demographics who, lacking knowledge and understanding, took out loans with high interest rates, hidden (and high) fees, explosive ARMs, undisclosed terms, and penalties that led to debt, foreclosure, and bankruptcy. 

The crisis was a wake-up call for the mortgage industry, forcing it to tighten-up approval protocols, lending products, and unethical practices. Lenders such as Ameriquest, New Century Financial, and American Freedom Mortgage (among others) filed for bankruptcy and liquidated.

In the last 20 years, the mortgage industry also underwent a technological transformation. While mortgagetech did start gaining momentum in the early 2000s, many organizations and MLOs have been dragging their feet to incorporate the technology to help simplify tedious tasks and processes for their closing teams and borrowers.

All of these changes are a lot to digest for many seasoned MLOs, for whom dropping their egos and getting out of their comfort zones has been an uphill battle. During the last 2 years, lenders benefited from a purchase and refi boom caused by the pandemic. But, at the same time, many were caught off guard and unprepared to handle the new business, resorting to semi-predatory and selfish lending practices which prioritized their needs over their customers.

Unprepared LOs were simply moving too fast, using outdated tools, and submitting messy and incomplete files, which created static for closing teams and borrowers. Some MLOs were banned from top pricing lenders because closing teams couldnt process their paperwork. Others avoided better-priced lenders all together because of their strict requirements. This had a negative and unfair impact for the borrowers, making them unaware of better top pricing lenders and loan products for their home purchase loans or refinances.

A big part of the problem for MLOs is ignorance and more often than not, systematic laziness, ego, and lack of willingness to adopt new technologies. MLOs got bombarded with new business and selected products and processes that were better and less hassle for them. Many chose to submit loans to specific lenders that made the approval process easier rather than providing best products/pricing for their borrowers. Sadly, these were top lenders in the industry known for least effort for MLOs and closing teams. In the end, taking the easy route cost borrowers tens of thousands of dollars for the same rate but at other lenders. This behavior is a perfect example of MLOs doing what serves them rather than setting proper expectations, explaining qualifications and necessary documentation to get better products for the borrower. 

Now that the housing market is slowing down, it’s a pivotal time for mortgage professionals to reassess their processes, incorporate automation technology, and provide borrowers with the right products.

Here are some solutions that RealKey came up with to help MLOs gear up for the next upswing:

Get Rid Of The Ego & Be Open To Change

There is always something new to learn. Having the “I’m the best” mentality creates a liability for mortgage professionals by not being open to improved processes, technology, and tools that benefit both them and borrowers. In order to be a successful and client-centric originator, MLOs have to be open to change and strip themselves of outdated and non-serving point of views and methodologies. They must leave their comfort zones and learn how to work with technology, changing customer needs and demographics.

Put Customer As Priority

When a customer is looking for a loan, some are well-informed, knowing the exact product they want (and qualify for), with others starting from zero. While MLOs are sales people with a majority earning commission, their responsibility is to help borrowers choose the best product for their needs and manage the process from start to finish. A lender’s job is to find the best product for the customer while explaining its pros/cons and mapping out the requirements and qualifications. It’s a client-centric process and product. RealKey’s automation technology can help MLOs clearly and effectively communicate steps and requirements of different loan products while setting realistic expectations.

Implement Digital & Automation Tools

Today, digital and automation tools are the holy grail for MLOs. There is an overwhelming amount of POS, LOS, and AUS digital tools that help originators and closing teams streamline parts or a majority of  the origination and closing process. Approximately 60-70% of tasks in the lifecycle of a mortgage can be automated. RealKey’s digital tools make the process easier, more efficient, and less error prone for customers and closing teams.These tools also create cleaner and complete files to be submitted to “stricter” lenders with tougher documentation requirements.

Seek Help From Industry Experts

Fintech and other digital tools are changing at the speed of light. It can feel like a full-time job to stay on top of new digital offerings and learn how to use them. By integrating RealKey into MLOs loan origination operations, mortgage teams not only get technology that enables them to streamline their processes, but also live onboarding and training at no additional cost to ensure they fully understand how to use and maximize the platform. 

As an added service, RealKey offers free consulting from the most experienced and highest producing experts in the mortgage industry. They stay up-to-date and share the most effective technologies and best practices to help new and seasoned mortgage teams easily scale and improve on their business.

Leave

The 2008 financial crisis exposed lenders and organizations such as Ameriquest, Countrywide, and New Century Financial Corp for practicing predatory lending and subprime loan schemes. Interestingly, these financial institutions, long before the crisis, had a negative reputation. Ameriquest was known for churning their customers, and was coined as the “AQ Revolving Door,” by pressuring to take out a 2-Year ARM with a 3-year prepayment penalty. While this was the lowest rate in their limited product offerings, it resulted in constant refinances. Although many whistleblowers did come forward about being pressured to sell risky loans and to qualify borrowers for products they couldn’t afford, many of them did so for years before taking a stand.

Predatory behavior and working for toxic institutions is no longer acceptable. If a lending organization does not align with personal values and engages in unethical business practices, LEAVE, and find an organization that does.

Mortgage lending is a customer-centric industry, and MLOs must do what’s best for the borrower. In order to provide customers with the best service, product, and overall experience, lenders must check their egos and constantly reevaluate their tools, processes, and be open to better ones.

RealKey is an innovative mortgage automation solution that can help lenders run and grow their business efficiently while providing customers with the best experience. RealKey’s software works seamlessly with existing point of sale and loan origination systems to bring an end-to-end, fully digital mortgage processing experience and submit clean files for complex loans and to strictest lenders.

Contact us today for a demo, and learn how RealKey can help you scale your business.