The Recovery Strategy: A Business Method for Mortgage Brokers

August 23, 2008

In November of 2007 new software – which costs nothing – was introduced to mortgage originators nationwide. I’m referring to the latest version of our Funding Suite credit management platform.
While I try to avoid mentioning our products specifically, I’m forced to in this case because without Funding Suite – and its advanced credit proofreading tools – The Recovery Strategy for mortgage originators would not even be possible.

In this post I’ll describe what the Recovery Strategy is, and why it can dramatically improve any mortgage originators’ business. In my next post, I’ll explain how you can easily implement a Recovery Strategy in your business.

Recovery is the concept of using software to “recover” initially declined applicants. Using a Recovery Strategy will qualify (recover) 15% – 20% of your initially declined applicants immediately – and the remaining applicants sometime within the next 12 months. Further, you will be able to do this without any additional cost or resources – and with very little extra work.

Phase One Recovery: Saving 15% – 20% of your initially declined applicants.
Upon the initial credit review, the loan is usually lost either because the applicant’s scores are simply too low. These low scores may disqualify the applicant altogether, or they may indicate a rate and/or terms unacceptable to the prospective borrower. Either way, you’re forced to disengage from the applicant.

An originator using the Recovery Strategy realizes that 15% to 20% of mortgage scores are actually calculated incorrectly due to credit data errors or credit usage errors. By using credit proofreading software, applicants in this category are instantly identified and then moved to a processor trained to resolve these issues immediately, which provides a new qualifying credit score within 24 to 72 hours.

It’s important to remember that these recovered applicants never left the qualifying pipeline – they were simply moved to Phase One Recovery. Through the process the applicants are positively impacted by a level of professionalism and qualifying expertise in the originator’s business that will generate additional word of mouth business. This is a very pleasant side effect of using a Recovery strategy.

Phase Two Recovery: Saving the remaining 80% of initially declined applicants.
After investing time and money to attract an applicant to your office the last thing you want to do is to disengage from any applicant – even those which can not be immediately recovered. Now you don’t have to. For the first time, software makes it possible to nurture these applicants to qualifying status over the next twelve moths without any effort on the part of the originator. Even better, this turn-key, software driven “mortgage qualifying” service can be sold to your applicants, generating a profit up front.

Instead of sending your declined applicants away, instead enroll them your own private, secured program that will educate them about mortgage qualifying and even give them a step by step plan toward better credit health. Without any effort by the originator, the client receives twelve months of ongoing education, coaching and guidance to help them achieve qualifying status. The moment they do, the system notifies the originator so that the loan process can begin.

How much additional income would you receive by qualifying an immediate 20% of your initially declined applicants? How pleased would your remaining declines be to discover you can offer them a personal credit health program to help them qualify within the next 12 months?

The Recovery Strategy is made possible only because new software has been invented to deliver it. Its free and available for originators right now. Its very easy to actually implement an effective Recovery Strategy in your mortgage business.

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Posted by Caped Crusader

Another Mortgage Broker Gets It

July 19, 2008

In occasional fits of literal despondency, I question whether the world really needs another blog – especially one as banal as this one.

Yet, in the course of a typical business day I’m reminded how little mortgage professionals truly understand about credit and credit scoring. And naturally, if those in the business lack understanding, how much more the typical mortgage loan applicant. So once again, I find myself behind the keyboard pounding out banality, hoping to educate the world one blog at a time.

This month my company signed a rather large mortgage origination shop. This company is doing well in a very difficult market, and as I’ve come to know some of the executives, I can understand why. Loan applicants are treated with respect, and the company pays for all prequalifying expenses. The company has solidly trained loan officers and even an executive solely responsible for corporate strategy. Its an honor to be supplying their credit management software.

Yet, in an operation this adept, this talented and this experienced, I must admit I was not overly surprised to discover how little they knew about credit proofreading – and the legitimate process of credit rescoring. It’s a fact that 15% of this company’s loan applicants that walked out the door without a mortgage each month  could have been approved. Why? The sad fact is that the loan officers had no idea that these applicants credit scores were calculated incorrectly due to errors in their credit files. Errors they could have resolved in less than three days – providing the applicant with an accurate, properly calculated credit score.

The very good news is that this mortgage origination shop now “gets it” – and they are rapidly embracing the credit proofreading concept. Top management is taking the time to learn how to use Funding Suite’s credit proofreading tools which instantly identify harmful credit errors. And they are creating business practices to teach their loan officers to properly communicate this new capacity to borrowers.

So it goes, that each month this firms loan applicants will be served by loan officers possessing state of the art credit proofreading tools. And each month, 15% more of them will qualify for a home mortgage.

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Posted by Caped Crusader

Some of the Best Mortgage Originators

June 12, 2008

Our Funding Suite credit management software is used by tens of thousands of mortgage originators throughout the country. Consequently, I know many of these originators and some of them are extremely good. This morning I want to recognize a few top originators to highlight what too often goes unrecognized – an unwavering commitment to serve the applicant. 

Here they are, in no particular order.

Alan Vogan
First Lending Solutions
Riverside, California
(951) 317-3165
I’ve known Alan for years – and in the spirit of full disclosure, Alan personally handles all of my mortgage needs. When I need to better understand a new Fannie Mae underwriting issue, or the impact of new legislation on lending practices, I’ll call Alan. While its true that he understands the business of mortgage lending better than most, his true strength is an uncanny ability to see things from an applicant’s perspective. I recently referred a friend to Alan and his experience sums this up perfectly. While Alan was working on my friends loan he did the unthinkable and sent my friend to a competitor (Bank Of America) because he knew the bank had a very good loan program. Turns out that BofA didn’t offer the program as advertised, and Alan now counts my friend as a client.

Kevin Glackin
Village Capital
Mount Laurel, NJ
(856)-252-1517
Kevin has a very good understanding of mortgage credit – and is well versed in credit proofreading. Recently, credit proofreading discovered that the single derogatory item on an applicant’s credit report was involved a credit card the applicant used every day. However, though the card had the applicant’s name on it, he was actually an authorized user on the card. This means that the true card holder (his brother), had simply added a card to his account and then gave it to the applicant. The applicant’s brother was going through a difficult time and became late on the payments. Kevin’s credit proofreading tools revealed that since the applicant was only a user on the card, the late payments belonged to his brother, not the applicant. Kevin used his credit proofreading tools to permanently remove this derogatory account from the file in days. And, are you ready for this? The applicant’s credit score increased 240 points. Now that’s service.

Christian Lombardini
United Fidelity Mortgage
Nashville, Tennessee
(615) 383-5626
Christian is another one of my favorite loan officers because he consistently puts the client first. Sometimes this means working with a client for months (at his own expense) until the client is financially prepared to make a mortgage loan commitment. In one recent experience a client wanted a mortgage, but needed to increase his down payment amount. Christian consulted with the applicant and helped him devise a savings plan. Christian also used his credit proofreading skills to improve the applicant’s credit health at the same time. After following Christian’s advice, the client was able to buy his new home nine months ahead of schedule. The capper was that the applicant was referred by a real estate agent, and Christian went out of his way to make sure the agent received the all the credit. Nicely done.

Shane Jackson
ENG Lending
Little Rock, Arkansas
(501) 907-1126
Shane is another expert in credit proofreading, which means simply that he knows how to use software to detect and eliminate errors in credit files that damage credit health. When our company was interviewed by a leading mortgage publication about how credit proofreading helps borrowers, the magazine also interviewed Shane. Shane mentioned that more than 10% of declined applicants can be turned into approvals by simply proofreading their credit files, and removing errors. Imagine a couple declined for their first home simply because their credit score had been incorrectly evaluated due to errors within the credit file. Guys like Shane won’t let that happen.

If you are looking for a mortgage, I’d heartily recommend these folks. They’ll take care of you. If you are a real estate agent, and if you live near one of these mortgage professionals, do your client a favor and pass along one of these names. Tell them the Caped Crusader sent you.

 

 

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Posted by Caped Crusader

Mortgage Brokers Provide Value in Credit Expertise

May 30, 2008

Most brokers understand that selling to referred clients and selling to cold prospects are so different that they can’t be compared fairly. Generating referrals, however, can be a struggle for many brokers. But if you can offer your clients a service with inherent value, you may see your referral business boom.

Most mortgage clients understand that their credit report influences their loan and its terms. For many, then, credit review and improvement can mean the world — not to mention a favorable mortgage.

For brokers, credit proofreading — or credit review and rescoring — can be an effective referral-generating opportunity. This service helps you identify errors in your clients’ credit reports, as well as ways they can correct the errors.

In fact, many FICO scores could be wrong. A 2004 U.S. Public Interest Research Group report found that 25 percent of credit reports contain “errors serious enough to deny consumers access to credit.” This could mean that one of in four
applicants may be turned down because their credit score was wrongly and unnecessarily lowered in error.

Another type of error that can deflate FICO scores and that often is more damaging involves credit-use. These errors  often appear in different forms, which makes them hard to detect. Worse, consumers who seemingly make good short-term financial decisions inadvertently commit credit use errors without realizing it.

In fact, many consumers use credit in ways that needlessly lower their scores. Some have too many credit cards. Others don’t have enough. The same goes for credit balances. It all depends on how the credit fits into their profiles and how Fair Isaac and Co. interprets consumers’ new credit.

Mortgage brokers can help their clients identify these errors, however, and work toward reconciling them and increasing their credit scores. To offer a credit-review and rescoring service, you’ll likely want software that detects any hint of data or usage errors within a credit profile. The software scans an applicants’ entire credit profiles each time you order a credit report. Results are then neatly categorized by the type of error, with credit-use errors separated from
data errors.

Once detected, these tools tell you how to fix the errors and how many more points your clients will get by doing so. With the help of a credit-reporting agency, your clients often can see higher credit scores in just three days. When you position your credit review in a way that presents you as a qualifying expert, you’re moving down the referral runway. Taking the next step and demonstrating that you can improve your clients’ credit health can enhance your referrals.

People are concerned with every detail of their financial lives, and with credit proofreading, their credit profile becomes the one financial area in which you can help. And because healthier credit profiles often mean higher credit scores and better mortgage terms, many clients go out of their way to send you their friends and family members.

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Posted by Caped Crusader

Why You Need A Mortgage Broker

April 4, 2008

Initially this blog was intended for those who made a living originating mortgage loans. I’ve discovered however, that some readers are non-industry types, desiring simply to better understand the ins and outs of credit reports. Glad you’re here, and starting today I will included blogs about credit from the borrowers perspective.

I am not a mortgage broker, but as I work in the mortgage industry I know many both personally and professionally. As in any profession there are some well versed in the job, and others not so much. In a way, mortgage brokers are a bit like their professional cousins, the real estate brokers, in that when real estate is booming everyone wants to be one. Know up front that newbies in the mortgage business fail because they try to maximize their own earnings (commissions) up front. The good ones understand that helping you find the best (lowest cost) mortgage today, means additional business from you (and the clients you’ll refer) in the future.

And that’s the rub. Good mortgage brokers can save you money, a lot of money, during the course of home ownership. I’m often surprised by the number of people who tell me (smugly and in a way that implies they are letting me in on a secret I’m not quite worthy of hearing) how they always go directly to lenders to save money by cutting out the middle man.  Their logic breaks down because mortgage brokers are not analogous to typical retailing middle men. So whenever one of these jaw waggers corners you and starts spouting mortgage buying strategies, just remember this – mortgage brokers don’t cost you money, they save you money.

The mortgage broker makes money in two ways. First, they’ll ask you to pay them loan origination fees. This is money you pay during closing which amount is based on the size of your loan. You need to know that you should never agree to origination fees. Its kind of like agreeing to put money down when you agree to lease a car. They may request it, but just say no.

Instead let the lender pay the mortgage broker for you. Lenders generally quote the mortgage broker a wholesale interest rate which will be a bit lower than the rate your mortgage broker quotes you. The higher the rate the broker can get you to accept, the more he or she makes. Fine, we’re all capitalists after all, but simply do your due diligence and compare loan rates and programs with others and you can ensure a good deal. Some brokers, the good ones, aren’t greedy – and will present you a very attractive program. By comparing rates and terms you’ll quickly identify the best offers.

Brokers can save you money because they shop multiple loan sources for you. Many lenders do nothing but originate mortgage loans through mortgage brokers. Since these lenders have low overhead (no branches, no tellers, no mortgage sales people) they can often price lower than the direct lender even when using an independent mortgage broker to originate the loan. And the good brokers get very attractive wholesale pricing, which ultimately saves you even more.

In the future we’ll talk more about mortgage brokers, they other ways they help and how you might select a good one. But for now, just realize that you should talk with a professional mortgage broker before you make that offer on the new home.

And, yes, we’ll talk about credit too.

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Posted by Caped Crusader