Mistake #1: Conducting Business as Usual Like the Old Days
A big mistake that lenders make is with their compliance in originating loans. Many companies that need to be allotting time and staff to remain compliant are lax. Be certain that the enforcement division at the CFPB is not.
We are living in an era when communications coming from lenders can be determined as an offer to provide financing, with a simple tweet or post on social media.
Although the majority of mortgage loan originators (MLOs) in your company have the borrower best interests in mind when they send out emails, promotional flyers, or texts selling your products, MLOs generally do not have the legal expertise to be sure these communications are compliant with the CFPB.
Why the fuss? Just look search the mortgage industry news to learn about the significant fines, penalties, and charges assessed by Dodd-Frank’s provision known as the Unfair, Deceptive, or Abusive Acts or Practices Act . Most of the industry blindly thinks they are fully compliant. It is far from the truth.
Mistake #2: Resisting Change Due to Potential Decline
Many managers & VP fear their MLOs will pushback if they enact restrictive measures and there will an exodus of originators opting for companies that are not so rigid. In that scenario, their competitors will grow stronger and production will fall.
There’s no replacement for leadership, especially when it comes to compliance. MLOs and branch managers need to be partners of compliance, not enemies. The choice to resist change can be critical for a business.
Ask for Referrals Continuously
A large number of realtors and loan officer tend to not ask, or plainly forget. Studies have shown that the best time to do this was prior to the loan or home purchase closing. The key here is while the licensed individual was still actively involved with the client and had their complete trust and attention.
You need to at all times believe that your clients would be delighted to refer someone to you. However, don’t expect or ask a client if their transaction with you was very stressful.
Make it easy for past clients to refer you. This can be solved by giving them:
Your brochures that lets people briefly know about what you do and why they should pick you.
Instructions about how to go to Yelp.com and other review sites to input a review
Your business card, with a request on the back to refer a friend if they ever need financing.
Incorporate Referrals into Agreements
Many client relationship start with an agreement. Realtors have buyer and seller exclusive or non-exclusive agreements and depending in the state you are in, there’s a mortgage broker agreement. The objective of this document is to define the expectations, fees, and any other measure ahead of time, so there is not any misunderstanding going forward.
So, although you are making a request for them to provide you with a referral, there is not a stipulation it must be given at that moment. A really good way to do this is to add the following phrasing like this:
“If XYZ company meets or surpasses a minimum of 75% of the described goals by the end of the second quarter, Client John Smith will provide at least three qualified people looking to buy or refinance.”
This method makes certain that your client has the chance to see how well you deliver on your word firsthand before they agree to providing you with a referral.
This is similar the written agreement and is fairly easy to do. Although, there is no guarantee, when you exceed someone’s expectations in a large transaction, you have earned their trust and they will certainly send people your way if you simply ask. Keep them pleasantly surprised as you over-deliver on a promise.
Ensure Your Website is Mobile Friendly
Were you aware that two-thirds of all emails are opened on a phone or tablet? How about the fact that mobile website traffic makes up around 30 percent of visits? As you can imagine, having a mobile website definitely is important. Any real estate professional will greatly benefit by having a responsive designed website, especially in terms of creating a professional image.
As an owner of a responsive website , it means that no matter what screen size a user is on, the content and design will be displayed properly so it can be read on any device. The navigation menu on smaller screens also adjusts to become finger-friendly. Always test each web page on multiple PCs, tablets, and phones. Additionally, any emails you send out need to be properly made and displayed to understand on any email platform.
Obtain Customer Reviews
People search for reviews about local restaurants on Yelp. Before making a purchase on Amazon, they read customer feedback and ask their friends for guidance on big purchases. To summarize, people want to see other people’s experience on things that concern spending money. Being in real estate industry where people make some of the biggest purchases of their life, reviews can certainly help a mortgage company or individual loan originator gain some extra clients with a good experience.
A good way to capture these highly coveted reviews is to set up a strategy to ask your customers for feedback (and too) just prior to the closing date on a loan. As soon as you know the date of closing, get in touch with your client face-to-face and by email to ask them for a review on a website where you can be found.
The optimal time to do this is just prior to closing or in a few weeks afterwards. The reason is they still have good thoughts of working with you. So, the goal is to make it as easy as possible for them to do this. Create a special post closing “thank you email” guide them to link(s) where you want them to leave a review for you.
Valuable Nugget: Send a gift card after they write a review. Be sure that you’re doing this as a means to saying thanks and not as an incentive.
A very successful loan originator shares some traits that he links to his ongoing success:
One needs to be self-motivated, extremely competitive, and maintain high energy. In essence, don’t have “low energy” which real estate billionaire Donald Trump points out as well. There will be ups and down so you can’t let problems bring you down and lose your composure. You have to remain dedicated to your goal.
To be successful in this career needs to be your passion and not treated like a part-time job. In fact, HUD does not like FHA mortgage originators who have another job in the real estate industry no matter what field ( HUD Handbook 4060.1 Chapter 2: Section 2-9).
“Full, Part-Time and Outside Employment. A mortgagee may employ staff full time or part time (less than the normal 40 hour work week). They may have other employment including self-employment. However, such outside employment may not be in mortgage lending, real estate, or a related field. Direct endorsement underwriters are included in this provision.”
You need to be aware of loan product guidelines, and compliance regulations, because you want to be an expert in the field so your clients (and their friends) can use you again and again.
You will always be an average mortgage originator and not a top producer if you are not a disciplined person. A top producer will focus on generating new business and not on paperwork or documents for loans in process. There is a reason the industry has processors and loan assistants and that is to handle that part of the business.
Clocking in just five hours a day of low energy and not meeting with referral partners is a recipe for failure. During business the focus should be growing new business.
If a mortgage originator is in an environment that gives them challenges: a company with numerous opportunities to flourish, to grow, to emerge as one of the best. Quite simply, a place with many opportunity which is what America is all about. Grow your career and profession with a mortgage banker and broker to take your business to the next level.
Mortgage originators, often called loan officers, have to employ a variety of strategies to keep their loan production flowing monthly as well as create beneficial relationships. Associating yourself with licensed real estate specialists, business professionals, former clients, your circle of friends, and prospective borrowers utilizing marketing and promotional strategies are crucial if you wish to succeed in this profession
Make an appointment to visit brokers and realtors in their offices, introduce yourself and hand out leaflets often. Flyers should feature a quick outline of the mortgage products that you offer or distinct loan programs, along the lines of “100 Percent Financing.” Go to real estate events, conferences, seminars, and regular meetings; find out where these events happen from your local real estate organization. Become a member of local groups, organizations and associations; build up a referral network with other like-minded professionals. Connect with other professionals by becoming a member of professional groups like the local Building Industry Association, Chamber of Commerce, and Municipal Rental Organizations.
Give Out Valuable Information
Organize a weekly or convenient seminar or class for new homebuyers, realtors, homebuilders, title agents and new loan officers; educate them on the fundamentals of home financing and credit. Inform them about the significance of appraisals, what’s needed anytime you’re applying for a mortgage and simple tips to comprehend the transaction from start to finish. Create a newsletter for your referral base as well as clients and prospective clients. Keep it short and simple with just one to two pages, and incorporate a few popular areas of interest, an question and answer area, and something for the family. Subject matter can range from school, family holidays, and recipe ideas.
Don’t Forget to Ask for Referrals
Include the phrase “I Love Referrals” on all marketing materials you prepare and send out. It’s important to put it in your newsletters and flyers and on the back of your business cards and brochures. If time permits, join your local church, sports, or arts organization. Create relationships with other members and keep your business cards on hand to give out at a moment’s notice. Another important thing to do is send out a card and thank-you gift to past clients. Basic closing gifts can be plants, flowers, chocolates, gifts, or even VISA/Mastercard gift and retail store cards. And like the other materials, place the slogan “I Love Referrals inside the card.
The headline news that may have rattled the feathers of mortgage industry professionals.
– Feb 3, 2016 – Wells Fargo is laying off 87 additional mortgage workers in Raleigh.
– Sept, 2015 was that Wells Fargo laid off 182 mortgage originators in Raleigh, North Carolina.
– Just two years in August 2013, Wells Fargo let go of 763 home mortgage employees.
In order to not jump around so much in the volatile mortgage industry , you may want to carve out your own destiny by managing your own branch under a solid mortgage company regardless of the dynamics in the economy. In addition, you want to stay ahead of the competition and understand the trends.
TRENDS In 2016, the Mortgage Bankers Association (MBA) expects year-over-year home purchases to increase by 10%. By knowing this, there are lots of ways for that buyer’s transaction to fall out. As a mortgage expert, you need to have some type of technology to assure that does not happen and lose successful closings.
INTERNET PRESENCE Another big trend is that lenders, not real estate agents, are increasingly becoming the first person to speak with when it comes to shopping for a home, and lots of home buyers are locating their lenders on the internet. While having real estate referral partners is still very important, the simple fact is that an increasing number of borrowers are applying for and getting loan approvals online, a trend that is only going to grow in the future.
QUICK TO ADAPT Lenders typically sell “fast response” times to borrowers. However, the truth is many lenders don’t understand what “fast” today actually means. Calling back a borrower’s by phone or email in just a few hours might have been great in 2005. Not so anymore.
Millennials, people age 34 and younger, are one of the largest groups of homebuyers. Their idea of waiting a few hours is not acceptable so they go with convenience and responsiveness. If it takes a lender an hour or longer to respond to a prospective buyer who’s a millenial, he or she could have already visited 5-10 other websites, and filled out a 1003 application and is ready to make an offer.
The solutions is not let leads sit in your email for hours or worse, days. People understand they have options. So, as a lender, you need to be there when they call or inquire online.
FLEXIBILITY Lenders need to be make it convenient with how they offer their services. Due to advancements in mobile technology, people and businesses communicate completely different from a decade ago. Millenials and most adults have embraced technology prefer their method of communication over phone calls, voice mails, or fax. Your prospect may only text you which comes to your email and you may never get their actual voice until closing. The key here is to be flexible.
With the October 2015 launch of TRID, which stands for TILA-RESPA Integrated Disclosure, mortgage loan originators will dedicate a lot of time navigating their way through the ins and outs made by the effectuation of the new mortgage disclosures, but these challenges are not likely to have a significant impact on the volume of loans originated in 2016.
However, some industry experts are expecting different results such as loan origination volume to be marginally less due to other things happening in the loan industry.
While the overall mortgage volume could drop from 2015’s levels, many expect the purchase mortgage volume to increase in 2016. The reason us due to increasing home prices, a better job market, and another yearly drop in the amount of all cash home sales.
In 2009 and 2010, the year after the housing and banking crisis, roughly 40% of home sales transactions were for all cash. That number has decreased to about 24% in 2015 and is forecast to be lower in 2016.
A loan originator needs to ensure that the information is accurate and the loan is originated in compliance so the risk of repurchase stays low. However, with TRID implementation, many lenders are reporting longer closing times.
When it comes to the new Closing Disclosure, early reports are showing that most lenders are taking 2-4 days longer simply to send out the Closing Disclosure to the borrower. Once that is sent out, then there is a 3 day waiting period. That can put a 30- or 45-day lock in jeopardy. What that means is the total cost to originate the loan will go up. As a result, a loan originator’s income will suffer somewhat. So, with this huge effort by the CPFB to help consumers, they are actually making them pay more in the long run.
Is the CPFB not enforcing the obvious? When it comes to RESPA laws, they currently allow a homebuilder to offer homebuyer incentives to use their preferred lender without violating any laws. The offer is still a choice because the consumer is not restricted to look elsewhere for better rates and terms. The truth is, the builder is obligated to give the consumer an affiliated business disclosure form that states the homebuyer is not required to use the builder’s lender and are advised to inquire with other lenders for a mortgage.
Now if, the builder increases the new home sales price to cover the incentive of using the homebuilder’s lender, that is not ethical. The price should never increase due to using a financial partner of the builder.
For lenders, the CFPB can impose civil money penalties of $5,000 per day per violation for noncompliance, $25,000 per day for reckless violations and $1 million per day for knowing violations. Such fines do not apply to trusts, but they fear being sued by their investors in the event of loan losses.
After multiple years of falling, the median income of a Realtor is at long last on the way up, climbing 2.3 percent in 2011 to $34,900, which is the latest full year obtainable. It used to be that just 5-10% made all the money, but statistics show that 17 percent earn over six figures. Even better are the numbers for licensed brokers, who earn on average $48,400 per year. With the housing market getting even stronger, expect earnings to continue rising for real estate agents and mortgage originators.
So, is it a good time to make the career switch? Although licensing requirements vary by state, becoming a licensed mortgage originator requires a 20-hour NMLS class and national exam. (To learn more, go to the National Licensing Mortgage Registry.) Outside of licensing, a particular set of skills are necessary to make the transition a success. You’ll need the ability to…
Be willing to work long hours. You may have to work 60 to 70 hours a week, including weekends and evenings. to accommodate realtors and borrowers. Whie you may work hard and long hours, there’s also a considerable amount of freedom too (unless your work for a national bank). As a top producing originator, it is not uncommon to to take extended vacations during the year.
Whether you’re headed to the doctor, need to attend your child’s school performance scheduling appointments with borrowers are easily worked around a frantically paced day. As long as you pull your weight in closed transactions, you’ll also be able to take time off whenever you feel the need arises.
2. It is not all sales either. While mortgage lending is basically a sales job, just 15 percent of those who changed careers claim they had a background in sales prior to making the switch. It’s a lot more crucial to be relaxed interacting professionally with new clients, and genuinely listening to their objectives.
3. There’s No Ceiling On How Much You Can Make. If you work for yourself, as many loan originators do, or you’re employed by a large company, you’ll usually be regarded to as an independent contractor. While that means there’s no paycheck when you’re not closing, it also means that there isn’t a maximum amount of how much you can earn each year.
4. Growth Can Be Unlimited. If you become a top producer in the mortgage business, you can become a branch manager and grow your business to 5, 10, 50 or over 100 employees, whatever you desire. There are not many business owners who have that capability.
No matter if you decide to continue with a one-man operation or hire other originators is really your call once your business starts doing very well
Maybe or maybe not. If your borrower intends to keep the loan for a very short period ( like two years or thereabouts), It could make more sense to get a larger rebate and take the higher interest rate.
Then again, if a borrower wants to keep their loan for a much longer time they would be better served with a lower interest rate by paying “points”. In many cases, if a mortgage applicant pay 1 point to lower the rate by .375% they will break even in approximately four years, and it hardly ever is practical unless the new owner or existing homeowner intends to use the better interest rate to pay down the loan quicker.
When it comes to fees, you have to analyze the fees from lenders (mainly loan processing & underwriting) and third-party costs (title, settlement, appraisal, recording, doc stamps).
A number of mortgage lenders and brokers have substantially higher fees, while others may have higher interest rates instead. This is exactly why, the person needs to get a written estimate of all associated fees for the proposed transaction, and then evaluate the choices.
Here’s an example: Lender A may require you to pay $1,200 for processing and underwriting, while another charges nothing. However if the “lower cost” lender’s rates are higher by .125%, it is a wrong move to go with zero cost lender.
What are the leading factors that determine who gets a loan?
A borrower’s debt-to-income ratio (DTI) is the most important thing. The DTI is calculated by adding the total house payment (principal and interest, taxes, insurance and mortgage insurance, if applicable), and all “long-term” debt obligations (only those which will continue for over 10 months), and then using that sum as a percentage of the gross monthly income.
For a conventional loan, 43% is the maximum DTI, but some loan programs like FHA may allow as much as 55% DTI.
The lender must also take into consideration the loan-to-value ratio (LTV) which is the loan amount expressed as a percentage of the home’s value. if the LTV is above 80%, the borrower will have to pay mortgage insurance or the lender will include it in the rate.
Following that, the lender must review the borrower’s income.
They will to see if the borrower been employed or self-employed in the same occupation for a minimum of two years?
Can the borrower document their income using 1040 taxes?
Lenders use the adjusted gross income from Federal tax returns, and average the last two years’ income for their monthly amount.
Lastly, the borrower will have to provide documents that they have sufficient liquid assets to complete the transaction. All large deposits on their bank statements will have to be sourced. Some buyers receive gifts from relatives and they must be documented as well.
Buying or selling real estate tends to be a challenging process as each transaction has its own set of particulars, so consumers look for a real estate agent or mortgage agent to help them through deal with all the nuances.
Careers in mortgage lending or real estate focus on the transfer of residential and commercial real estate between individuals or companies, and usually require them to analyze financial and legal aspects during the contract period. A mortgage career can turn out to be quite lucrative and very flexible, which is ideal for those seeking job without an expanded territory.
The average incomes for a realtor or mortgage originator are pretty close. However, if you’re not looking to make average income, specializing in certain aspects of mortgage lending can be a great choice. Breaking into the top 5-10% of realtors or mortgage lenders in your city is not easily accomplished within 6 months, especially without a powerful sphere of influence.
Once you are established and develop solid business relationships and work in a high cost area, it is not uncommon for a mortgage lender to originate from 1-4 loans each month. That will translate into a pretty decent living if your loan sizes are close to or above the jumbo loan limits of $417,000.
With that being said, if you’re good at what you do, you can make a killing. Likewise, in high cost areas like Orange County, Los Angeles or the Bay Area, the competition becomes a lot tougher.
Here are some reasons to become a mortgage originator:
#1: Love being your own boss.
For sot people, nothing’s more frustrating than a boss micromanaging you every day. When you go with a career as a mortgage broker, you are basically operating your own small business. Although, you’ll probably have a broker-owner to answer to, the relationship between a broker and an originator is far different than an employee and employer. For you to make money in this line of work, you will be micromanaging yourself.
#2: Like to make your own schedule.
If you choose to take a 2-or 3-hour lunch, make appointments in the morning, afternoon, or evening, it’s your call. Different time slots can be adjusted to meet your schedule and your family. It sounds alike all roses, but remember, your income revolves around your clients and their availability. So, mortgage originators oftentimes have to schedule their work around their clients’ schedules.
#3: Mortgage Originators Meet New People As a mortgage originator, you get to use your interpersonal skills at professional networking events, on the phone, and sometimes with your clients’ immediate family. Typically, you’ll be speaking with colleagues, affiliates, partners, and new prospects. Each day presents a chance to meet someone new.
#4: Mortgage Loan Officers control their career For a mortgage originator, the ceiling of how much income you can make is non-existent. You’re in complete control of your profession. You determine if you want to advance and manage or own a mortgage office or branch. You are the guiding factor in the advancement of your career.