When Choosing a Lender The Loan Originator Trumps the Company

When Choosing a Lender The Loan Originator Trumps the Company

It’s a well known fact within the real estate industry these days that getting a mortgage from application to funding is no small feat. I don’t think I’d hear much argument from my peers if I said that transactions that try one’s patience and fortitude are far more common than the ones that seem to close on auto-pilot. Even for experienced loan originators; those that have been in the business for half a decade or more, the challenge presented by prospective borrowers, not to mention the constantly changing guidelines put forth by lender and agencies (Fannie Mac, Freddie Mac, FHA, etc.) can really test the mettle of the loan professional, not to mention the Realtor®, if any, and those same borrowers as well.

How does a prospective borrower tend to get the best outcome in a transaction without questioning their sanity before it’s all over? Well, I want to specifically recommend that a would-be borrower try to obtain a strong recommendation from a well-respected Realtor®, in the case of a home purchase mortgage, or an acquaintance, in the case of a refinance loan. I also want to recommend that the referral be directed toward a specific individual in the mortgage industry, and not just a company, no matter how prominent that company may be.

Any company of any substance will have loan originators that are knowledgeable and have the customers' best interest in mind, and yet those same companies may have other individuals working for them who either lack the knowledge to optimally help a borrower, or may just lack the wherewithal and capacity to do so. Many lenders spend millions of dollar annually branding their companies to be recognized as industry leaders in the field of mortgage lending, and yet horror stories can be found where certain transactions processed within those same companies turned out to be nightmares for all those involved.

There is no one company out there that comes to mind in this analogy. In fact, I can’t think of a single mortgage lender that does not have raving fans and yet, at the same time, have at least a few severe detractors out there as well.

Most mortgage lenders work on a team concept when seeing a loan application from start to finish. The mortgage loan originator (MLO) is usually the one the borrowers deal with up front. The more competent they are the better off the transaction will run over the long haul, but working side-by-side with the MLO is the loan processor. Depending on the loan processor’s experience and expertise, very often potential inadequacies regarding the MLO’s performance can be compensated for in the case of an excellent loan processor, or exacerbated, when the loan processor lacks the fundamentals of professional competence. When the processor submits the loan for underwriting and creating the loan documents, other weaknesses and strengths can come to the fore. This is where the team concept is so important. If all the links are strong the chain will hold; otherwise, as is always the case, the weakest link prevails.

Even a normally strong lending team can have a rough transaction. First of all, many buyers have issues that they bring to the table, such as not being forthright with the MLO up front regarding their employment, or problems verifying other income and/or maintaining a reasonable credit profile. The sign of a competent MLO is to identify most of these potential speed bumps before a loan goes into process, and address to those involved, such as the Realtors® and the borrowers themselves, the likelihood for closing a loan on time or at all. If a experienced MLO cannot see a clear path to the funding of the loan, they will normally give their respects and walk away from the transaction. There is nothing wrong with an MLO telling borrowers what they need to do to get themselves into shape as it pertains to credit, income, and assets, but tell them that the process may take several months and to please stay in touch. The worst thing an MLO can do in this business is to ramp up the hopes of the principals and professionals in a transaction only to have the transaction collapse in the end.

Also keep in mind that good lending teams are comprised of human beings, and that there are many judgment calls that need to be made in order to determine if a transaction is likely to close. Just like a physician or a airplane mechanic, not all of these judgments are full proof, especially in an environment where guidelines are changing so constantly. Also, I’ve seen borrowers lose their job during a transaction, and sometimes buyers will do some outright crazy things like finance a car the weekend before they were to have closed escrow.  And I’ve also seen very knowledgeable and component professionals make dumb mistakes. While these mistakes are minimal the more competent the lending team members are, I know of no professional who has been in the business for more than just a few months who hasn’t hammered their own thumb, so to speak, at least once.

If you are buying a home, it’s important to find a competent Realtor® who is willing to stake their own reputation on their experience with a particular mortgage professional. (The same is true for title and escrow companies as well.) That’s not to say that you can’t bring your own lender to the table, especially if you have firsthand knowledge of their superlative work in the past, but if you’re a blank slate when it comes to applying for and obtain a mortgage loan, taking a Realtor’s® recommendation is vitally important. Let’s face it, the Realtor® wants to not only get paid, for which the transaction must close, but they will also want their own reputation unsullied in order that you can then refer potential homebuyers to them. This is how they build their careers, as do their team members (lender, title, escrow, etc.) as well.
  
 


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