Mortgage originators get high marks from borrowers

Application slowdown means hard-to-qualify borrowers may now get funded.

By Jeff Lazerson | jlazerson@mortgagegrader.com | MortgageGrader.com | March 14, 2021

Silver lining indeed when it comes to borrower satisfaction with their mortgage loan originators amid the COVID-19 pandemic.

Mortgage rates came crashing down. Crushing numbers of borrowers ran to the mortgage ticket line to catch the low mortgage rate wave. A record-breaking $4.3 trillion in mortgages were originated in 2020, according to Black Knight. Of those, $2.8 trillion were refinances and $1.5 trillion were for purchase loans.

Consumers were very satisfied with their mortgage loan originators in-spite-of the kerfuffle of longer timelines and stricter COVID-driven underwriting requirements, according to a nationwide survey.

The Stratmor Group crunched last year’s numbers on more than 256,000 owner-occupied, funded purchase and refinance residential mortgage survey respondents in its annual Mortgage SAT findings. We’re talking banks, credit unions, non-bank lenders and mortgage brokers.

Loan officers scored 95% satisfaction in the eyes of consumers.

Not bad for an ever-changing chaotic existence of lockdowns, working from home, fear, panic and worry that death could be knocking at your door.

Mortgage loan originators did average 95 out of 100 in three of the past four years.

“To put it another way, the fish weren’t just jumping into the boat, they were threatening to sink it,” wrote survey director Mike Seminari.

Even at 95% satisfaction, the Stratmor SAT survey had some take-aways for stakeholders to consider. The first reminds me of the lyrics from “The Things We Do for Love,” which says, “Communication is the problem to the answer.”

“Communications should be at a consistent time each week and in the style the borrower wants, phone, email, text,” said Seminari. “Wholesale (mortgage broker channels) always performed better than retail in white-glove service.”

I polled some industry peers about the kinks they see in the system and how we can make things better. To a person, all said to emphasize the additional COVID-19 income requirements.

For example, show proof of business activity — like an invoice within the past 20 days or a profit and loss statement within the past 60 days prior to funding a self-employed borrower.

Getting turned down in 2020 could pivot to a 2021 loan approval for you.

Over the past year, I received a plethora of reader complaints about getting the cold shoulder from lenders. Many said they were just told “no” due to the complexity of their file, small loan amount or being self-employed.

New mortgage application volume seems to be plummeting this week as a direct consequence of rising mortgage rates. Lenders now focus on much thinner profit margins to keep significantly higher rates at bay, stay competitive and feed the beast.

In addition, efforts are being made to debug, solve uploading challenges and get used to a brand-new loan application template mandated for March 1. The new loan application is nine pages long with a separate four-page addendum for each additional borrower.

The previous five-page “1003” application was last updated in June 2009.

If your qualifying situation is complicated, now just might be your time.

Rates are higher, but they are still great from a historical perspective. Lenders have an abundance of staff with time to dig in.

“Difficult loans can work just fine,” said one industry executive. “The key is good communication.”

Borrowers and their loan officers must clearly and succinctly present the facts and the issues for the underwriter to consider.

As for small loan amounts, plenty of shops avoid small-balance mortgages because there is little or no profit in them. Can you say loss leader?

Another issue: Federal regulations known as HOEPA (homeowners equity protection act) and the QM (qualified mortgage) Rule restrict loan origination fees, according to attorney Roger Fendelman of Garris Horn.

“Loan origination points and fees are capped at somewhere below $2,500 on a $50,000 loan, $3,308 for $100,000 and $4,500 for a $150,000 loan,” Fendelman said. “It is critically important that lenders who discriminate against consumers requesting smaller loan sizes understand the risks of doing that, and work to ensure they are providing credit to all who qualify.”

Enforcement likely will be stepped up under the Biden administration, he said.

One lender also is giving self-employed borrowers a break. After raising its lowest middle FICO score for all borrowers to 780 last year, it lowered that requirement to 700 last week.

Freddie Mac rate news: The 30-year fixed-rate averaged 3.05%, up 3 basis points from last week. The 15-year fixed-rate averaged 2.38%, 4 basis points higher than last week.

The Mortgage Bankers Association reported a 1.3% decrease in mortgage application volume from the previous week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $548,250 loan, last year’s payment was $93 more than this week’s payment of $2,326.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with a 1-point cost: A 30-year FHA at 2.25%, a 15-year conventional at 2%, a 30-year conventional at 2.75%, a 15-year conventional high-balance ($548,251 to $822,375) at 2.25%, a 30-year conventional high-balance at 3% and a jumbo 30-year fixed at 3.125%.

Eye catcher loan of the week: A 30-year fixed rate at 2.875% without points.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com. His website is www.mortgagegrader.com.