This ARTICLE On Avoiding Bad Mortgage Reviews Solutions Is The Second Part Of A Two-Part Blog Series Was UPDATED And PUBLISHED On July 20th, 2019
Avoiding Bad Mortgage Reviews Solutions is the second part of a two-part article series. If you have not read the first blog on Avoiding Bad Mortgage Reviews which explains the reasons why consumers write bad reviews and testimonials on mortgage loan originators. This article on Avoiding Bad Mortgage Reviews Solutions is geared towards mortgage loan originators and will high light solutions with mortgage loan officer mistakes and how avoiding bad mortgage reviews solutions. We will cover common case scenarios and potential solutions
In this blog, we will discuss Avoiding Bad Mortgage Reviews Solutions For Lenders.
Qualification Stage Of The Mortgage Process
As mentioned in the first series of this blog, Avoiding Bad Mortgage Reviews, the main reasons why there are issues with a mortgage loan file and why mortgage files get last-minute denials is due to a sloppy pre-approval.
- The pre-approval phase is the most important stage of the mortgage process
- If the mortgage loan originator issues a solid pre-approval letter, there should be no issues with the mortgage loan approval process
Avoiding Bad Mortgage Reviews Solutions Starts With Issuing The Pre-Approval Letter
As mentioned in the first article, Avoiding Bad Mortgage Reviews, a sloppy pre-approval letter can create major chaos during the mortgage application and approval process:
- Not properly qualifying borrowers is the number one reason why mortgage loans get last-minute denials
- A sloppy pre-approval letter is a cause for bad mortgage lender reviews and testimonials for loan officers
- There are more to reviewing the borrower’s mortgage loan application and making sure that the borrower meets the minimum credit score requirements
- A diligent loan officer needs to thoroughly review the borrowers’ tax returns
- They will make sure that all proper write-offs have been taken into account when qualifying income
Thoroughly Qualifying Borrowers And Co-Borrowers
Loan Officers should not just check the credit scores to see if the borrower meets the minimum credit score requirements, but thoroughly review the credit report and look for the following:
- Late Payments In The Past 12 months
- Public Records Such As Bankruptcies, Foreclosures, Deed In Lieu Of Foreclosures, Short Sales, Judgments, Tax Liens
- Collection Accounts And Charge Offs
- Mortgage Charge Off Accounts
- Deferred Student Loans
- Credit Disputes
- Find Out Whether Or Not Verification Of Rent Is Required
How Loan Officers Review Borrowers Prior To Issuing A Pre-Approval
Credit Scores, Credit Payment History, And Public Records on the credit report is not the only analysis a loan officer should do prior to issuing a pre-approval letter.
- The loan officer should carefully review the borrower’s income, the type of income, and whether or not the income can be used
- Any gray areas or if the loan officer is not sure with the borrower’s income, the loan officer should do a verification of employment with the employer of the borrower
- This holds true especially when it comes to part-time income, overtime income, bonus income
Analyzing Qualified Income
Here are items mortgage loan originators should carefully analyze with income prior to issuing a pre-approval letter.
- Is borrower employed full time and if so are they hourly, or salaried.
- Does borrower have part-time income, overtime income, bonus income. If so, has the borrower had these types of income for at least two years?
- Are any of these types of income declining income?
- Many underwriters will not count declining income if the part-time income, overtime income, bonus income has been declining year after year
- This holds true even though the borrower has had a history of part-time income, overtime income, and bonus income for many years.
- If child support income, alimony income, or royalty income needs to be included to qualify income, will these income continue for the next three years?
- Gaps in employment
- Remember that you are allowed to have gaps in employment to qualify for a mortgage loan
- However, if your employment gaps were greater than six months, then you need to be on your new full-time job for at least six or more months for it to count as qualifying income
Asset And Bank Statements For Verified Assets For Down Payment And Closing Costs
Thoroughly review 60 days of bank statements.
- Overdrafts are not allowed by most mortgage lenders
- Many lenders will deny any borrowers with any overdrafts within the past 60 days
- 3Make sure you do not use any bank statements with overdrafts in bank statements
Either wait 60 days for the overdrafts to season or do not use bank accounts with overdrafts.
- Check asset information, especially when reserves are required
- Make sure that the borrower has enough funds to close, including closing costs
- HUD Loans allows 100% gifted funds to be used for the down payment and closing costs
- However, not reserves
- If borrowers have credit scores of under 620 FICO, chances are that the mortgage underwriter will request three months reserves
- Reserves need to be borrower’s own funds and cannot be gifted funds
Avoiding Bad Mortgage Reviews Solutions By Communication With Borrower
Communication with borrowers is key for all loan officers.
- Educate and set proper expectations with the borrower from day one
- Be available to all of their phone calls and/or emails
- Borrowers do understand that loan officers have many clients to deal with
- However, if a borrower calls you, return their phone calls promptly. No matter how busy you are, you need to return borrower phone calls the same day at the very latest
- I normally return phone calls by all my borrowers within an hour they contact me
- The time to communicate with borrowers is when things are going wrong and not when things are all rosy
Mistakes are human nature and if you are upfront with your borrowers about the mistakes you made, your borrowers will work with you.
Case Scenarios Between Borrowers And Loan Officers
Here is a real case scenario that just happened with one of my loan officers.
- A borrower completed an online mortgage application and my loan officer diligently reviewed all of the borrower’s credit profile and income
- Everything seemed to be a go
- The borrower did have a higher debt to income ratios, 56% DTI, and his credit scores were 621 FICO
- FHA Loans allow up to a 56.9% DTI on borrowers who have at least a 620 credit score
- The debt to income ratio cap gets reduced to 43% DTI for borrowers under 43% DTI
- Everything seemed to be a go and the mortgage loan seemed to be on target
- However, the underwriter caught that the borrower’s name was misspelled on the online mortgage loan application
- That is how the credit report was run
- A new credit report needed to be pulled with the correct name on it
- When my loan officer pulled the new credit report, the borrower’s credit scores drop to 617 FICO
- Huge mess
- Now the borrower did not qualify for the loan because the debt to income ratio was capped at 43% DTI since the credit scores were below 620 FICO
- Closing was within a week and now we had this mess because the loan officer did not double-check the online mortgage loan application whether all the information the borrower inputted was correct
- The mortgage loan originator just assumed everything was correct
The borrower was immediately notified about the situation.
Solutions After Discovery Of Mistakes
We had a major issue here and needed to come to a solution.
- The home closing needed to get delayed but more importantly, we needed a solution asap
- My loan officer contacted Credit Plus, our credit vendor, and asked what we needed to do to get the borrower’s credit scores over 620 FICO
- Credit Plus account executive told the loan officer to add $30 dollars on a credit card that had zero balance and that should boost the borrowers’ credit scores
- The borrower was told to go to the local gas station and fill up his tank using his credit card
- The loan officer did a rapid rescore and pulled credit and luckily the borrowers’ credit scores went up to 635 FICO so he was back in the running
- The buyer’s attorneys, sellers attorneys, buyers realtors, and sellers realtors all got notified about our issue and were told that we solved the problem
We had a two-week extension on the closing and the home buyer closed on his very first home.
Honesty Is The Best Policy When Mistakes Are Made
A mistake was made, but the loan officer was diligent in solving the problem and involved the borrower and everyone on the buyers and sellers side to find a solution. It was great teamwork and at the end of the day, it worked out. This is a classic case of avoiding bad mortgage reviews solutions. The ironic part of this story was that the borrower gave an excellent review on Zillow. Not a negative review, but a five-star positive review. Again, this article on Avoiding Bad Mortgage Reviews Solutions is the second part to Avoiding Bad Mortgage Reviews.
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July 20, 2019 - 7 min read