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By Vince Parlove
Benefiting from n g om
Michigan Mutual Inc.
Strong Relationships a
Mortgage meltdown teaches importance
of creating and maintaining allies
Although the national economy shows signs of a turnaround, the mortgage landscape likely
will remain altered for years to come.
To adapt to these changes, write bet-ter-performing loans and grow their client base, mortgage brokers must forge
lasting relationships with lenders.
As brokers seek to improve their
business procedures, they should
work with lenders to build accountability and meet increasing standards
for lending responsibility. Relation-ship-building works both ways, and
lenders seek partnerships with brokers who make it their business to establish, foster and maintain mutually
This is of particular importance in today’s market, in which untold numbers
of underperforming loans remain on
many lenders’ books. In many recent
cases, borrowers with long-time jobs
have found themselves unemployed.
In these occasions, brokers should
see an opportunity to connect borrowers and lenders in an effort to avoid
In many instances brokers were
blamed for the mortgage downturn unfairly. Brokers and lenders must work
together to strengthen the lending environment and the industry’s reputation.
brokers gain new clients and build
trust with current and future lending
partners. A rigorous evaluation of customers’ income can help, and brokers
can use Internal Revenue Service (IRS)
Form No. 4506 to obtain borrowers’
Although many brokers’ clients have
signed Form No. 4506 for years, brokers often haven’t used the obtained
information. In many cases, prospective borrowers could provide pay stubs,
which brokers would accept as a true
reflection of the borrowers’ income
landscape and ability to make timely
mortgage payments. This became problematic when customers used overtime
or other extenuating circumstances to
qualify for larger loans than what they
In the past two years, many lenders
began to match customers’ income records with income reported to the IRS.
Cross-referencing income lowers the
likelihood of placing clients in mortgages beyond their fiscal capabilities.
month may want to increase their production to compensate. Developing
strong lender partnerships can be crucial to the success of such efforts.
Brokers also should continue to
watch for higher interest rates, which
many industry players believe could
be inevitable by or before year’s end.
Planning for the likelihood of these
changes and determining how to react
in advance can be the difference between a thriving business and a struggling one.
Although some brokers and lenders
view higher interest rates as a disadvantage, brokers will continue to have
many opportunities to refinance loans
for consumers looking for new terms
and lower payments. In addition, purchase demand likely won’t dive in the
face of higher rates, especially if home
prices remain low in response to elevated inventory levels.
“One of the primary
ways brokers can
check on their
partners is by evaluating
default ratios a l ati s.”
Brokers should do more than deliver
mortgage applications. They should
offer lenders insights about their financial standing, industry experience,
track record and credit history. By doing this, brokers can build trust and
promote a mutual commitment to doing business together.
Evaluate lenders and yourself
One of the primary ways brokers can
check on their partners is by evaluating default ratios. The Federal Housing
Administration provides loan-perfor-mance data for lenders and appraisers
— as well as information for the general
public — via its Neighborhood Watch
When brokers’ ratio of underperforming loans increases, especially in
a short amount of time, lenders may
choose to stop working with them
or help them get back on track and
strengthen their business practices.
Lenders can do this by looking closely
at brokers’ approach to quality control
and by offering ideas for improvement.
Brokers also can take a proactive
approach by monitoring themselves
and their loan performance before intervention is necessary. This can help
Change and opportunity
Despite mortgage-industry challenges,
brokers can expect many exciting
changes and growth opportunities
throughout this year and beyond. For
those who run successful shops, consider increasing the number of lenders
with whom you partner, particularly
lenders that showed resilience during
the economic downturn.
In addition, make sure to remain
current on new licensing standards
outlined by the Secure and Fair Enforcement for Mortgage Licensing Act (aka,
the S. A.F.E. Act). They provide a significant step toward increasing integrity
and reducing fraud in the residential
Because stricter regulations and
underwriting guidelines come with in-
creased costs, many brokers who pre-
viously closed fewer than 10 loans per
Ultimately, many brokers who survived
the market downturn have proven their
strength in difficult conditions. To move
forward, they must continue to origi-
nate solid loans, help past clients in
need and watch market trends.
Vince Parlove is president of Michigan Mutual
Inc., based in Bingham Farms, Mich. He oversees day-to-day operations of the company’s
160 employees. Before joining Michigan
Mutual Inc., Parlove served as executive
vice president of secondary marketing for
FMF Capital, where he managed 90-plus
employees, selling more than $400 million
per month into secondary markets. He earned
a bachelor’s degree from Adrian College in
1992. For more information, call (248) 203-
1340 or visit www.michiganmutual.com.