Qualified Mortgage (QM) 3 points to remember

Well here we go again, DU is about to be updated again in June this year from what I hear.  Again we see the implementation of QM rules into the approval engine.  Ever notice how every 6 months or less now, DU is being updated?  Let me explain why again.

QM is making all loans backed by the Government Sponsored Entities eventually be 43% DTI too.  They were/are just exempt from that rule for 7 years.  It will be hard to fathom for some that do FHA/VA loans at north of 50% DTI all the time, that they will be capped at 43% in a very short time.  QM is half way through that 7 year period.  And every time DU is updated it is lowering the risk thresholds on DTI.  Ever notice that?

Well there’s more to the story.  In the next two years mark my word.  Correspondent “Lenders” are going to be regulated heavily.  More and more “skin in the game” reserve requirements will come to the land of mortgage lending.  It will more than likely require a fraction of a fraction of the overall business generated and funded monthly to be kept as reserves by that mortgage company.  More regulation for compliance of those “mini-correspondents” of the world will force them back to the “broker world”.   I see this trend now, more correspondents are going back to “brokering” to avoid compliance tasks.  There was a trend in emerging correspondent lenders since 2010, and now that the disclosures are the same on the front end as banks, that trend I see reversing itself as new regulations come to play in the next few years.  Yeah, you can still make front end and back end, but you still have to be at 3% total QM fees.  This is what I see happening, and of course not factual yet I do not think.  If your not closing north of ten million on your own lines per month it may not be worth it.  The dollar amount in fees and interest just to use the line makes it that your break even point may be around that same 2.75% that could be “brokered”.   Heck that break even point may be a higher funded volume.  And if new laws come to play that make a mini-correspondent hold more skin in the game as reserves, that extra “monies” is going to have to be held.

Now the third point.  The 3% rule.  I see it all day just because I do the math in my head so fast.  But LO’s you need to do this too.  For example, know what goes INTO the QM and then do the “math backwards”.  Commission, Underwriting fees, Points (unless bona-fide), Affiliated arrangement profit.  So if you are not affiliated with any AMC etc, and you “waive” or “buy out” the underwriting fee, then the only two things to LOOK at would be your compensation plan plus any points if any.  Now you can bona-fide 1 discount point if you have a rate that isn’t the top rate on the rate sheet or the bottom rate on the rate sheet.  Important to remember.  So if you are lending at 2.75% comp plan, and you have a final price of 97.5 after all add-on’s, you ARE going to run into an issue.  2.75% plus one bona-fide point would put you at 99 net pricing, and you would only have about a .25 or so left.  Not even.  So at that rate you could be at about 98.85 based on my estimation buying out the underwriting fee, charging 2.75% and bona-fide one discount point.   NOT 97.5% on final net pricing.  Do the math when  you lock.  Just cause the the rate’s on the rate sheet in most cases you can’t even offer that rate with a 2.75% comp plan and still pass QM 3% rule.  Know this in advance.

Here’s an insert from an article that quotes the concepts I was mentioning, made in JAN 10th 2013….CFPB Releases Final Rule on Ability to Repay, Leaves Back Door Open on DTI

“CFPB concedes there are instances where a debt-to-income ratio above 43 percent may be appropriate based on individual circumstances but believes these loans should be evaluated on a case-by-case basis under the ability-to-repay criteria rather than with a blanket presumption. Given the fragile state of the mortgage market however CFPB is concerned that creditors may initially be reluctant to make loans that are not qualified mortgages, even though they are responsibly underwritten. The final rule therefore provides for a second, temporary category of qualified mortgages with more flexible underwriting requirements so long as they satisfy the general product prerequisites for a qualified mortgage and are also eligible to be purchased, guaranteed or insured by the GSEs (while under conservatorship), HUD, The VA, or The USDA. This temporary provision will phase out as these agencies issue their own qualified mortgage rules, if GSE conservatorship ends, and in any event after seven years.”

QM Simplified

Sell Well – JUICEMAN

TRID still affecting you? Blast from the past that speaks the truth about TRID.

A Broker in Cali, that I have in my network asks me today;

How does TRID really affect me and what do I really need to know?

My answer is 3 parts of importance for you to know on how it changes the way the Mortgage Broker does business now.

1. The way Broker’s can switch lenders in doing business now changes.  The thing to know is the GFE and the TIL are combined.  So the fact the GFE isn’t signed now and it’s easy for brokers to “switch” lenders will change.  You will now need to “create” a new GFE if you are switching lenders assuming comp plans are different or the fee’s are different.  Then the borrower would need to sign that new LE (Loan Estimate). **re-post notes.  This is why the “Broker is bouncing back”.  The new disclosures level the playing field and Bank and Broker disclosures in the initial LE all look the same.  More and more rules are coming that will make more “mini-correspondents” have more reserves and mandate licensing etc if they “lend”.  Even more compliance laws to roll out in the next two years is what I see.  Why being a “wholesale Broker” is the way to go.  More new business starting daily.

2. The Tolerance items on the GFE as it is now are changing.  This could be a big movement in the industry.  And we could see “more” upfront fees on LE than we do on the GFE now a days.  The shopper will have a handle on Brokers that go skinny in the fees.  You know how the transfer taxes and owners title are a “ZERO Tolerance” item…. well guess what that section of the “LE” or new GFE if you will, is changing to include more items.  Pretty much all the items in box 3 right now.  What that entails is the Credit Report fees, the Appraisal fees, Tax Service fees, Flood Cert fees.  So, better make a new BEST PRACTICE as a Loan Originator in my opinion.  At the beginning you should disclose the cost of an appraisal and 1004D upfront at least.  Better disclose the credit report fee and at least two credit sups upfront.  Hope to see Flood cert’s and Tax Service fees more common on the new LE as well.  These would be mandatory to disclose in my mortgage company if I owned one.  Because if your fee’s end up 1 dollar more we all know that the 1 dollar becomes a Broker cure on the difference and shorts your income. **re-post notes; This is why companies are hesitant to send out CD’s in advance of CTC.  Continue to read 3.

3. The act that I preach now to all my network about “creating a HUD1” out of calyx or encompass after verifying fee’s is going to be a big deal.  At the end of the process under TRID there is a new disclosure called the CD (Closing Disclosure) that goes out and you have to wait 3 days from acknowledgement to get docs.  SO, that means no last minute changes.  About the time the loan is CTC’d Broker’s should be verifying fees from Title/Escrow and then having processors verify all those fees and structure with a HUD1 you create out of Calyx/Encompass/Byte etc.  Again the point is changes will delay loans and burn locks.  So it is important for all loan originators to adopt a new process that verifies structure and fees on a loan prior to closing.  Like a week before.  As the last conditions are sent in.

There are a few other changes Broker’s should know about, read about the full changes don’t go uneducated on how these changes will affect you.  Happy Originations.

**Re-post notes; You still seeing the affect of TRID or are you closing loans fast again?  If not call me I can help.


Tax Week Q&A!

The week of April 15th is tax week, and the dawn of tax refund special advertising.  It’s funny how this week I can almost bet that you see a furniture commercial advertising they will pay your sales tax, or perhaps a car dealership will match your down payment if you use your tax refund with them.  There are a ton of marketing spins to this during this the week of April 15th.  Rightfully so too, and great advertising.  Taxes owed and filing have a big impact on certain financing.  Such as a home.

What does this mean when buying a big ticket item like a house?  Well with Fannie and Freddie conventional loans having to owe taxes is not necessarily grounds for disqualifying you from buying a house.  If you owe taxes this year set up a payment plan, and once approved make a payment or two.  Now Fannie and Freddie do not say you need to make a payment, but FHA does.  FHA now says you have to have a payment agreement and pay 3 months of that agreement to be eligible.

What if I owe back taxes or have an IRS lien?  Yes you still need to have an agreement in place for FHA and three months payments made on it.  If you are attempting to do a conventional loan then you will be stuck having to pay off the back taxes if they are a true tax lien.  If they do not have a lien yet, but they owe back taxes that client should definitely be able to show an agreement and a payment history on that previous years taxes at this point.

What happens if I don’t close my loan on April 15th?  Well the clients’ should have transcripts from the IRS showing they filed taxes hopefully.  IF NOT, an extension is ok to have in the file now.  From April 15th to Oct 15th is the window in which any file can close using the previous two years taxes as verification if a tax extension was filed by an individual.  During that time you just have to have a copy of the filed extension in the file.

What if they just Filed taxes this weekend (week of April 15th) for example, how soon can we close?  Great question if the wage earner on the loan is in fact W2’d and income is not more than 25% commission, we can do a W2 Validation only loan.  The transcripts we get back as lenders is verification of the employer filing the W2 not the client.  So we wouldn’t have any down time.  If the client was paid all commissions or self employed and just files this week, well then your probably going to end up waiting a month or two… I only say that because the transcript results of someone verifying a clients filed taxes come based on the IRS turn time of getting them in that system.  And on the busiest week of the year for the IRS, the odds that it’s just going to take 3-4 weeks will be slimmer.  I’ve always experienced a surge in turn time being a lot longer for those that need transcripts in a loan but they just filed at the week of April 15th.  Try like 6-8 weeks out for them to show up.  Plan accordingly.

Sell Well – JUICEMAN


The artistic approach to follow up!

Follow up is a major role in sales.  In a call center many many years I was basically forced to develop the best habits I have today and didn’t even know it.  It’s all because the CRM I was using placed the next person for me to call right in front of my face.  All I did was hit next.  What I will detail in this article is the best follow up methodologies I’ve learned.

In effort to be timely on emails and responsive to fresh leads I would call them as soon as they hit my inbox or queue.  I would leave a message or often times get someone that answers the phone shocked that I’m calling them because they just hit the button 10 seconds ago to have someone call them.  Still to this day instead of responding to emails with another email, I pick up the phone.  It’s one of the best ways to respond with the “ante to play”.  I learned this as a young gun in the mortgage industry and still to this day respond that way every chance I get.  People on the receiving end love it.  As far as follow up after the first initial ask for contact, well being timely can make all the difference.  I would call a fresh lead the moment I got it.  If I left a message, I would call three hours later or make sure it was past “work hours”.  If during dinner time I didn’t get an answer I would again call before 8pm.  In some days I would call a fresh lead 3 or 4 times to attempt to get that “Lower my bills” lead on the phone.  It was strategic to get to the client first.  I knew if I got that chance to get them on the phone and deliver information about a mortgage to them, that I would WOW them in my attempt to custom tailor a mortgage and it would be a remembered conversation.

In fact for years I had others tell me that they got 19 calls and it’s between me and one other guy/gal for them to get the “best deal”.   You know what’s funny, I was picked more often than not, and I didn’t have the best price.  I just added more value.  Why, because my follow up smooth.  Having follow up reminders and a plan in place to follow up for everything will make a difference in your sales.  You want to strategically place calendar reminders to follow up with your clients in process, to past clients asking for referrals.  This is true for B2C and B2B sales.  The follow up timing with B2C is definitely more often for those on B2B in my opinion.  But the concepts work hand in hand.  B2B I transitioned too over a 7 years ago as an account executive to help mortgage Brokers close loans.  The Law of Averages in B2B from what I’ve found is that every 10-14 days a follow up call should be placed.  I wish now I had a CRM that put those clients in front of me.  If I could instill one best practice out there today, is create some sort of TIME BLOCK daily to follow up with past clients or clients in process, or clients pitched but not bought.  That’s the key to sales in efforts to add value and customize your sale to the end user.  The follow up “law of average” will be different for each industry or client type, it’s your job to determine what that may be.  No sales guru can tell you when that magic number is.

It’s funny how when planned right, I find that Brokers that aren’t using me and I do a strategic follow up with all the sudden call me a few days/weeks later with news that the other lender dropped the ball and they have a loan for me.  Same with car sales, and the shopper of mortgage rates, sometimes its not the fact you have the lowest rate or the cheapest car, it’s about your follow up being timely and the need to pull the trigger.  There is such a thing as calling too much, but it’s strategic, and you will have to find your own balance.  For every one person that says you call too much, there are three sales made due to follow up habits being timely.  That’s a great number to live by.

I wish you luck in your timely follow up – Create time blocks for this and it will make a difference in your sales numbers.

Sell Well – Juiceman

Sales skills you should master!

Sales is 100% a numbers game.  Some are just really good converters of turning prospects into clients.  Some are really good at getting prospects but not as good at turning them into sold clients.  Some are great at closing, but lose relationships that could lead to additional sales.  Sales is all about helping others, no matter what way you slice and dice it.  Today’s installment of JUICE is about how to increase those ratios and strategies that help others gain success.

Number 1, the biggest difference between good and mediocre sales people is the ability to walk the client through their pain.  That fact finding phase where you ask questions and LISTEN more than you talk.  Even I have had difficulty over the years at this.  But the best of the best walk their client through having a pain that they can solve with the need for their product or service.  HOW DO YOU DO THIS THE BEST? Tell stories.  Listen to others stories, they tell you want to tell them.  Facts tell, stories SELL.  Remember that.  99% of the conversations I have daily involve me telling someone else about another brokers success or what pains they came into when doing a loan and how they solved it with ME.  There is an art to painting pictures in the sales process, I often do this with guidelines.  And one thing my network loves about me is I don’t just say yes if I don’t know a guideline, I look it up or ask an underwriter to ensure that information is correct to put together a loan.

Number 2, keep prospecting.  Once you have the art of your sales pitch down now you need people to prospect in order to make sales.  The biggest mistake some make is letting the foot off the gas when the iron is hot.. They spend hours or days or weeks attempting to close a sale, then they don’t ask that client for a referral.  They hang up or walk out without asking for the most important part, MORE BUSINESS.  In some sales it’s called the rehash, in mortgage sales it’s the referral ask.  You can’t ever have enough people to call.  The best mortgage folks I work with have leads to call for days, or applications to call back from last week still.  FOCUS on the front end, and the money and the numbers will follow.  Think 70%, and even if your closing ratio is better than that lower what your subconscious mind thinks it is.  WHY WOULD I DO THAT?  Well because it keeps you hungry to grind for more.  The more prospecting you do, the more opportunities you will have to close more clients.  And then when you close someone take that sale all the way home, not just to the board room table.  What I mean is those you fought for their business are often times the best sources of referral business.  Don’t be shy to ask.  If you ask you will get.  You miss 100% of the opportunities you don’t take.  Are you a Mortgage broker reading this?  If so, who do you have doing your 580-700 FICO deals?  I Motive-ate these loans to the closing table all month long.  Let’s work together, reach out to me.  586-737-7456 is my office line.

Number 3, have fun and look to add value in helping others.  The CORE of the success that others have in sales is NOT the product or the service.  It’s the person that the client is working with and their inherent feeling of helping other people.  The more like-able you are, the more engaging you are in taking an application, the more needs wants dreams goals you find out about your client.  And in mortgages you can custom tailor that loan to help the client achieve that goal.  Then add value to the client by following the GOLDEN RULE of marketing.  WHAT’S THAT?  Well it’s easier to sell an existing client than it is to go out and find another one.  Create synergies with not only your business partners to work with you over and over again, but clients too.  Too many times I see that clients are closed and then a year or two years later that client is moving and that LO/Agents have no idea.  WHAT?  I ask myself, why don’t Broker’s position themselves to be the newest addition to any one clients financial team.  Their “Banker/Broker” for life.  To help the client buy a second home, start an investment portfolio or help their kids buy their first house.  Not many take this approach, seems elementary, but not many Broker advertisements actually state this.  Add value, stay in front of your past clients with newsletters and birthday cards and ask for referrals all the time.  What loan are you working on today that I can help you get done to help that client?  I am taking applications now for April closings.

The more you do these things the more sales you will see.  The more you will be building a portfolio of business partnerships, and be able to help others.

Sell Well – JUICEMAN

Add your Culture to your script.

The best way to custom tailor any script for sales is to incorporate your personality into it.  Nobody wants to hear a sales person sound scripted.  If you have a client on the fence and perhaps your stumped on how to address it.  Do this, stop pitching and be personable.  Tell them something about your company, tell them about your corporate CULTURE.  The “pillars”, are these foundations of “client centered focus and service” that most companies in the mortgage industry have plastered on orange and yellow walls somewhere.  **Note to self, paint walls.  Motive does have pillars much like other past workplaces of mine.  Most great sales coaches will tell you sell yourself.  Selling your company and their values is a part of that.

As you hit the hard work in on the phones, you must ignore the noise, and take the roast out of the oven with intent to do the right thing. Respond with the ante to play, and put your clients first. These PILLARS are your BEST SALE and sit right in front of you.  Share your pillars with others in your sales today in whatever you do.  Remember in my article Believe In Better I say the first step is to BELIEVE.  And part of having that belief in sales is leaning on the “Pillars” that founded your CULTURE.  You should be incorporating your culture of belief’s on customer service in your scripts and engaging in it during your sales presentations.

AT MOTIVE LENDING our pillars are AACC.  Accountability, Accessibility, Communication, and Consistency.  My management does the best job Motive-ating these through the company.  And live up to our pillars we stand for.  Love how Motive does this.  And today as we begin another month, start with the end in mind.  Then at a time when relationships and timelines are tested, it will be with great pleasure that you get to lean on the foundations of your culture.


Sell well today, sell your CULTURE and Pillars of client service you stand for! – Juiceman