Something Seem Fishy? Don’t be Afraid to Dig a Little Deeper

If is walks like a duck and talks like a duck, it may be a duck! Financing a mortgage has a lot to do with good underwriting and funding models – but also a lot to do with gut instinct! If you are underwriting an application and something seems fishy, the time to dig deeper is now as to save invaluable time and expense!

Clients and brokers alike err from time to time. Often this is unintentional and occurs because the individual made their best educated guess on a piece of information. Of course, sometimes there are also deliberate attempts to manipulate information to get a deal through.

Here are some key underwriting tips that you may or may not be deploying to mitigate risk when you underwrite a deal.

Compare - When asking for documentation from the broker or client, such as void cheques, paystubs, ID, etc., make sure to check your documents and compare them against the information both in the credit report and in the application. This can be one way to not only identify issues that could surface later on your deal but also to mitigate fraud. I know, I know – seems like common sense, but many underwriters process volume deals and scan paperwork, when taking an extra couple of minutes could make a major difference.

Verify – don’t just take what is said to you at face value. Check the facts on the application at the application stage. Tools are now available that will enable you to verify who is the legal homeowner is, as well as verify registered mortgages and liens.

Evaluate – investigate the value yourself. Do not just depend on the fact that CMHC may accept the value or that you are going to get an appraisal to move forward on stated value. This can impact your closure rates with your insurers, not to mention avoiding that the wasted time spent underwriting a deal only to find out later that the value wasn’t there.

So we have talked negatives. You thought something seemed fishy and thus investigated it – does it mean that you will always discover a bad fish? Absolutely not. You may discover a big, fat grilled salmon. Your client may owe far less than anticipated or may have a home worth far more money than the client or broker projected. What does this mean to you? Upsell, upsell, upsell. You may have more of a deal than you think you do!

If something seems off, don’t ignore your gut. Compare, verify, evaluate. If everything is good, that is great. However, if something isn’t lining up, save yourself the time and expense and fix the problem right away.

For more about the tools that make comparing, verifying and evaluating easy, call Purview For Lenders today at 1.855.787.8439. 

HPI (House Price Index) and OMI (Ontario Mortgage Insight Report) Two Acronyms that mean A Lot

There is a reason why many economists subscribe and pay attention to the Teranet National Bank Index and The Ontario Mortgage Insight Report. If economists are paying attention to these what is contained in these reports, you should be too! These reports shed insight into the Canadian and Ontario real estate markets and trends. Reviewing this data can enable you to foresee changes coming in the market – both good and bad. This can help you to ramp up marketing efforts in particular regions or to mitigate risk.

The Teranet National Bank House Price Index is a monthly published report that provides the rate of change for Canadian single family home prices. The data is amongst the most accurate available and the report bases its measurements on actual sales in the public land registries. This is a national composite. Here is where you can register to receive this very valuable monthly report to your email inbox: http://www.housepriceindex.ca/Default.aspx.

The Ontario Mortgage Insight Report from Teranet also provides valuable statistical information which includes mortgages and home equity by location and transaction. This report is available in Ontario and you can register to receive it by contacting Teranet.

These two reports give you the competitive edge – stay in the know by staying in the loop!

Want to learn more about either one, or the many ways in which they can help you become more efficient and competitive? Contact Purview For Lenders today at 1.855.787.8439. 

More Mortgage Brokers Than Ever Using AVMs

While you have likely been using AVMs (automated valuation models) for many years as a lender, many brokers have only started using them more so in recent years, largely because they have been a product generally offered to lenders. This is no longer the case thanks to advancements in technology.   

The lack of use of AVMs or use of some platform to validate property values and home ownership information can largely explain the shock you likely hear from brokers when they submit a deal and without requesting an appraisal, you upsell the deal, down-sell the deal or decline the deal because you disagree with the value as a result of your AVM.

We often blog to brokers about the importance of strong lender/broker relationships. Developing and nurturing these relationships means work on both sides – especially if your approval and funding process is largely electronic, meaning little human contact between underwriters and brokers.

We constantly stress the importance of packaging and due diligence.

One way you can help your brokers to validate information more consistently and from the same source as you is to let them know the types of tools that you use when underwriting deals.

AVMs are an excellent example – just think of how many bad deals would be avoided before crossing your desk if your brokers leveraged AVMs to validate values, registered mortgages and the people on title.

This means education! When your BDMs hit the streets, arm them with more than current rate sales and info on who qualifies for what. Educate them about the tools, tricks and techniques that are available to perform due diligence and better package their deals.

Also – social media. Social media may be a marketing platform you use to attract brokers. Providing brokers with additional content that is of value to them and educating them on how they can be more successful can be a more powerful marketing tool than pushing out rate sales.

Teaching your brokers how they can underwrite more effectively leads to more qualified deals and an immense amount of time and cost savings – to you, your broker and, if you are not using AVMs, your insurers when disagreements re: value occur.

More mortgage brokers and agents are using Automated Valuation Models than every which is excellent for the industry. Get on board, and help your brokers be more effective.

For more about the value of an AVM for your brokers, please contact Purview For Lenders today at 1.855.787.8439. 

Private Lenders - Good Mortgage Gone Bad – Now What?

There is nothing worse than funding a deal that goes bad! If you are an FI who insures your deals you may have some solace knowing that you have that insurance in place – but there are still tons of lenders who don’t insure their deals simply because they can’t!

You know better than I that those more difficult deals where there are challenges with credit or income type generally don’t qualify for insurance and end up as equity deals that largely depend on the integrity of the asset, location and equity.

You may have done all you could – you may have had a conservative appraisal, lent on a low loan to value only to encounter a surprise later when a mortgage goes into default. This often occurs when there are changes in the marketplace impacting the value of a property – or in the case of second mortgages, the first goes into default and the first mortgage lender begins chewing up equity with whatever expenses they incur.

You likely have your standard procedure for dealing with defaulted mortgages – but this blog will shed insight into some technology that banks use, technology that is now available to even independent private mortgage lenders, that can be useful.

The first thing you want to do when a mortgage goes into default is check into the value and any encumbrances that may have been registered after your mortgage. A simple property search using a tool such as Purview For Lenders can achieve this by validating both value and registered encumbrances.

You can change your criteria to generate different models that show you the low to high end of the spectrum with respect to other properties in the area.

What’s more, you can even leverage an AVM (Automated Valuation Model) to identify trends in particular areas to be able to see where you have assets that may be experiencing a shift – good or bad. This could be a sign to solicit clients to borrow more – or a sign that on renewal, maybe this isn’t a good deal to have in your portfolio.

Shifts in markets and equity positioning are especially challenging for private lenders because when 1 year terms give you a chance to get out, annually, interest only payments mean that you are not seeing principal go down so a shift in values in a particular area can present considerable risk.

Want to be prepared when a good deal goes bad? Deploy the tools and technology available to you!! Purview For Lenders has those tools. Contact us today by calling 1.855.787.8439.