Ways to Ramp up Your Closure Rates

Ramping up your closure rates is as simple as tightening your internal procedures and the way you put your deals together. Ramping up your closure rates means being able to quickly identify not only opportunities but also problem deals so as to maximize the use of your time.

So why don’t deals close?

The client backs out. Well, there is not much that you can do here other than try to learn why the broker is losing the deal and looking for ways to compete.

The property is not worth what was submitted on the application. The high ratio insured deal is particularly challenging because if you don’t identify discrepancies in value before the deal gets to the insurer and you have a high volume of submissions to the insurer where their internal AVM disagrees with your values, this can strain the relationship between you and your insurer. When a property fails to come in on value, your broker may get upset and disagree - not to mention the costs incurred if you were trying to land the deal and have paid for a drive-by appraisal, only to find out the value wasn’t there. Running AVMs on your deals at the point of application is one of the most inexpensive ways to validate a value before you submit a deal. You can even ask that your brokers use the same AVM tool as you so that they can validate this information before the deal even gets to you.

Discrepancies in home ownership. People often forget that they have other family members on title while others are straight out deceptive. Verifying home ownership information at the application stage goes an incredibly long way in preventing fraud, mitigating risks associated with deals that fail to close once with the lawyer, and finally enabling you to go back to the broker or branch who submitted the deal and ask the client to clarify discrepancies.

Encumbrances – this is a big one. Undischarged mortgages, undisclosed mortgages and liens come up all the time. More than discrepancies in homeowner information and just less than discrepancies in value – encumbrances can kill a deal fast because they can either signify that the borrower is higher risk than you initially thought or that there is not enough equity to make the deal happen. It is more than advantageous to identify this early on. This is especially a challenge for credit unions, trust and finance companies who write a lot of B business or second mortgages. It should be noted that a B lender or secondary lender should have a tool to check encumbrances on all deals.

Deploying tools and technology to close more deals will not only make you more competitive long term, it will also strengthen your relationships because you will be positioned to respond definitively to applications quickly.

For more about how Purview For Lenders can give you an advantage when it comes to identifying problem deals, please call us today at 1.855.787.8439.

What Do You Value in a Good Mortgage Broker?

If you are a lender who works closely with mortgage brokers then you know that lender/broker alignment and a strong relationship can make or break the mutual success of both.

The best way for brokers to know what lenders value in brokers and vice versa is for both sides to gain a better understanding of expectations.

What are your expectations?

·         Do you prefer that you brokers take increased measures to perform due diligence?

·         Do you prefer that your brokers take particular steps when packaging a deal for submission?

·         Are there documents that they can gather upfront that aren’t mandatory but if gathered would make the closing process a smoother one?

·         Do you prefer that brokers you deal with use the same tools that you do, with the same data sources, so that you are dealing with the same information?

The broker’s relationship with their lenders is as important as that of their borrowers. No customer = no deals and no lender = no $$. That said, what a lender values in a broker is different from consumer expectations. Brokers are charged with the delicate task of building policy and procedure that leaves both groups happy.

Communication. Communication. Communication. This is crucial.

If you don’t share with your broker partners what you value, then, when underwriting, they may not be not be proving documentation that is up to your standards. What do you expect of your brokers? Maybe they would present more value to you performing more searches when underwriting a deal to submit to you. The key to getting the most from these relationships is being able to express your expectations to your partner.

Many lenders now mandate that brokers meet minimum closure rates as a result of brokers who submitted too many deals that failed to close. Showing your brokers how to present an extremely strong deal makes them more effective when qualifying and structuring a deal for you.

Likely your company has BDMs out on the road visiting brokers and emailing out rate sheets to keep the applications rolling in. Here is an idea: how about making the most of your visit and spending some time educating your brokers about the tools that you use when underwriting deals and what they can do to present even stronger deals?

Broker/lender alignment is critical for mutual success and your relationship with your broker will be as strong as you want it to be.

For more about the tools that make broker/lender alignment strongest, please contact Purview For Lenders by calling 1.855.787.8439.

New Year’s Underwriting Resolutions

So the New Year is quickly approaching. You may have already scribbled down your personal resolutions for 2015 – but have you written down your professional ones?

Underwriters unite! What New Year’s underwriting do you have to share with your fellow financial professionals?

HPI Monthly Report: Home Prices Down 0.3% in November

In November, the Teranet–National Bank National Composite House Price Index™ was down 0.3% from the previous month. It was the first monthly decline in a year. Moreover, it was very broad-based: prices were down in eight of the 11 metropolitan markets surveyed, flat in two and up in only one. Prices fell 1.6% in Halifax, 1.5% in Quebec City, 1.0% in Montreal, 0.7% in Winnipeg, 0.6 % in Ottawa-Gatineau, 0.3% in Toronto and Victoria and 0.2% in Calgary. Prices were flat from the month before in Vancouver and Hamilton and rose 1.1% in Edmonton. It was the first time in two years that prices were up on the month in only one of the markets surveyed.

Since in November 2013 the composite index declined only 0.1%, this November’s 0.3% decline meant that 12‑month home price inflation decelerated from 5.4% in October to 5.2% in November. That countrywide average was largely exceeded in Calgary (9.2%), Toronto (7.3%), Hamilton (7.0%), Edmonton (6.2%) and Vancouver (5.9%). Unsurprisingly, the resale market in these five urban areas is balanced or even tight. The 12-month increase was more moderate in Winnipeg (1.5%), Victoria (1.4%) and Montreal (0.6%). Prices were down from a year earlier in Ottawa-Gatineau (−0.2%), in Quebec City (-0.3%) and Halifax (−1.8%). The composite index has been up from a year earlier for 62 months now, since October 2009. The only one of the 11 markets to match that run is Toronto, though Hamilton comes close with 60 months.

For the full report including historical data, please visit: www.housepriceindex.ca

Underwriting 2.0 - Using an AVM to Validate Your Appraisals

Many mortgages involve appraisals. When you are considering funding a deal that relies heavily on home equity the appraisal is the one thing that validates that your security is worth what was stated in the mortgage application.

Appraisals can be somewhat subjective because, while there are 2 distinct methodologies (comparable sale method and income method) an appraiser can be swayed by their opinion of property condition. They have the discretion to select which comparable sales are used and sometimes even discretion over what distance and sale time is acceptable in terms of what is used. For example, if you don’t specify distance to the appraiser, your appraisal could include comps outside of the client’s subdivision and variances in value can be vast from one subdivision to another; from one side of a subdivision to another, the quality, types and designs of homes can change, which can impact value.

Many lenders are now adopting AVMs (Automated Valuation Model) into their underwriting process just to double check/validate the value that comes back on an appraisal. Where equity is not as high a concern, many lenders will also couple a drive-by appraisal with their AVM. An AVM, as you may know, is an automated tool that you can use to estimate the value of a property. Different AVM providers obtain their data from different sources and also use different methods in terms of how the value was calculated.

What is true of all AVMs is that they are emotionless. They estimate value based on data and data alone. For this reason often an appraisal coupled with an AVM is your most powerful combination to ensure the value you are lending is certainly within the ballpark of what was initially estimated.

Another way that an AVM can be used with an appraisal to actually reduce the overall cost of appraisal is that you can even look at an AVM before you request the appraisal. This way you can get a ballpark on the value, upsell your deal where there is more value, or go back to the broker or the branch if the value is not there and before you or your client incur the expense of a drive-by or even full blown appraisal.

Once the appraisal is performed you will have the full picture because you will have an automated valuation of the property to compare against the appraisal, thereby giving you more insight into interior/exterior conditioning, home improvements and other things that you would otherwise need to visit the property to learn.

For more about the benefits of coupling an AVM with an appraisal, or to find out more about Automated Valuation Models, please contact Purview For Lenders today by calling 1.855.787.8439.

The True Cost of Mortgage Fraud and How to Mitigate It!

While perpetrators of mortgage fraud may think it is no big deal because it is somehow a victimless crime, mortgage fraud costs the mortgage industry as a whole. The cost of mortgage fraud is more than just the cost of the lost mortgage that may have been advanced – operational costs associated to collections, default management, power of sale/foreclosure costs, legal fees, property repair and maintenance costs, resale costs and more are all resulting costs associated with this crime.

The cost of mortgage fraud to brokers and the public include: more stringent lending guidelines and verifications by lenders, and rightfully so.

While as a lender you may rely on the mortgage broker or real estate lawyer to catch fraud, you have no way to know what tools they use or what internal procedures they have in place when performing due diligence. In fact, there have been many proven cases of mortgage brokers or real estate lawyers who were the perpetrators of the fraud.

In the former mortgage underwriting course offered at Seneca, the textbook used highlighted a famous example of mortgage fraud in Canada that involved (surprisingly) a real estate lawyer. In 2006, the Law Society of BC approved over 30 million dollars in payments in connection with a multi-million dollar real estate fraud case where a real estate lawyer received funds to discharge titles on real estate transactions he was involved in with a developer. The lawyer was subsequently disbarred.

Most financial and legal professionals are ethical but we can see how a few bad apples can spoil the whole bunch. So what can you do to protect yourself and reduce the cost of mortgage fraud within your organization?

The 2 most common forms of mortgage fraud are:

·       Fraud by shelter - this is when an application is manipulated so that a potential homeowner who could otherwise not afford a mortgage is approved – this could be through misstating income, doctoring documents all the way up to identify fraud.

·       Title fraud - this is when fraud is undertaken by an individual or group to make a profit and often the identity of the homeowner is assumed and a new mortgage is taken out.

The most common ways that individuals and other professionals in the industry commit mortgage fraud as it relates to a property are:

·       Over-inflating the value of the property

·       Misrepresenting characteristics of a property

·       Misrepresenting the use of property – the intention is for the property to be used for rental

·       Builder bail-out schemes – a builder presents paid borrowers as new homeowners to secure financing

·       Fraudulent title transfers

·       Property not in the name of the seller

Many lenders use tools like Fraud Check, an aspect of the Purview Report, to review active mortgages, recent sales, prior foreclosures, no conc. management, active judgement, active caution, active liens, power of sale, unusual discharges, frequency of Powers of Sale in an area and more…This information can really help to avoid the costs associated with mortgage fraud because it helps to mitigate risk.

Leveraging tools such as Purview For Lenders enable you to investigate a property or borrower, identifying potential fraud quickly so that you can dig that much deeper to ensure that you have a solid deal. These tools also go a long way towards mitigating fraud (especially where it relates to a property) and reducing the overall cost of mortgage fraud in the mortgage industry.

Mortgage fraud costs everyone involved a great deal of time, money and effort, can lead to the disintegration of important relationships, can damage reputations and make future success difficult.

For more about how Purview For Lenders can help you mitigate risks and identify fraud before it becomes a major wrecking ball, please contact us today by calling 1.855.787.8439.

Happy Holidays from Purview For Lenders

December is here and it is time for the holidays! The entire Purview team at Teranet extends you and your family warm wishes over the holiday season and all the best successes in the New Year.