There are at least three definite truths in the mortgage business:
(1) change is inevitable; (2) a lot of companies and mortgage professionals will be resistant to change at first; and (3) successful companies and people adapt to new processes and find ways to make it work.
That process is happening again, this time in regard to pricing being offered by mortgage insurance companies, as they are lowering monthly premium amounts to benefit borrowers. The problem is that the changes have made the process more complex for loan originators.
Gone are the days where mortgage insurance companies offered one-size-fits-all rates. Back then, no matter which lender that a loan originator chose to work with, every company’s LTV and FICO requirements were the same, and everyone offered the same adjustments across the board. Now, because of tax benefits that President Trump has implemented, mortgage companies have changed their rates, which has eliminated that sense of uniformity throughout the industry.
Better rates are available for borrowers if they have a low DTI and if there are two borrowers on the loan, because it’s a less risky loan. All the mortgage insurance companies are doing different things now, determining their own price points, overlays and guidelines. The game has changed now, but it will be better for loan originators once they master the new way it is played. They need to go direct to the lender to price out their mortgage insurance rates, instead of relying on pricing engines for the most accurate rates.
That new style of play is another reason why it is advantageous for loan originators to work at mortgage broker shops instead of large banks and mega retail lenders.
If a loan originator works at a retail lender that only aligns itself with one specific mortgage insurance company, he or she may have to charge more from borrowers that have a higher DTI, or charge more if there is only one borrower on a loan instead of two.
Or, beyond simply charging higher prices, loan originators at retail lenders and large banks might have to deny a borrower altogether – because the borrower doesn’t meet that lender’s DTI or LTV requirements of a maximum 43% DTI, or set a cap at 95% LTV, while wholesale lenders can go higher in both categories.
If a loan originator works for a mortgage broker, they can find the right lender, based on things like products, technology and service, and make the best decision based on which particular mortgage insurance companies that different lenders work with.
Mortgage insurance of today is not what it has been in the past. Brokers really need to educate themselves on the pricing and guidelines that different mortgage insurance companies are offering and partner with a wholesale lender that provides them with choices. That way, they can help all of their borrowers instead of just a select few.