Top producers work on educating clients about the mortgage process
Among the questions National Mortgage News posed to applicants for this year's Top Producers program was one seeking to identify the biggest misconceptions clients had about the mortgage process and the steps the loan officers were taking to address those.
The responses made clear it is important to grasp the customer’s understanding of the process. Many come in without much information or are operating under misguided expectations about how the process will work.
"I believe most buyers start the process scared and worried it will be a bad experience," said Stephen Novotny, a loan officer for Willamette Valley Bank in Coeur d'Alene, Idaho. "The mortgage process for a buyer can be a fun experience as long as you provide them with the tools and service."
Mass marketing of online mortgage products is fueling some wrong ideas about the process, some participants said. For example, some expect that applying for a mortgage "is as simple as clicking a button," said Robby Oakes, managing director of Corporate Investors Mortgage Group in Chapel Hill, N.C. "We have to educate buyers that our industry advertising is very misleading to the actual process. Setting proper expectations is key."
Applying for a mortgage is different than getting another type of loan, said Chris Kirman, assistant vice president for The Ephrata National Bank in Lititz, Pa.
"Specialized knowledge or guidance is needed even with the best of technology platforms or most independent of customer," said Kirman. "Everyone thinks a rocket ship sounds great until they have to ride in one or fly it."
Many consumers also are operating under the belief that the rate they see in advertisements applies to all applicants, said Bay Equity Home Loan Sales Manager Rich Holsman of Eagle, Idaho.
"Advertised rates are just that, advertised. It gets buyers in the door, but the rate may not apply to their specific scenario," Holsman said. "We educate our clients on how rates work and what affects an interest rate, so they can adjust as needed. Bait-and-switch can create a lot of frustration for clients as they try to meet deadlines."
A side effect is that many applicants don't realize they still must provide a lot of information to their originator to get a mortgage.
"The biggest misconception is lending requirements have eased to a point where documentation is not as necessary as it may have been in previous years," said Pamela Baker, a mortgage consultant for On Q Financial in Scottsdale, Ariz. "This is for our clients' benefit to ensure they are well qualified."
While originators state that consumers have unrealistic expectations about the time needed to approve a loan, they also are demanding their employers take the initiative to improve turn-times.
The vast majority, 95% of the loan officers surveyed, said it was important to their job satisfaction and choice of where to work that their company made an ongoing effort to speed up the process from application through closing, with 77% categorizing it as extremely important.
The desire for better processes makes sense. Mortgage lending has become much more commoditized and consumers tend to think "that all loan officers are created equal," said Yvette Clermont, Inlanta Mortgage's Lakewood, Fla., branch manager. Finding ways to differentiate is key. "Experience and education of those consumers hire can and will make a difference in the process. Education of the full process is key to successful home purchase."
That applies to teaching them about the different types of originators. "I have to do a lot of educating to help them understand the differences," said Kelly Zitlow, a vice president in the Scottsdale, Ariz., office of mortgage banker Cornerstone Home Lending. "If a client goes to a big national bank and the big bank denies the loan, it's not like they are going to refer the client to another lender or broker, the answer is just 'your loan is denied.' Clients don't realize that doesn't necessarily mean that you can't get a home loan somewhere else."
For one top producer, clearing up misconceptions means making sure borrowers know that common sense and rationality apply to the underwriting and lending process.
"This is not the case. This comment is not meant to be a complaint," said Mike Rafii, a producing branch manager in the Del Mar, Calif., office of Bay Equity Home Loans. "By communicating to the client upfront that rational and logical processing is not necessarily the way guidelines are written, you are setting the expectation to have clients trust you as the originator as the professional guide that they have hired to navigate through the process and have a smooth landing. Clients are our copilots."