NMP - September 2016 - 76

Prepare for Unconventional Conventional Lending conventional loans. But they may require more attention from a conventional lender. Find wholesale lenders that work with borrowers who don't fit the traditional mold By Rey Maninang onventional lending covers a wide swath of the residential mortgage industry, as it includes both fixed-rate and adjustable-rate mortgages, conforming and non-conforming loans and nearly everything else that isn't guaranteed by the U.S. government. As such, it has long dominated the residential mortgage market, but even more so since the housing crisis and subsequent tightening of credit standards. This past July, conventional loans accounted for 65 percent of the mortgages originated1, C according to the Ellie Mae Origination Insight Report. And no wonder, as conventional loans had the highest closing rate at 72.1 percent. These numbers are reflected in the often narrow offerings of today's wholesale lenders. These lenders dictate strict guidelines and requirements for their conventional loans, and show little interest in investigating the realities of more complex loan scenarios. But as more and more brokers and originators jockey for the perfect conventional loans, they may be overlooking the borrowers-and lenders- that can help them close more SEPTEMBER 2016 n National Mortgage Professional Magazine n NationalMortgageProfessional.com 76 TO OU Y E K IT MA E 'S TIM JOIN A R E MOV ! Loan Officers, Branch Managers and Teams GROWING TEAM Inside & Outside Sales positions available Carrington is expanding nationwide. We are looking for experienced managers and teams to join our organization. Contact us to learn more about Carrington and make the move to expand your business and career. WE OFFER: John Cervantes | RECRUITER  Great compensation and benefits  Operations focused on quality & speed of closing  Marketing support and lead generation  Licensing and compliance support  Agent co-marketing programs VOTED John.Cervantes@CarringtonMH.com 949-517-7127 Carlos Fernandez | RECRUITER Carlos.Fernandez@CarringtonMH.com 949-517-7204 TOP 50 BEST PLACES TO WORK WE ARE THE #6 FHA LENDER IN THE NATION EQUAL OPPORTUNITY EMPLOYER © Copyright 2007-2016 Carrington Mortgage Services, LLC headquartered at 1600 South Douglass Road, Suites110 & 200A, Anaheim, CA 92806. 800-561-4567. NMLS ID #2600. Nationwide Mortgage Licensing System (NMLS) Consumer Access website: www.nmlsconsumeraccess.org. All rights reserved. loans. With some larger banks leaving the wholesale space, mortgage brokers have the opportunity to expand their business with new lenders that can manage more complex conventional financing beyond the typical loan scenario. Conventional does not equal simple Mortgage brokers recognize a good loan prospect when they see one: A borrower with great credit, a 20 percent downpayment and a steady job with a good income. For a mortgage broker with this borrower, finding a conventional loan is just a matter of securing the best rate for their customer. But not all borrowers meet these criteria. Many have a more complex credit history or a less traditional source of income. For these borrowers, mortgage brokers may have a harder time finding a lender that will provide financing. Some wholesale lenders don't want the additional time and effort it takes to underwrite more complicated financing scenarios, such as: l A self-employed borrower with good/great credit and cash on hand for purchase l A borrower with income from child-support payments l A borrower with income that isn't great, but who has a lot of assets l A borrower seeking the lowest possible monthly payment for the first few years of the mortgage l A borrower needing a mortgage on a partially completed home l A borrower seeking a cashout refinance after the home was listed for sale, but then taken off the market l A self-employed borrower looking to refinance, with equity in the home All of these scenarios are A closer look If you consider just the first scenario of a self-employed borrower, it doesn't seem like it should be a stretch for conventional lenders. Good credit, good down payment, good to go, right? Not necessarily. According to Fannie Mae's underwriting factors and documentation for selfemployed borrowers 2, a lot more information is required, as well as more documentation. Following Fannie Mae's guidelines, these factors should be analyzed for a self-employed borrower: l Income stability l Business location and nature l Product or service demand for the business's focus l Financial strength of the business l The income potential of the business: that is, whether the business can keep generating and distributing sufficient income so the borrower can meet the mortgage commitment Some lenders see the need for this kind of in-depth analysis and shy away, making it difficult for mortgage brokers to secure the financing their client needs. But financing is possible if the borrower, broker and lender are willing to take the extra time to procure the necessary documentation. Required documentation would include in this scenario, two years' of federal income tax returns (both business and personal), written analysis of the borrower's personal income and business income and potentially a business cash-flow analysis, if the borrower intends to use business funds for the downpayment or closing costs. If you look at the next scenario-a borrower with income from child-support payments-it, too, doesn't seem that complicated, as it's just income from another source. But it requires extra documentation as well, which http://www.NationalMortgageProfessional.com http://CarringtonHomeLoans.com http://www.nmlsconsumeraccess.org

Table of Contents for the Digital Edition of NMP - September 2016

Table of Contents
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NMP - September 2016 - 1
NMP - September 2016 - Table of Contents
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