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Coming Together.

When you bring the wholesaler's underwriter under the same roof as the broker, you get real advantages. Two brokerages report the idea has boosted production, helped build reputation and won over Realtors for those hard-to-do loans.

A NEW IN-HOUSE WHOLESALE LENDER CONCEPT HAS HELPED TWO WEST COAST BROKERS INCREASE THEIR BUSINESS VOLUME. Instead of the traditional business formula where brokers bring their business to the wholesaler, this wholesaler brings his underwriters to the broker.

New efficiencies and productivity have resulted that are--surprisingly, in this age of technology--not the result of technology. The innovative factor here is people in closer business proximity.

Alliance West Mortgage, a Scottsdale, Arizona, broker, has doubled its size in two years after accepting the offer of a wholesaler lender, ComUnity Lending, San Jose, California, to put an underwriter dedicated to servicing Alliance in the broker's office. This makes it possible for Alliance loan officers to get immediate answers to their questions; allows originators to help prioritize the underwriter's workload and gives the brokerage firm the look and feel of a mortgage banker.

Puget Sound Mortgage and Escrow, Bainbridge Island, Washington, a broker with offices in Poulsbo, Silverdale and Bainbridge Island, Washington, also has taken advantage of the in-house wholesale lender concept. It has helped the brokerage to originate loans--some of them out of the ordinary--that might have gone to other brokers. The ComUnity Lending underwriter is dedicated totally to the broker's needs. This makes it possible to undertake immediate, face-to-face consultations to overcome obstacles to originating loans.

Alliance West Mortgage is a large brokerage firm in Arizona, with seven offices located throughout the state. It specializes in assisting small- and medium-sized home builders in financing the acquisition and development phase of their projects and also helps to obtain FHA, VHA and Fannie Mae project approvals. Alliance West also supports its loan officers with a telemarketing operation that provides them with high-quality leads.

"Two years ago, we were looking for ways to grow the firm," says Greg Dwight, president of Alliance West Mortgage. "The main challenge that we faced, along with every other mortgage broker, was attracting and retaining good loan officers. I realized that the key to building up our staff was giving our brokers the opportunity to originate more loans. This was what initially attracted me to ComUnity Lending's Mortgage Master concept. I felt that this approach might give our loan officers an advantage over the competition by giving them the ability to close loans faster and to find out exact loan status at any time."

No commitment required

"We were not required to sign any contract or pay any upfront costs," Dwight says. "ComUnity simply asked me to agree on a handshake to continue the arrangement as long as it is mutually beneficial. We were asked to sign two covenants: that we will not solicit the Mortgage Master for employment and that we will respect the copyright nature of their proprietary software. The Mortgage Master is an employee of ComUnity Lending, yet is totally dedicated to our firm. ComUnity Lending provides the computer equipment needed to underwrite, lock, draw and fund loans on-site in the broker's office. We provide office space, use of a copy machine and enough loan volume to make the arrangement worthwhile. We are, of course, free to utilize other wholesale lenders where we feel that it makes sense."

There are currently 23 brokers participating in the program. "ComUnity is a company that creates win-win strategies," says Jayson Stebbins, vice president of expansion at ComUnity. "What makes it happen is two companies that are committed to a relationship and aligned with each other. The contract doesn't contribute to that. If we are not bringing value to our customer, we don't want to force them to continue the relationship."

Mortgage Masters work for ComUnity Lending, and receive a base salary plus profit participation. Along with the Mortgage Master, ComUnity provides exclusively for the broker a variety of automated underwriting systems--such as Fannie Mae's Desktop Underwriter[R] (DU), Freddie Mac's Loan Prospector[R] (LP)--and other conduit-specific automated underwriting systems such as GMAC-Residential Funding Corporation's (GMAC-RFC's) AssetWise [SM].

"One of the first points that crossed my mind when I began considering this approach was: Who would our underwriter be?" Dwight says. "ComUnity Lending President Darryl Fry said that he was open to suggestions, and asked if I knew anyone who I thought would fit the bill. I immediately thought of Pam LaVictoire, a person who, at that time, I had already known for nine years. Pam was my operations manager when I worked at a different mortgage firm. Later, she worked for a mortgage banker and became an excellent underwriter. We had stayed in touch over the years, and I had a high respect for her skills. I recommended her to Darryl, he contacted her and the rest, as they say, is history."

While LaVictoire already had the assessment skills necessary to make an informed risk decision, says Dwight, ComUnity Lending provided a two-week training class to prepare her to handle the entire lending process.

"When Pam returned from training and set herself up in my office," Dwight says, "we noticed a major improvement in communications right from the very start. The way we were used to working is that when a loan officer had a question, he would call one of the reps from the mortgage banker. Then, many times, the rep would have to call the underwriter at the home office to get an answer. It could take several days for the loan officer to get the information. Often things got lost in the translation as the information was passed along from one person to the next. Now, whenever our loan officers have a question they just walk over to Pam and ask her. She knows where everything is, because she's doing it herself. The loan file never leaves our office, so she has access to all the necessary documents."

When the crunch comes

"Where having an in-house mortgage banker really comes in handy is [when] the loan needs to be completed in a hurry or there are unusual conditions that need to be met," Dwight says. "Let's say that a loan officer encounters a potential client that has some type of unusual situation that makes the loan a bit more challenging. Suppose they have their own business or low income but lots of equity, for example. In the past, we would submit that loan to the wholesale lender and wait two or three days for them to get back to us. Usually, they have questions that we need to answer and then once we get them we have to wait several more days. With the underwriter sitting in our office, it's an entirely different story. The loan officer just sits down with Pam and has an answer in minutes. This often makes the difference between us getting the loan or somebody else.

"But having Pam in our office brings us a lot more than just fast answers," Dwight says. "Being able to talk one-on-one with the underwriter gives our loan officers a terrific advantage in putting together a deal. Rather than submitting an application and waiting a week to find out if it's going to work, they can sit down with her, find out immediately if it will work or not and, if not, get suggestions from her on how to make it happen. There are so many variables involved that it could take weeks to find a way to do things using the conventional approach. With Pam here, our loan officers can figure out the right way, in minutes, and get back to the borrower far ahead of the competition."

Prioritizing the wholesale lender's work

"The ability to prioritize Pam's work has also been a big part of our recent success," Dwight says. "When we run into a situation where speed is important, we simply tell her to drop everything to get it done. This is something we could, of course, never do when we were dealing through a rep with a wholesaler across the country.

"Let me give you a recent example. ... [A real estate] agent who had been working with another mortgage broker ran up against an obstacle and couldn't get the loan through. She came to us a few days before closing and asked if there was anything we could do. If our loan officer had to submit the loan to a traditional wholesale lender, it could have taken a few days just to find out where it stood. Instead, the loan officer walked down the hall to talk to Pam, and within minutes the two of them had figured out a way to put the deal together."

Matt Gulp, business development manager and loan officer for Puget Sound Mortgage and Escrow, says that the firm's managers had long wondered if there was a better approach to the traditional method of dealing with wholesale lenders. "Because the account executive that we deal with isn't involved in the underwriting process, they can only provide us with limited guidance on whether it's possible to make a particular loan work and what's the best approach to take," Gulp says.

"The account executive simply passes the file on to the underwriter, who comes back with a 'yes' or a 'no.' We rarely have the opportunity to deal directly with the underwriter, so we don't get the opportunity for the face-to-face, back-and-forth type of discussion that I always thought might make it possible to make a lot of deals work that we used to have to turn down. Another problem with the traditional process was that it worked slowly."

An in-house wholesale lender

"That's why I was quite interested when ComUnity Lending offered to put an underwriter, who is also trained in document preparation and funding, into our office to exclusively service our needs," Culp says. "The next question that we faced was who the Mortgage Master would be. ComUnity asked for suggestions, and we introduced them to Linda Sutherland, who we knew through our dealings with another local lender. The fact that I already knew and had worked with Linda before eliminated the need of getting to know each other and helped to get the arrangement off to a fast start. From almost the very first day, I was able to walk into her office with an application and get an immediate answer on whether or not they could do the loan. Even better, Linda works with me to try and make the loan happen. Her attitude is 'Let's figure out how to make this work.' This is a nice difference from the traditional mortgage lender, and has helped us originate loans that we would not have been likely to place in the past."

The training provided to the new Mortgage Master encompasses all aspects of the position, including underwriting, drawing and funding, using the software system. Nearly all underwriters have the assessment skills necessary to make an informed risk decision; however, they typically need to learn the mechanical skills associated with committing, drawing and funding a loan. Prospective Mortgage Masters are trained to operate the software system that produces the loan documents, how to prepare the document package for title and, upon receipt of the executed loan documents, how to review the final closing papers, balance the loan funds with the title company and deliver a completed loan file to central support for postclosing functions. Throughout this process, the software helps to avoid errors and increase productivity. For example, if a person attempts to enter a nonowner-occupied loan at 95 percent of the property value, the software will warn him or her that this type of transaction is nonsalable in the seco ndary market. Training also covers the other aspects of serving a customer from within the office, including marketing loan programs to loan officers managing the costs of the unit, reviewing P&L (profit and loss) statements and other aspects of the Mortgage Master position.

No-income, no-asset loans

"Here's a good example," Gulp says. "A Realtor referred us to a woman who was buying a house and was going to put 50 percent down. While the woman had good credit, she did not have a job or any other significant assets. Her ongoing income came from a $10,000 per month gift provided by her father. She had been getting this gift for the past five years, but it wasn't coming from a trust and was not totally committed. The woman did not want to get her father involved with a promise to continue.

"She had been working with another mortgage company, but that particular lender only offered variable-rate mortgages, which was not what she wanted. The Realtor was concerned about the deal falling through and brought her in to see us. After taking her application, I walked across the hall to Linda's office and laid out the facts to her. She and I put our heads together and played around with a few different scenarios. The one that Linda felt made the most sense was a no-income, no-asset loan, which she was willing to do in this case because of the borrower's high down payment and good credit. Although this wasn't an extremely time-sensitive situation, we had the deal pretty well worked out in less than an hour. I hesitate to think about the amount of time and number of phone calls it would have taken to get an answer from a traditional wholesale lender.

"Another example," Culp says, "was when a borrower wanted to refinance a rental property. She had been self-employed for about two years and hadn't made much income for most of that time, but just recently had turned the corner and was starting to do very well. The problem was that when we did the traditional averaging of her two most recent years, her income was too low. She did have several other things going in her favor, if we could only figure out a way to count them. One was the fact that she was taking care of an elderly person in exchange for a place to live, so she didn't have a rent payment. Another was that her company was making a $500 per month payment on a small business loan that would be fully paid off by the time of the refinance.

"Linda took these factors into account as well as the fact that the borrower had good credit and a lot of equity in the rental property. As a result, she was able to arrange a 30-year, fixed-rate loan at a very attractive rate. This was another situation where we would have had to spend an inordinate amount of time and effort going back and forth with a traditional lender."

Helping provide better service

The greatest benefit of having Linda Sutherland in the office was probably the ability to originate loans quickly, according to Culp. "One area where she helps out is in being able to get quotes and get people started on a loan application very quickly. Another advantage is that we can immediately find out the status of a loan or get answers to any other questions." Culp adds, "Finally, there's the advantage of being able to prioritize Linda's time. If a Realtor tells us that this one has to happen right away, Linda can give approval in 15 minutes and immediately start to work clearing conditions."

"All in all," Culp says, "the Mortgage Master concept has had a major, favorable impact on our business. We are able to originate loans that we would have had to turn down in the past, either because a traditional lender wouldn't take the effort to make them work or because the amount of time required on our part would have been too great. Realtors in the area have heard that we can handle unusual loans and provide faster service on ordinary loans, so the number of referrals that we receive has increased. The bottom line is that there has been a marked increase in the number of loans originated by our firm since Linda came on board."

"Having an in-house wholesale lender is a big factor in recruiting good loan officers, winning recommendations from Realtors and attracting new borrowers," says Dwight. "The fact that ComUnity Lending has a way of looking for ways to approve a loan doesn't hurt, either. We believe that these factors account for a major part of our success over the past two years."

Jerry Fireman is president of Structured Information, Inc., Birmingham, Michigan.
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Publication:Mortgage Banking
Geographic Code:1USA
Date:Nov 1, 2000
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