(Originally published 09/11/12.)
According to The Wall Street Journal (Tighter Lending Crimps Housing, June 25, 2011), in 2010, the nation’s 10 largest lenders denied 26.8% of their loan applications. In New York State, the percentage of loans rejected was an astounding 34.8% of their loan applications! These include borrowers wishing to refinance as well as borrowers planning to buy a home. Those are incredibly high numbers! And according to the article, “Recent surveys by regulators show no sign of credit easing so far this year.”
The article identifies those borrowers having a harder time to include self-employed borrowers as well as borrowers who have seen their incomes fall or interrupted by a period of unemployment. And you may be surprised to learn that many of these rejected borrowers had excellent credit and large down payments. “There’s no question that accessible credit is a problem,” said David Stevens, chief executive of the Mortgage Bankers Association.
What is the cause for these astounding numbers? Why are so many borrowers being denied by the “Big Banks?” The reasons include:
- The corporate culture within many of these ‘Big Banks’ is still one of selling product (in this case, mortgage loans) rather than helping clients achieve their financial goals and housing dreams. Their loan officers tend to be unlicensed, with less training and education than many of this industry’s true financial professionals.
- The ‘Big Bank’ corporate culture still encourages getting as many applications as possible, rather than getting to know the needs of your client.
- More applications without truly knowing your client is akin to a physician diagnosing without a patient interview or diagnostic tests. It’s financial malpractice, plain and simple.
- Fannie Mae and Freddie Mac are aggressively forcing banks to repurchase loans if they go bad, aren’t documented perfectly, or don’t meet guidelines to the letter. Since banks don’t want these loans on their books, management has put intense pressure on underwriters to ensure loans are perfectly qualified. Those loans not clearing the bar are denied.
- Since the quality of the loan packages submitted by these loan officers are often less than spectacular, the result is a large number of loans being denied.
- These high rejection percentages are exacerbated by the borrowing public’s common misconception that “my bank knows me and cares about me.”
This could not be farther from the truth! It makes no difference whether you have millions deposited at your bank, whether you’re on a first name basis with your bank teller, or whether your bank “relationship” spans decades. Your mortgage application at ‘your bank’ is simply another number on a pile.
So how can YOU ensure that your mortgage is approved? That’s easy.
Don’t entrust one of the biggest financial decisions in your life to the ‘Big Banks!’
By working with Mortgage Wealth Advisors, we’ll ensure your mortgage complements your financial needs today, while attaining your financial goals tomorrow. Your transaction will go smoothly. Your loan will close. And guess what? The rates and fees you’ll receive are probably the same or better than if you went to ‘your bank.’
Warren Goldberg is a Certified Mortgage Planning Specialist and a published author. His interviews include Blog-Talk Radio, Newsday, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.