(Originally published 10/23/12.)
Early this year, Ellie Mae, a leading provider of mortgage loan origination software, began publishing an Origination Insight Report. This monthly report draws data from the significant volume of loans originated from companies using their software. The data is then analyzed for insights and trends on current mortgage lending.
When commenting on the first report covering December 2011 through February 2012, Jonathan Corr, chief operating officer of Ellie Mae said, “If you look at the full report…you’ll see the impact of the higher underwriting requirements…that were in place in February. Last month, if your FICO score was below 720 or you had a down payment or equity of less than 25%, there was a good chance that your refinance application for a conventional loan was denied or you were offered a significantly less attractive interest rate.”
However, when delving deep into these reports, I uncovered a disturbing and truly staggering set of statistics on loans denied since the beginning of the year:
Ellie Mae’s Industry Average of Denied Loans
Month Score LTV Debt to Income Ratios Closing Ratio
March 2012 699 85% 27/43 46.9%
April 2012 702 87% 28/43 48.1%
May 2012 702 88% 28/43 47.2%
June 2012 701 87% 27/43 46.2%
July 2012 710 85% 28/44 45.8%
August 2012 708 88% 27/43 47.8%
Sept 2012 704 88% 27/44 50.5%
These statistics show that nationwide, over 50% of all loans originated were denied! And this is despite borrowers’ average credit scores being above a respectable 700. What’s more staggering is that these averages include both purchase and refinance, as well as both conventional loans and FHA loans.
Considering these numbers, I was curious on how my numbers would stack up. My calculations concluded that since the beginning of 2012, my percentage of originated loans that were approved and closed was 93.5%.
That’s a rather dramatic difference, don’t you think? Why are my closing ratios so much higher than the national average? I can only attribute it to the following reasons:
- Competence: Most loan originators are simply salespeople, more interested in selling than learning. They have only a cursory knowledge of underwriting guidelines and do not know how to properly structure a loan application. They don’t have the wealth of experience and the depth of knowledge I’ve accumulated in over 20 years working in the mortgage industry.
- Culture: Most loan originators work for Big Banks or boiler room style lenders. Their business models promote selling as many loans as possible, regardless of whether the loan is appropriate for the borrower. And if you think “Your Bank” truly cares about you, you’re sorely mistaken. Despite their advertisements, bank culture is not about the consumer; it’s about volume and profit.
- Caring: Most banks and loan originators do not build relationships with their customers. How can they possibly help you choose an appropriate financial product when they never take the time to get to know you?
Don’t entrust the biggest financial decisions of your life to some bank representative looking to sell you a mortgage. Put your trust in this seasoned and Certified Mortgage Planning Specialist with a proven track record. Only then can you ensure your transaction goes smoothly, your mortgage complements your financial plans, and that you’ll enjoy your new home for years to come.
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.