In 2011, The Wall Street Journal published an article (Tighter Lending Crimps Housing, June 25, 2011) reporting 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! Those were incredibly high numbers!
Yet according to a report just released by the Consumer Financial Protection Bureau (Federal Financial Institutions Examination Council Announces Availability of 2015 Data on Mortgage Lending, 09/29/16) the number of loan denials has grown ominously. In 2015, 12.1 million Americans made applications for a home mortgage. But only 7.4 million applicants were approved! That means nearly 40% of all mortgage applicants nationwide were denied!
What is the cause for these astounding numbers? Why are so many borrowers out there being denied? The reasons include:
- The corporate culture within many banks is to sell products (in this case, mortgage loans) rather than helping clients achieve their financial goals and housing dreams. The loan officers at the biggest national lenders are often 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. It’s a culture of, “Throw applications against the wall and see if they stick.”
- Fannie Mae, Freddie Mac, and HUD 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 loans 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 publics’ common misconception that “‘My Bank’ knows me and cares about me.”
For those borrowers who make the mistake of thinking, “‘My Bank’ cares and will approve my mortgage,” please take note: It makes no difference whether you have millions deposited at ‘Your Bank,’ whether the branch manager is your best friend, or whether your banking “relationship” spans decades. There is no favoritism. The mortgage application you submit to ‘Your Bank’ goes through the same underwriting process as every other borrower.
It’s worth noting that during this same period,
less than two percent
of loan applications with Mortgage Wealth Advisors were denied.
So how can YOU ensure that your mortgage is approved?
Don’t entrust one of the biggest financial decisions in your life to ‘Your Bank!’
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 about the same as if you went to ‘Your Bank.’
Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, The Daily News, Anton Press, 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.