Mortgage Puzzles
I’ve written about mortgage documentation in several columns over the years. This week I had an interesting call with several of my colleagues about trends we are seeing in the mortgage world around paperwork right now.
There are people who think that mortgage brokers are able to cut corners and have an easier time getting a mortgage approved. Ironically, I believe we are held to a higher standard which sometimes translates to frustration for clients as we are doing our due diligence with document collection.
When starting with new clients part of my conversation includes an overview of the documents we will need as well as an explanation of why. This conversation also includes a bit of an apology because I know how challenging this process can sometimes be.
“My bank has never asked for that” is something I hear often. What clients don’t consider is that their bank has a full historical view of their day to day banking as opposed to new lenders who are just being introduced to these clients.
If you were asked to lend someone half a million dollars would you do it on a handshake?
Would you assume they will repay you in a timely manner (as agreed) because they seem like good people?
Likely no to both questions.
That’s one part of the puzzle.
The other piece to the puzzle is the increasing trend of fraud in the mortgage world.
From my perspective, my reputation and livelihood are too important to entertain clients that I suspect are not quite as they appear. I explain I am very particular about gathering documents upfront to make sure we are not going to run into any unexpected or unpleasant surprises.
From time to time we come across documents that are glaringly obvious attempts at fraud. With today’s technology fictitious documents are becoming easier to create and harder to detect.
As brokers we represent both our clients and the lenders we are placing their mortgage with. I discovered fraudulent documents on one of my files recently and cancelled the application and notified the lender.
My (ex) client was very very angry. He didn’t see what the big deal was. He went to a local branch and his mortgage was approved.
Where is the harm?
If part of the fraud includes income documents, will this client actually be able to make his mortgage payments down the road? Because he did have a substantial down payment relative to his income, does he have a sideline that isn’t declared or legal?
I absolutely agree that collecting the required documents for your mortgage can seem frustrating, and you may question why your mortgage person is asking for the weird and wonderful collection of paperwork they are asking for. Or you may question why they are asking for more and more paperwork.
Please understand that these requests are coming from the lender and we are doing our best as the middleman to help ease the process for you. Lenders want to be confident that they are making solid decisions with their approvals and are doing their best to prevent mortgage fraud.
