How brokers can help today’s single borrower
The average borrower has changed dramatically over the years. Today, more and more borrowers are self-employed, work remotely and have multiple sources of income. For brokers, working with these borrowers can be complicated as they require unique processes. HousingWire recently spoke with Bill Dallas, president of Finance of America Mortgage, to discuss how brokers can leverage technology to meet the needs of today’s average buyer.
HousingWire: How has the average borrower done in recent years?
Bill Dallas: Today’s borrowers generate income in a variety of ways and have different household compositions than previous generations. With the boom in the economy of odd jobs and remote working arrangements, more Americans than ever have multiple sources of income or are self-employed. As of August 2021, more than 10.2 million Americans were self-employed, according to data from the United States Bureau of Labor Statistics. This represents an increase of around 7.5% from the previous year and is a trend that is likely to continue.
In addition to the self-employed, the “concert” economy – or independent contractors and freelancers who do short-term work for multiple clients – continues to grow. In 2019, the share of gig workers in companies jumped 15% from 2010, according to data from the ADP Research Institute.
All in all, these are dramatic changes from when the traditional guidelines were put in place. Consequently, today’s borrowers need mortgage products that are better suited to their current needs while taking into account their repayment capacity.
HW: What are some common issues brokers face when working with borrowers in unique situations?
BD: First of all, the biggest problem for brokers is finding lenders who offer mortgage solutions outside of the conventional lending box. Some lenders may only offer a handful of products that don’t offer the innate flexibility needed to accommodate independent borrowers in multigenerational households financing a home with multiple sources of income, for example. These situations require more creativity and innovation, and brokers may have a hard time finding lenders who are willing to work with borrowers in these situations.
Another hurdle that brokers face is unclear or inconsistent communication from lenders during the underwriting process. This is especially true in unconventional lending scenarios where more documentation may be required or where borrowers have to overcome more hurdles to show their income or employment history or verify their independent business income. This is why it is important to have a partner who understands the challenges faced by brokers and who can offer unparalleled support.
In today’s fast and furious market, brokers need to be confident that their borrower can get to the closing table quickly and efficiently. Turnaround times are a huge problem, especially when borrowers in unique situations may be forced to close faster in a competitive seller’s market. A seller can get impatient if loan approval is delayed and they have back-up offers with less complicated financing.
HW: What kind of innovative lending options and technologies do brokers need to improve communication with borrowers?
BD: Brokers should have access to strong non-QM loan programs that give independent borrowers more options. And with home price growth soaring in many parts of the country, access to flexible jumbo loan options for borrowers in high cost areas who exceed compliant loan limits is needed to help jumbo borrowers. well qualified who cannot qualify for a conforming loan. It is also important to have products tested and proven, so that you know that they will remain available to borrowers.
When it comes to technology, a loan origination system that offers updates every step of the pipeline and can deliver on time is essential. The technology that allows brokers to stay ahead and meet their clients on their terms through a multi-channel approach is also becoming increasingly important to borrowers today. More than that, however, brokers need confidence in lender’s loan pipelines in order to consistently meet (and, ideally, exceed) their clients’ expectations.
HW: How does FAM TPO help brokers meet borrowers wherever they are in their financial journey?
BD: FAM TPO sets itself apart because we have a wide range of products available and we are continually evaluating and innovating our offerings to ensure we can meet the changing needs of more borrowers.
FAM is an agile company capable of creating bespoke products that you would be hard pressed to find elsewhere. FAM TPO recently rolled out a new COVID-19 loan program to help borrowers who have experienced a disruption to their income or employment during the pandemic. The broker makes the connection, and you have a win-win for everyone.
In addition, FAM TPO offers a suite of proprietary non-QM and jumbo loans that give borrowers improved purchasing or refinancing power over standard rate loans. Known as Two-X Flex, this suite of products is a pillar of FAM TPO’s success in helping our broker partners better serve a more diverse group of borrowers.
The FAM TPO Two-X Flex suite includes:
- Two-X Flex – A comprehensive documentation loan with common sense guidelines.
- Two-X Flex Bank – A loan that requires no tax filing and allows independent borrowers to qualify using bank statements.
- Two-X Flex 1 Year – A loan that allows borrowers to qualify using only one year of income.
- Two-X Flex Asset – A program that allows certain borrowers to qualify based on their assets only and lack of employment.
- Two-X Flex 1099 – A new limited documentation program that simplifies underwriting for self-employed and concert workers who receive an IRS Form 1099 for self-employed contract work.
- Two-X Flex P&L – A new solution for independent borrowers with inconsistent payment history.
Finance of America Mortgage (FAM TPO) elevates a broker’s business by providing a suite of products to help even the most unique borrower afford a home.