Currently, an increased amount of time is being spent on pre-mortgage Prospects by loan originators trying to help their clients primarily with lingering credit issues and to get needed down payment assistance (DPA). This is time well-spent to avoid issues later. But many MLO’s don’t know what to look for or where to start.

Now is the time to tap into the services of HUD approved housing and credit counselors for prospective homebuyer needs if MLO’s don’t desire or know how to help clients with issues.

For months, I have attempted to make a simple report within my loan operating system (LOS) that will allow tracking of Prospects who may be stalled from purchasing a home due to problems with credit, DPA needs and other issues. I’ve also investigated multiple customer relationship management (CRM) systems that can connect to an LOS to allow for a robust Prospect report to keep track of a growing number of pre-mortgage clients.

Getting current borrower and post-closed borrower information is often readily available no matter what LOS system is being used. But for pre-mortgage clients known as Prospects, field information is not as updated or available in many LOS systems. Less attention seems to be paid to the front side of getting Prospects ready for a mortgage refinance or purchase.

WHY is Prospect pre-mortgage attention so important?

• Because of Covid forbearances and deferments, loan originators are seeing an increase in credit issues that need to be corrected to increase credit scores for the best mortgage possible. This is especially important as interest rates continue to increase.

• In the last two weeks, I’ve worked with two VA clients, one with a foreclosure 13 years ago and one with a short sale 12 years ago that were the result of a required deployment to another country or state. These mortgage Prospects were told by the VA that their past mortgage issues would not affect them in the future, but the basic VA entitlement for both clients on a new VA purchase came back as $0 available. The good news is that both clients got automated underwriting approvals through Fannie Mae and Freddie Mac for a new VA loan. A VA Bonus Entitlement was sought to save one of these loans but was not enough for the other client. But what if the same issue showed up within the last 7 years? Would the loan even get an automated approval for a past negative mortgage credit profile?

• Or what if the CAIVR system red flags these clients, as some loan originators are telling us is happening to their clients with government backed mortgages and student loans?

Loan originators need to ensure that credit is clear on both the credit report platform and within automated underwriting systems (AUS). If your HUD counselor can’t run an AUS, do it upfront yourself for the client. CAIVRS and VA Certificates of Eligibility (COE) need to be checked upfront for clients where there might be a possibility of a past problem. Being aware of specific issues from a client’s past can allow MLOs and HUD counselors the ability to correct and apply quick intervention to prevent a denial of a new mortgage. And if the loan originator doesn’t desire or know how to get this cleared, work with a  HUD housing or credit counselor who knows how to handle these issues to clear the prospective mortgage client for you.

Recently, we communicated with a national IT company that sees the value of connecting mortgage loan originators (MLO) with HUD housing and credit counselors. They expect that the MLO and the HUD counselor will stay in touch on the progress of referred clients. A “Fee for Service” where the client pays upfront for the cost of HUD counselor services will be offset by a credit paid for by the MLO towards the mortgage prospects closing costs. The IT company also knows about DownpaymentResource.com and sees the benefit of the buyer having a source of money for down payment and closing costs set up in advance to be competitive with other buyers.

Stay tuned. We are also close to finding that CRM that can categorize what help prospective clients need.

Definitely more to come. To learn more about resources for Realtors and MLOs, visit our partner resources page. If you are a borrower learn more about getting mortgage ready by visiting our get mortgage ready page.