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Combating Tighter Credit Standards

February 7, 2014 Buy vs. Rent, CFPB, Compliance Matters, Mortgage News, NAHB, QM QRM 7 Comments

CLICK HERE to see yesterday’s Listing Booster Webinar.

Most of the lenders in the audience know what we’re talking about when we say there’s a desire within their community to increase their business.  Lenders have been seeing their volume  fall off  to the tune of 27% in Q4 2013.  With rates rising the drop isn’t surprising necessarily but it stings none the less.  So the question at hand for them is “where do we get more business?”

Tight Credit StandardsWell there’s a few things they can do.  One of those things is easing credit.  By easing credit you can get more buyers through the system by increasing the pool of potential people that can take advantage of your services.  The other thing you can do is reduce your price.  If you’re cheaper, you might be able to lure customers from your competitors.  And finally, you can simply market better.  The more people who know about you the better chance you’ve got at getting their business.

Unfortunately the first two options really aren’t available anymore.  Lenders are very reluctant to ease credit right now with the uncertainty of how the CFPB’s new QM rule will work out.  Lenders aren’t going to dip their toe into risky waters right now and credit standards are going to remain high from the origination standpoint even if technically they can deliver slightly lower standards into the secondary market.

Lowering pricing isn’t a very good option right now either.  With increased underwriting, documentation and compliance, there are increased costs.  So if they take the angle of reducing price, they can’t be sure that they will get enough new volume to make up for their increased costs.  So really what it comes down to is improved marketing.

How are lenders going to do this?  Not sure.  But in our opinion, they need to allow their originators to spread their marketing wings a little bit.  Of course lenders have to be careful about what an originator is publishing, but they have to allow them some latitude in our opinion.  The originator on the street is probably a little more in tune with his or her local market, and allowing them to have some room to roam in the marketing arena would probably help with the volume concerns of lenders.

There’s a bunch more information about the matter in the video of course, so watch it, you’ll be glad you did.  Most of all, we’d like to know what you think down below, so leave us all a comment.

You all have a wonderful weekend and we’ll see you Monday!

Frank and Brian


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