It seems to keep coming back to quality. Not to beat a dead horse (as the saying goes. I would never beat any animal; dead or alive) but quality really does matter.
If we haven’t learned that we are doomed to repeat our lending failures. Take the recent changes by Fannie, Freddie and FHA aimed at increasing financing options to more first time homebuyers. Retaining quality in the equation will definitely reduce the risk in making these loans. (Reduce Risk)
Just because someone jumps off a bridge doesn’t mean that you need to? That was something my mother always said when I told her that “everybody” was doing something. So, just because down payments and MI premiums are lowered doesn’t mean that everyone now has to get a loan.
Should everyone now get a loan? I don’t think so. Lenders shouldn’t forget what we so recently learned the hard way. There is no substitute for prudent underwriting, regardless of the loan product parameters. Whether 10 % or 3 % down, the borrower must qualify for the loan and have the ability to repay the debt (BTW- that’s the law).
It’s now the 4 C’s of lending; Credit, Capacity, Collateral and Compliance, along with adequate documentation to support the approval. All analyzed correctly and properly documented results in quality. Quality you can count on for better loan performance, increased business and more income.
Quality products and services bring a better price. By manufacturing a better product, you provide better service to your customers, with fewer problems, defects and delays. This translates into a better quality loan for a quicker sale at a better price. All of this leads to more income for you.
Be smart and use the new products and low rates to attract more applicants. Then, use common sense and prudent underwriting to close more quality business.
By keeping your eye on quality, you’ll reduce your risk associated with originating these new products.