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As it was said to a young Peter Parker (aka Spiderman) by his Uncle Ben. This is now so true when it comes to non-bank lenders increasing their share of FHA loan originations.
Did you know it is believed that this quote actually dates back to Voltaire? A variation dates back to Jesus Christ (Luke 12:48), “To those who much is given, much is required.”
I’m sure throughout history we can find many similar quotes. The fact is “When you’re the lead dog, you had better go in right direction.” (This one is mine)
A recent firestorm has erupted over a study that found that non-banks are now doing the lion’s share of the FHA insured loans. Some believe this is riskier for the FHA loan program and related insurance fund. Some think since these loans are perceived as a higher risk it may lead to increased defaults resulting in increased claims and a drain on the FHA insurance fund.
Coupled with this, is a belief that since the non-bank originators have less capital there is a greater risk to FHA of their ability to recover losses resulting from loan origination defects. Simply put, can the non-banks stand behind what they originate and certify to FHA?
Non-bank lenders are fighting back (as they always will and always do) (Non-Bank Rebuttals), citing reasons why these fears are unfounded. Further, they state that since QM & ATR, they have become the driving force behind first-time homebuyer lending. This has helped to spur the housing and economic recovery. Without their FHA lending, the markets may have collapsed. Maybe so, but that means they’ve become the lead dog. A now it’s time to accept the “great responsibility”.
Let’s face it. There is a risk in any lending and FHA lending is no different. It’s all in how the risk is evaluated, minimized and handled by all parties involved.
Independent Mortgage Lenders (I like that instead on “Non-Bank Lenders”) now have a responsibility to originate good quality loans to help mitigate some of the risk inherent in FHA lending. To do so, they must make sure their originators and support staff are well trained in all aspects of mortgage lending and are provided the tools needed for them to succeed. Like the utilization of the new CFPB Mortgage Shopping Tool Kit.
This toolkit will replace the current settlement information booklet required to be given to all applicants when applying for a mortgage. I’ll bet most originators have never read the existing booklet. Have you? The new toolkit should be used to educate origination staff and consumers about what to expect when buying, financing and closing on a new home. It helps everyone to better understand their responsibilities.
Independent Mortgage Lenders must lead by example, not by argument. The easiest way to quiet your critics is to prove them wrong. They have a prime opportunity to do so by originating sound, quality, FHA loans which prove to be solid collateral for the GNMA securities they back. By doing so, they will continue to strengthen the economy, improve the housing market and in turn increase business and profits. Become the superheroes of mortgage lenders. Quality is the key.
Are you an independent? Are you prepared to accept great responsibility? Do you realize how important your role is to the FHA programs, all mortgage lending, and the housing markets?
Like Spiderman, sometimes the Independent Mortgage Lender is misunderstood, but, like Spiderman, they must continue to seek out and assist those who need their help. All while doing it right for all the right reasons. It’s your responsibility!
Please don’t let us down.
