Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
I was recently speaking with a client who was referred to me after spending over eight weeks at a commercial bank trying to get a million-dollar mortgage. It is well known that big banks are out there vying to earn the business of high-net-worth clients in an attempt to cross-sell them on all of the other products and services thereafter. They promote very attractively “below market” rates for “Jumbo” loan products that often cannot be matched by independent brokers and lenders.
It is true if a bank wants to “beat the street” they can offer things that are unique to the marketplace, but it comes with many caveats and catches. First and foremost, the average consumer doesn’t know at which point in time what bank will be most appealing and beneficial for their circumstance. These “deals” are unpredictable and fade as quickly as they appear.
For example, if “Bank A” is offering discounted rates in one particular month, that doesn’t mean they will be competitive the following month, because it’s likely that they met their “volume targets” and need to slow down new business, so they increase their rates. By the time the average borrower hears about these discounted rates, the promotion is likely over. At that time, it’s too late to “shop,” or most likely people are too apprehensive to look elsewhere to see if there is something better out there.
Then there is “Bank B” which offers discounted points and fees if you deposit an exorbitant amount of money with them. While that might be appealing for some, there is fine print that is different with each bank, and often those funds are used as security against the loan being made. Again, even if they fully disclose some of the restrictions, other catches show up later on to offset these discounts.
If it weren’t complicated enough to know which bank to go to for a particularly unique situation, it’s important to understand why there is so much confusion and diversity when it comes to these “portfolio type loans.” The banks that offer niche loans that they keep “in-house” are subject to stricter underwriting and regulatory standards. Most of these loans have a harsher threshold for qualifying if they exceed certain loan amounts and loan characteristics.
As a result, banks are forced to scrutinize the documentation more and impose restrictions and limitations that might not be demanded elsewhere. Unfortunately, these banks want the best of both worlds – they are willing to give the lower rates, in hopes of making up for it with other products and services – but they also demand the “perfect borrower” with the most rigid qualifications possible.
Getting back to my new “jumbo friend” – his $1.1 million mortgage application at a bank was getting the run around because they couldn’t get the Mortgage Insurance companies to approve the loan for the “PMI” because they were putting down less than 20% of a down payment. They were trying different PMI companies, seeking different exceptions and favors, but getting nowhere slowly. It is very frustrating to me to see something like this happen because I don’t understand how a bank doesn’t realize that they might not be able to get PMI on a loan product they are offering. What’s the point of offering a product that you aren’t sure someone will ensure?!
It is for these many reasons that we expanded our loans to higher loan limits and have higher authorities granted to us to APPROVE these JUMBO loans with NO PMI required whatsoever. When I walked this client through the logistics and the numbers of his particular situation, even though our rate was higher, our total payment was lower, because we didn’t require the mortgage insurance. In fact, even if the rate were more than 1% higher with us, without the PMI, this client would still walk away saving over $200 per month!! Our new “Approved Advantage” jumbo programs can go up to $5 million with no PMI and as low as 5% on loans up to $2 million. A higher standard indeed!!
All that said, at this time of year it is most suitable to realize and recognize that when all is said and done, we all answer to a true “Higher Authority.” With the “New Year” quickly approaching, it’s important to remember that the efforts and prayers that we do at this time of year will genuinely dictate the outcomes for the year to come. Good luck to us all! Wishing everyone a happy, healthy, prosperous, and blessed new year!
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