One of our most important jobs as a mortgage professional is to keep our clients informed about the status of their loan application. But is it possible to keep them a little too informed? Based on my experience, I think the answer is yes.
I remember a particular client I had back in the 2000s when I was brand new in the mortgage business. They were one of the types who called in frequently (maybe daily?) to check on the status of their loan file as it moved through processing and underwriting.
I remember the file being a tough one; the borrower was marginally qualified, so reaching the closing table was far from certain. We were paying off debt, which saved them a lot of money on a monthly basis, so the stakes were high for my client.
Unfortunately, I kept my client a little too informed about all the roadblocks, issues, and uncertainties we encountered along the way. This created a lot of emotional ups and downs for my client.
The loan eventually funded, but it was a very stressful process for my client. And because it was stressful for them, it was stressful for me, too.
Shield Your Clients From Unnecessary Stress
It’s a critical part of our job to regularly inform our clients about the status of their application. However, I think it’s also important to shield our clients from unnecessary stress.
Some clients are well-qualified with excellent credit, a low LTV, solid income, and a low debt-to-income ratio. For those types, the loan application and approval process is typically a breeze.
However, others have sketchy credit, high debt-to-income ratios, and high mortgage balances. The application and approval process can be bumpy, high stakes, and stressful for such clients.
I had a reverse mortgage client who was forced to cut back on his work hours because of health issues. That reduced his income, which caused him to fall behind on a small second mortgage. When I first talked with him, he was facing foreclosure.
Fortunately, we were able to get him qualified for a reverse mortgage, which meant he would be able to get rid of his mortgage payments altogether and save his home from foreclosure.
The reverse mortgage offered tons of benefit, but approval was far from certain. The numbers were super tight. We had barely enough proceeds to cover his mortgage payoffs and the life expectancy set aside that was required because of his credit.
Just days before we planned to close, the loan file got kicked back from underwriting. An abatement that required annual renewal had popped up. We potentially hadn’t allocated nearly enough to the set aside for the property taxes.
If the taxes really were as high as it looked, it would increase the size of the life expectancy set aside and make the loan short-to-close by around $15,000. Ouch.
My client didn’t have that kind of money to bring to closing. If we didn’t resolve the issue, the loan would be dead and my client would lose his home.
Obviously, the stakes were high. My client was already stressed out because he knew what would happen if the loan didn’t work.
My client happened to call in for an update while we were trying to hash out what to do about the property taxes. I could have told him that his loan was possibly dead, but I kept it to myself until I knew for sure.
I kept the conversation positive; I told him we were still working on the final approval and that he would likely hear from me in a few days with an update.
Two days later, we worked out the issue and sent the file to docs. My client never knew that his loan nearly died.
A Few Rules I Follow
I think it’s important to shield clients from unnecessary stress. Don’t loop your clients in on file issues unless you really have no other choice. Many of the problems that pop up in processing and underwriting can be worked out without ever needing the input of the borrower.
This saves both you and your client a lot of stress. Stressed-out clients call every day (or a few times a day) for status updates, which eats up a lot of your time and energy.
Here are a few rules I’ve learned to follow:
- Submit clean files. Your best defense against unexpected hangups in processing and underwriting is to submit loan files that are as complete as possible. You’ll never eliminate all of the nasty surprises, but submitting complete files reduces the number of them (and makes processing go faster).
- Don’t wait for your clients to call you for updates. Be proactive and keep them updated on a regular basis. When clients know they’ll hear from you on a regular basis, they’re less likely to be worried about what’s going on and blow up your phone inquiring about the status of their loan file.
- As far as your client is concerned, everything is proceeding until it isn’t. Yes, you may have big problems you’re working through with processing and underwriting, but as far as your client is concerned, everything is moving forward until you have no choice but to tell them otherwise. When you talk with your client, keep the status updates generally positive until you really have hit a roadblock and have no other option but to get their help or decline the file. To be clear: this doesn’t mean you lie to your clients. Don’t tell them everything is great if it’s not. Just tell them that the file is in processing and you should have an update in a few days.
- If you have bad news, tell your client and move on. It stinks, but bad news is part of the business. Sometimes we have to tell our clients that the loan they really want and need doesn’t work. If the loan really is dead, let your borrower know. Don’t avoid their calls and string them along. Deliver the news so you and your client can move on.