Answering Mortgage Lenders’ Top FAQs


Answering Mortgage Lenders’ Top FAQs

February 15, 2024
Certified Credit

The mortgage industry is constantly evolving. As we move into 2024, many mortgage lenders are wondering how they can optimize their operations in light of the new year’s unique challenges, opportunities, and regulatory changes. 

To assist with this process, the Certified Credit team has answered ten of mortgage lenders’ most frequently asked questions for 2024. Read on to find their advice for success-minded mortgage lenders. 

Note: Make sure to check out Part 1 of this Frequently Asked Questions series to find Team Certified’s answers to mortgage applicants’ top FAQs. 

#1 If only 18% of borrowers go back to their original lender, how can I make sure I know they’re shopping without waiting for them to reach out?

The mortgage lending industry has a borrower retention rate of just 18%. In other words, only 18% of borrowers use their original mortgage lender for additional home loan products, highlighting the dire need for stronger customer retention tactics.

In part, the infrequency of interactions between borrowers and lenders explains this dismally low retention rate—by the time a borrower is in the market for a new home, they’ve often forgotten about their original lender. To combat this issue, many mortgage lenders try to stay in constant contact with their past clients, often annoying them in the process. 

A more effective strategy is to reach out to past and present clients when they’re actively searching for a new mortgage product. You can do so with ease with the help of Cascade Alerts. This low-cost credit monitoring solution scans your past and present client’s credit reports for mortgage-related inquiries. After that, it sends you lists of in-the-market leads within 24 hours, enabling you to reach out to them before they commit to a competitor. 

By boosting borrower retention, Cascade Alerts boasts an impressive ROI. Better yet, it can help you stay one step ahead of any potential EPO situations. 

#2 Credit reports are so expensive—do I really need a tri-merge report upfront? 

In 2023, credit reporting prices skyrocketed across the country. With even more price hikes scheduled to take effect in 2024, many mortgage lenders are rightfully looking for ways to cut costs. 

Fortunately, you don’t need to order a costly tri-merge for every applicant upfront. You can obtain credit information more cost-effectively from one-bureau and two-bureau soft pulls instead. By using soft pull credit reports early on in your mortgage lending process, you can also mitigate the chances of activating competitors’ trigger leads.

Want to make your credit reporting costs even more affordable? Implement a tool like Smart Select. This automated credit report ordering solution pulls from one bureau first, ensuring your applicants meet your basic parameters before upgrading them to bi-merge or tri-merge credit reports.

#3 How will the changes to credit with the bi-merge impact borrower mortgage eligibility?

In October 2022, the FHFA announced that conventional loans will only require bi-merge credit reports going forward. The purpose of this change is to promote competition among the credit bureaus. 

Many mortgage lenders are wondering how this change will impact their borrowers’ eligibility. So far, the predictions are mixed. Some government agencies expect the bi-merge requirement to expand the pool of eligible borrowers. On the other hand, one of the credit bureaus asserts that this change will reduce borrowers’ eligibility. 

With so many conflicting opinions, only time will tell how this regulatory change will impact borrowers’ eligibility. Thus, it’s a good idea to prepare for all outcomes and educate your borrowers as the data unfolds. 

#4 How will the new bi-merge impact my business?

The new bi-merge requirement will impact mortgage lending in many ways beyond borrower eligibility. Most notably, lenders will need to determine which credit bureaus they want to order from.

 Additionally, some mortgage lenders may need to update their:

  • Point-of-sale (POS) systems
  • Loan origination systems (LOS)
  • Pricing engines

Working with a credit reporting expert, like Certified Credit, can help you prepare your business proactively so you’re ready when the bi-merge change takes effect. 

#5 How do new credit scoring models differ from the classic FICO model?

Over the past two decades, Fannie Mae and Freddie Mac have required lenders to use the classic FICO credit scoring model during their conventional loan originations. The FHFA has recently announced that it will soon replace classic FICO with FICO 10T and VantageScore 4.0.

These credit scoring models resemble consumer credit scoring models, due to their inclusion of non-traditional, self-reported payment activity, such as:

  • Rent payments
  • Utility payments
  • Telecommunications payments 

By integrating this data, these credit scoring models are more inclusive of borrowers who have otherwise thin credit files. 

#6 How can I know if my borrower is taking out a new loan or a line of credit?

If an applicant takes out a new loan or line of credit before closing on their mortgage, it may derail their eligibility, resulting in last-minute fallout or repurchase demands from secondary market investors. 

You can find out if your borrower is altering their credit activity with the help of an undisclosed debt monitoring solution, like Cascade UDM. This automated credit monitoring tool keeps tabs on your applicants through closing and can alert you of any new tradelines or credit inquiries that may put their eligibility in jeopardy. 

By pairing Cascade UDM with milestone ordering, you can start monitoring applicants’ credit reports at the ideal time in your lending pipeline without manually turning it on each time, enhancing your efficiency that much more

#7 My verification of employment (VOE) didn’t provide 24 months of employment. Now what do I do?

For some applicants, third-party VOEs are unable to offer 24 months of employment verification. In this case, you can verify the applicants’ income in one of two ways:

  • Written VOE – With a written VOE, you send a form to the applicant’s employer asking about the stability of their employment and the consistency of their income. 
  • Verbal VOE – With a verbal VOE, you can call your applicant’s employer 24 to 48 hours before closing to make sure that their employment is stable and consistent. 

These VOE strategies can help you determine whether or not an employee is likely to continue in their current position.

#8 I want to modernize my borrower experience. Where should I start?

A simple way to modernize your borrower experience is to upload as much borrower data as possible into your POS from the start. By uploading applicants’ pay stubs, authorizations, and other documents right away, you can save time down the line and eliminate redundancies, facilitating a better borrower experience.

After that, you can look into automating key steps within your loan manufacturing process, such as your:

  • Lead generation
  • Prequalification 
  • VOE
  • UDM
  • Credit supplements

Our line of Cascade solutions can help you employ this automation quickly and cost-effectively. 

#9 How can I make sure my entire team is following the same origination process?

Standardizing your loan origination process can help you cut costs, enhance efficiencies, and provide a more consistent customer experience. While standardization has many benefits, some of your team members may resist its associated changes at first.

You can make sure your entire team is following the same processes by: 

  • Obtaining buy-in from key team members from the start. 
  • Integrating your desired changes into your POS, so they’re unavoidable. 
  • Having your credit partner manage the implementation of new processes. 
  • Regularly reviewing your revamped processes to ensure all team members are on board.

For example, let’s say you no longer want to order tri-merge credit reports early on—you’d rather rely on soft pull credit reports instead. At Certified Credit, we can make it so soft pulls are the only option available to your loan officers during the early stages of loan origination, automatically standardizing your operations. 

#10 What is some advice you would give to a lender looking to automate their origination process?

Automating your origination processes can provide a host of benefits, from lower costs to faster turnaround times. If you’re interested in automating your origination process, we recommend employing milestone ordering to ensure you enact your automated processes at the optimal times.

For example, rather than ordering your automated VOEs upfront with Cascade VOE, you can use milestone ordering to make sure they’re ordered after other key steps have been taken. Doing so can compound your cost savings and improve your efficiency. 

Stay Up to Date With Certified Credit’s Quick Hits Questions

After reviewing these ten FAQs, you hopefully have a better understanding of how to navigate 2024. If you have any more questions, don’t hesitate to reach out to the Certified Credit team. We’d love to answer your questions and provide support as you take on this coming year. Also, don’t forget to follow us on social media for more Quick Hits videos. 

Along with our consulting services and educational materials, we also offer a growing number of products and services at Certified Credit, including:

  • Affordable credit reports 
  • Automated lead generation
  • Automated prequalification 
  • Automated VOE
  • Automated UDM 
  • Automated credit supplements
  • Property and valuation support
  • Fraud and risk mitigation
  • Flood zone determinations
  • Underwriting compliance
  • Settlement services

To learn more about our offerings, schedule a credit consultation with our team today.