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Mortgage Saving Without Refinancing

Mortgage Tax Auditors PDF Print E-mail
Ask the Expert - Dave Hershman
Monday, 22 January 2007 06:24
Q:It seems this question of whether a file needs a 4506T or not run rampant throughout our industry when it comes to stated income (whether assets are verified or not) loans. The standard answer on conventional / conforming loans is (yawn!) "The mortgage industry is heavily regulated, and the 4506T allows 'auditors' to independently pull you tax returns from the IRS to verify the income information in your file. Well, who are the 'auditors'? What are the ramifications if the information in the file doesn't match the IRS supplied tax returns? Is there a margin of error, does it have to be exact? What happens if it doesn't match? Does the loan go into immediate recall/default even if the payments are being made on time?  Why do some investors require it and others don't? Bonus question - who's got the best rate (investors) on SISA/SIVA loans? Thanks for your time.    

PS: As I previous attendee, can I get an extension on your discount for the advanced class scheduled in Jan?
Best Regards, & Peace Be With You!   Alan R. King (USN ret.)

A: Alan—Good questions!

  • Who are the auditors?  Every lender has a quality control program. In this “QC” program, the lender “audits” a certain percentage of files for accuracy. The percentage of files may vary depending upon the type of file (stated vs. full doc or investors vs. owner-occupied). This audit usually takes place after a file is closed. If the underwriter suspects something is wrong with the file, they can order a QC on the whole file or a part of the file before closing.  It used to take days (even weeks) to get separate income verification. Well, with electronics all the rage, lenders can now get the information instantly with the new form. So I suspect more are taking advantage of that to verify a certain percentage or suspicious files even before the file closes.
  • What if there is a discrepancy? There are many reasons for stated income besides the obvious—people lying. Perhaps the income is very complex and tough to prove. Perhaps they are self employed but though their present level of income is right on—last year it was not and an average would not work. So no one is expecting the number to be exact. The there is a difference between 50K and 45K (when the customer is counting a car allowance and we would not) and 100K and 10K. One is lying and is fraud. The other is not.
  • Why some lenders require the form and others do not.  It is a matter of competition. They all want an advantage over the other. If one says they don’t need it—doesn’t it sound more appealing to you? Unfortunately, the way I look at it—the one that does not is like saying—hey you can lie and we won’t check. Here is the point—those lenders are stupid in my mind. Encouraging people to commit fraud. Just because they don’t check, does not mean it is not fraud. And if that lender sells the loan and it defaults and someone is looking for a scapegoat, do you think the stance of the original lender will matter?  Lenders complain about how brokers act—and then they compete in this way. It makes no sense.

Regarding attending our class in January. Our policy is to allow a free audit within one year of original attendance. But we have had many inquiries from those who want to come back and refresh after three or four years—so our policy is $395 (half-price) but you will get new text books and lunch, of course!

I am a fledgling broker with a small and integrity driven firm.  While my knowledge is perhaps not as vast as a season broker, I often find potential clients are being promised things that truly cannot be delivered.  How can I keep my integrity and show a client the process without subtly naming my competitor as a liar?  I ask this question simply because it has been one of the most frustrating parts of this business to date.                Thomas

First. The cornerstone of a successful business based upon referrals is the delivery of great customer service. Second, you deliver great customer service by exceeding your customers’ expectations. Third, you will never exceed your customers’ expectations by promising more than you can deliver.  If you over-promise you will always under-deliver.

Now the problem. If you under-promise—you will lose the loan because everyone else is promising the world. This is really frustrating. But if you are coming from a position of expertise, those you deal with will respect your position. They also will know your reputation if you are dealing with referrals rather than cold calls.  I have no problem with making a statement such as—“I can’t promise _____, but I will promise that I will work as hard as I can to help you through the process.”

One other consideration. Even if you lose the loan, make sure that you leave the door open by saying that you will continue to help them throughout the process. Then call the person back seven to ten days later and make the same offer. When they discover they have been over promised they will be unhappy. You can put yourself in a position to get the loan back if the timing is right.  Don’t call asking for the loan back—just check in to make sure everything is okay. Leave the door open. Remember—if you don’t put yourself in position—you will never succeed. 

Dave

Ask The Expert is an exclusive feature of Origination Update. If you have a question on finance, sales, marketing or leadership you would like to ask—email me at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

    Dave

Dave Hershman is the leading author for the mortgage industry with eight books and several hundred articles to his credit. He is also head of OriginationPro Mortgage School, the most advanced comprehensive curriculum in the industry, and is a top industry speaker. For more articles by Dave, free marketing materials and a schedule of classes, visit www.originationpro.com

 
 
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