MReport February 2018

TheMReport — News and strategies for the evolving mortgage marketplace.

Issue link:

Contents of this Issue


Page 17 of 67

16 | TH E M R EP O RT COVER STORY providing some payment assistance for young buyers struggling with student loan and credit card debt." Still, most agree that it all comes down to underwriting. As millennials continue to earn income in new and innovative ways, lenders need to evolve and find ways to con - sider those income streams when evaluating a mortgage application. "This group is paid differently, and that can be a real challenge for a traditional lender," Salditch said. "Not only are we see- ing more 1099s and less W-2s, but we're also seeing them earn money from a side hustle. Being able to underwrite that kind of income is becoming very important for millennial borrowers." Underwriting Undergoes a Change I t seems better serving the millennial mar- ket is more than just offering non-30-year products. According to many lenders, it's the entire underwriting process that needs to be reexamined. But Salditch, whose Better Mortgage specializes in serving millennial buyers, says doing so can be costly for tradi- tional lenders. "I think in general, it's just more expensive," Salditch said. "The underwriting process is just longer. Maybe they're willing to do it, but they're probably nickel-and-diming folks in order to do that." Still, many lenders are taking steps to adapt. Just take Fannie Mae's latest move, for example. "When I was at Fannie Mae, we had just rolled out a new student loan product which really looked at how you consider some of that debt and have it forgivable—or not included in a calculation of income—to be able to have the borrower qualify," Fercho said. "I think we are going to have to look at more creative things like that to really have a significant impact." Salditch agrees that Fannie Mae—as well as Freddie Mac—are taking steps to revamp underwriting guidelines to meet the needs of up-and-coming buyers. "I think that the GSEs, particularly Fannie Mae, are doing a lot with trying to modern - ize the underwriting guidelines," Salditch said. "Lenders need to be able to work with them and bundle up opportunities to potentially serve a borrower that might have been shut out from traditional underwriting guidelines—provided they're creditworthy." Salditch says it's not just underwriting that needs a facelift though. When it comes to millennials, it's the entire mortgage process. "The way the mortgage process works does not necessarily favor this newer generation of homebuyers that might need a lower-down payment product," Salditch said. "One of the things that we've done is we've launched something called the 'Better Offer,' which allows us to actually fully underwrite the borrower and the property before a purchase offer is even made. This allows borrowers to make a contingency-free offer, which we think helps millennials in particular—who are living in expensive cities, who need to stand out in very competitive markets—and particularly in markets that have a lot of cash buyers." In the end, it's these innovative solu - tions—like those from Fannie Mae and Better Mortgage—that will pave the way for larger swaths of millennial buyers in the coming years. Developments in technology and big data will also benefit these buyers—particu- larly those who are self-employed. "Technology has really enabled lenders to integrate automatic source data into their pro- cesses, and I think it's something that is really changing the market and will be really useful to how we underwrite self-employed borrow- ers," Fercho said. "I can easily see a day that, because of this access to information and it being verifiable instantly, where the concern over self-employed borrowers will really start to dissipate and it will be much easier to underwrite those borrowers. You'll have the same confidence about their ability to repay that you would with a W-2 borrower." Serving Veterans and Other Minority Buyers M illennials aren't the only population segment that's struggling to enter the market. According to Jones, a former Army captain, veterans are also having trouble getting the service—and products— they need to become homeowners. The biggest factor? Jones says its miscon- ceptions about VA loans which, most of the time, are the absolute best choice for a military buyer and their family. "VA loans are a little bit more expensive for lenders to execute because of the special- ized training on how to underwrite them," Jones said. "They've got to pay these un- derwriters a little bit more. Because of that, they steer people away. Real estate agents misunderstand, too." Sometimes, vendors will even push vet- erans toward non-VA loans because of the added effort they take to process. "Many loan officers will steer people away from using it and to an FHA loan product, typically, if it's a first-time homebuyer," Jones said. "On average, that's going to cost the veteran $3,600 more in fees and interest over There were charming real estate investors looking to restore distressed properties around the country. RCN Capital's responsive team was able to work their magic and provide the renovation funding they needed when they needed it. But our tale is far from over, contact us today to see how RCN can fund your next fix and flip story.

Articles in this issue

Links on this page

Archives of this issue

view archives of TheMReport - MReport February 2018