Why do some lenders refuse to provide guidelines to brokers?

Question

I have always wondered why lenders such as Kiavi, Easy Street Capital, Visio, CV3, etc.. fail to provide any credit guidelines to brokers.  Now I tend to work with more  broker-only wholesale shops that do have guidelines for brokers and do not have a retail side.

What's worst is that they have horrible policies if a borrower shops you with the same lender. It's always a game of, who can get more skinny to win the deal.

How do they survive? It's like submitting a file and praying for the best. Something ALWAYS comes up.

Upen Patel · Answer

@Erik Estrada I agree with you. We have all faced borrowers who have no dignity. They will pick your brain, and take the details to a LO how has nothing else to offer but a lower rate. I can smell this over a call (most of the time) and tell them straight up to not waste my time if they are just rate shopping. As respectable LOs we have to be upfront.

I am glad I am not facing what you are on the lender side. Most of my Non-QM lenders are correspondent, so I control everything in house. The few that we work with as broker, I build deep relationships with, and they know that I will out them if they ever competed against me.

Get rid of bad borrower and lenders, and life will be better.

Gene K. · Answer

Many lenders hide their rates to maximize returns. There are some lenders that are very transparent with their terms and rates and open to brokers. Reach out for references

Nick Belsky · Answer

I find this as fascinating.   Many of the lender's you've listed as not sharing guidelines have been more than forthcoming with guidelines for me.   Personally, I avoid wholesale lenders as nearly every scenario requires an exception, they over condition more than agency lenders, are slow as hell to UW and get docs out, don't understand investors,  etc... I could go on and on.

I've "fired" many a lender for being overly ridiculous with conditions, difficult to work with, and a few for not honoring broker protection agreements.  We strive to provide our clients with the best loan experience as possible.  That is hard to do if you don't have a solid rolodex of lenders who can deliver just that.   With that said, not one lender out there is the best for for every scenario.   Knowing how your lenders UW is key to placing your clients in the right place.

Many of the lenders on the "broker friendly" list provided earlier are black booked for me... along with a slew of Realtors and title attorneys or title companies who are not capable of delivering a consistent client experience.

I should also note that both Kiavi and Easy Street (among many others I work with) notified me immediately if one of my clients attempted to reach out to the retail side.   I was given the option to let it go, shut it down entirely,  or reconnect with the client to discuss steps.  Thankfully,  this has only happened a handful of times over the years where a client tried to circumvent me.  Only once did a lender close a loan with one of my clients without me and once it was caught,  they cut me a check... I didn't even have to ask.

Nick Belsky · Answer

Again, fascinating how we have nearly polar opposite experiences with some of the same lenders and opposing views on resources.  Not to say either of us is in the right or wrong, but the contrast is interesting to say the least.  Carry on!

Doug Smith · Answer

HI @Erik Estrada, I actually just ran into this with a private equity group with a robust retail platform that is trying to break into wholesale. They sent over an agreement that gave us little protection. I've found it better the avoid working with groups that have a strong retail component. It's been my experience that as soon as business slows down on the retail side they start back-soliciting the clients of their broker partners. We also don't work with groups if they refuse to provide us guidelines to work from. I have no issue signing an NDA to not share those guidelines, but if we're going to put together a solid package that meets their guidelines, it's hard to do if you don't know the guidelines. Otherwise, we're wasting everyone's time including ours, our customers' and our lenders'. It's also been my experience that the groups that fund investor deals are seldom run by credit people, so the guidelines can be all over the place. I'm with you, Erik.

Erik Estrada · Answer

Honestly I feel like these lenders should either focus on retail only or brokered transactions only. They will do so much better in the long run.

You would not believe how many times I have structured a deal with these in-between lenders and the borrower go around me and cut out the broker fee with a retail loan officer. There is no loyalty in this business. You can do so many good things for a client, and they will still find a way to squeeze out another fee cut. It's completely absurd.

Steve Theobald · Answer

Erik, Please tell me more about broker-only wholesale shops.  This is the first time I have heard about these.  Please list some here publicly or send me a private message? Thanks!

Erik Estrada · Answer

There are many,

I'll list some here:

1. Velocity Mortgage Capital

2. Loan Stream

3. Cake Mortgage

4. Forward Lending

5. UWM

6. A&D Mortgage

6. Broker's First Funding

7. Acra Lending

8. HomeXpress Mortgage

Erik Estrada · Answer

That's good to hear they are treating you well.

I have had numerous instances where I sent a deal to them, structured it for the client and then the client circumvented me on their retail channel. They closed with them and never cut me a check, despite me doing all the leg work upfront.

The only times I have ever really used the "private lenders" are for deals that are very specific to some of their product offerings (such as fix and flip, ground-up, etc..) I try to avoid using them altogether as they don't provide me any guideleines despite me asking numerous times.

There have been many instances where they have killed my deal and I had to take it to a true wholesale shop with an exception to get it closed out. Would have been easily prevented if they sent me guidelines upfront.

I actually prefer that wholesale shops have the option to give exceptions. Kiavi, Visio, Lima One, etc.. are all straight cut, no exceptions. They also will hit you with undisclosed fees which can cause a poor experience for your clients. I had a client walk away from closing because of ridiculous "3rd Party fees" that were not disclosed anywhere on the term sheets they provided to me and the client.

In my opinion true wholesale only shops are better. Sure it can have a bit more paperwork than private lenders, but it's worth it knowing that you aren't in limbo and know exactly what you are getting beforehand.

And this is not only me on the broker side, but some of my best clients went retail and have fallen out from these lenders for the same reasons. The lack of transparency and disclosures it what kills it for me. And in my opinion, they take way too long to close.

As long as I have all the docs upfront, I have closed in less than 14 days on a DSCR loan using a wholesale shop, as compared to the rest that depend on you harassing their processor for an update.

Steve Theobald · Answer

Thanks so much.  It fries my brain that lenders like Kiavi can go both ways (broker and direct) and disincentivize brokers from bringing them TONS more clients.  "Oh, no big deal, just add another point on top!"

Here's an even better one from Conventus (almost verbatim from a real conversation with them): "Hey, we love brokers.  But because we now have to work with yet another person on the deal, we are going to charge double the points you charge. No problem. One for you and one for us.  1.5 for you and 1.5 for us. Easy!" [. . . I complain . . . ] "Huh? What's your problem?  Oh, we are still so much lower than the standard 12 & 2 the borrowers could get locally. So go put on your salesman hat. This is a great deal.  Go sell some loans for us!"

I am eager to find lenders willing to treat Fix N Flip brokers the way Retail loan brokers are treated - as part of the team.

Why do some lenders refuse to provide guidelines to brokers?

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