The early 2000's were a different world from what we know today (think Brittney or Kanye) but especially when it comes to real estate mortgages and lending.
Just about everybody (including) myself was involved in RE back then. All of my friends worked with me (or for me) at one point or another and from appraiser, to mortgage bros to RE brokers, we had some crew in those sunny South Florida days..
Fast forward two decades to California and Oregon and outside of my growing RE business and portfolio, my day to day interactions with mortgage guidelines and underwriters were limited. Two years ago I decided (out of client necessity) to reapply for my NMLS mortgage broker license to provide more robust mortgage options and services to my clientele. To be clear, I never facilitate both the Real Estate & Mortgage roles in any single transaction, but I do when possible try to work within my own organization or team for cohesiveness and reliability of transactions.
More importantly, with the rate and lending environments of the past two years, having mortgage insight, access and resources has supported or improved the invest-ability for the majority of my real estate clients. In other words, the right mortgage products, lender or program helps to make deals work. Take for example a six plex I sold last year, that was for sale as 'cash only' due to an incomplete unit. The borrower was overqualified, the property was cash flow positive, I approached a local lender and due to the strength of property and borrower they provided essentially conventional terms of 25% down on a 25 year amortization where as other investors could only consider the transaction as cash.
No brainer for my investor clients, what was the difference? Existing mortgage experience and relationships. I will continue to say, that the real heroes of any real estate transaction are the lenders/mortgage brokers. The real estate professional or coordinator has input and dealmaking influence, but the terms of financing are generally the key component to unlocking the transaction.
This is particularly relevant when it comes to creative or NON-QM lenders. Not all Jumbo, DSCR or zoning types are created equal. Take the most recent example of a two-unit property zoned commercial for STR usages outright. The listing broker was apprehensive to accept a conventionally financed offer, our strategic lending partner sent the listing and overview to the underwriting team and got verbal approval and evidence in the guidelines that the property type was permissible. The mortgage broker contacted the listing broker to reassure them they could provide financing. The client is pending.
The past twelve months I have been intimately involved with expanding offerings and niche programs with my current lending partner (based in NY but still with ties to South Florida.) As a Nationwide lender in 47 states + Puerto Rico that is fully endorsed, there are not many lending scenarios we don't cover in house, but there are always scenarios that fall outside of conventional or standard Non-QM guidelines. Some examples include: properties on 10+ Acres. DSCR loans to ratios of zero. Unlimited cash out (in hand) refinances. Super Jumbo Loans up to and above $10M+. Properties that utilize STR income to qualify. Condos. Non-Warrantable condos. Log homes. Unique properties. Hobby Farms. Costs to cure. Seasoning issues. Buy-downs. Buy before sale. Construction loans. Closing in LLC's or Trusts. Usages. Limitations on number of units. MFH investment properties.. HOA restrictions..And just about any other possible underwriting scenario nobody thought of.
In assembling complete guidelines and cheat sheets of investor programs, products and incentives for an internal investor resource guide, I can tell you that as much as things have evolved when it comes to mortgage lending since 2008, not that much has changed.
In fact, mortgage interest rates themselves are very close to where they were in the early 2000's. True, gone are the NO Doc loans to anyone with a pulse, but mortgage investors and lenders still have a lot of creative ways to lend. When not 'full income' verification, which can even allow for high 55%+ DTI there are alternative income verification guidelines like bank statement, P&L, DSCR, Foreign National, Asset depletion, bridge and portfolio programs that allow expanded ways for borrowers to qualify.
The differentiator for individual mortgage lenders is experience, knowledge, resources and tenacity. The lender or broker working on one's behalf has to want it as badly as you do and for the right reasons.
One thing that has changed, is that the majority of unscrupulous individuals in the mortgage industry has been marginalized. The vast majority of mortgage pros I work with are just that, professional, qualified and operate in true fiduciary capacity. With that said, not every mortgage broker has an exceptional reputation. What cannot change, is that the mortgage industry and profession is challenging and demanding. Communication is critical and it is not always easy to explain or provide updates when one is underprepared, under-qualified or delivering negative news. The higher the stakes (as in value, timeline or risk) the stronger lender profile and performance will be required.
Mortgage underwriting and pricing is complex financial work with very little margin for error (especially nowadays.) Consumers are more educated than ever (thanks to resources like BP!) In the future, supposedly AI will revolutionize the industry and streamline the mortgage process for borrowers, but there is no substitute for reputable creative financing solutions and human reassurance when the closing date is tomorrow. A great mortgage lender is worth their weight in gold (or whatever loan amount requested.)
What's most important to you when selecting or suggesting a mortgage partner or lender?
For me, I work with and suggest lenders that I would trust with my own loan ;)
