Mortgage Lenders All Use the Same Guidelines – Aren't They All the Same?

The Fed has stopped its bond-buying program.  Conforming limits are set to go lower for government-backed loans.  Housing prices are barely holding steady or in decline. Constant regulatory change is the new normal. Pundits say there has never been a more turbulent time in the real estate lending market, which makes predictions and planning difficult.

How do you know if a lender will maintain its viability as a business?

One way is to see how the firm is structured.  For Tower Federal Credit Union, a vertical integration strategy has provided some buffer to the broader turmoil of the housing market. 

Under the Tower banner is a title company, Tower Title Services, and the credit union refers its members to a particular national network of Realtors through CU Realty Services, which offers real estate services exclusively for credit union members. The combination of services is overseen by salaried, not commission-based loan advisors who help members through the home-buying process.  More than $1 billion in loans later, the strategy is paying off.

“In many surveys and focus groups, members wanted an easier way to buy a home and we are providing that,” says Barry Stricklin, Tower’s vice president of Real Estate Services. 

Tower did its homework on the idea and researched the specific points that members want: creating a “one-stop shop” experience for financing, realtors and title services; a single point of contact throughout the process; a streamlined application; elimination of unnecessary repetition like having to enter the same data contained on a credit report; and an easy, secure way to apply online.  As the program took shape, the credit union incorporated features that allowed applicants to start, stop, and return to an application on its website. 

Other benefits such as educational seminars, after-hours and off-site settlements, and even cash rebates for using a CU Realty realtor have gone a long way toward creating devotees to the Tower program. Stricklin says by using Tower’s network of Realtors, members receive an average of $2,000 in cash rebates at settlement. Most use it to help cover closing costs.  

“Our primary objective remains making the program easy to use and providing members with the right resources,” Stricklin says.  “They have confidence that they are working with credible agents to find the right home and an experienced loan officer who is acting in their best interest.”

Tower retains servicing for the lifetime of the mortgage loan, a different model than banks that often sell their loans on the secondary market.  Say Stricklin, “Members know they will get prompt attention throughout the life of their loan.”

This focus on a long-term, sustainable program is what helped Tower weather the last few tumultuous years in real estate lending.  Lenders must now work within more stringent rules designed to overcome shortcomings among bank lending practices.  Fee collection, documentation, loan officer compensation, underwriting and appraisals all have tougher standards to meet.  For all lenders, the new regulatory requirements add layers of administration.

“There have been more changes in the real estate lending industry in the past three years than in the last 10,” confirms Stricklin.

While uncertainty in the real estate market continues, integrated programs such as Tower’s provide a counterweight to the unease that many mortgage applicants feel, and to credit unions trying to forecast how well they will perform in the coming months and years.