White says the HOAs and realtors who don't understand the new rules need an expert, and brokers who step up will own the referral
While the mortgage industry continues to give feedback to Fannie Mae and Freddie Mac about the recent changes to condo financing rules, the focus has shifted from lobbying for delays to the policy to educating clients on the impacts.
Organizations like the National Association of Mortgage Brokers (NAMB) have been making sure members were prepared for the changes and able to communicate them not only to homebuyers but also to referral partners.
While brokers who work in condo lending have been aware of the upcoming changes, not all referral partners like real estate agents and HOA leadership are as aware. This presents an opportunity for mortgage brokers to step into that knowledge gap and strengthen those referral relationships, according to one mortgage executive and veteran broker.
Kimber White (pictured top), president of NAMB, said brokers who are paying attention can turn a challenging situation into a business opportunity.
"Take the opportunities to use this as a teaching moment," White told Mortgage Professional America. "Teach your realtors. Go to the HOAs, explain to them what's going on. We have to go out and educate them. We have to educate our realtors, we have to send out flyers, we have to do all these things, and we have to be diligent with the changes."
Educating referral partners
White said he is not surprised that HOA boards have been slow to absorb the changes. Most boards, he said, are made up of volunteers who did not want to approve higher dues and had little incentive to stay ahead of insurance and reserve requirements.
He said the Fannie Mae and Freddie Mac webinar NAMB hosted, attended by approximately 1,500 people, presented an opportunity for brokers to hear first-hand what the impacts of the new policies would be. For the GSEs, White said it was a chance to communicate directly with the broker channel, which represents almost a third of the mortgage market.
"We told the agencies that we are that 33%, and we want to make sure we have education coming to us too," he said.
Brokers who move into that education void will be building a referral network, not just solving a problem, he said.
"Right now it's about education, preparing the associations, use it to your advantage," he said. "We are the expert right now. Go out there and educate these people, and then go to the associations. You can even ask them to a board meeting and explain to them what's going on. Half these associations don't know. And it makes you the expert. And who's going to get referred financing? You're going to get referred financing."
Non-QM filling an important role
When brokers find properties that aren’t eligible for financing for agency loans, White said that having strong non-QM lending partners lined up is critical. He said it allows brokers to have contingencies already figured out before they’re even needed, making sure that the deal is able to be closed without losing a customer to another loan provider.
He said the reluctance many brokers have had toward non-QM, associating it with the subprime era, is costing them business. He also said it’s just not accurate.
"I had someone knocking on my door for years about non-QM. I said I'm not doing subprime again," he said. "And it got to the point things slowed down in '22, and people started coming to me — bank statement loans, non-QM condos, non-warrantable. And I started doing some. In the past three years, 40% of my business is non-QM condos, whether it's bank statement condos, whether it's DSCRs. Had I not had that, I would have had a big hit to my business."
He said the case for non-QM in the condo context is also easier to make to borrowers than many brokers expect. The products have improved significantly, and the rate premium is not severe.
"Non-QM is not a bad loan,” White said. “It's about 0.5% higher, but you still can do 10% down. You still can do non-warrantable. There are things that you can do that are still not the end of the earth. But it's not conventional financing at 3% down."
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As is often the case, being the expert in any situation gives the mortgage broker an advantage over their competition. White said even if you don’t have the answer right then, as long as you can get it quickly, you can earn that customer’s business.
"I say all the time, 'I don't know, but I'll get you the answer,'" he said. "The worst thing is to say 'I don't know' and then they go. Because guess what, they're going to go to somebody else. But 'I'll get you the answer' and make sure you get them the answer within 24 hours. That gives people confidence."
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