The average borrower has drastically changed throughout the years. Today, more borrowers are self-employed, work remotely and have multiple streams of income. For brokers, working with these borrowers can be complicated because they require unique processes. HousingWire recently spoke with Bill Dallas, President of Finance of America Mortgage, to discuss how brokers can leverage technology to accommodate today’s average homebuyer.
HousingWire: How has the average borrower changed over the last few years?
Bill Dallas: Today’s borrowers generate income in various ways and have different household compositions than previous generations. With the rise of the gig economy and remote work arrangements, more Americans than ever have multiple sources of income or are self-employed. As of August 2021, more than 10.2 million Americans were self-employed, according to data from the U.S. Bureau of Labor Statistics. That represents about a 7.5% increase over the year prior and is a trend that will likely persist.
In addition to self-employed workers, the “gig” economy — or independent contractors and freelancers who do short-term work for multiple clients — continues to grow. In 2019, the share of gig workers in companies jumped 15% compared to 2010, according to data from the ADP Research Institute.
Altogether, these are dramatic changes compared to when traditional guidelines were put in place. As a result, today’s borrowers need mortgage products that are better aligned with their current needs while still considering their ability to repay.
HW: What are some common pain points brokers face when working with borrowers in unique situations?
BD: First and foremost, the biggest pain point for brokers is finding lenders that offer mortgage solutions outside of the conventional lending box. Some lenders might offer just a handful of products that don’t provide the innate flexibility needed to accommodate self-employed borrowers in multigenerational households who are financing a home with multiple streams of income, for example. These situations require more creativity and innovation, and brokers might be hard-pressed to find lenders who are willing to work with borrowers in those situations.
Another barrier brokers face is unclear or inconsistent communication from lenders during the underwriting process. This is especially true in unconventional lending scenarios where more documentation may be required or borrowers have to jump through more hoops to show their income or employment history or verify their self-employed business earnings. That’s why it is important to have a partner that understands the challenges facing brokers and can offer unparalleled support.
In today’s fast and furious market, brokers need assurance that their borrower can get to the closing table quickly and efficiently. Turn times are a huge pain point, especially when borrowers in unique situations may be pressed to close more quickly in a competitive seller’s market. A seller may grow impatient if a loan approval is delayed and they have back-up offers with less complicated financing attached to them.
HW: What type of innovative loan options and technology do brokers need to enhance communication with borrowers?
BD: Brokers need access to strong non-QM loan programs that provide self-employed borrowers with more options. And with home-price growth climbing in many parts of the country, access to flexible jumbo loan options for borrowers in high-cost areas that exceed conforming loan limits is necessary to help well-qualified jumbo borrowers who cannot qualify for a conforming loan. It’s also important to have products that are tested and proven, so you know they will remain available to borrowers.
As far as technology goes, a loan origination system that offers updates at each step in the pipeline and can deliver on promised turn times is critical. Technology that allows brokers to remain top of mind and meet their customers on their terms via a multichannel approach is also becoming more important for today’s borrowers. More than that, though, brokers need confidence in lenders’ loan pipelines in order to continuously meet (and, ideally, exceed) their customers’ expectations.
HW: How does FAM TPO help brokers meet borrowers wherever they are in their financial journey?
BD: FAM TPO stands apart because we have a wide range of products available and are continually assessing and innovating our offerings to ensure we can meet the evolving needs of more borrowers.
FAM is a nimble company capable of creating tailored products, which you’d be hard pressed to find elsewhere. FAM TPO recently rolled out a new COVID-19 loan program geared at assisting borrowers who experienced a disruption in their income or employment during the pandemic. The broker makes the connection, and you have a win-win for everyone.
Additionally, FAM TPO offers a suite of proprietary non-QM and jumbo loans that give borrowers enhanced purchasing or refinancing power compared to standard-fare loans. Known as Two-X Flex, this product suite is a pillar of FAM TPO’s success in helping our broker partners better serve a more diverse group of borrowers
The FAM TPO Two-X Flex suite includes:
- Two-X Flex – A full-documentation loan with common sense guidelines.
- Two-X Flex Bank – A loan that requires no tax returns and enables self-employed borrowers to qualify using bank statements.
- Two-X Flex 1 Year – A loan that enables borrowers to qualify using only one year of income.
- Two-X Flex Asset – A program that lets some borrowers qualify based on assets alone and no employment.
- Two-X Flex 1099 – A new limited documentation program that simplifies underwriting for self-employed and gig workers who receive a 1099 IRS form for independent contract work.
- Two-X Flex P&L – A new solution for self-employed borrowers with inconsistent payment history.
Finance of America Mortgage (FAM TPO) elevates a broker’s business by providing a suite of products to help even the most unique borrower afford a home.
