Only one of two things can happen when a Loan Officer for a large financial institution is unable to qualify a bank customer for an agency loan. The Banker can either say, “Sorry, we can’t help you,” or “We don’t originate alternative loans, but I can refer you to a great company that has just the product you need.”
Because the second answer is clearly preferable, non-QM Originators will find that many traditional competitors can become great referral partners. Most major banks do not originate non-QM mortgages. At the same time, they never want to tell consumer or commercial banking customers that their business is not welcome.
A 2016 Federal Reserve study showed that around one in every eight mortgage applications (more than 10 percent) is rejected for a variety of reasons. When agency lenders must deliver bad news, they can also offer hope by recommending a reputable non-QM resource.
“The last thing you want to do is tell people their business is not good enough,” one Bank Manager told me recently. “That’s why it is important to help people even if you refer them to a rival. Otherwise, they may take their checking and credit card business someplace else, wiping out years of goodwill.”
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