Why Haven’t Loan Officers Been Told These Facts?
This week, in step with the season, the LOSJ continues to tell the allegorical tale of Eva and her mentor, the crafty and unscrupulous Mr. Mendax. More than 80 years ago, C.S. Lewis, the noted British scholar, writer, and Christian apologist, penned the famed satire, “The Screwtape Letters.” In the spirit of late medieval Christian spiritual notions, Lewis sought to expose and mock the wicked shenanigans of two fictional evil spirits who do everything in their power to make an ape of man (their “patient”). The book introduces the reader to two spirits: Screwtape, the more accomplished and seasoned spirit; and his protégé, Wormwood.
In the spirit of the season- Halloween, Reformation Day, and the 88th anniversary of Orson Welles’s radio rendition of H.G. Wells War of the Worlds- the LOSJ borrows from Lewis’s satire, with hopes of encouraging and amusing the many honest, hardworking mortgage loan originators who commit themselves to serving their customers with honor, integrity, competence, and love.
Though Mr. Mendax was one of his era’s most prolific originators, the LOSJ sincerely hopes mortgage loan originators will find his practices and guidance to young Eva abhorrent.
Mendax and His Message
Eva,
Now you have the tools to impress prospects by simplifying the Loan Estimate and addressing their needs for clear, straightforward options and competitive pricing. By using the Loan Estimate to simplify their decision-making, you can build lasting customer relationships.
As I mentioned in our previous discussion, you may have questions about how we address the expectations set by the Loan Estimate presentation. For instance, how do we account for optimistic quotes regarding prepaids and insurance?
There are three possible outcomes.
1. We provide terms that closely match the projected payments and cash required to close, as outlined in the Loan Estimates.
2. We offer more favorable terms than anticipated, including lower monthly payments and reduced cash required at closing.
3. We deliver less favorable terms than estimated, including higher payments and cash to close.
Maintaining Goodwill
As the closing date approaches, you should prepare for the most likely outcome. For every transaction, you should develop a Plan A and a Plan B. Let’s discuss these “situating plans” in order. Remember, the plans are templates. They provide a framework to help you overcome typical objections and obstacles encountered while closing.
PLAN A
In Plan A, you prepare for outcomes 1 and 2. To leverage Plan A, interest rates must fall significantly as the closing date approaches. Delay locking the rates until within 7 to 10 days of closing. At that point, opt for the standard 15-day lock. If you are at or better than the LE, the customer will be delighted to receive what they applied for because your terms were better than any other lender’s.
Don’t expect to use Plan A as much as we’d like; we’ll need Plan B instead. Plan A is pretty simple—you lock in the rate shortly before closing and deliver something close to the LE, or better. However, that takes a significant rate drop from application.
A few best practices applicable to plans A or B. Review the Closing Disclosure with the prospect following the same recommendations given for Loan Estimate reviews. Keep it simple. Stay on page 1 for the most part. Focus on the Projected Payments and Cash to Close. Just skip right past all the minutiae in the rest of the disclosure. But if a prospect objects that the Closing Disclosure shows higher prepaids and escrows than what was shared in the Loan Estimate, no worries! You can find the appropriate responses in my Plan B comments below.
PLAN B
Plan B anticipates and addresses the disappointment the prospect experiences with “increasing rates” and costs during processing and before locking. Don’t unnecessarily upset them. Wait until the last possible moment to unveil the actual terms. At this point, there is no time for borrower changes; if you present the unpleasant figures in the right light, they always close.
It’s best to avoid delving too deeply into the details of any TRID form. This approach keeps discussions positive. When someone raises an objection, try to stay calm and open-minded. Instead of getting defensive, share helpful solutions and explanations. Keep the conversation moving, so don’t linger on the issue. Remember, the best approach is to listen and respond without arguing or trying to change their mind. Share your insights with confidence, and then gracefully transition to the next topic. In general, people won’t express more than two objections. If there’s nothing more to discuss, simply conclude with the following: “Do you have any other questions or concerns? Great, let’s get it done!”
A few general suggestions
Whenever possible, introduce seller credits into the transaction. Always try to structure seller credits into the transaction, especially when addressing objections from home inspections. Condition the selling agents to structure their offers with seller credits. Seller credits can help obscure, minimize, and offset increased closing costs, especially when adding seller closing credits after the initial LE.
When rates increase (or fail to decrease), point out that factors beyond anyone’s control influence rate changes. If the borrower is still expressing concerns about discrepancies between your prepaid and escrow estimates and the actual costs, clarify that federal law requires lenders to use the most accurate information available when preparing the Loan Estimate. Then overcome the objection as follows.
Higher Homeowners Insurance Premiums
Everyone hates insurance companies, and for good reason. Tell them, “Some insurance companies are experts at fleecing people.” Make sure to make this observation about premium rates. Remember: At the same time you malign insurance companies in general, always sound charitable when speaking about specific service providers. Tell the prospect that in their case, “The insurance company provided a best-in-class policy, which drives the higher price.”
When working with a prospect on their loan application, it’s generally best to avoid referring them to your homeowners insurance partners. This approach lets you address any insurance agent dissatisfaction or product shortcomings by offering your insurance team’s support to review their options after closing.
Higher PMI Premiums
Higher PMI premiums are relatively easy to explain. As mentioned above regarding property insurance, many people have a negative perception of insurance companies. Subtly, feed that bias. A gentle nudge from you is all it takes to shift responsibility to the PMI provider. That nameless, faceless housing hobgoblin! Here are a few common explanations for higher PMI premiums that are generally effective, especially for marginal applicants:
– We could not obtain coverage from the most competitive insurers. The transaction doesn’t meet these PMI companies’ requirements. They do that sometimes.
– The PMI company used a different credit model than we used.
– PMI companies often change their premiums without notice. You should have seen the full premium increase; thankfully, we were able to get you a discounted rate.
Per Diem Charges
Let the prospect know you did what you could, but due to contractual terms, the per diem interest charges/taxes/HOA fees, whatever, couldn’t be adjusted.
Ingratiate Yourself
The frosting on the cake is your ability to leverage the $500 lender credit whenever you choose. Remember, I will split all lender credits with you 50/50 (including the $500 gift card). Here’s how to present the $500 lender credit.
As you go through the CD, don’t forget to remind them about the $500 gift card you promised! Ask if they’d prefer it for a furniture store or a home improvement store—whichever they’d enjoy more. If they notice any significant increases in settlement charges or payments, tell them you noticed that too, then point out the discretionary $500 lender credit. Let them know it’s a special family rate, and kindly ask them to keep this extra credit to themselves. If you can, have the Closer add the credit under “Other Costs,” Subheading F: Prepaids. Before wrapping up, check in with them to see if they have any other questions or concerns. It’s all about making them feel respected, special, and cared for.
When you provide financial help, it is nearly impossible for them to be cross with you about the estimates. You’re on their side. Always work that angle. When you tee them up this way, you have a great chance to ask for a small favor in return. Encourage them to share the gift card coupons with three friends this week. You can acknowledge that they might be busy, but let them know how much you’d appreciate them spreading the word to their friends and family. Do not wait until closing to ask for referrals. The first time you should ask for referrals is when completing the loan application. More on that another time.
Borrowers simply can’t think that, while you are giving them so much and asking for reciprocal favors, you might not be acting in their best interest! It sounds a little dark, but it’s a hell of a lot of fun once you get into it. All that matters is they think you did a great job, even if the “evil lender or insurance companies” did not.
In addition to the store or furniture store credit, buy the borrowers something special and personal as a closing gift. Take it to the closing. Use your imagination. Also, before closing, always give the referral partner a gift of equal or greater value than what you give the borrowers! My favorite referral partner gifts are tickets to sporting events because they are like money! The recipient can always re-gift these tickets to others.
The Bottom Line
Eva, keep this in mind: the way we see truth and reality is often shaped by our perspective. The world is what we see. And so it is for your borrowers. It’s really important to make sure the borrower feels appreciated and respected. You can show how much you care by reminding them you went the extra mile for them and would happily do it again because your customers always come first!
These suggestions are impactful, but not cheap. You’ll need to invest significantly in your business. As mentioned, we will share these costs equally, at 50/50. I have much more to share, including strategies for securing your referral partners’ loyalty and my special guidelines for capturing builder referrals. Until then.
Eva, as the saying goes, the ends always justify the means. Continue your outstanding work!
Cheers,
Mendax
BEHIND THE SCENES: NMLS LICENSE RENEWAL CHANGES
Washington, D.C. – State supervisors recommend Nationwide Multistate Licensing System (NMLS) licensees prepare in advance of the annual renewal season, which starts on Nov. 1. New this year — licensees must complete updated disclosure questions and comply with new employment reporting requirements in NMLS before they can submit requests for license renewal.
“Updated system policies for disclosure questions and employment reporting provide greater clarity and transparency for licensees,” said Kirsten Anderson, chair of the NMLS Policy Committee and deputy administrator, Oregon Division of Financial Regulation. “While approximately 80% of individuals and companies have completed the new requirements, it’s important that remaining licensees do so to prevent any possible delays during renewals.”
Licensees in the mortgage, money transmission, debt collection, and consumer financial services industry are required to renew their licenses in NMLS annually. Mortgage loan originators (MLOs) and mortgage companies account for more than 915,000 state licenses eligible to be renewed. The number of individual state licenses eligible for renewal is 9% higher than last year, while the number of company licenses eligible for renewal is up 4% compared to this time last year.
Information on NMLS renewal is available on the NMLS State Resource Center. The renewal period in most states runs from Nov. 1 to Dec. 31. State-licensed MLOs must also have completed annual continuing education requirements to renew their licenses.
NMLS Disclosure Questions Guidance
Employment Reporting
Tip of the Week: Sign up for 2026 CE
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Expanding your product offerings is an effective way to enhance your business’s vitality. This year, the Loan Officer School is surveying non-Qualified Mortgage (non-QM) financing options. We will review the various types of underwriting required for non-QM financing, including higher-priced mortgage loans (HPML), balloon-payment features, and interest-only options.
Presenting non-QM solutions to consumers improperly can lead to serious consequences. Understand the essentials of compliant and ethical subprime mortgage origination. Attend the Loan Officer School 2026 continuing education classes.
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