Fallout Shelter

Written By: John Hoxsey
Certified Master Loan Processor (CMLP)

We all have fallout, but as the housing market declines and the industry tightens its grip, it seems like the pull-through ratios are declining. Which leads me to the question – Is it fair to charge a broker for a loan that did not close?

Well - yes and no.

We are in business and we have to take expense and risk into consideration, but we have to be careful not to punish our clients for changes in the industry.

It is one thing when a loan dies due to an unforeseeable guideline change. It is something completely different when a particular loan officer or branch has a high ratio of loan fallout.

In my contract I have a few clauses that address this.

First and foremost, my contract makes it clear that the relationship can be terminated by either party at any time.

Second, if a branch or a loan officer has a high ratio of fallout, I let them know in advance that I will start charging them for the fallout. $50 to $75 per file is fair to cover expenses (toner, paper, time, etc)

Third, I have a clause that indicates that multiple loan submissions to different lenders will incur a fee. I have noticed that loans that are denied at one lender are typically accompanied by a request to be submitted to a new lender. The loan can travel from lender to lender followed by one denial after another. Hopefully the loan ends up in a lender’s closing dept. However, if your client has a habit of giving you fallout loans, then it may not.

In this case you should have something to fall back on for all of your hard work. I do not charge a fee for the submission to the second lender, however I do charge $100per each additional submission after that.

These clauses and practices are fair, and should protect you from wasting money and time on loans that do not close.

Remember - Your reputation is your business.

Happy processing!!

About the Writer. As one of NAMP's volunteer writers, John Hoxsey is currently a NAMP member in good standing and is a NAMP Certified Master Loan Processor (CMLP). If you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.