We recently completed another audit going back to 2012 (the year I started Transparent Mortgage) and looked at every single transaction we put into process. We are thrilled to report that our closing ratio has remained above 95%, 96% to be exact.
We have always believed in putting quality above quantity and this statistic is living proof that we have absolutely done that.
How We Came up with this Number
First we counted all loans that were submitted to the actual lender or investor for underwriting review and compared it to our number of funded loans. Then we looked at the list of the ones that didn’t close and omitted the ones where something happened that was legitimately outside of our control.
Here is the criteria for the ones we omitted:
- Buyer willingly cancelled escrow because of an issue with the property or for personal reasons
- Client misrepresented a material fact on the application (or didn’t communicate a material fact) that led directly to a denial from underwriting. We have only had a few of these in 5 years.
- Client lost their job mid way through the transaction
The Stakes are High
Being able to close is incredibly important because people’s homes are literally on the line. In addition, the amount of time and labor involved to close a mortgage loan nowadays is tremendous. So we feel very strongly that it is our obligation to close every single loan we put into process.
An Industry Plagued with Painful Experiences for the Homeowner
Many companies in the mortgage industry unfortunately play a numbers game. Because their bottom line is profit and growth, they focus on sales and marketing and getting as many loan applications in the door, knowing that a decent % of them will close. The more loans they put into process, the more closed loans they get paid on. And because of this focus on revenues and the incessant desire to continue growth, they tend to be less focused on the loans that don’t close and less focused on the customer experience. As a result, the customer is the one who suffers.
We Dare to be Different
Being that our name is “transparent mortgage” we feel a strong obligation to be as open and honest as possible and that tends to lead towards a stronger level of integrity in how we go about our business. The reverse is also true…. our high level of integrity and commitment allows us to be more open and honest with our clients both at the start and throughout the transaction. And this is part of the “not so secret sauce” that leads to our high standards of performance. We work very hard to prevent surprises during the transaction and that all starts with doing the work up-front, and being able to see the transaction from a high level and anticipate what may come up. I was taught at a young age by my father (who runs a successful fishing lodge in Alaska) that “when you have to say your sorry, it’s too late”. We have adopted this mentality wholeheartedly and even taken it a step further. If a client has to call and ask me for status, it’s too late because it means that they are worried about their transaction. Because of this commitment to communicate pro-actively, my phone very rarely rings with a concerned client asking for status.
Setting a Higher Standard
It starts with our commitment to quality over quantity.
This naturally translates into a certain diligence in which we approach the up-front work that we do on each file. We need to feel a high level of confidence before we move forward and we use our expertise to avoid moving forward with transactions that are prone to have challenges. This means we do not move forward until we have a high degree of confidence we can close. It also requires us to get very clear with the client about what we are trying to accomplish and our expectations, especially the rate and fees, so there are no surprises at closing.
We have found these components to be essential to maintaining this high level of quality:
- Attracting and choosing the right kinds of clients
- Creating an atmosphere of mutual trust and teamwork with the client right from the start
- Doing our diligence up-front on a file and getting very clear about the critical components
- Getting a 2nd set of eyes (or 3rd) on more difficult transactions
- Let clients know right away if we have concerns about whether we can get it done
- Being very careful about how we move forward into transactions and setting clear expectations
A Secret to Quality Control: Put Your Own Money on the Line
Since 2012, I have fronted the cost for every single appraisal at the start of the transaction. Appraisals usually costs around $475. So when we move forward on a transaction we are also making a serious commitment. Not just the money, but also the time and work that goes into our process is heavily loaded up-front. So if a loan doesn’t close we lose big time. And we cannot afford that. So we don’t let it happen.
So we are making a commitment to the loan and the client by putting our money on the line. If the loan doesn’t close, we do not get reimbursed. This creates a culture and a frame of mind where we do everything possible to avoid this loss.
A Mortgage Company Built on Principle
The mortgage industry, like the banking industry, tends to be focused on money as the primary driver of all things. Not here. We know that if we take care of our clients and put our best effort into every single transaction we will be successful and the money part will take care of itself. So we instead put our energy and focus into our principles and improving our process, our company and ourselves as people.