Beginning of our series "industry checks and balances" - at it's core is reliable credit decisions. In an age where most of the emergence of this page know little about how sound credit decisions were achieved, with the introduction of credit scores and the matrix of scores vs. vs. DTI LTV ratios, this problem is the long-term survival of individual critical careers and the industry as a whole. We are most of the necessary "checks and balances" to explore over the next few months.
Sound creditDecisions are starting on the 3 Legged Stool custom - not on a computerized credit score ALONE. Character, Capacity & Collateral - it's just so simple that even more complex. What is in a chair with three legs, each leg is the stronger, more stable and reliable it will be.
In a nutshell ...
Acceptable character is basically a detailed analysis of the credit report of an applicant, together with its stability of residence and employment. The bottom line is there is a scalehere - from world-class gold all the way up miserable. Is farther away from lousy, the stronger the legs of the stool. And, this is an important as the leg (long experienced by many lenders as I BTW).
An applicant (reviewed documented historically stable long-term) capacity for a good credit decisions is critical, as it is important that any new customer has the option to repay their debts. The character of leg strength tells us their willingness to takeCare of their obligations in an acceptable manner. This capacity, however, measures its capacity leg - its capacity - they can afford it? The leg of the chair needs the support of a likely future of reliable and stable source of revenue available, then the customer has the necessary resources to the timely payment.
The collateral that secures the transaction, the third stage of the stool with three legs. The more security to collateralize the loan, the better, and the strongerthe chair is. This is, however, by many as the least important stage of the stool because it lose value and are not always of satisfactory quality "thought merchantability or accessible, in case of failure.
With two strong legs weaker for our chair, with only one, albeit not ideal, is still an appropriate formula for a more conservative loan approval. Two of the weakened legs is usually a recipe for disaster. Once all three legs on fragile creation,unless a miracle is surely a future loss.
One component is missing in the recent training of most employers in our industry is the lesson in this approach, the entire staff. Sure can, processors will receive a small piece of it through osmosis, of course, underwriters and institutional investors should all be very familiar with this kind of thinking, but our observation of far too many of them are not. All too regularly, unfortunately, do mainstream Loan Officers not the first indicationwhat it's all about. They see themselves as sales professionals - NO, and unfortunately not hire analysts as they should be. Yet it is precisely these LOs are the face of our industry from almost all outside the company!
It is time for them to understand and all the others, which is a good loan.
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