To most borrowers, a mortgage is the largest financial undertaking they will ever experience. The volume of paperwork, the esoteric banking terminology and the prospect of large monthly payments into the foreseeable future is enough to make anyone nervous. With this reality in mind, the best loan officers immediately set out to build confidence and instill comfort in their customers by patiently explaining the lending process in layman's terms. Yet a loan officer represents an institution, i.e. a bank or finance company. These organizations will have charge over the home loan long after the officer collects a commission.
It begs the question: does a large, national lender have any advantage over a smaller, local one?
How Banks Get Big
The largest, most widespread lenders in the United States evolved into the multi-trillion dollar businesses that they are. The vehicles for this evolution were merger and acquisition. When one institution acquires another, it acquires its assets. Of course, it also finds itself with more personnel and infrastructure than necessary, so real estate is off-loaded and people get laid off. This is called consolidation. When all is said and done, the dominant bank increases its net worth. In the aftermath of the 2008 financial crisis, the consolidation of banks accelerated. Some of the "too big to fail" institutions became that much bigger.
Do National Lenders Make Better Mortgagees?
National banks and loan companies tend to have longer histories. This implies they have been around for a while and have the resources to remain solvent and do business far into the future. Moreover, the larger lenders are able to field customer service contingents that are available by phone or online on a 24/7 basis. Plus, big banks offer extra perks to their mortgagor/depositors like award points and financial breaks during periods of hardship.
At the same time, borrowers can sometimes feel more like problems to be managed than customers to be served. It is hard for these organizations to recognize their mortgage clients as individuals with specific needs and concerns. They tend to pay more attention if a home loan payment gets missed.
Why Consider a Smaller, Local Lender?
Customer service is not as readily available with local banks but it is almost always more personal. With fewer underwriters, processors and funders, their universe of total customers is often smaller. When a borrower calls with a servicing question, the person on the other end of the phone may remember the closing and some of the loan details. Meanwhile, the loan officer is more likely to follow up after closing, and maintain a relationship with his or her clientele. Out-of-the-box applicants like self-employed business people or those with one or more credit blemishes will find more sympathy among small, local banks. Structuring a no-doc loan or helping raise a FICO score is more worth the time for community-based lenders.
Each Borrower is Different
It is likely a good thing to have both large and small, national and local lenders from which to choose. Each applicant comes with their own financial goals and histories. Decent home value, excellent credit and verifiable income fares well with big banks. Less-than-stellar scores, multiple revenue sources and borderline home value may find a warmer reception with a local lender.