What, Why and How: Merchants Bank Mortgage Underwriting

Mortgage Underwriting Team

Merchants Bank Underwriters (l-r): Chris Thrune, Angie Booher, Abbey Krumrie, Shelley Vondrasek, Teresa Ebersold, Lynn Corey, Shay Yackel, Kady Cada, Haley Schultz and Jenna Hartman.

Underwriting. A term you might not be familiar with, or if you are, one that brings to mind piles of documents and lots of questions. In this edition of our eNewsletter, we’re demystifying the underwriting process to help you understand why it’s important, essential and ultimately a beneficial part of the mortgage process.

“Underwriting is about assessing risk – the risk the Bank takes in loaning money, but also the risk the customer is taking by promising to pay back borrowed money. Our underwriters work hard every day to make sure applicants truly qualify for a mortgage and help guide them to smarter financial decisions,” says Underwriting Manager, Jenna Hartman.

But, first things first, where does underwriting fit in the mortgage process? Here’s a simple breakdown of the steps:

  1. Discussing Your Needs. You meet with a local lender to discuss your goals, budget and loan options. With your lender’s help, you select a home loan program.
  2. Pre-Approval Application. You apply for a mortgage pre-approval and provide the necessary paperwork to your mortgage lender. Pre-approval is a great first step to help you determine how much you can afford before you look for a house and show buyers you’re serious about purchasing a property or land.
  3. Pre-Approval Application Reviewed by Lender. The lender reviews your application and documentation.
  4. Pre-Approval Decision/Approval. After review, your lender determines if you qualify for mortgage pre-approval and how much you can afford. You’ll discuss your budget in more detail and prepare for your house search (or contractor search, if you’re building).
  5. House Hunting. Now comes the fun part! Once you have qualified, stay in touch with your lender during the building or house hunting process. Or, maybe you’ve already found the perfect home…then you’ll move on to step six.
  6. Application Reviewed by Underwriting. With the property selected, you provide additional documentation to your lender. From there, the Underwriting department at Merchants Bank, made up of nine employees based in Winona, MN, reviews your application, including all of the documentation you provided.
  7. Loan Decision/Approval. After careful review of all your documentation, the Underwriting department determines if you qualify for the home loan. The decision is communicated to you by your mortgage lender. If you are refinancing a current mortgage, you’re ready to sign papers.
  8. Buying/Building a Home. You finalize the details of the mortgage terms with your lender, who will also communicate with the realtor and/or sellers. Once terms have been agreed upon, you meet with all involved parties to sign the final paperwork.
  9. Moving In. Congratulations! Now that you’re moving in you’ll be busy making your house into a home and begin your mortgage payments. Our local Loan Servicing department will be with you throughout the repayment process to answer all your questions and help put you at ease. About a month after your loan closing, you’ll either receive your loan payment book or notice of your first automatic payment, whichever payment option you selected. If you are escrowing (putting money aside each month as part of your mortgage payment), for your property taxes and homeowner’s insurance the Loan Servicing department will pay those bills the next time they are due. Stay tuned for an article in our next eNewsletter with an inside look at Merchants Bank Loan Servicing and tips from our experts.

We’re with you from start to finish. This mortgage application process can take anywhere from a few weeks to a few months, depending on the housing market.

The important thing to note is that while there are guidelines our Underwriting department must work within when reviewing loan applications, lenders, customers and underwriters can all work together to make the process go smoothly. Communication is key and another reason having local lenders and local underwriters is so beneficial to our customers. Jenna shares two common issues that can slow the loan process and how you can avoid them.

Acquiring New Debt

“One common issue we see is applying for or acquiring new debt – like a credit card – while our team is reviewing a loan application,” says Jenna.

She recommends consulting your lender prior to taking out new debt to avoid this hiccup in the loan process. “Even if you could save 25% at a department store or on furniture for your new home – it might not be worth it. Any new debt you take on during the loan process has to be documented and could affect if you qualify for the loan.”

Moving Money Between Accounts

Jenna adds, “[w]hen you move money from account to account or bank to bank, it can make our job to verify your financial assets more difficult.”

When your money is moved between accounts or financial institutions, it makes the paper trail to track the funds harder for the Underwriting team to verify. Many people don’t realize that verifying adequate liquid assets is part of the mortgage loan approval process. It’s all a part of the education we provide our customers. This problem can also be avoided by consulting your lender before you move any money.

If you have questions about the underwriting, or any part of the mortgage process, just ask your local Merchants Bank mortgage lender.

“Everyone in the Merchants Mortgage team is working hard for you – from the lenders to those of us behind the scenes. As underwriters, we know that when we approve a loan, there are people moving into homes and making memories. It’s such a rewarding process to be a part of.”

Additional Resources:

 

 

From the President’s Desk: Spring 2018

PresidentsFeature-Blog

By Greg Evans, President & CEO

Spring has finally arrived… thank goodness! I hope you’ve already had time to enjoy the warmer weather and feel the more vibrant sun on your face.

With the warmer weather comes a natural uptick in everybody’s ability to be out, about and on the go. It’s a good time to be reminded that Merchants Bank delivers value-added personalized service and support for a number of consumer loan product offerings that it might be timely for you to be thinking about.

Home Loans with Personalized Service

This is a time of year when our business in providing financing for new home purchases and construction really picks up. If you or someone you know is in the market for a new home, be reminded that Merchants is a regional leader in residential mortgage financing.

There are dozens of options when it comes to home financing. Rates and terms with virtually all providers are similar. The critical difference in turning what can be an anxious process into a comfortable one is working with a home loan professional who is as committed to making the process as comfortable as you are wanting it to be. The team of mortgage bankers at Merchants is the primary reason we are a regional leader in making mortgage loans. Difference-makers are available in virtually all of our communities, and any of them would welcome the opportunity to work with you.

Another critical difference in securing a mortgage loan from Merchants is that you can count on the ongoing servicing of your loan to be retained by Merchants. We currently service 20,000 loans ($2.5 billion in balances). Those are big numbers, but that’s not what really matters to our customers. What matters is having a local, reliable resource to talk to in person when you have a question on your loan. Many of our competitors choose to sell the servicing rights when the loan is delivered to the secondary market. This makes a huge difference and our mortgage loan customers value the local, dependable service they can count on for the life of the loan.

Local Credit Cards

Having a dependable local contact also makes a huge difference when it comes to needing service on a credit card account. If you’re like me, you probably have at least a couple of credit cards in your wallet. If one of them isn’t a Merchants Bank credit card, you are surrendering that same local service benefit that brings value to our mortgage loan customers.

The credit card options available at Merchants Bank are extremely competitive as it relates to rates, terms and rewards…. In fact, I just returned from a trip to Napa Valley, California that was paid for using my reward points on my Merchants Bank credit card. The major difference, though, in using a Merchants Bank credit card is the local service. Local service includes the ability to make payments at any Merchants Bank location, the availability of dedicated credit card professionals to answer your questions, and the peace of mind knowing that people right here in this region are mindful in monitoring the trends related to credit card fraud security.

Mortgage loans and credit cards are just a couple of consumer loan options available at Merchants Bank. Our commitment to local service which delivers a real difference in support of those products also includes the consultative approach all of our bankers excel at in making sure that our customers borrow wisely when it comes to any form of consumer credit. If you would benefit from the value-added service from any of our bankers during the upcoming warm weather season, we would absolutely welcome the opportunity to discuss your needs. Make it an awesome Spring!

Mortgage loans and credit cards subject to credit approval.

Kaleb Storm Joins Merchants Bank as a Commercial and Ag Banker

Kaleb Storm

Kaleb Storm has joined Merchants Bank as a Commercial and Ag Banker, according to Randy Domeyer, Senior Vice President and Commercial Banking Manager for Merchants in Winona.

“Kaleb’s experience in commercial and ag lending will be a benefit to his customers and add strength to our team here at Merchants,” Domeyer said.

Storm brings industry experience in banking as a Commercial and Ag Banker, as well as a credit analyst, from Unity Bank, working both in Wisconsin and Minnesota. He has experience in both SBA (Small Business Administration) and FSA (Farm Service Agency) loans.

Storm also brings practical experience in agriculture, which will help him understand the needs of his customers first-hand. He worked on the family farm near Westby growing up and looks forward to continue helping family in the St. Charles and Dover area. He has also worked as a Vineyard Manager, again near Westby.

“I understand what’s important in making a good loan, and I understand and appreciate the value of hard work,” Storm said. “The values that I have are consistent with Merchants’ values, and that was important in my decision to join this organization.”

Storm has a degree in Business Administration/Business Finance from the University of Wisconsin-Eau Claire.

“I look forward to getting to know the area and the people who make this a special place,” Storm said.

Merchants Bank has 21 locations, including its locations in Winona, Goodview and other Minnesota locations in St. Charles, Rochester, Rushford, Lanesboro, Caledonia, La Crescent, Spring Grove, Cannon Falls, Red Wing, Hampton, and the southern Twin Cities metropolitan suburbs of Apple Valley, Cottage Grove, Hastings, Lakeville and Rosemount. Merchants has Wisconsin locations in Eau Claire and Onalaska. Loans are subject to approval. Twin Cities-based Merchants Bank Equipment Finance is also a division of Merchants Bank, N.A.

Area Business Leader John Killen Elected to the Merchants Bank Charter Board of Directors

John Killen, Board of Directors

John Killen, President & CEO of WinCraft, Inc., was elected to the Merchants Bank Charter Board of Directors at its April 17 meeting, according to Scott Biesanz, Chairman of the Charter Board of Directors.

Since graduating from the University of Kansas in 1985, Killen has spent all but four years of his career with WinCraft, an industry leading manufacturer of licensed and promotional products for retailers, professional sports teams, concessionaires, colleges, businesses, distributors and schools. Killen spent four years working for the NBA during its great resurgence in the late 1980s and early 1990s, developing the corporate premium and promotions business as well as promoting the USA Basketball Dream Team.

“WinCraft is a leader in its field in the country,” Biesanz said. “With that leadership position comes insight to how businesses throughout the region and throughout the country view opportunities for growth. John will be able to share that and more, strengthening our board as we continue to grow.”

In addition to leading nearly 700 employees at Winona-based WinCraft, Killen has contributed his talents to a number of organizations over the years. John serves as a board member for The Vernon Company, Newton, IA, and on various advisory boards at Winona State University and Saint Mary’s University. Recently he’s spent time as a member of the National Marketing and Communications Committee for Ducks Unlimited.

“Merchants is a regional banking leader, and I look forward to lending my experience and knowledge to the Board,” Killen said. “It is a privilege to be able to serve with a group with such a broad base of expertise.”

Killen and his wife Wendy live in Winona. They have two sons. John Jr., 23, is a Marketing Manager at WinCraft and Henry, 21, is a Junior at the University of Kansas.

The Merchants Bank Charter Board of Directors is responsible for the fiduciary duty to carry on the business of banking and for providing oversight and strategic direction for Merchants while insuring the safety and soundness of the organization. Without a separate local Community Advisory Board for Winona, Goodview, St. Charles, Eau Claire, and Merchants Bank Equipment Financing, the Bank’s the Charter Board of Directors serves in this capacity as well for those locations.

Merchants Bank has 21 locations, including Minnesota locations in Winona, St. Charles, Goodview, Rochester, Rushford, Lanesboro, Caledonia, La Crescent, Spring Grove, Cannon Falls, Red Wing, Hampton, and the southern Twin Cities metropolitan suburbs of Apple Valley, Cottage Grove, Hastings, Lakeville and Rosemount. Merchants has Wisconsin locations in Eau Claire and Onalaska. Additionally, Twin Cities-based Merchants Bank Equipment Finance, a division of Merchants Bank, N.A.

Top Business Fraud Updates – April 2018

FraudPrevention-Blog

Please review our most recent fraud alerts and security reminders to help protect your business.

Email Spoofing On the Rise

Our business customers have reported an increase in email spoofing scams. Fraudsters are posing as a customer or employee of the business and sending an email to the business asking for a wire transfer or ACH payment. Only after completing the wire transfer have businesses found out that they were dealing with fraudsters and not their actual customers or employees.

Before you complete transactions to your customers, make sure to verify who you are speaking with over the phone or through an email through a secondary source. Call your customer directly through a phone number you have verified. When working with customers via email, remember to look at both names and email addresses for consistency. If you notice anything suspicious, take the extra time to make sure both your business and your customer’s information is safe. When in doubt – check it out and verify.

Directory Listings Scam

Have you been contacted by someone wanting to verify or confirm your business information for a directory listing? Be cautious. Scammers have been calling business claiming to be able to help them with their online directory listings for a fee. In the end, the business is out the money and their information was verified for a directory listing that doesn’t exist. To avoid falling for this scam, make sure to verify who you are speaking to and confirm the phone number through a third party, like the phone book or Yellow pages. Read more details about this scam here.*

Steps to Take Now to Prevent Fraud

Here are three simple things you can do now to prevent fraud on your business accounts. We recommend:

  • Checking your business bank accounts daily for fraudulent transactions. If you are suspicious of a transaction, contact the Bank immediately.
  • Using a fraud transaction detection service, such as Positive Pay, to help you prevent fraudulent checks and transactions from hitting your account.
  • Using our free debit and credit card security apps to track and review all of your transactions immediately. Learn more about My Mobile Money for your business debit card and SecurLock Equip for your business credit card.

Protect Your Business from Cyber Attacks

This tip is part of the FCC’s top ten cyber security tips for small businesses. Protecting and cleaning any computer that handles business information or touches your network is a must. One of the best defenses against online threats is making sure you have the latest security software, web browser and operating system in place too. You can set each of these to automatically install when a new software update is available. In addition, your antivirus software can run a scan after each update to ensure your machines are adequately protected. Take half an hour to check your settings and update your software now. Get more tips here.*

Consider Security First

Use this guide from the FTC to create a security first approach to your business. This in-depth article gives you-step-by-step best practices for protecting sensitive information your business may handle. Read the FTC’s Start with Security Guide now.*

Next Steps If You Have a Security Concern

If you think your business bank account information has been compromised or have a security concern, contact your local Merchants Bank and ask to speak to your Cash Management Specialist or a Customer Service Representative.

 

*You will be linking to another website not owned or operated by Merchants Bank, NA. Merchants Bank, NA is not responsible for the availability or content of this website and does not represent either the linked website or you, should you enter into a transaction. We encourage you to review their privacy and security policies which may differ from Merchants Bank, NA.

Industry Snapshot: Learn More About Building Material Suppliers and Construction Managers/Contractors

KendellLumberGordiansKnot-Blog

(l-r) Randy Knutson, Brad Ballard, Jim Vrchota, Travis Buege and Greg Backes

In our second story focusing on industries in 2018, we highlight two related industries, Building Material Dealers and Construction Managers/Contractors. Our goal is to bring you useful information and research for those industries.

Read our first story on food manufacturers and wholesalers here.

Randy Knutson and Greg Backes, of Kendell Lumber of Winona and Rollingstone, and Brad Ballard and Travis Buege, construction managers with Gordian’s Knot, will tell you the outlook for building is good.

Merchants Bank Commercial Banker Jim Vrchota will tell you that he and many other commercial bankers across Merchants Bank’s footprint especially enjoy working with these industries.

“Our bankers especially enjoy helping businesses in these sectors because their success is based on the same elements as ours – exceptional service, competitive products and strong relationships,” Vrchota said.

But what do the numbers say? Let’s take a closer look:

Building Material Dealers

Data from Hoovers and First Research says this about the future for Building Material Dealers:

  • “The value of US residential construction spending, which impacts contractor demand for building materials, rose 4.3% in January 2018 compared to the same period in 2017.”
  • “US retail sales for building material and garden equipment and supplies dealers, a potential measure of building material supply demand, increased 6.0% in the first two months of 2018 compared to the same period in 2017.”
  • “Total US wholesale sales of durable goods, a potential measure of demand for building materials, rose 9.7% in January 2018 compared to the same period in 2017.”

And this about predicted growth through 2022:

“The value of US private and public building construction, which is a driver for building material supply sales, is forecast to grow at an annual compounded rate of 6% between 2018 and 2022.”

Building Material Dealers-2

Residential Construction Contractors/Construction Managers

Data from Hoovers and First Research say this about the future for Residential Construction Contractors:

  • “US personal income, which drives consumer spending on home construction, rose 3.8% in January 2018 compared to the same month in 2017.”
  • “The value of US residential construction spending, an indicator of the health of the residential construction market, rose 4.3% in January 2018 compared to the same period in 2017.”

And this about predicted growth through 2022:

“The value of US new residential home construction and renovation is forecast to grow at an annual compounded rate of 7% between 2018 and 2022.”

Residential Construction Contractors-2

Demand is Cyclical

The numbers show the industry is enthusiastic, but it is a cautious enthusiasm tempered by experience for those who have worked through downturns.

As Hoovers and First Research points out — “Demand for new residential buildings can change rapidly, depending on the economy and interest rates: from 1986 to 1991, annual US home construction dropped 40%; from 1995 to 2005, it increased 75%; and from 2006 to 2011, it fell 65%.”

Both Knutson and Backes and Ballard and Buege understand that first-hand. They point out that one of the reasons they are doing well now is because they are survivors. They said the number of dealers in their market has shrunk since 2008, as did the number of contractors. A result is businesses like Kendell absorbed the customers of other dealers, and the need for Gordian’s Knot’s service has increased because there is less competition and demand is picking up.

Compared to 2008, for example, Kendell is above where they were in terms of business, according to Knutson and Backes. The same is true for the residential construction contractor/construction manager business, according to Ballard and Buege of Gordian’s Knot.

Industry Pressures

“The same house we built last year cost 15% more this year to build and it will continue to grow,” Ballard said.

Another threat is the cost of materials. A lumber tariff on Canadian lumber has driven prices, and steel prices have also risen because of recent tariffs, according to Knutson.

Hoovers and First Research notes that the average margins for “lumber companies selling commodity products primarily to contractors can range from 5 to 20%. Home Depot and Lowe’s, which sell mainly to consumers, have gross margins of about 35%.”

That increases the need for efficiency, and one of the best ways to be efficient for dealers is to provide quality materials where contractors don’t have to come back for better materials or deal with complaints from end use customers down the road, Knutson and Backes pointed out. Ballard and Buege noted Kendell’s top materials save them time because they don’t have to sift for quality.

Another threat is material allocations from producers, according to Knutson. He said it is simply that there may not be enough to go around at times because some of the larger big box stores have ordered the biggest part of the material supplies because of natural disasters.

It’s also difficult to find people to work. The 34-year-old Buege is a bit of an anomaly in the industry where he said the average worker is 55. He said people across the industry are faced with the challenge of finding dedicated and accomplished workers.

“The cost of trade labor has gone up,” Buege said. “But the cost of building is still manageable. The economy is good and people have equity in their current homes.”

While there are things to pay attention to, Gordian’s Knot and Kendell agree they are generally optimistic about the future.

“Everybody is pretty confident in the economy,” Backes said.

It Comes Down to the Relationships

Kendell and Gordian’s Knot both are long-time customers of Merchants. Kendell has been in business since 1957 and Ballard started Gordian’s Knot in 2004.

“Ours is a relationship business,” Backes said.

Ballard agreed.

“We answer our phones and we call people back. If we can’t help them, we get them to someone who can,” Ballard said. “We grow through the service we provide.”

That service and willingness to understand and support their businesses is why both Kendell and Gordian’s Knot partner with Merchants Bank.

“It’s the quality and service experience. There’s a value there that’s hard to put a price on,” Backes said.

Vrchota said it’s that “Start to Finish” attitude that is pervasive with Merchants and is one of the reasons Merchants stands apart from others. Another is how Merchants can help them with their financial needs, especially in a business that is seasonal.

Typically, with suppliers, a bank can partner with them in a number of ways, Vrchota explained. Often, it is with a line of credit so money is available when the business needs it, or with equipment or real estate financing.

With contractors/construction managers, a line of credit is often in place, and there is an emphasis on helping them with financing for construction projects.

“Those are the basics,” Vrchota said, “But every business is different in some way, so it is worthwhile to work with a banker that is knowledgeable, adaptable and will take an interest in your business, like our bankers here.”

 

Q&A with Two Business Banking Experts: Meet Annette Bleninger & Jeff Carter

Q&AAnnetteBJeffC-Blog

Did you know we have over 40 Commercial Bankers and Cash Management experts available to help your business? At every local branch, you’ll find a Commercial Banking team ready to get to know your business and provide meaningful financial solutions.

This month we’re meeting two of the team who serve our clients in the South Metro area:

  • Jeff Carter, Commercial Banker in Cottage Grove and Hastings
  • Annette Bleninger, Cash Management Officer and Certified Treasury Professional (CTP) in Rosemount

Read on to learn more about Jeff, Annette and how they approach working with business customers every day.

Share a little about your background and banking career

Annette: I have worked in financial services for over 20 years, with more than 14 of those years in Cash Management. I started with Merchants Bank in September of 2017 and am very happy to be with a community bank that really strives to find meaningful, valuable solutions for our business customers.

Jeff: Likewise, I have been in the financial services industry for over 20 years, with 15 years in commercial lending. I joined Merchants in 2013 and have spent most of my career in community banking culture, where my passion lies.

What do you like most about your job?

Annette: I really enjoy the variety of customers that I meet when we go out to visit businesses. It is so interesting to hear about your passion and see your facility. Having that background knowledge and relationship really helps us work together to create the most efficient cash management plan for your situation.

Jeff: Getting to know you, our business customer, is one of the most rewarding parts of my job as well. I really enjoy creating relationships with business owners. At the end of the day, I strive to bring you value – whether that’s products, services or counsel – to help you succeed. I hope these relationships are lifelong and meaningful.

What kinds of business do you typically work with and how do you help them?

Jeff: The beautiful thing about community banking is that we can help every business in our community.

Annette: Yes, that’s definitely true. I work with businesses of all sizes and variety every day. Cash management solutions can be used by any business – big or small. I help businesses like yours come up with plans to make their day-to-day processes more efficient, reduce the potential for check or electronic fraud, while allowing them access to their cash as needed.

Jeff: In addition to Cash Management services, we also have deposit accounts to help your business with daily financial needs and grow your money. We even offer business checking account analysis, free of charge, whether your account is with us or elsewhere. We know the needs of a business change over time and we want to be sure you’re in the account that best serves your needs.

Then on the loan side, we can provide smart solutions to leverage capital and grow your business. No matter where you are on your business journey, from start-up to expansion, we have the products and expertise to assist you at any stage.

What do smart business owners do?

Annette: Security is a big concern for our customers, so I think smart business owners make information security a priority. You can start small. One of the most important things a business can do is monitor their daily activity in their accounts to catch fraudulent activity early. Whether you are using our fraud management products (like Positive Pay), or managing it on your own through daily monitoring in online banking, it is a critical function.

Jeff: For me, smart business owners understand the value of a relationship with their key financial partners (ie: banker, CPA, attorney, insurance agent, etc) and will learn how we can all work together to assist in their success. Consistent communication and collaboration amongst your key sphere of influence can keep you on track and uncover unforeseen obstacles and opportunities.

What is something not many businesses know about working with Merchants Bank?

Jeff: Merchants is large enough to provide the level of products and services every business needs but is culturally small, meaning, the focus is on local bankers creating local relationships to support the communities that we serve.

Annette: Along the same lines, I think it’s important to note that we are most interested in finding solutions that work for your business and help you succeed. We are not here to pressure you into using and/or paying for products that may not be the best fit for your needs.

How would you describe your team approach to working with businesses?

Annette: I typically work very closely with our Commercial Bankers. As one of our business customers, we try to help you understand each team member’s main area of expertise, but we are always willing to take your call and direct it to the correct person. You will never hear “that’s not my job” at Merchants Bank.

Jeff: The Merchants Commercial Banking team brings you many areas of expertise, which include our lenders, cash management experts, lending assistants, credit analysts, and more. We are very supportive of one another and team up to provide assistance and bring more value to you.

What does community banking mean to you?

Annette: Community banking means being a trusted partner for our business customers. We truly get to know you, your business, and your needs and expectations so we can be proactive instead of reactive with our approach.

Jeff: To echo what Annette said, community banking is all about relationships and value. As Bankers, we need to know our customers by building relationships in order to provide the most valuable solutions for their situation so they are successful. We live in the communities we serve and successful businesses build strong communities. We do it together.

Learn more about business and commercial banking at Merchants Bank: