Scott Lindner is the National Sales Director of Mortgage Lending for TD Bank, one of the 10 largest banks in the U.S. TD provides more than 9 million clients with a full range of retail, small business and commercial banking products. In his current role, Lindner leads TD’s mortgage loan officer sales force and guides sales strategy, product development, and integration with TD’s retail bank network. Lindner has more than 25 years of experience in the financial services industry.
Lindner spoke with MReport about the challenges facing medical professionals in the housing market.
What is a medical professional mortgage? And how does it differ from a traditional mortgage?
A medical professional mortgage is a mortgage that's targeted to physicians and residents who are for the most part in the early part of their career, either just graduating and going into a residency or coming out of residency into a full doctorship. It's geared towards supporting the physician as they make that move into their career.
A traditional mortgage relies heavily on previous income, the career path of longterm jobs, of validating tax returns, and W2's. Physicians coming out of school, typically don't have that history. They've been in school for a number of years, in residency, and now they're looking to purchase their first home. But quite frankly, they've been at school for eons. The physician med program that we have and is throughout the industry really relies on the fact that these folks have a contract residency, they've taken on a new job as a doctor, as they graduate with a contract to do so. So, it minimizes some of the income qualifications as it relates to proof because we're relying very heavily on that contract at the hospital to substantiate their income on a go-forward basis.
It also recognizes that these doctors are coming into full doctorship, they're at the very bottom end of a hockey stick, as it relates to their income-earning potential. It recognizes the fact that these physicians over time, are going to significantly increase their income. It helps us make the loan in a situation where we wouldn't normally do it because we have high faith in the income-earning potential of the physician.
It also allows us then to look at higher loan to values, because we know that a doctor coming out of residency is going to be saddled with a lot of student debt. So they haven't built up a lot of assets to put down 20% on a traditional mortgage. So we allow in our case, up to 100% LTV on a loan up to $750,000 and 95% on a loan up to $1,250,000. And this is standard throughout the industry of having high-loan to values, to help support these physicians as they're moving into their first home. That's a recap of how they are.
I guess the summary differential between a traditional mortgage is proof of income is significantly lower because we go on contracts and W2 income, but we can rely heavily on the contract for the new position, and loan to value as we allow higher-loan to values versus a traditional mortgage.
What can the industry do to make sure professionals in this field are aware of this option?
Many doctors educate themselves, and there's a number of sites out there that doctors go for education. If you look at a site like White Coat Investor, Leverage Rx, Physicians on Fire, these are sites that are very well-known within the doctor and the resident community, to help doctors become educated about things like personal finance.
Doctors spend so much time in school learning about everything they have to do from a medical perspective to help them with their craft, but what happens is they don't understand the options around their student loans, or disability insurance, or life insurance, or mortgages, or investments. So there are a number of sites out there that doctors reference to help educate themselves about their entire financial life, including mortgages. We support many of those sites with advertisements to help encourage their usage and to obviously source opportunities for us. Educating the doctor is probably key, and we probably need to do more throughout the industry and also help educate realtors around these programs that are available for physicians.
What additional challenges do medical professionals face in today's housing market?
If you asked me this question three months ago, it would probably be a little different. When you look at the housing market in the COVID environment, what we're seeing is a lot less inventory. So when you look at the housing market, specifically, what we're seeing is, is that there's a lot less inventory in the marketplace, people have pulled back putting their houses up for sale for a number of reasons. Part of it's just COVID-related. They don't want strangers walking through their house, they don't want realtors walking through their house, they don't want appraisers walking through their house. So they've held back on putting that house up for sale, which has shrunk the amount of inventory in the marketplace
How does tightening credit limits impact possible buyers that have high student debt?
Well, I think it's actually a little broader than that. When you look at what's happening in the credit availability, we've seen a number of competitors in the industry start to pull back on their credit criteria. As it relates to the medical professional program, we've seen many of our peers who were at 100% loan to value and 95% LTV, pull back to 95% or 90% LTV, and that don't offer that option anymore.
At TD, when we crafted our guidelines for our medical professional mortgage, we were confident that the guidelines and the structure that we have around this product were going to work through the entire cycle. This means that we make good loans in good times, and we make good loans in bad times. So we're not changing our guidelines because we believe it'll hold strong for us throughout the process. I think it's important for medical professionals or those people looking for this product that they do shop around because there are differences in the product overall speaking, but even now because of the pandemic and the economic environment, we've seen some more lenders pull back on loan to value, increase credit scores, and look more consistently at debt to income. We at TD have not made those changes.
If you're talking specifically about high student debt, it's less about the student debt and more about credit score, and the impact that the student debt has on the ability for repayment. So if someone has high student debt, it's going to come down to the size of the house that works, given their debt to income as it relates to their mortgage. I would say that a word of advice for medical professionals looking at this is, "Manage their credit score. Pull their credit score early before they're looking for a house. Understand what that is. If there are things that are erroneous or wrong on those, get those things fixed. And then obviously, to the degree that they can minimize student debt, it is easier to get a loan when you don't have high amounts of debt, whether it's student debt or car loans, et cetera. Just be mindful of the impact of that student debt and the size of the house that they can afford to purchase."
What other ways could the housing and mortgage industries better assist medical professionals?
That's an interesting question. The product and the structure that we have across the industry for medical professionals is really a strong offering. And I feel really good about TD's offering because I think we're incredibly competitive, and we haven't changed our guidelines. I think we're probably one of the best banks in the industry right now to go to for this kind of product.
I don't think there's something different the industry can do better to make product changes to help support this community, but it goes back to the earlier conversation about education. How do we get this out in the marketplace more consistently, where physicians can actually know that it exists, be able to compare options and take advantage of it? Because I think we've got a great solution for doctors across the entire industry. And to our point earlier,
I think we need to do a better job of getting that communicated out to physicians about the options that are available to them.
Every institution isn't the same in terms of how they approach this. There's a number of companies in the industry where anyone can sell a medical professional loan, and I'm sure that's great from a distribution perspective. But TD takes a different approach. What we do is we have medical professional specialists that really do a vast majority of the business in this space. I have 240 loan officers, but I only have 16 that are really authorized to sell this product. And in this case, they're deep experts on the medical professional product and the impact to physicians.
When consumers or realtors or other folks who are looking into this, I would highly suggest they talk to someone who's got deep expertise in this, and be mindful that not everyone has the same solution to mind from that perspective. I feel confident that if a physician was speaking to one of my medical professionals, they would get the consultative conversation that they need to do the best thing for them. Is it best to go with 100% LTV. Would it be better to do 95%? There'll be coaching and conversation around how to protect that physician's assets. Does it make sense to title the property under an LLC, to offer an umbrella of protection from a liability perspective, given the litigious nature of the medical field.
What I would say that as we're talking to folks and educating people in the industry about it, it's not just the product they need to be educated about. They need to make sure they're talking to someone who's got a deep level of expertise, to offer that consultation and advice that they really need to get them in the best situation possible.