Underage refers to the situation that arise whereby the fees charged to a borrower by a loan officer is less than the target fees specified in the guidelines of the lender or broker.
It has nothing to do with legal ages for buyer alcohol or cigarettes.
While many people still have the mindset that it is near impossible to “get one over” a lender, occassions like these actually happen more frequently that you’d imagine.
It goes without saying that any profit-driven organization will have margins to enforce. But sometimes profits are not all that matter.
Sometimes revenue is more important. But that a discussion for another day.
The real reason why the phenomena of underage occurs is often due to loan officers needing to achieve certain performance targets.
For example, the officer is $100,000 disbursement away from hitting a second tier sales target that would double his commissions for the month.
Even though in an ideal world, a gross profit should be made on each sale, the story is not always so simple during the course of business operations.
It could be that looking at such a transaction as a single sale would be loss making. But when hundreds of profitable loans have already been made for the month, a little short terms loss is a fair trade-off for customer acquisitions.
There can be various other reasons.
What’s important to note that underage mortgages are a reality in the lending industry.
The opposite of underage is overage.