Ch. 22 Heuristics (vs. Shortcuts)

Cover of Be the Better Broker by Dustan Woodhouse, Mortgage Broker

An excerpt from Vol. 2 of Be the Better Broker.


As defined by Wikipedia, a heuristic technique, often called simply a heuristic, is any approach to problem solving, learning or discovery that employs a practical method not guaranteed to be optimal or perfect, but sufficient for the immediate goals. When an optimal solution is impossible or impractical, heuristic methods can be used to speed up the process of finding a satisfactory solution.

Heuristics can be mental shortcuts that ease the cognitive load of making a decision. Examples of this method include using a rule of thumb, an educated guess, intuitive judgment, stereotyping, profiling or common sense.

More precisely, heuristics are strategies derived from experience with similar problems, using readily accessible, though loosely applicable, information to control problem solving in human beings, machines and abstract issues.

A Broker learns and refines the craft one file at a time. Focus on processing files, small, medium or large. Focus on the file; focus on the client. This is where you will learn your heuristics.

A Heuristic

In opening conversations with clients, I eliminate the need for a mortgage calculator for them by letting them know that with 20 percent down at today’s rates their monthly payment will be $400.00 per month per $100,000 borrowed. This is a simple shortcut that allows them to calculate mortgage pay­ments in their heads.

In the final process of a transaction, when comparing two or three mortgage products with variations on rate or amortisation, we no longer use a heuristic—we use a calculator. Detailed and very precise answers have a time and place.

Heuristics are helpful, right up until they are not. Heuristics are not assumptions. A heuristic may be based on an educated (informed) guessbut never a flat-out shot-in-the-dark type of guess. And often more specific detail is required than a heuristic will allow.

A Shortcut: A Case Study

While taking a client’s application, in the interest of “not bugging the client,” you leave a few fields blank, or worse, you make an assumption. Perhaps in the field that indicates whether the person is separated, married, divorced, or other.

You carry on building the preapproval, advising the client that she qualifies for X amount of mortgage money. In turn, the client goes out on the road with a Realtor and views more than 35 properties over a period of several weekends. The Realtor writes up the offer, and it is accepted. Client and Realtor alike are elated; now it is up to you to deliver the goods. You submit the file for approval. You are able to send documents to the lender up front as you had them in hand weeks earlier from the client. You got the documents in December, and the offer was written in late April of the following year.

The lender requests, due to the applicant’s reliance on bonus income, the most recent year’s Notice of Assessment (NOA). No problem, you have that too because you know (from reading this book) to get two years’ NOAs in hand for 100 percent of applicants.

Oh wait, now the lender wants the most recent year’s NOA. It was not available in December when you took the application. But with the tax deadline only a few days away, it is being requested.

No problem, your client is stellar—not only has the client filed her taxes and paid them, but the client had a licensed accountant file for them. So although the client does not have the latest NOA, we can provide a copy of the accountant-prepared and filed T1 General Tax Return. The lender is ready to waive the NOA in lieu of the T1 and accountant’s letter confirming taxes paid—phew, this is coming together nicely.

You receive the T1, scan the line 150 income figure for accuracy, and forward it to your underwriter—and then…


The top-right corner of page one of the T1 General states that the client’s marital status is “separated.” The lender immediately conditions for a copy of the separation agreement. How did this happen?

You reviewed the previous NOAs, and both said “single.” You call the client and now you ask a question that you saved, what, maybe three seconds not asking up front, because the answer seemed “obvious.” That question was “What is your marital status?”

As it turns out, the client got married in February of the previous year, a rush marriage triggered by a pregnancy, and within months they separated and here we are.

And what lurks in the pages of the separation agreement? Both spousal support and child support expenses which collapse the client’s entire approval. The numbers no longer work.

Who would have thought that a 25-year-old female applicant living with her parents would be not only paying significant spousal support, but also child support? Snap out of it, caveman—it is 2019!

Always ask. Assume nothing.

You assumed from the applicant’s date of birth and from comments made by the Realtor about having met this client in a bar one night after a hockey game that she was single, as the supplied documents (NOAs) also stated.

You took a shortcut.

Rule 1. Never leave a field in the application blank.

Rule 2. Always ensure you are filling the blanks with answers obtained verbally from the client. Trust but verify (the documents and the client).

The root of nearly every file detonation can be traced back to one seemingly small detail not clarified verbally. That one itsy-bitsy, teeny-weeny detail is the proverbial butterfly flapping its wings, which in turn triggers a tsunami—days, weeks or months later.

No shortcuts.

Recall from above that “heuristics are strategies derived from experience with similar problems, using readily accessible, though loosely applicable, information to control problem solving.”

I want you to understand the difference between shortcuts and heuristics. In every blank field in an application, in every nuance, in every unasked question, there lurks an atom bomb waiting to blow up your client’s approval. The collateral damage caused in these instances can be devastating.

What about the File?

In the case above, we saved it.

It was messy and stressful, and I wore the mistake in the eyes of the client, the Realtor and the referral source alike. And I never heard from any of them again… nearly.

We had a parent swoop in and were able to process the purchase under the parent’s name. I bought the rate down to the max possible, covered the complete appraisal and legal fees, but it was still too little too late.

A year later, I wrote a heartfelt letter to the client, and another to her parent, and let each know that there was a standing credit to cover the costs of the title transfer back into the daughter’s name when she eventually qualified.

Another two years later, they took me up on that offer. I wrote a cheque for the three years of property tax grants that the client was unable to apply for, and I wrote a cheque for the second round of legal fees.

In this business you pay for your mistakes emotionally, but the good news is that you can also write a cheque to pay for them, and doing so does help with your own psyche.

There are no expectations of future business from that client, nor do I expect that she will share the story of my reparations paid to her with the original Realtor or referral source. I was simply covering the long-term costs of the damage I caused by failing to ask a simple question.

Always own your mistakes. Always ask questions.

Heuristics are great; assumptions are not. Understand the difference. Make no assumptions when taking a client’s application, as heuristics do not apply to an applicant’s history.