Your loan officer, especially if you are working with me, is in an interesting pickle nowadays. We want to deliver a great loan, that meets your expectations, is at the rate you were promised, closes in about 45 days and you get the chance to review the numbers at least a few hours, if not a day before closing. Doing this is the best way to ensure you go away happy and tell all of your friends, family and co workers to call me for their next mortgage.
But we don’t control any of that…
During the go-go days of the early 2000s companies were on board with helping mortgage loan originators provide that service. They correctly saw keeping the clients happy as the most effective way to serve the loan originators that work for them. Happy loan originators with happy databases refer new clients and thus generate additional future revenue. The business agenda of your sales oriented loan originator and the internal partners he worked with at his company in getting loans done were aligned. Combine that with the lower compliance threshold that existed and there were fewer moving pieces to control to get you fast closings, accurate numbers and solid commitments on rates.
Today it has become a mountain moving experience on almost every loan. I closed a loan for a client last week who has something go sideways at best at every turn during the loan process, through no fault of his, nor ours frankly that led to his closing, Friday night at 10PM. But he got done.
Long story short, this client was upside down on a home that used to be his primary residence in Illinois but he got a great job transfer to another state and was unable to sell without putting tens of thousands of dollars he did not on the table. However, he could make the payments so he did the right thing instead of letting the property go to foreclosure or short sale and the property became a rental, kind of on accident.
When the market was at 4.25 this borrower, at almost 6.000% on the current mortgage, applied for the loan. And that’s where the snags started.
First the loan was locked for 60 days. But at day 35, the original approval was sent out and the second mortgage has to be subordinated. This required negotiations with a second lender who wanted to renegotiate the terms of their in a manner more favorable to them since the house was upside down. Many transactions die at this point, but the borrower decided that they wanted to move forward, renegotiated the second which required a FULL LOAN APPLICATION AND APPROVAL by that lender. The second lender took 45 days to do this, so now our rate is expired.
Now being 80 days into the loan, the bank statements, paystubs and some other documents are too old to work with, so the borrower feels inconvenienced to go back for fresh stuff. And those statements have a Christmas bonus in there that has to be explained, etc. The client starts to feel a bit worn out by this process.
As we move through underwriting, it turns out three more “minor issues” are discovered and need to get addressed. The second lienholder, in modifying the old second and changing the payment terms also changed the loan number. This is now on the credit report as “new credit” and needs to be explained by the borrower in writing. Reasonably as well, the new terms and slightly higher monthly payment need to be worked into our numbers and finally, this change in loan number and the note or terms on this loan have been recorded, so a new title needs to be pulled.
All of this is going on and two more issues come into play, first, the rate has been expired since day 60 and now rates are up. So we are stuck in a higher rate, payment etc. Back to underwriting to approve the higher number and the time delay associated with ensuring the client can make the higher payment. Let’s not even discuss the “your rate is going up, sorry” discussion with the client.
Add to this, that we have to close in a few days or the client will be out of the country on business for about 12 days on a trip that has been scheduled for months. But a FEBRUARY trip is not likely to be on the radar of the customer to discuss at the loan application in OCTOBER!
The loan is finally cleared to close on afternoon Friday after spending most of the day Thursday resolving some final underwriting issues in addition to getting a “terms of withdrawal” statement from the 401K provider on Friday morning to confirm that almost $100K in savings could be drawn on if needed. The title company finds a closer on short notice, five states away on Friday afternoon, docs are drawn and finally we close after eight on a Friday night.
So to recap the great work by our team in a nutshell:
Loan approved in short order on the front end.
Processing works ultra hard on loan understanding deadlines created by second lien holder.
Underwriting revisits loan multiple times in final 48 hours to clear it to close.
Title Company revises title on short notice AND finds a closer same day, five states away, in a few hours.
Closing department draws docs within 90 minutes of final approval.
Loan closes without blowing past a drop-dead date that likely kills it.
Yet the client has a pretty reasonable case for having a bad taste in their mouth between the time it took to get approved, the terms they ultimately closed on and the hoops that needed to be jumped in the last week.
Anyone who can figure out a way to solve the challenges faced by this borrower who is not alone in their frustrations stands to make a boatload of money.
All I can do in the meantime is say “I’m really sorry…your loan is funded.”
