My friend Brian Koss posted this earlier this month
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I thought it was worth sharing.
There was a time in the late 90’s when all the focus was on getting the manufacturing of mortgages to mirror the manufacturing of car loans. The idea was that technology was the answer, formulas in black box models held all the answers. By eliminating expensive underwriters, appraisers and loan officers, the process would be cheaper and faster. By 2005 we were there with AUS running AVMs with online applications. A good FICO at a low LTV with “green light” and you could close tomorrow with a notary and title rundown.
Whiplash! We have gone so far back our necks are aching! Not only are we thoroughly underwriting files with every piece of FULL documentation. We are auditing and post-closing the file prior to close! 90% of the loans done today are Government loans, some of which involve Government hands touching the loan — RD underwrites, FHA Condos, VA appraisals, State Bond final approvals, FHA new construction, etc. So control is not always in the hands of even the largest lenders. This is not about broker v.s. lender; this is about double and triple checking to ensure the best chance of no buyback or compliance violation.
All trust and common sense has left the industry. By having a mortally wounded Fannie/Freddie backed into the corner as your primary lending source, it is liking forcing you into an abusive relationship. You keep coming back home but flinching every time you take a loan. This behavior cascades as it runs through the chain of lenders of every size. Add to that an unreadable and unimplementable regulatory position with an unforgiving prosecutorial mindset enforcing it, and you have a catatonic state that smothers creativity and automation. So the concept of applying for the car loan at the dealer with a mini-app and receiving a “greenlight” on a Saturday is beyond dead.
Ironically, the demand for those parties who were trying too be eliminated — good underwriters, good loan officers, and good appraisers –has never been stronger. But you must be well licensed and thoroughly designated. If you are not a Govie expert or certified or insured etc you are not in demand. It is a new land for professionals. Professionals can also do miracles and handle emergencies well. What they will refuse to do is nothing but miracles and emergencies.
So why haven’t the Realtors been able to receive, understand and comprehend this message about the changing of our business? Why do they continue to demand unrealistic dates for their transactions? Maybe its because mortgage people are too afraid to discourage or refuse the demand to close that RD loan in 27 days or the FHA condo in 5 weeks or the 4 person investment deal in a month. Maybe, because we are afraid that if we tell them we don’t want to take that deal with the unrealistic closing dates we fear they take that as we can’t?
The fact is that we CAN do it; Hell we have closed in a few days if MDIA allows! It’s the question of protecting a deposit in case it doesn’t close and of course the managing of expectations. Every borrower says “Just do what you say you are going to do when you say you are to do it.” Why would anyone go into a transaction promising something they can’t deliver? If we were a builder we would be sued for negligence and bait and switch, but we allow ourselves to be pushed into it. That is our own fault as an industry. All the risk is ours and the customers. Their deposit is at risk and we are left with a rushed poorly manufactured loan with all the reps and warrants for the life of the loan. CRAZY!
I believe that the professional realtors out there would change their approach if they understood what they were asking for. I believe that the large majority of deals do not have to close as fast as they are requested. Its “wants v.s. needs”. We can assess each deal and let it be known up-front if the dates are realistic. But the threat of “if you cant meet this date, I’ll find someone who will” isn’t the right answer. The current and future regulatory environment wants the borrower to not be rushed and believes that 60-90 days is the right time to close. This is not your lender talking but your governement on behalf of the borrower. So unless there is change in Washington don’t hang Main St. lenders out to dry….
