In our September newsletter we discussed the last four (4) residential real estate mortgage lending industry ‘correction cycles’ in some detail. I see we’ve underestimated the length of the ‘punishment segment’ of the longer overall correction we’re in the middle of right now. The suggestion was that the ‘punishment’ portion of the correction should be over by “… next Summer of Fall” – when today I believe it may last easily until the end of 2008 and probably longer, with the over-all correction cycle coming to a close by the end of 2012 at the earliest (because these cycles last longer than that usually).
I am starting to see some positive results, evolving right here in the midst of this retribution period. We all watched - in the middle of the ‘easy money cycle’ which just ended - as several industry observers and others were saying “… we better begin to police ourselves, before the government does it for us ….” It’s regrettable however, those warnings were not heeded by most people. Secret! University for one, spoke out loud and often about the urgent need for a return to proper Ethical behavior, solid Integrity, and strong Moral values all being badly needed again in the industry, and the notion of becoming your ‘Brother’s Keeper’ – and doing whatever was necessary to either help, or RAT OUT the next guy if he/she was doing things that were unethical or unlawful. Could have saved us all a lot of turmoil had some of those pleas been heard by all the wrong-doers.
One very positive note - we now have almost 3 dozen individual new State laws which address new requirements for the face of our industry to the public - the front line players ... mortgage loan officers and mortgage brokers; Federal legislation isn’t far behind. These new laws all have a common theme; it’s all about having a 'fiduciary responsibility' to the customer and language similar to this '… (a) having the duty to not recommend or induce the borrower to enter into a transaction that does not have a reasonable, tangible net benefit to the borrower, considering all of the circumstances, including the terms of a loan, the cost of a loan, and the borrower's circumstances; (b) the duty to make a reasonable inquiry concerning the borrower's current and prospective income, existing debts and other obligations, and any other information known to the Mortgage broker/originator/LO and, after making such inquiry, to make his or her best efforts to recommend, broker, or originate a residential Mortgage loan that takes into consideration all of the information submitted by the borrower.' Handling customers this old fashioned way with respect, etc. will surely help to solve coming concerns we may all have about future originations at all levels.
Given the fact that a couple of hundred thousand new loan officers and mortgage brokers leaped into our business during the last ‘easy money cycle’ - being called in by their big commissioned pals from previous employment slots ... laws like these will STOP that attitude type individual from returning to our industry once they all exit the biz ... their pain has been earned! Register then post your views here on our Discussion Board
What's Your Job Position Worth?
With so many of you considering new employment, or who have recently accepted a new position somewhere - this seemed like a good topic to cover ... What’s your job position worth – what do you contribute to the overall process of turning a stranger into a funded residential mortgage loan transaction? OK, so let’s run through one, start to finish:
Customer visits Google and searches the term … mortgage refinance, bill consolidation, mortgage broker, or home loan, etc. and up comes 'Millions' of results, they close their eyes, point & click the link to where you happen to work, and study the website. During that review they're able to determine you do the type of loan which they’re looking for (rate & term refi w/cash out), so they complete your on-line application and away we go!
Their first contact with anybody is probably a Loan Officer, who learns the customer is a regular ordinary average one; not somebody that wants an Exotic kind of loan, but a simple full doc 30/30 cash-out refi. The credit report gets pulled and they discuss its contents, customer receives a ‘quote’ (an important customer service/help-desk function) – and the application & credit report is handled off to the processor, who will process/verify etc. and guide the package through the pipeline.
Over the next several days, she will order an independent field appraisal of the subject property, collect the additional necessary paperwork directly from the customer, open escrow (in a non-lawyer State, or via an attorney in those backward (early 20th Century East coast lawyer) States, all along verifying everything is genuine, as well as confirming the developing package will meet the standards of the lender/underwriter program (extremely vital job duties).
The escrow company personnel (or attorney if necessary) open up the title order, requesting a preliminary title report from the title insurance company and they send off for known mortgage lien ‘pay-off’ beneficiary statement(s), request and collect a loss payable endorsement on existing property hazard insurance, and otherwise get prepared to schedule a closing/signing of the customer documents (fast paced and detailed activities oversights are not permitted).
After preliminary title report, demand pay-off’s’ of mortgage lien(s) or others, real property appraisal, and all the final pieces of paper needed from the customer are received and everything is verified and analyzed by the processor (inside a presser cooker environment with a stop watch on her now) – the transaction is presented to the lender/underwriter for approval.
Once received by the wholesale lender funding source, the underwriting department (account mgr/processors) re-confirms that all the pieces of paper are genuine and what they purport to be, that they are sufficient, and then makes the determination if the transaction exceeds the minimum standards of acceptability, approve the transaction by advising the mortgage broker company, and get the signing documents prepared for delivery to escrow for signing/closing (all highly stressful duties - errors are not acceptable - easy to lose your job).
As we move into the home stretch, the signing docs are shipped out to escrow (or attorney), the customer is scheduled to visit the escrow office for document execution (or if necessary a mobile closer/notary meets them at Starbucks, Denny’s, or sets up a signing on the hood of their pick-up truck somewhere out in the countryside). Docs arrive at escrow (the clock's ticking), who now puts these pieces of paper all in order, get’s everything signed and notarized properly, and returns back to the wholesaler/lender (except for the mortgage or deed of trust), awaiting a 'fed wire' of the loan amount (all has to happen same day). Once received, they get the deed or mortgage recorded with the proper County Recorder in the same County where the subject property is located, close their file with the HUD-1 balancing, and distribute the funds as directed by the wholesaler/lender.
Of course this fairy tale closing isn’t what really happens, there are always multiple crises that happen along the way because too many people have to touch the transaction, and they make mistakes all the time. As you can see there’s plenty of room for multiple train-wrecks with each closing; and there normally are!
Now as to cost/worth value (excluding all the possible problems that could have come up – this article would be 25,000+ words longer if I detailed all of them too): First, making the website credible and marketing it on the internet and elsewhere to attract customers, cost (in time & money) at least $X,XXX per loan, the LO spent about 20 minutes of his/her time (LO and owner/operator have predetermined what that’s worth and is paid after closing) the processor probably spent 60 minutes or so (typically the customer paid fee at closing is $300 for processing), credit bureau $15 (whether closes or cancels), appraisal fee $300 (several hours work/travel time non-refundable if loan doesn’t close) and both must be uncompromisingly reliable. Two-way doc courier fee $50, escrow fee (180+ minutes spent at warp-speed) usually $350 (only if loan closes), in attorney State – attorney fee $500+ (non-refundable if doesn’t close), preliminary title report (if loan cancels no charge unless done by a lawyer in an attorney State), mobile notary/signer/closer $125 (easily one or two hours works/travel time), lender/wholesale funding source (90+ minutes) is paid out of future customer paid interest and only after closing ... so ... are you overpaid or underpaid? CLICK HERE if you want to give us your opinion on our Discussion Board
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