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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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