Loan Officers, Realtors, and Consumers...... be very, very careful out there. Loan programs are changing by the minute. Not only are stated loans becoming nearly extinct (by Janet Guilbault), but 100% financing is becoming extremely difficult.
On August 17th, 2007, I will have been in the mortgage business as a loan officer and as a manager for a total of 15 years. I have only lost 2 purchase transactions ever. And I have saved over 15 loans or so that I can remember in recent years that were turned down by other lenders.
Well today I might have lost a loan. Closing was set for 8/10. My guts are all in a knot and I haven't been able to eat as of yet today. We had to rerun the loan in the DU system (delegated underwriting) late yesterday afternoon to only find out that it was not being accepted under the previous conditions. Why did I have to rerun it? I followed up with the borrower to see if he had taken care of his homeowners insurance as of yet. Yes, he got a quote. Great.... what is it. $1,200 a year, which turns out to be $500 a year more than I estimated. OUCH. Why? Because the electrical system in the house is older and has copper caps. His qualifying ratio went from 52.35% to 55.63%. Besides, the taxes were a little higher also. And I am a banker who can broker loans out as well. Well, after 4 different tries with 4 different DU systems, the best that came back was a EA - II approved eligible. The problem here is that this investor won't do anything more than a EA - I.
Folks, we are headed back to the basic lending from the 1990's. Full doc loans, those loans with a down payment, or decent credit. Say it isn't so, but some of these predictions that you are hearing that it won't get better until late 2008 or possibly 2009 might be true. I have read so many blogs stating that it will get better, sooner than later. Well, they haven't been paying attention to the foreclosure and delinquency numbers. And keep forgetting that Wall Street and investors can pull the plug whenever they want.
No more band aids to fix loans unless it can be manually underwritten. And if you think about it, most of those loans that I did save at one time was because of the same reason. Many of these loans were FHA loans, because I can manually underwrite.
But something can be learned from this and we all need to pay attention to this. Suggestions :
- Always have a back up plan.
- Make sure the client has their homeowners insurance as soon as possible.
- If it's a program relying on a DU or LP system and not by the naked eye, have multiple back ups.
- And make sure that you get a better idea on the property taxes.
- And educate the borrower of the pitfalls of 100% financing.
Conclusion : I am still torn, but still haven't given up. Yes, I have reduced the rate and was even prepared to not make a dime on this, but no good. I know some of us have done this in the past, I know I have. And what's just as bad telling the buyer that we can't do this loan as of yet is that this is my first deal with a new realtor. But I will not run and hide. I will face the music, even though I don't consider this my fault, but I still feel responsible.
When I first found out yesterday, I called my realtor, that's if you want to call him that as of now. I told him the situation and asked for the seller's realtors number. I always believe in communication. After explaining everything to her, she did comfort me and told me that she really did appreciate the phone call. Well, after talking to her several times today, I now have a better understanding to as why. She just went through this with another lender on another property, but this loan officer dragged it out, saying that everything was okay. Well, after 2 more weeks, it never made it to settlement. And I even talked to my realtors in-house lender, to give him anything that he might need. After we went over the whole deal, he agreed with me that there is nothing that can be done, unless I go FHA. In which case I already thought about this, but my buyer would need another $3,000 out of pocket. But he would get a lower rate and payment. So he is looking into that right now. The only good thing that came out of this is that the seller is not buying another property, so there is not a so-called train of people buying other houses. Only time will tell, only time.
UPDATE : Here is an e-mail from the client that this has happened to. As of 8/3/07 at 9:41 am.
Thanks.
I have plans this weekend, obviously requiring money, so let me know when I can take out some cash too.
And I know you are doing everything you can to help, so I want you to know I really do appreciate what you are doing for me. I also appreciate all the phone calls keeping me up to date. I will be in a meeting today from about 10:30 until noon or so, so if I don’t answer my phone I will call you back when I get a chance. I will also have my laptop with me, so I will have email access.
Thanks again.
Rob
***** This e-mail still doesn't take away the pit that is in my stomach, but it certainly puts a smile on my face that some people really do appreciate what we do, even if the outcome might be negative. ***** And I am still working on this..... but my options are running out.
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