Home : Blogs : Greg Polashock : Greg's Blog

URGENT: The Current State of the Market Should be a Wake-up Call to All

Please read this post with careful attention.

As you may be aware, the Bond and Equities Markets have been getting battered lately. I'm not going to go into detail as to reasons why or ripple affects through Wall Street or anything like that.

However, as Real Estate Professionals, you need to be watching this situation as it unfolds with eyes wide open.

The "NoDoc" financing option has all but dried up in the mortgage market. Now, daily, investors are even running away from "Stated" style loan financing. It is critical that you tend to your clients and make sure you understand fully the financing being used. It is NOT ENOUGH that your clients have a loan approval and/or a rate locked. Investors are pulling the rug out from under products for which there is no longer an appetite in the secondary and tertiary markets.

This information is not just for Selling Agents to be aware of. Listing Agents, if you are not as knowledgeable about the prospective buyer's financing as can be released to you, you need to be thinking about your seller's well-being and understand that closing could collapse at the last minute if the buyer's financing is at risk of not funding.

I recommend that, whether you are a Listing Agent or a Selling Agent, you have your client talk to a preferred lender with whom you are quite familiar and have a good working relationship. Selling Agents, please understand that Listing Agents will need to put your clients through this for the sake of the integrity of the transaction. All Agents, please explain to your client that they are not under obligation to use your lender, but, again, for the sake of the transaction, you must obtain a professional opinion from someone you know and trust. Clients who come in saying they already are pre-approved with their own lender are not typically equipped to understand what could happen. It no longer matters if the lender is XYZ Mom and Pop Mortgage or a market standard like Wells Fargo or Countrywide. This situation is moving through the industry like wildfire and the home financing market is markedly, let me reiterate that, MARKEDLY different than it was even one week ago.

Folks, this is BIG! It WILL have major impact throughout the housing industry for the foreseeable future and, if you are not diligent to the highest degree, will bite you at some point. For the sake of your professional image and reputation, please consider the recommendations I have made.

Please understand the urgency of implementing the discipline of requiring qualification with your lender into your business model for dealing with all clients.

I wish you much success as we move through this period of change and I encourage you to educate yourself on what is going on in the mortgage side of the transaction.

Greg Polashock is a Real Estate Home Mortgage Loan Consultant and Certified Mortgage Planning Specialist with Cherry Creek Mortgage and resides in Castle Rock, in Douglas County Colorado. He can be reached via email at Greg@GregIsFinancingSolutions.com, by phone at 303-887-0672 or on the web at http://www.gregisfinancingsolutions.com/.

Posted by Greg Polashock on 08/07/2007 08:15 AM

Comments (55)

castle rock mortgage loans, douglas county mortgage loans, real estate planning, realtor

This post has been included in Colorado Information
Post is included in group: Realtors®

55 Comments on URGENT: The Current State of the Market Should be a Wake-up Call to All

AUG

2007

Greg,

Great items to note. It is ironic I went to activerain just after sending an email to a listing agent I had to explain to why we were removing all EXCEPT the loan contingency. He seemed flabergasted I would think such a thing as you have mentioned could happe. I told him no one was safe from a home office shutting its doors. I have a really well qualified buyer and the loan is a slam dunk by most senarios but in todays market, in this climate, the hurricanes hit without warning!!

Thanks for the insight, ducking for cover.

Glenda

Hello Ms. Heidsick!

Good for you! Even with well-qualified clients, you sound like you're taking the "belt and suspenders" approach.

You are the type professional who will come out of this with happy clients.

Best of future success!

Greg Polashock

Hi Greg,

Great post and you are 100% on the mark. I previously did quite a bit of very "heads up" business with American Home Mortgage. A friend and neighbor was a district manager. I am afraid we are going to see a large blood letting for a long time.

Bonnie Cox

AUG

2007

Well, Hey there Ms. Cox!

How nice to hear from you. I hope things are going well in your world.

I am not surprised to hear your comments. You are one of those professionals whom I know I would never have to worry about "getting it."

Let me know if you ever need anything.

Greg

Good post. We like to have all of our Buyers talk with one of our preferred Lenders. That way we are sure that we can close when the time is right. This should be a practice in any market situation.

Great post. We are all going through a different market now and who knows what the future will bring.

Greg,

Nicely done, there are changes every day and it is vital that everyone keep on their toes and react and adapt accordingly. We live in interesting times and with each transaction, all the information as it comes to pass needs to be laid out on the table so everybody is on the same page. This isn't a time to panic, yet it is time to make sure more than ever the i's are dotted and t's are crossed. Good heads up for everybody Greg!

There seems to be some good 100% programs still for first time home buyers though, mainly community or city housing programs.

Good reminder to do so even with the most qualified clients. thanks, mg

Greg: (Whew!) Thank goodness this was featured and that you wrote such an excellent piece. I have had huge concerns that our real estate community did not understand the urgency of the situation and that we as mortgage professionals should be giving them a heads up. You have done this so well, and with such insight that I simply must commend you both for the quality and also the care you have shown to the community.

In my blog last night the last lines were: Stormy waters ahead. Get Prepared. Thank you for telling them HOW. I hope it is well read by all the Realtors. The situation hasn't really bit them yet due to the time lag of a real estate transaction. But, oh, it will, if something doesn't change.

Well deserved feature and rated a 5.

When it's my listing and I get an offer, the first thing I do is call the buyer's lender to discuss the buyer's qualifications. That initial phone call can give you a lot of information, not just about the buyer, but about the lender's responsiveness, approval procedure, etc.

We all know that the pre-approval letter doesn't mean much, especially now. We have to do what we can to ensure a successful transaction. Getting the deal together has become much easier than keeping the deal together. Thanks for the reminder!

Great Post thanks for the information

Greg,

Great Post,

This makes me realize that I need to spend more time with my realtor partners conveying this message. You are 100% right. Thanks for the comment or inspiration.

Greg,

This is something I've personally watched from the beginning of the 100% financing boom. I never understood the concept of shopping with no money in your pocket. Thanks for sharing a great recommendation.

Greg - Thanks for the wake-up call! I was just discussing this same exact issue w/my Broker only moments ago. One of our clients is meeting with some unknown lender to us because he promised he could get her a "better deal" than the reputable ones we set her up with. I'll be calling her ASAP.

Excellent post and well deserving of a gold star! It is very frustrating for agents when a buyer comes in with their own lender, and takes it as a personal insult when you encourage them to speak with someone you know and trust.

Everything seems to be cyclical. We're getting back to a more "normal" market where you actually have to do more than fog a mirror to get a mortgage.

Greg,

Great post!

Listing agents are going to need to make sure that the buyer agent's client really does have a solid approval. I'm sure there will be some resistance from buyer agents, but there's nothing wrong with having a backup plan in place.

Greg - Personally as a listing agent, I don't make the buyer(s) talk to one of my mortgage professionals. Rather, I do contact their mortgage company/broker and question them about the creditworthiness of the buyer as well as the security of the lender and program their going to be using. About 50% of the time the mortage broker I'm calling gets mad, the buyer and their agent get mad, but it's for the sake of the transaction and my sellers are always VERY pleased!

Good post.

Greg,

This is a informative and timely blog for all real estate professionals. As a former banker, I understand what is going on in the mortgage industry. And unfortunately it is not good! I do pass on to my clients the importance of working with a reputable mortgage professional. I am looking forward to seeing what direction the FOMC takes after their meetng today. Plus what their comments will say aboutr the state of the economy!

Howdy Greg,

I am in ESCROW! Because I read your post this morning and had printed out to re-read later and maybe give to someone else. I was going to pesent an offer for my buyer in less than 10 mins. It was a quickly moving multiple offer (no counter-bring best offer) situation. I was well prepared and had already done all the things you advised.

BUT: In the heat of the presentation I whipped out your mornings article to show the Sellers and their agent the validation/ written proof of the value & importance of me doing all the things you advise. It was so close but things changed when they read the article right in front of me. I walked away with the buyers signature and I'll open escrow by noon. :) Thanks

Fantastic post. I will take all of your sound advice with open ears and eyes.

We specify in our listings...local lender pre-approval/financing and it's easy enough to check up on them if it is someone we do not know.

The only reason I know what is going on regarding these recent events is because I participate on AR. I wrote a post, hoping consumers in my market, or any market would read it, suggesting that consumers should not take it for granted that their agent knows what is going on with the lending industry. No one else in my office seems to know about it and I spoke with a lender this morning who did not know American Home Mortgage went under.

Consumers need to take the initiative--if their agent isn't doing so--to get their agents to see if they are still in the game.

Today is Fed Day and in 15 minutes, they will release their interest rate decision. Any guesses before they release the news?

Rob

I looked on Active Rain last evening to see if anyone had posted something about the mortgage financing issues facing our industry-as of last week! I was a little nervous I didn't see much. Thank you for your insightful post.

I hope everyone "gets" this. What you as agents have done in the past-even a week ago-may not be good enough to protect your clients now. Each day lenders will be evaluating which loans to discontinue; each day there is a good possibility of another lending institution foreclosure. It happened to a colleague of mine last Friday. All was signed and done and all of a sudden-no wire from the lender.

Greg,

Great post. It is a very difficult time for all of us in the real estate industry. Now I have only been in the market for several years and this is my first time going through this market. I have asked senior real estate professionals and mortgage professionals hoping to get their view point and they all tell me that nobody has been through a market condition like this. This is new to all of us and a learning experience.

Good stuff Greg. Man this market is difficult!!! As a listing broker I rely so much on the other side being truthful with me and I sure don't like being in that position. It is certainly time to align myself with a trusted lender to check on the buyers prior to going pending. Hey this sounds like a service someone could charge for. Hmmm.....

Greg...

I am sure you have no problem with me parking and following this conversation as it unfolds.

Thank you Sir :)

TLW...ROAR!

Very timely post and on a subject we all need to be well versed in. Many sad stories ahead of us as we try to get our contracts through closing.

Very informative post Greg. In the past I've been able to email post to some of my clients, but this one does not seem to give me that option. I have a few clients that have purchased multipule properties with me as investments and the intention of selling for more which they should have been able to do. It is Information like this that they need to see in order to get them real with there prices and other options of wht to do currently with their properties.

As we all know - the REAL Work begins in trying to get deals to CLOSE !

Excellent Post - Greg - We share in your sentiments that Listing Agents today must be very diligent in assuring the transaction has the best possible chance of successful closing by reputable lending when reviewing offers.

Good post. Valuable information and things we all have to think about all the time.

Greg,

that was a grat post I work for a mortgage banking company and the changes that happened last week threw a lot of peole off. Especially with some of the loan officers i know that doesn't really pay attention to that also with their marginal loans that completly got denied. I look at it also as a good thing becuase we can finally get rid of some of the loan officers that doesn't really know what they are doing.

You know, I have always required a pre-approval letter from each of my clients before we get together but now I will make it a part of my spiel. I will have a conference call set up during our first meeting at the office. I will present it as a technicality that protects both my office and them.

Thanks!!

Greg,

Points well taken. I am a victim as a listing agent of a pre approval by a buyer that is getting State bond money. Her income is right at the border line of being too much and now red flags have popped up and there is no guarantee that we will close! It's a jungle out here right now!

Excellent overview and advice all realtors and loan officers should heed.American Home Mortgage was in serious jeopardy last week, but the offices west of the Mississippi were salvaged because another company made a bid to buy them out. However, this week AHM has locked its doors nation wide and declared backruptcy. So, even though things looked good for some at AHM, it's a totally different story this week. The lesson is that it can happen to any mortgage company at any time...epsecially in this volitile market.The safest lenders today are banks with home loan services. However, they may not all be able to handle anything but A paper loans. They are also prevented from loaning any money other than their own. So don't lull yourself into thinking that the well has an infinite supply of cash.Aloha!

Greg,

Great info and advise. As a rookie agent I don't hear much of this information in my market area. I will definitely take your advise and share with my other associates.

Greg

I agree with you. All of the bank owned homes in Southern California are starting to require a countrywide or chase bank approval because theyre tired of getting into escrow with unqualified buyers. It used to be you could do nothing for 2 weeks, call an LO you knew, and they could slam a loan through in a week. Now it takes a week just to get a condition signed off because the underwriters have tightened up their lending standards. If they would have done this to begin with part of this glut would have been avoided!

Greg,

Great post! I handle turnkey email marketing for mortgage professionals, and placed an article on this very same topic in my clients' email newsletters four months or so ago.

<> I think you should have highlighted these sentences.

It is NOT ENOUGH that your clients have a loan approval and/or a rate locked. Investors are pulling the rug out from under products for which there is no longer an appetite in the secondary and tertiary markets.

I've heard from several clients (LOs) saying that they've had a program locked, only to find out that the lender/investor would not close the loan... and these are some of the largest, "most stable" lenders in the industry.

I guess we'll just tough it out. :-)

It is posts like this that keep me reading Active Rain. Thanks!

I'm really nearvous since we do a lot of first time and no money down loans in my area...Do you think this is going to effect buyers already in escrow? I have a buyer who is in escrow with one of my own listings who is doing "stated income" because of self employment...should I worry since we are already in the process, or should I seek another buyer for the property? I am new to this kind of market.

Shari, we are all new to this kind of market--except for those of us that were around during the S & L fiasco. I was. There was a bailout. I will be very surprised to see a bailout this time. Why don't buyers simply exercise some discipline and save some money. I have had two listings close on stated income, where the Realtor/mortgage lender (cannot think of a bigger conflict) represented foreign national buyers. Often stated income is used to hide the fact that the borrower is not earning that much income and hiding what he/she does earn from the government. I pay my taxes. Many of these borrowers are laughing at our lax system. They are often either lying to the lender or lying to the government. How much more money all of us would have in the bank if we weren't paying a third of our income in taxes. We have a great country. I know we have to pay to fix bridges, highways, maintain our wonderful park system. I just think we ALL need to be doing this and should never have allowed borrowers who have something to hide to use stated incomes. Have any of you ever thought that many of these fraudulent mortgage schemes, where 100s of thousands of dollars were scraped off the closing table, might have been used for subversive reasons and used to turn weapons on own kids fighting to keep us safe? That may sound a bit Clancyish but damn, who knows?? We have been stupid with our lending practices for about 12-15 years. Stupid and greedy!! BTW, if you were in Denver where Greg and I both are, the chances of this loan closing would be zero to none!! Good luck. I would not want to have to go to your seller with this news!

AUG

2007

The lender that I work with has been telling me about lenders turning down perfect packages that would have been a slam dunk earlier. Nothing is simple now.

Timely post. It's an interesting market to watch right now and get the best from it.

Excellent points you've made. I'm keeping a close eye on this mortgage issue -- I believe as things settle down, we're going to see more stringent lending practices -- more in line with the way the lending industry used to be before the boom of 2000.

While I believe this will make it more difficult for the self-employed and first-time buyers, in time we'll see loan programs geared towards these people.

It'll be interesting to see how things play out in this ever-changing lending world ...

It's is definitely scary times in the mortgage industry. Guidelines are changing dramatically and when institutions like Countrywide are having problems you know it is a BIG problem. You are giving very good advice.

This is a time where your preferred lender may not be there. This is excellent advise and those of us who are smart will be proactive by including this kind of information to the agents that we work with.

Well, not only are prices adjusting, but, so is the financial arena. Money was way to easy to get and as a result I lot of people were getting in trouble by over extending themselves. Obviously, banks are going to scrutinize each file much more and at the end of the day it will work out better for everybody.

AUG

2007

This is great advice - and thank you for taking the time to share. I had a listing that closed a week ago, and I'm grateful that we were able to get it done. It was suppose to initially close the end of September - and I would have been worried sick up until that time.

AUG

2007

Greg, Once again your depth of knowledge and professionalism show through! Thanks for this timely post that we should all heed well. I see no problem with requiring your trusted lender to review the buyer's qualification. Most bank owned and short sale deals do and this may be one way to avoid getting to that point in the future. Thank you for the information.

AUG

2007

Greg,

Great post and reminder to all - thank you

AUG

2007

This is a wonderful reminder to be ever vigilant in protecting and serving our clients. I have, from the beginning made it a priority to verfy the lending information on a transaction, whether I represent the buyer or the seller. This has helped me make sure my transactions make it through closing and given me a solid closing rate. Thanks for the reminder. I will be sharing your blog with others. Have a great day.

FEB

2008

100% Right on! It's almost scary, isn't it?

Leave a response…

Name:

Email:
(optional)

Comment:

What does the graphic say?