To set the tone for this blog, I will tell you that below is an actual email to a loan officer on my team.   They encountered an issue on a purchase money loan that was well "less than perfect" credit.  It was a manual underwrite and most of the people in the transaction were upset to say the least.   This is in response to the loan officer telling me that the listing agent has informed her in a NOT so nice way that they are pulling the contract "if it doesn't close tomorrow" because their client has to settle on another home this coming Monday (5 days from now), and they need the HUD from this transaction to settle on the other.  

This email is not to point blame, as I feel the true culprit is a total breakdown in communication and proper expectations being set from the get go.   I am proud to say that we do not have many of these incidences, but any company that tries to tell you this NEVER happens is probably trying to hide something.  I feel it is a good learning ecperience for all of us. 

Dear LO,

I guess I am confused.  If the seller needs this HUD to close on their loan on Monday of their new house, then how are they able to kill the deal today and not expect delays on that closing.   Sounds like ,and I could be wrong, the old Realtor I am pissed and will bluff.  If you want to know for sure, just call them and tell them you have no positive confirmation that this will close today, but it did get CTC and that you have advised the lender to kill the loan at the request of the listing agent.  See what they tell you then.   

I never cease to be amazed at the power of lack of communicaton.   They honestly think we are still in the height of a boom and they can just send their client to another lender who will close it in 1 day.   Even in that part of SC where the market is still moving, the lending market has still been affected the same way.   THEY JUST DON'T GET IT.  There are a multitude of people busting their humps to get this file to the table

  There are two lessons to be learned here:

• Stop messing with the high LTV low credit score manual underwrites.   These are the investors that are going to take forever to underwrite a file (they are busy, they have laid off half the staff, they are still advertising that they can get garbage loans closed, their people are SOOOO busy wading through not a chance loans to get to the ones that qualify, .....you get the picture)  Unless the loan to value is low and there are some very serious compensating factors, these loans are standing less and less of a chance of getting approved.  On a side note, I predicted that manual underwrite would be phased out.   With a corporate Giant like Indy Mac going out of business, you will see this happening faster and faster.   What I mean is that they revised DU 7.0 so that many tolerable manual underwriting guidelines were built in.   MOST lenders have already made the switch that if the credit score is sub 580 that it has to be approve /eligible in DU  to get final approval.   In a very short period of time you should expect ALL lenders adhering to this policy.   (For good reason)

•  ALWAYS CONTROL THE TRANSACTION BY SETTING THE RIGHT EXPECTATIONS UP FRONT.  We are the money people and nobody gets paid without us to provide funding.   Work with your Realtors as a team.  Do not  candy coat things or omit things going on in the process for fear of looking bad.   It will usually come back and do just the opposite.   DO NOT take a contract for less than 30 days in this credit market.   There is just way too much that can go wrong, and people will generally drag their feet on getting you everything that you ask for.  It is human nature.   It is also a lack of understanding of our process by the borrower.  

Example: how many times have you had someone get you the final condition that you have been waiting on for a week?   As soon as they get it to you what is their question (99% of the time)?  Can we close tomorrow? (or some form of it, right)

This is because when you ask for the final condition you also HAVE to make it clear of what the next steps are.  

Example:  Now that we have your bank statement it will have to go to underwriting and be reviewed and signed off on.  This is generally taking 36-48 hours.   This means that there is no reasonable way that we are going to hit our closing date.  I need you to call your Realtor and ask them for a 15 day extension and if they have any questions they can call me.   Have your Realtor fax that extension to me as soon as they get it so as to avoid any other possible delays.   Thanks.

 By following these two tips, you will definitely close many more loans and have FAR FEWER angry and disappointed relationships.   There is a certain reality that ALL real estate professionals have to get used to ( as much as it sucks) and that is the fact the underwriting guidelines are stricter and files are being looked at much closer these days.  This creates longer turn times and MUST be accounted for in the sales cycle.  It is that simple.

I hope that these tips help you in your future originating endeavors and as always give me a call if you need anything else to get this file closed.

Tom