* * * *   HARD CORE REAL ESTATE TALK * * * *

Thanks to the Mortgage Pro Week in Revew: 6/30/2008 throught 07/06/2008  by Alan 'AJ' Nisen, I found some very good reading material by ActiveRain members from the mortgage loan industry.   

NOTE:  ADD this link to the content in this post.  It's very interesting. 

One of the featured articles includes real estate agents in the group responsible for the mortgage mess.  Including real estate agents in the blame game for the mortgage mess appears to be a knee jerk reaction.  However, the writer doesn't say how the real estate agents were responsible for the mortgage mess.  We know how mortgage loan officers can be responsible for approving loans for unqualified buyers.  I have yet to hear how a real estate agent can be responsible for a loan officer approving an unqualified prospective borrower. 

"Get pre-approved before selecting a real estate agent" is the advice from mortgage loan officers and HUD.  If mortgage loan officers can pre-qualify a prospective home buyer before the consumer has selected a real estate agent, how does the real estate agent become responsible for the actions of the loan officers approving loans for consumers once the consumer has an agent???  

The mortgage loan officer is not responsible for the institutional creation of the Alt-A, the Neg. Am, etc. loan instruments.  Those loans were created at a much higher level than the mortgage loan officer.  In fact, Fannie Mae and Freddie Mac guidelines approved many loans that were doomed to failure.  Surely, the mortgage companies that employ loan officers have Policies and Procedures for their employees.

  • On Tuesday, Fannie Mae (nyse: FNM - news - people ) executives told analysts that 43.0%, or $946 million, of the $2.2 billion in losses incurred during the first quarter involved Alt-A loans. They also said that the company's "Alt-A book will continue to drive an outsize portion of our overall credit losses." Fannie also reported $344.6 billion current Alt-A exposure and a limited strategy for stemming future losses.  Forbes, May 6, 2008.
     

REAL ESTATE AGENTS ARE AT THE BOTTOM OF THE FOOD CHAIN.   I've read the license law in both states in which I practice real estate brokerage.  Neither have any duty on the part of the broker or agent to advise or have any knowledge of mortgage lending, rates, terms or conditions.  How can real estate agents be held responsible to police the actions of mortgage loan officers??  Not only are they not trained in the intricacies of mortgage loans, they have no authority to police the application and approval process or criteria for mortgage loan approval. 

Why does everyone try to suck the agents into this mortgage mess?  Agents have their job and loan officers have their job. 

  • Does the agent blame the mortgage loan officer when the agent fails to provide required disclosures? 
  • Does the agent blame the loan officer when a buyer closes on a home without the HOA docs?
  • Does the agent blame the loan officer when the agent practices undisclosed dual agency? 
  • Does the agent blame the loan officer when the agent provides an inaccurate CMA?

Real estate agents and brokers do have many duties for which they bear responsibility.  Mortgage loan approval is not a duty of the real estate agent.  There are many levels of knowledge and exprience of real estate agents.  However, mortgage lending is not a required competency for real estate agents.  I have always been of the opinion that it takes about 100 transactions before a real estate agent really has an understanding of real estate brokerage.  If agents are responsible for mortgage loan failures, you'll have to add a few years experience for competency.  Few agents even attend or participate in mortgage loan applications.  If we are responsible, we would have to have been involved in the approval process.  Real estate brokerages have published Policies and Procedures for their real estate agents.  Those guidelines do not include mortgage loan approval authority. 

Loan officers often say that they wouldn't approve bad loans for buyers if the agent didn't "pressure" them to do so.  This statement astounds me.  Pressure from an agent is hardly an excuse for failing to follow the law or guidelines for a mortgage loan. 

All the mortgage loan officer has to do is "SAY NO"!

The blame game has to stop when one sector of the real estate industry tries to suck everyone into the mess and refuses to police themselves and accept responsibility for the causes.  

If the mortgage loan industry is not going to accept the responsibility for making mortgage loans to consumers who didn't meet the guidelines, the persons making those loans will continue to perpetuate this problem and the consumer will continue to be badly served. 

Consumers do not understand mortgage loans even when they shake their heads up and down and say that they understand. 

Many real estate agents do not understand mortgage loans, even when they shake their heads and say that they understand. 

Mortgage loan officers DO understand mortgage loans and if they approve a loan for an known unqualified home buyer, they may bear responsibility for their actions.  FHA and VA have "charge back" features that go a long way to prevent unqualified buyers being approved.  Loan officers know when a buyers is qualified and when they are not. 

In all the years I've been selling real estate, I've never known a loan officer who couldn't say "NO".

                            

                            "Good news!  I can qualify you for a loan with a 1.5% start rate."

===============================================================

THIS MAIL HAS GENERATED SOMETHING I HAVEN'T GOTTEN IN QUITE A WHILE

I'M GETTING FLAMED!!! 

Note, that the whiners don't have the guts to publish their views.  They primarily flame me with e-mail exhibiting a considerable level of commission envy. 

I never quite understand why loan officers complain about the "6 or 7%" that real estate agents collect at the end of a sale.  Fact is, they all have the freedom to do the same thing we do.

Take the real estate course
Pass the real estate exam
Get hired by a broker
Invest in promotion and farming for customers
Work your butt off to meet qualified buyers and/or sellers
Work your butt off to get some buyers and/or sellers to settlement
Collect the commission

It's a free country and I suspect that anyone who can get a job as a loan officer
could get a real estate license and strive for those easy commissions.

It's a free country.

=====================================

Wednesday 7/26, 2008

Well folks.  This has been an exciting read.  I'm not quite caught up yet and may not ever be. 

I just returned from a meeting with a loan officer and his underwriter getting caught up on their processes for approval, etc.  I like to meet with new mortgage company folks to look them in the eye. 

For one thing, it gets my calls answered or returned quickly and my folks get good care.  That's important because I refer 2-3 buyers to mortgage companies every day. 

I've already sent this loan officer about 25 buyers (about 6 have been rejected) and thought it was time we met.  It was a very productive meeting.  But, I won't be doing his job and he won't be trying to qualify folks who don't meet their the guidelines.  I'm not taking those buyers anywhere else. 

My agent and broker partners to whom I refer buyers will benefit from the meeting and communication will be better than if we had not had the meeting. 

The point of this comment is that real estate agents and mortgage loan officers can have a good mutually beneficial relationship working together.  Agents can't hide their heads in the sand and try to make square pegs fit into round holes.  A buyer is either qualified or they are not. 

However, our competencies are quite different.  I do my job and the mortgage company does theirs. 

It'works very well. 

     ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Thursday, July 17, 2008

As the pusillanimous "google" points out above, below, thinking he found something incriminating in one of my past posts, I did say "I don't have a problem with 100% loans.".  In didn't when I wrote that post and I don't now.

And for the record, I don't have a problem with Alt-A, negative am, pay option, etc. loans.  Exotic?  Sure.  However, used responsibility by loan officers, they open the doors to home financing that would otherwise be closed to many responsible home buyer such as self employed persons, persons who are on an upward mobility track in a professional field like medicine.

However, I do know that the consumer should be provided with an amoritization table so they have actually seen how their payments and mortgage balances will move.  Disclosure and information would have saved a lot of consumer the anguish of foreclosure if they had simply known.  In the past 10 years or so, I have had one, just one, loan officer provide a 10 year amortization table to my buyers.  So I do it.  Am I stepping on the toes of the loan officer?  No.  I'm just letting my buyer who wants to buy a home at the limit of their qualifying range know what to expect. 

We also through the house (along with a wonderful home inspector who agrees to perform this extra service for my buyers) and let them know what to expect in the way of home maintenance and upgrade costs for the next 5-10 years.  If a buyer spends his last dime to buy a home and the air conditioner, while working new, is at the end of it's useful life, that buyer is at risk if he has to pay $5,000 for a air conditioner and only has sufficient income to meet his mortgage payment. 

So, there is nothing wrong with 100% financing if it gets a family into a home they want and need as long as it can be established at the outset that they are prepared financially to make the mortgage payments. 

It's very difficult for families (even a family of one) to save cash these days.  However, everyone has to have shelter and if buying a home with 100% financing is an alternative to renting, I'll help them all I can.  However, I don't expect loan officers to put my buyers in loans that put that buyer at risk of foreclosure. 

If, on paper, the buyer works two jobs and earns $25,000 W-2 earnings and they are approved for a $500,000 house with a 100% mortgage, that's not one of my buyers. 

=================  FLAME RECEIVED IN MY E-MAIL =====================

Lenn,

While I appreciate your comments on active rain I have to disagree and this is why:

  • Most Real Estate Agents only care about their commissions
  • Most Real Estate Agents couldn't figure out a payment
  • Most Real Estate Agents are stupid

When you point the finger you are enforcing my last point.  You all have driven up the price of homes and filled the balloon with hot air.  Not the balloon had popped and you want to blame us? 

Step back and look at your industry and the ethics and professionalism there.........lacking to say the least...............You are the theives who charge 7% not us.............A home has to increase in price in order to be sold to pay your sorry ass.

Thanks for listening.

 
Post is included in group: Front Porch Majority
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405 Comments on IT'S A MORTGAGE MESS, NOT A REAL ESTATE MESS. A DEFENSE OF REAL ESTATE AGENTS

JUL
14
2008
407,201 Points 74 Featured Posts Outside Blog

That's right and I kept saying this although I'm sure there were a few agents who let their buyers go through with loans that probably never should have been but generally it goes back to the people who finalize the qualifications. Especially when I asked this guy I knew ..i asked him if he was still in the business..he said barely but when I mentioned all the loans that went through that were subprime...his answer was...well we all have to make a living...what a stupid remark I told him.
6:57am • #1
407,201 Points 74 Featured Posts Outside Blog

Oh I forgot to mention how when a deal was having a problem the mortgage brokers claim to not be a party to the contract but when they do lend the money on what is supposedly a false basis it's our fault? They are a party to the contract..if not then they shouldn't be mentioned anywhere such as the rates and or the terms...commitment letters,...down payments...looks like those things aren't the Real Estate agents fault since they don't monitor that.
7:00am • #2

I didn't read the source you are referring to.  We real estate agents are not always being blamed for the mortgage approvals but some of us did recommend iffy programs to clients.  There were people in my former office who recommended 100% + financing to clients so they could get into the home they wanted. I also think we bear some responsibility for the spike in pricing over the last five years. Of course we are guided by our clients but we also advise them. We are now in the uncomfortable position of why a house which sold for say $500,000 last year can only be sold for $450,000 this year. Thanks for writing.  Veronica
7:02am • #3
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THANK YOU!  I am continually amazed at the folks who point the finger at agents.  Though I will say that there ARE some agents who did have a real estate license and were running a mortgage business on the side who DID KNOW that there buyers were not qualified.  Those agent should be held responsible for writing loans for their clients when they knew all they had to prove for income was an hourly wage job and their only credit was a cell phone bill.  Perhaps they are looking over their shoulders as the FBI investigations continue.
7:13am • #4
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Lenn...

I think the ONLY ones to blame here are the consumers who bought expensive real estate with marginal credit and little or nothing down. What I fail to understand is what are they losing? They had nothing going in, so getting out with nothing isn't a loss.

Now the investors that bought the loans... that's a different story.
7:14am • #5
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Neal.  In a reading of the MD contract, the mortgage company is not a party to the contract.  However, the loan approval is a condition of the contract.  So, the way I see it, if the loan isn't approved, the contract fails and never goes to settlement. 

In that case, the loan office has done their job. 

Veronica.  We can recommend "iffy programs" to clients, but we can't approve them.  I see nothing wrong with 100% mortgage loans, if the buyer is qualified by income and debt ratio to make the payments. 

As far as the house we sold for $500,000 now worth $450,000, the why is easy. 

  • The seller wanted $500,000.  
  • They buyer wanted the house and agreed to pay $500,000.  
  • The lender had an appraisal that said the house was worth $500,000. 
  • The lender approved the loan. 

I told a lot of buyers that homes were not worth what the seller was asking.  We made offers and sometimes got them and sometimes didn't.  However, if the offer was accepted and the house subsequently fell in value, that's a reflection of the real estate market, not the real estate agent.

 
7:14am • #6
270,951 Points 41 Featured Posts Outside Blog

LENN - We can lead a horse to water, but we can't make them drink.  It doesn't matter if every agent used high-pressure tactics to get people to max out the loans in whatever way possible to get into a home.  The bottom line is that each person buying a home is an adult, and should be a responsible one if they are planning to become homeowners.  No one can force someone to overextend themselves.  I can't imagine that there is an underwriter in the country that is going to write a loan because an agent put pressure on them to do so.  Real estate agents are far from perfect, but blaming the mortgage issues on us is absurd.
7:16am • #7
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Lenn, I always wondered how we could be brought into the mess. We had one client, no 2 that we tried to get approved, none of our loan officers would approve them.

Both went out and found lenders that would, one the internet.

Should we have refused to continue to represent them?

One lost their home to foreclosure, she said you all were right, we should not have bought the home.

One is doing fine, living there and current on all payments.

Our job is to give advice, we can't force the buyers to take it, on anything, what to offer, etc... Not to buy now... you name it.

Some buyers are head strong, both were determined, come hell or high water to get into those homes, and they did.

 
7:19am • #8
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Cindy.  Are you kidding me???  Are you saying that there are real estate agents who also write loans for their home buyers???  Good grief!! 

The next thing I know you'll be telling me that an agent or broker can "represent" the interest of a buyer and a seller on the same property.  Please, tell me it ain't so!

Some things that are "legal" are so inconsistent with common sense, they are unbelievable. 

Richard.  If a borrower provided false financial information, they are responsble.  That's mortgage fraud.  If the lender approved a loan with income information they knew was false, that's mortgage fraud.  I still can't find the real estate agent in that loop.
7:20am • #9
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I'm thinking back about 2 years to a customer that I lost.  He had no job but was smooth and seemed to know what he was doing.  He wanted to buy a house without a job.  I thought he was wasting my time and sorta dropped him.

Another agent picked him up and sold him a house.....and he still had no job.  At this time he has not lost the house but I learned something from that experience.  Not taking him seriously cost me a commission.  I was too ignorant at the time to realized ANYONE could get a loan!  Sub-prime was in its prime and I was still operating as in the dark ages.
7:21am • #10
297,869 Points 15 Featured Posts Localism Sponsor Outside Blog

Lenn,
Thank you for an excellent defense of the real estate agent.  I agree it is not our job, we send the clients to the lender and it is their job to qualify (or not) for a loan.  So clear to me, I just don't understand how or why we should receive the blame. 
7:26am • #11
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Adam.  What can I say but, I agree. 

Missy.  I've had many buyers over the years that purchased to the limit of their qualifying range.  None has every defaulted.  I have had two defaults of which I am aware.  One simply refused to make the payments even though she was able to do so.  The other was a divorce. 

However, I have had many buyers for whom the lender said NO and that is the end of it.  No amount of pressure from me, if I was interested in trying would have changed their mine.  Not qualified is not qualified. 

The Alt-A, subprime, option-arm, stated income loans, etc. were sold and purchased on the secondary markets.  Many borrowers are still in their homes because of the ease of obtaining these loans.  If, and we know it happened, the loans were approved with knowingly false verifications, or none and the buyer then defaulted, I still fail to see how the real estate agent is responsible. 

 
7:29am • #12
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Barbara.  The question is, did that agent collude with the lender and borrower to fund the loan????  If so, how????  What did that agent do to faciliate the loan approval????

Cynthia. Agreed.  Folks are responsible for their own actions, not the actions of others.

 
7:32am • #13
250,907 Points 44 Featured Posts Outside Blog

Amen.
7:37am • #14
302,515 Points 5 Featured Posts Outside Blog

Lenn:  It is our responsibility that our clients understand what they are signing to. It is also our responsibility to make sure that ALL service providers for our clients are fair and professional.

Our clients are supposed to be protected by us, that is what fiduciary services are  all about, but if the client feeds you erroneous information. .all bets are off.
7:38am • #15
410,701 Points 81 Featured Posts Localism Sponsor Outside Blog Hit Router

What, no gold star?  I flagged it for one before I was halfway through.  This post says it all, and I may have to link to it from my "outside" blog.  I, too, am sick of hearing the blame game - 'Guarantee you, no client of mine had one of the problem loans, because I referred my clients to a conservative and business-savvy loan officer and company. If an agent has any role in this, it recommending responsible lenders - even so, the loan approval IS in the lenders' hands alone.
7:48am • #16
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Fernando.  Fiduciary is putting your client's interests above your own. 

You wrote:  "It is also our responsibility to make sure that ALL service providers for our clients are fair and professional."

Kindly tell me on what basis are we qualified to determine what is "fair and professional" in a loan officer, home inspector, termite inspector, etc. 

It's our responsibility to advise our clients about the real estate Contract of Sale.  It is not our responsibility to advise our clients about mortgage loans. 

Many loan officers are quick to point out the real estate agents' lack of qualifications with respect to mortgage loans.  Yet, when the mortgage mess engulfs us all, real estate agents now bear some of that responsilitiy.  I reject that. 

 
7:50am • #17
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Kris.  Thanks.

Margaret.  Agreed.  I've had agents send many buyers to known loan officers who said "NO".  That was the end of that client.  If they needed time for credit repair, fine.  But, never was any pressure put on the loan officer to approve an unqualified buyer.  It is not the real estate agent approving the loans. 

 
7:54am • #18
244,351 Points 8 Featured Posts Outside Blog

Great blog Lenn, agents do NOT make mortgages happen.  Finger pointing will get worse if more companies like INDY MAC bite the dirt. Agents will just have to hold their heads up and know they didn't create or cause this mess.
8:10am • #19
667,569 Points 72 Featured Posts Localism Sponsor Outside Blog

Lenn, I had the same reaction to Cindy's comments and lender/agent all in one, and it's not done here.  In some parts of the country, however, it's an accepted practice.  The closest I've come to seeing this here are some husband and wife real estate teams where one is an agent and one is a loan officer.  Then there are the in-house lenders, and that bothers me less.  But I've had some scary deals with happy couples.
8:20am • #20
401,323 Points 59 Featured Posts Localism Sponsor Outside Blog

Lenn:  AMEN Sister!  I do have to say that I disagree with your later comment that we, as agents, are not responsible for advising our clients regarding mortgage loans:  I have, in many, MANY cases advised my clients NOT to go for the 100% financing, ARMs, neg AM loans and they insist and were pushed even harder by the lenders to do so!  They felt that the lenders knew more about financing than I and they are absolutely correct.  However, I felt that it was (and still is) my duty to advise them of 'trouble ahead' as I don't want any homeowner to suffer the loss of a home and/or impending bankruptcy.  BUT, honestly, every one of my clients who made foolish choices are all over 21 and grown adults who made this decision on their own.  All fault, guilt or blame does not fall on the lenders--even though I feel strongly that SOME of them made extremely poor recommendations regarding these disastrous loans--it falls on the ADULT BUYERS who made the idiotic loan choices!!

NO, the blame DOES NOT and should not fall on the shoulders of the real estate agents!

Debe in Charlotte 
8:22am • #21
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Lenn, from the time I started in real estate, questionable practices have occurred with lenders, be it fudging income, "gift" letters, or whatever. That the result of this huge debacle is more (understatement) significant results in the finger pointing, but here's the thing: any real estate agent that has worked with numerous lenders KNEW that, based on previous practices, things would be pushed to the limit (and beyond) with the latitude provided. Which begs the question, why on earth was the latitude permitted? Lenders taking liberties beyond that which is legal was common knowledge, so I'd have to look at those that initiated the recent practices and turned a "blind eye".

That responsibility doesn't fall to real estate agents, or loan officers. The intentional ignorance was initiated by those that RUN the show, and as is historically the case, the bit players permitted what had always been "acceptable" with a whisper and a blind eye. Who was dumb enough to assume that that would change?
8:54am • #22
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Debe.  Here's why I made that statement.  If agents are responsible for advising our clients regarding mortgage loans, we would have to have the necessary training and experience to give such advice.  We do not.

Further, we are not visionaries.  Back in 2004 and 2005 when the mad rush to buy, buy, buy was at it's peak, we needed the buyers first and the contract second.  Without the buyers out there wanting the homes and the lenders approving the loans, we would have been sitting at home. 

We can provide listing and sold information to our buyers based on the reports from our MLSs.  However, our MLSs don't project the future markets.  If buyers believed that the upward trend in prices would go on forever, they knew a lot more than I.  Once the average price overtook the average ability to qualify, I knew it was all over.  My buyers were advised of the present market.  No promises were or could have been made about the future. 

That said, we still sold a lot of real estate and still do.  Folks still need a place to live.  Often the mortgage interest deduction makes buying better than renting.  Americans are a country of home owners or those who wish to be. 

 

 

 
9:00am • #23
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Gail.  I agree.  This mortgage mess started at the top of the food chain, not at the bottom.

Patricia.  Agreed.  I had a LOT of problems with an in-house lender some years ago.  The one I had proposed mortgage fraud for one of my buyers.  I had to change the buyer's lender.  Even when it was reported, the broker did nothing. 

I like firewalls.

Laurie.  Interesting comment.  If you've been around long enough, you've seen mortgage fraud attempted.  But, unless the loan approval violates one or more of the Fannie/Freddie guidelines and documents were fraudulent, was it really mortgage fraud???  Those loans that are in default and/or foreclosure for the past 2 years or so, either met the loose guidelines or mortgage fraud was involved.  I'm not sure the agent, unless specifically advised that fraud is a part of the approval, is competent to determine when a lender has gone too far. 

 

 

 

 
9:16am • #24
260,576 Points 59 Featured Posts Outside Blog

Lenn -  As I've stated before, when fingers start a pointing, everybody starts a ducking.  I'm quite certain blame can be shared but I do think it's a stretch (to say the least) to lay it on Real Estate Agents.  In my opinion, blame cast on Agents is probably nothing more than a futile attempt to divert attention from the real catalysts.  What's done is done, it's time to keep cleaning it up....
9:59am • #25
420,879 Points 36 Featured Posts Outside Blog

Lenn,

I try not to play the 'blame game'...I leave that to others...I concentrate on 'prevention' rather than punishment...There are too many professionals in real estate transactioning who fail to say no when they ought...that is the cause of many a process failure!!! JMHO, Thanks,   Fran
10:04am • #26
225,393 Points 30 Featured Posts Localism Sponsor Outside Blog

There are many things which can be laid at an agent's doorstep during the course of a transaction, but the buyer's choice of lending program is certainly not one of them.  While I will provide a recommendation to any client who needs one, I am not a part of the ensuing qualification process.  The buyer and the lender give me the green light to go find a home at "x" price, and we go find a home at "x" price.  Is it really up to me to grill the buyer as to whether the payments and terms agreed to are affordable?  Do I need to see pay stubs and tax records to requalify the buyer to my own satisfaction, not just the underwriter's?  If that is the case, why stop there?  Perhaps I should demand to know all of the reasons for the client wanting to buy a house.  Maybe run a balance sheet on pros and cons to see if home ownership is really for them. 

"I know you are excited to buy your first home, have saved for the past two years and are conditionally approved for your loan ... but do you really need the burden of home ownership at this stage of your life.  Maybe you aren't ready."

There is an enormous difference between providing guidance and fulfilling fiduciary responsibilities in our areas of expertise and in areas in which we are not qualified to do so. 

Just because we often play life coach to our clients, that does not make us responsible for, nor qualified to, question their choices.  If anything, I think many of us take on too much responsibility.  We do it to look out for our clients' interests, but risk doing more harm than good in cases where we provide advice in areas in which we are not qualified to provide it. 

Great post, Lenn.
10:26am • #27
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Jason.  I always thought you were smarter than the average bear.

Fran.  It's these conclusory statements like.  Everyone is to blame for the mortgage mess, loan officers and real estate agents, that get to me.  They never say HOW real estate agents are responsible for loans that defeult. 

An agent can't approve a loan or make a loan or fund a loan.  What is it we do that makes us responsible????

 
10:26am • #28
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Thank you Paul.  I appreciate your thoughts.  I agree that many agents give more advice that they probably should given the very narrow window of responsibility within our licensure.  That said, we cannot and are not in a position to make loan approvals. 

Real estate brokers and their agents broker real estate transactions.  It's a complicated process and involves a lot of experience to do it well.  However, I can't recall anything that said I approve mortgage loans. 

I do qualify prospective home buyers for price range, but very soon in the process, they are going to be qualified with an expert - the loan officer. 

 
10:32am • #29
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Quick follow-up, Lenn.  Along the lines of exceeding the bounds of our expertise, I have seen more agents get themselves and their clients in hot water by providing advice in areas outside of the scope of our licensing.  Interpretting what is and is not a big deal on the inspection report without contractor review, offering unqualified tax and vesting advice, etc.  Not only do we put ourselves at legal risk by overstepping our qualifications, but we put the client's interests in harm's way as well.  As such, I do not play home inspector, title officer, CPA nor lender. 
10:44am • #30
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Paul.  Well said.  You should write a post about that. 

I, for one, have never hestitated saying "That's above my pay grade". 

That said, I can write a powerful Home Inspection Notice tying the defects to the disclosure to the list for repairs. 

I don't write addenda.  I've seen addenda written by agents that were an invitation to litigation.  Our job is complicated enough without taking on the tasks rightfully the lender, home inspector, the title company, the attorney, the tax accountant, etc. 

 

 
10:59am • #31

One of the many things to think about before I activate my license. I think I'll leave most of the mortgage process and the addenda writing to those trained specifically for it.
11:23am • #32
258,243 Points 30 Featured Posts Outside Blog

Lenn- There was a Broker I know that did loans, Escrow, and selling the house too......do I need to say what happened tho this Broker......too many people don't think.....I see greed as one of the biggest factors....that almighty Dollar sure has a way of fogging a perfectly good mind.

And as far as blaming.....boy are there some people that need a heck of a lot more blame than they're getting.  And worse, the next administration will be blamed for so much of this mess as things continue their downslide.
11:33am • #33
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Carson.  I am perfectly capable of writing addenda, but I don't.  Actually, I do but have my attorney put his stamp of approval on them.  Our contract is such a work of art, it'e seldom that we need addenda.

Kathy.  You really have to operate at "arms length" to be safe.

 
11:54am • #34
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I agree with Paul's sentiments on this one. I do think it is a fine line about advising and guiding.  I have great lenders that I recommend, and one offered my client 3 different choices and they asked my opinion.  I looked over the GFE's and gave them an opinion about how it would impact future payments, improvements, etc.  Essentially how it would impact the purchase and resale of a home.

Clients really want guidance, and I do think that good agents and brokers can work hand in hand to do their best to help clients make good decisions for themselves. It may not be the decision I want them to make, but at least we all made an effort to ensure that it was an informed choice.

I think that what Fernando was going for was referring our clients to good people and pointing out red flags when we see them.  You just don't know if someone is professional until you have worked with them.  If I see someone acting questionably, I do point it out to my clients. 

 
12:15pm • #35
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Lenn, I believe that we all had a part in this mess.  The cause is a done deal that we will be paying for for years.  Now, and this is what I love about AR, we need start a discussion on how to prevent the problem and how to turn the market around.  As we start to see how all the parts work together, maybe we can come up with real change.  I think we are doing this and that is one reason why I love to read your posts.  AJ
12:39pm • #36
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Lenn - I agree with your analysis.  I just don't see how the overwhelming majority of real estate agents had anything to do with the mortgage mess.  I only work with pre-approved buyers - and even if I didn't, I have no power over whether they are approved or not.  I just don't get blaming the real esate agents.
12:50pm • #37
100,429 Points 1 Featured Post

When I started RE (19 years ago) we used to pre-qualify our buyers, and work up cost sheets for them on houses. Now we're advised NOT to do these things- "let the mortgage professional do it". even so, we try to talk to buyers about how much they can afford/want to spend. Sure, some agents push buyers to buy the very top they can qualify for, but most of us don't. I don't see how most agents have any responsibility for the mess.
1:59pm • #38
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Melina. We can, with experience advise our buyer clients about loans, lenders, etc., and I do.  But, we don't make the loans.  We can point our red flags and I do. 

We still don't make the loans.

AJ.  Thanks.  This discussion is surely helpful.  However, until the lenders can tell me what it is that agents do to cause bad loans to be approved, well, I just don't include agents as the cause.  Within our limited authority and training as agents, qualifying buyers is about all we cover in license law, principals and practices and continuing education. 

I still believe that we have to start at the top of the food chain to get to the bottom of the problem so we will recognize red flags when they occur in the future.  

As long as it just "everyone shares in the blame", nothing will change.

Joan.  I agree completely and I'm tired of reading it.  Real estate agents and brokers have our own problems for which we, as an industry, need to improve; higher standards for licensure, more responsive COE enforcement, more timely commission complaints, more vigorous supervision of agents by brokers, etc.  All of that would help us to what we do, sell real estate. 

We can't take on the responsibility for the loan offers' practices too. 

Leslie.  Agreed.  I still qualify buyers.  It doesn't take a Rhodes Scholar to qualify a buyer.  I don't review their credit because that's a job for loan officers.  I am very involved in my buyers financing from beginning to end, but I do NOT approve them for a loan. 

 
3:10pm • #39
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Lenn,

Great content here!  I have a current buyer (referred by a realtor) whose adult child is the point of contact, as the parent is out of the country for a week or so.  The adult child asked me if it would be okay to sign the loan application papers for the parent in order to expedite things. 

"Only if you're willing to go to jail" was my answer, tongue in cheek.  "But you'll have to get another loan officer, because I'd have the cell next to yours."

People with good intentions can commit fraud just as often as those who set out to deceive.

Mike in Tucson
3:29pm • #40
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Mike.  Don't get me wrong.  I'm not excusing agents and brokers from all problems with financing.  However, this particular national calamity was caused by forces way higher than real estate agents.

Goodness.  I had a real estate broker sign an addendum for a seller once.  She insisted that she had a perfect right to do so. 

I fired an agent once who initialed for a buyer on a lead based paint waiver.  The buyer asked the agent to do it because they didn't want to take the time to meet the agent and had no fax machine.  The agent simply thought it wasn't important.  That is not an agent I want to be responsible for. 

But, the mortgage mess???  That was not under our control. 
3:39pm • #41
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Lenn,

Keep in mind...agents are 'licensed'...that carries with it a certain responsibility...if not a fiduciary obligation certainly an ethical one...hair dressers and barbers are licensed in the State of PA...they have a responsibility by virtue of their 'licensing'...

A long time ago it was explained to me that the transaction process in real estate was like a big filter...everything is poured in the top, filtered by various professionals, i.e. agents, underwriters, LOs, title people, mortgage processors, closers, lawyers, etc., then resulting in a satisfactory, legal, and ethical closing.

I agree that we can't paint with a broad brush and say we're all guilty, but I can cite practices by mortgage companies, title underwriters, and others whose refusal to 'say no' opened the flood gates and slippery slopes...I for one did not stand on the sidelines and watch without opinion or voice...but my voice often was the lone one crying out in the desert...Too many people turn heads and ignore the avalanche building ahead...and of course you can follow the money in this too!!!

Sorry for the long comment...just trying to add to the value of an already good post!!!

Thanks,   Fran

 
4:33pm • #42
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Lenn, At this point I think the blame game is just a waste of time. But for arguments sake, I can assure you there were many REALTORS(R) involved in getting unqualified buyers through in my area. AND we have many REALTORS(R) that are also MBs doing loans for their buyers.

Here are some examples of how REALTORS(R) participated in bad lending practices.

  1. Agreed to have addendums hidden from the lender so the buyer could get closing costs from the seller under the table.
  2. Agreed to participate in hiding a "silent second".
  3. Inflated the purchase price to meet the appraisal.

These things were done frequently in my market. The Lender can only approve loans based on information they are provided. If something is deliberately withheld or just flat out fraudulent in nature the Lender wouldn't have known any different.

Florida is #1 in the Nation for mortgage fraud so I have a lot of experience in sniffing it out and I still bet I was hoodwinked more than once.

Your market is just night and day from where I work. You would be shocked to see some of the crap folks try to pull down here.

Good discussion you got going Lenn. 
5:23pm • #43
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Fran.  You wrote:

but I can cite practices by mortgage companies, title underwriters, and others whose refusal to 'say no' opened the flood gates and slippery slopes...I for one did not stand on the sidelines and watch without opinion or voice...but my voice often was the lone one crying out in the desert...Too many people turn heads and ignore the avalanche building ahead...and of course you can follow the money in this too!!!

Now just what kind of "flood gates and slippery slopes" are you talking about.  When a loan officer says NO, it means either that the buyer isn't qualified for the loan that they want or that the mortgage company can't provide the loan that the buyer is qualified for. 

I don't know what "flood gates or slippery slopes" are. 

No real estate agent can force a loan officer to approve a loan for an unqualified buyer. 
6:00pm • #44
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Bryant.  No, nothing would surprise me.  I know your market and anyone who can survive there with honest practices gets applause. 

However, with the exception of agents writing loans, I still believe that there is little the agent can do to facilitate or force a loan officer to approve an unqualified buyer unless there is mortgage fraud all around. 

  • Agreed to have addendums hidden from the lender so the buyer could get closing costs from the seller under the table.

    • This is a case when the buyer, seller and agents are involved.  This isn't a case of an agent forcing a lender to make a loan.  These practices are dispicable and I suspect that if the loan officer were communicating with the buyer, seller and agent, they couldn't get by with this stuff.  I know it goes on but not enough to bring down the financial markets in the country.

  • Agreed to participate in hiding a "silent second".

    • Interesting.  If the contract is for $XXX and the loan officer has approved the buyer for $XXX, the buyer has to provide proof of funds to close and document the source.  If the loan officer is doing their job, the Silent Second wouldn't happen.

  • Inflated the purchase price to meet the appraisal.

    • I've seen this happen here too.  Appraisal comes in high, the buyer wants the seller to give them the difference in cash out of their proceeds.  The lender already has a contract of sale before ordering the appraisal.  If the appraisal is high and there is suddenly another contract, they can't force the lender to approve a higher sale price.  The buyer and seller and listing agent and buyers agent would have to go to another lender.  The appraisal would have to be assigned or risk it coming in lower.  If it's FHA or VA, they're stuck with it for 6 months. 

    These things are just not so easy that a lender doing his job doesn't see red flags.

    Considering the verifications and documentation required to comply with FHA and Fannie Mae guidelines, a loan officer has to turn a blind eye to the obvious not to know what's going on.  If they still approve the loan. . . . . 

    I know how your market is and it ain't purddy. 

     
    6:19pm • #45
    420,879 Points 36 Featured Posts Outside Blog

    Lenn,

    OK, here goes!!!

    1) First off I know of no loan officer that has ever approved a loan...that is the job of the underwriter...I've seen circumstances where LOs and underwriters had adversarial relationships...show me a top producing LO with a following and I'll show you an underwriter under pressure...that's a 'slippery slope'...one you can't climb back up easily once you've headed down it!

    2) I've heard of Title Companies (Title Underwriters) who said 'yes' to affiliated business arrangements with realtors and mortgage lenders, when they had enough evidence to know that conflicts of interest would arise as a result of such arrangements...once these 'flood gates' were opened, you can't turn the flood waters back to where they originally were...

    Neither of these two examples are 'isolated incidents'...they're going on every day in every area of our real estate industry!!!

    Those examples of improper professional behavior cited in Bryant's comment above are just scratching the surface of the abuses existing in our real estate industry...eventually you reap what was sown...whether you sowed it or not!!! In other words we have inherited the real estate industry in its present state...like it ot not, it is what it is!!! 

    Thanks,   Fran
    6:19pm • #46
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    OK, here goes!!!

    1) First off I know of no loan officer that has ever approved a loan...that is the job of the underwriter...I've seen circumstances where LOs and underwriters had adversarial relationships...show me a top producing LO with a following and I'll show you an underwriter under pressure...that's a 'slippery slope'...one you can't climb back up easily once you've headed down it!

    Fran.  I understand that underwriters approve the loans. However, if the loan officer doesn't prepare the package and send it to underwriting, it would never get that far.  In fact, you make my point.  Once a loan package has been prepared and approved by the underwriter, the agent who represents the buyer can hardly be blamed if the loan officer and underwriter approve a loan that shouldn't have been approved. 

    2) I've heard of Title Companies (Title Underwriters) who said 'yes' to affiliated business arrangements with realtors and mortgage lenders, when they had enough evidence to know that conflicts of interest would arise as a result of such arrangements...once these 'flood gates' were opened, you can't turn the flood waters back to where they originally were...

    Affiliated business arrangements are an invitation to trouble.  These are not the brainchild of the real estate agents. 

    Neither of these two examples are 'isolated incidents'...they're going on every day in every area of our real estate industry!!!

    Nothing that you've cites here gives the real estate agent the power to force loan officers/underwriters to approve loans for unqualified buyers.   

    Those examples of improper professional behavior cited in Bryant's comment above are just scratching the surface of the abuses existing in our real estate industry...eventually you reap what was sown...whether you sowed it or not!!! In other words we have inherited the real estate industry in its present state...like it ot not, it is what it is!!! 

    Indeed, it is what it is.  But, until painting broad brushes to include real estate agents in the causes not to be repeated, diverts the attention to the areas that need to be tightened in the future so it doesn't ever happen again.   

    The bottom line here is that if a loan officer is involved with a company, affiliated or not whereby there is "pressure" to approve fraudulent loans, they have choices.  They can either go along, or instigate the fraud or they can leave and get another job.  No one is forced to write a fraudulent loan. 
    6:33pm • #47
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    Lenn,

    When you dangle the carrot of future repeat business referrals, you're entering the slippery slope...And when you turn a deaf ear to wrongdoing you're still guilty...only those agents who participated in behavior such as I have described know the extent of their guilt!!! Thanks,   Fran

    P.S. And yes, affiliations were the brain child of the real estate broker!!! Trust me, Title companies are not 'smart' enough to devise such a money making scheme!!!
    6:45pm • #48
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    Woooo!!!  Indeed.  I give you that one.  The mortgage broker is responsible for the affiliated mortgage company and title company. 

    That's a real black eye on the real estate industry. 
    6:58pm • #49
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    Lenn -- I got here 48 comments too late but I would have to say that allowing that mortgage loan officers may be competent is a bit of a stretch.  Mortgage companies recruit originators the same way real estate brokers recruit agents -- "Are you breathing? Do you have a license?" (or in the case of the mortgage originator it atops at "Are you breathing?).
    7:04pm • #50
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    Fran, sorry but I have to disagree.  There were a number of loans that I stepped away from and said no to, just to find out later that the Realtor then directed the Buyer to a Lender that they knew would ignore the rules and say yes, or to Loan Officers that would put people in Neg AM loans in order to lower the initial DTI so that they would qualify.  These Realtors were only concerned in closing the sale and did not care how it got done as long as it got done.  To me that makes them equally responsible as the scum bag that did the loan, because they fully knew what they were leading that Buyer to.  Some might say that the Realtor did not approve the loan and they would be right, but neither do the Loan Officers, their guilt is in the fact that they even submitted the loan, however, they did not approve it, that is done by underwriters.  Are the scum bag Loan Officers that wrote these loans and even on some cases lied on the 1003 part of the guilt in this mess? Absolutely!!!  But so are the scum bag Realtors, who were told that their Buyer did not qualify but guided their Buyers to the scum bag Loan Office that would submit the loan.  But lets not overlook the underwriters who did not checkout everything, the Lenders that fudged the rules to make it possible for these loans, and the greedy Investors that were all to willing to invest their money in them.
    7:15pm • #51
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    Ken.  Thanks for dropping by.

    I believe that the mortgage companies are licensed in MD.  This is a matter of quality control.  I know for myself, that the loan officers I refer to would not, under any circumstances, approve an unqualified buyer.  It just doesn't happen.

    What I do see here is a lot of buyers approved by ???? Internet lenders who are charging an arm and a leg for lender fees.  That's not mortgage fraud because the buyers are qualified.  If the buyers haven't the knowledge to shop their mortgage, I'll do it for them.  But, the buyers, once they have a relationship with a lender are loathe to change. 

    Fine with me if they want to pay through the nose to avoid another loan application. 

     

     
    7:17pm • #52
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    George,

    Respecting Lenn's post...how are we disagreeing...seems to me, you're making my point!!! Thanks,   Fran
    7:20pm • #53
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    Lenn, 

    Wow.  Totally concur.  I have not heard to date a lot of blame going towards the realtors but it is bound to happen.  Heck, everyone can be at fault !  What is funny sometimes is that if there ever is an issue post-settlement it is a rarity that the mortgage person gets involved.  Once that loan is done, it is done.  Where as realtors, we are handling post settlement disputes and hand holding people through their problems and stressors.  Now the better loan officers do keep in touch with their past clients but not too many.

    At the end of the day, however, I know mortgage professionals and companies are getting a lot of heat but it was still the consumers choice to buy the property and to agree to get a loan and to agree to the intial mortgage payment and so forth.  I know a lot of these people maybe should not have received loans.  But there is also the flip side where there are a lot of homeowners today that would never have been homeowners if the credit market was as tight as it is now.  And these people will be so better off and are up to date with all their mortgage payments.

    Is a tough issue... a lot of different angles to look at it,

    Chris Somers
    7:25pm • #54
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    George.  All I can say is that I must have led a very sheltered life.  Granted, I've met a few "slime ball agents" and a few "slime ball loan officers". 

    But, they don't "move our market". 

     
    7:26pm • #55
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    Lenn... I agree 110%  The lenders were making so much money during the "boom" that they were willing to take excessive risks and loan money to buyers that should have never been approved...  They created this mess all on their own... 
    8:00pm • #56
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    Lynn- I understand what you are saying and I certainly respect your thought process and you coming to the defense of us real estate agents, however, we as an industry brought us to where we are today. Some of us went through the past years doing business on the up and up and others decided to take a different path. Do agents approve loans? No they do not. Are all agents above board like you and me and a host of others who have commented on this post? No they are not.

    As I see it, it all started with the Buyers going on a feeding frenzy, their adrenalin running high on the chase of the home and the win above all other Buyers.  We got it, we got it! Hooray! Prices kept rising and the lending institutions jumped on the band wagon by revamping their loan programs to make it possible for anyone and everyone to buy a home and share in the excitement. Appraisers jumped in to keep up with the market and us agents, well many jumped on the band wagon as well and allowed all common sense to fall by the wayside.

    Looking back I could have made tons more money than I did if i had been one of those who chose to follow the craziness instead of my own beliefs and standards.

    Placing blame on one particular segment of a larger entity may sound good but in my reality a little bit of all segments had a part in where we are today. Maybe not you and me and a host of others but just the same, somewhere, somehow a lender, a mortgage company, an agent, an appraiser, a whatever or whoever did something they shouldn't have. 

     Do I like the mess we are left with from all the craziness? No I do not but I do know that I and many others will continue doing business and will come out the other end with our heads high and loving this business.   
    9:01pm • #57
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    Lenn, I have been pretty amazed at the finger pointing of real estate agents in this crisis.  I guess I shouldn't we live in an age where everyone trys to blame someone else for their problems. No one wants to take personal responsilbity but they want to blame someone else.  I have not a clue what my clients finances nor do I want to know; that's why they have a lender. 

    I have been surprised at the agents who were doing their own loans.  I thought that was a HUGE conflict of interest. I think those days are past though.
    9:34pm • #58
    396,959 Points 17 Featured Posts Outside Blog

    Good advice. And I think lately, it's become pretty clear to everyone that the only thing holding back the real estate market anymore is the mortgage industry.
    10:13pm • #59
    453,293 Points 54 Featured Posts Outside Blog

    Fran, sorry we are not, I was looking at your name while I meant to type Lenn's name.  Old age you know :)

    I respect Lenn's opinion but I have to disagree with her on this.  There were and still are a number of Realtors out their that all that matters as that their deal gets done no matter what it takes, and if you are not willing to bend the rules to get their deal done, then they will find someone who is greedy enough to. 

    Once again sorry Fran for typing the wrong name.
    10:19pm • #60
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    Plenty of blame to go around in fact billions of dollars of blame. In a recent interview I just listened to they were talking about lenders that really did not care if the buyer was qualified because they could always sell the property for more money in the future even if the buyer could not meet the monthly obligations so why not approve them? I guess the rules and the fact that no one guaranteed the value would increase crossed their minds so it must be someone else to blame.
    10:21pm • #61
    2 Featured Posts

    It's interesting that no one points to the consumer or the general lack of financial education in the US, our desire to keep up with the Joneses and other problems that lead people into houses that they really couldn't afford.  

    Regarding this comment:

    I believe that the mortgage companies are licensed in MD.  This is a matter of quality control.  I know for myself, that the loan officers I refer to would not, under any circumstances, approve an unqualified buyer.  It just doesn't happen.

    What exactly constitutes and unqualified buyer?  If someone is not qualified, they cannot be approved.  Period. If the buyer's qualifications conform to the underwriting standards he is approved, if not he is not.  I am unsure if you are referring to lo's approving unqualified buyers by means of loan fraud or if you are referring approving them by way of products like interest only, no doc loans etc.  These buyers may not be "qualified" by conventional standards but they are qualified as long as there is a lender that offers that type of program.  You can't blame a loan officer who puts somebody with a 550 score with no income verification if such a program exists.  This is not saying that these types of programs should exist or are beneficial but it seems contradictory to expect the loan officer to tell the buyer no or advise the client this is not wise and then not expect the same of the realtor.
    11:44pm • #62
    JUL
    15
    2008
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    Debbie.  In many ways, the loan officers with whom we deal on a daily basis were not the direct cause of the mess either.  They approved buyers who met the then current guidelines.  It was the guidelines that were the problem and that came from the financian powerhouses on Wall Street. 

    Martha.  I don't believe the problem started with buyers going on a feeding frenzy at all.  I believe it started with the attack on Wall Street on September 11, 2001.  Then Alan Greenspan, in efforts to help Wall Street, lowered and lowered and lowered and then lowered again, the rates that affect the financial investment houses.  Once the international investment money had no place to put their money that would get them a desired return, those same investment houses invented the very mortgage instruments that would make mortgages available to an ever growing number of home buyers. 

    "Honey, we can get a mortgage with a start rate of 3% for 3 years.  Let's go buy a house.  In three years, we'll refinance to a 30 year fixed and we'll have our dream home".

    THAT, in my opinion is what caused the "feeding frenzy".  American families looking for their dream home at mortgage rates they never believed they could get.  Of course real estate agents sold them homes.  What were we supposed to do???  Say, "no you shouldn't buy because this is a bubble  and sooner or later, it will pop and you'll not be able to refinace."  We didn't think that in 2003, 2004 and not until mid 2005 were the warning signs there when so many simply couldn't qualify for the mortgages.  But, they kept selling.  Much of the mortgage fraud occurred in the 2005, 2006 years when the market was at it's peak and lenders were desparate to keep the balloon in the air. 

    Unless a real estate agent is involved in colluding with a mortage loan officer, falsifying buyer information and engaging in mortgage fraud, I cannot see how the agents can be held responsible for the mortgage mess. 

    When folks write about who is responsible, it starts at the top with the investment houses on Wall Street, filtering down through the secondary markets and the perfidy of their officers, on down to the mortgage companies who steered buyers to risky loans without any regard to the buyer's ability to repay. 

    Sooner or later, the "You can always refinance" just didn't make any sense.

    I can't begin to tell you how many calls I've gotten from owners who purchased in 2004, 2005 and 2006, always with the thought that "I can refinance in 2-3 years". 

    They couldn't and now they are "short sales". 

     
    7:08am • #63
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    Lenn- I understand what you are saying. I always said that the mortgage industry did invent programs to keep up with the ever increasing demand. Why wouldn't they? is that not what any industry is to do? Produce a product that meets the demands of the consumer. With lower interest rates more and more consumers DID qualify for a mortgage when they normally would have not. When rates are lower the amount a consumer qualifies for is higher and thus as home prices went up the consumer was not left out in the cold of not being able to purchase. I find it interesting that buying habits of consumers run like the wind. The more buyers engaged in purchasing a certain product, the more buyers there are who want the same thing. The more buyers who shy away the more other buyers follow.

    You say 'Of course real estate agents sold them homes. What were they suppose to do?? say no you shouldn't buy because this is a bubble and sooner or later it will pop and you will not be able to refinance.

    No is the answer but we should have been telling them during that period that there was rumblings in the air of the end being near and to not put themselves in a situation that would come back to bite them. Was that the norm for all lenders and agents alike? Unfortunately not. Any industry no matter what it is attracts unscrupulous people who think they can make a fortune on anothers desires and naivetivity.

    I agree that it was those that purchased during the end of the upswing that got caught the hardest. They are the ones who are suffering the effects of the downturn the most. When the sounds of the winds of change were in the air in 2005 and 2006 these Buyers jumped on the bandwagon too late and all too many did so with an unscrupulous agent or lender guiding them along the way. I experienced it first hand when I went to a settlement on one of my listings. The Buyer did not even speak english and it was so obvious that the lender, the agent and the title company were in co-horts together to make the sale. We did not settle and walked instead. What was happening was not right and I wanted no parts of it under any circumstances. And even more recently an agent tried a similar situation with me on one of my listings with a 'private' lender. We walked before we even accepted a contract. The bad will never truly disappear as it is the nature of the human race

    That is why it is so important today that those of us who have been above board from the get go stay focused and pool our energies into bringing the positive forward at a time when so much negativity is so rampant. 

    Just my opinion Lenn, just my opinion. :)
    8:59am • #64
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    Martha.  Thanks for your opinion.  It is always welcomed. 

    Hindsight is always 20/20.  However, in 2005, when prices got to the highest on record in our market and qualifying began to be difficult, we had buyers that were searching all over the Internet for the best interest rate they could get.  Our local reliable mortgage loan officers would advise a buyer that they couldn't qualify for the home price range they wished to buy and the buyers immediately went to the Internet to get a rate that would permit them to qualify, usually with Countrywide and usually on a short term, interest only loan. 

    Countrywide closed those loans.  We sold the homes.  Our buyers were happy.  What are the agents supposed to do in cases when they have the largest mortgage company in the country giving them a loan to buy their dream home??? 

    Good grief, I sold a home to a mortgage losn oggivrt in 2005.  If anyone should have known what he was doing, he should have.  He didn't and now he's got a rental that is worth about 2/3 of what he paid for the house. 

    I believe that buyers were really caught up in something like a mass hypnosis to buy, buy, buy.  The TV, Internet, financial magazines and newspapers advertised rates so low anyone could qualify. 

    Real estate agents can't protect buyers in a market like that.  We could protect them in the contract, party to party, inspections, title etc.  But, we couldn't say:  "No, you can't buy because the market might fall and you'll lose money".  As long as there were loan instruments within which the consumer could buy, they would and did buy. 

    Whan assigning responsibility, we have to look to the facilitator, the loans that permitted buyers to buy with teaser rates, short terms, etc.  The grunt agent out there helping them find the home that satisfies their dream is not the cause of the mess. 
    10:39am • #65
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    The one thing I as an agent can do and do regularly is make quality referrals.  I have a short list of top professional loan officers with funding lenders who do a fantastic job of taking care of my buyers.  To date not one of my clients has gone into foreclosure.
    11:17am • #66

    Actually this mess was created by Dick Cheney And his pal Dubbya!
    11:24am • #67
    316,377 Points 40 Featured Posts Outside Blog

    Lenn--AMEN! We did not cause these problems and many of use were voicing our concerns for years! Some less than professional agents might have been part of the problem but the majority of good agents like good mortgage professionals had concerns long ago. Thank you for stepping up and naming it as it should be...a Mortgage Mess!
    11:30am • #68
    Outside Blog

    This is an awesome and informative post! Thank you for taking the time to present it! I will bookmark it for future reference. Thank you.
    11:39am • #69
    266,587 Points 14 Featured Posts Outside Blog

    Lenn:  AMEN (like Teri said) to your post!   I "think" sometimes why "we're" blamed so quickly is, because we are the face in front of the client most of the time-throughout the deal.  They see the lender once (MAYBE)...if it's not one of those online lenders.  BUT, PEOPLE buyers...HELLO, did you read the fine print? Did you do YOUR homework?    IF it sounds to good to be true... well, it probably isn't true.

    Thanks Lenn for your detailed post.

     
    11:56am • #70
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    Lenn, you make a very strong argument... one that is quite hard to find holes in.  However, I would say that there are agents that bear responsibility.  Just not in their role as agent.  Every day I get spam telling me to become a mortgage broker to make more money on each transaction.  I know agents that do exactly that.  I'm not a fan, and I have enough work to do already, so I'm not going down that road... but some do. 

    The bottom line is that a blanket statement that agents bear a measuable portion of the responsibility for the mortgage mess is pretty false, but there are agents that played it pretty well (or bad...) and deserve a bit of personal blame. 

    Of course, much of the same could be said for the mortgage brokers... they didn't approve the products or the participants.  They did counsel them, but didn't have the final say (both the underwriters and the consumers were in a position to issue a "No")... but there certainly were mortgage brokers that bear a disproportionate share of the responsibility because they were actively putting people in programs that they knew those people didn't belong in. 

    Now, if an agent knows that they can get someone qualified, and sends them into a property that they can get... but shoudn't... are they responsible for the consumer's decision to some degree?

    I think they are, but just a little...
    12:24pm • #71
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    Kathy.  Thanks.  I know that there are agents that violate rules and, indeed, laws, but the mortgage mess cannot be put to real estate agents. 

    Angelica.  My pleasure.  There's probably going to be more to come. 

    Teri.  Indeed.  It is a mortgage mess.  Starting at the top of the pyramid where the mortgage instruments are designed.

    John.  I'm sure.  No doubt they are responsible for that dead snail in my driveway too.

    Randy.  In 25 years, I've had two buyers go to foreclosure, one because of divorce and one because her X wouldn't come forward with more money for her to blow. 
    12:27pm • #72
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    Lenn - Very sound reasoning.  As a Realtor I know if a prospect came to me and was not pre-qualified I gave them the name of several loan officers to interview, not only  was I not involved in the approval of a loan no one could even accuse me favoring one lender over the other.  This is a blame that is certainly not one agents should accept.
    12:33pm • #73

    Let me see if I understand this....

    1.) If a Realtor knows of a leak, but the Home Inspection doesn't catch it, it's the Home Inspector's fault??

    2.) If a Realtor knows of a title defect, but the Title Company misses it in the search, it's the Title Company's fault?

    3.) If the sub-flooring in the bathroom has dry rot...and termites have eaten half the house...and IF the Realtor knew about it, but the Termite Company came back with a clear report, it's exclusively the Termite Company's fault? By the way...I can sense the rebuttal, so let me say that the Realtor DID know because it was on the previous termite inspection report...and it was the Realtor who removed the original inspection tag.

    4.) And if the Realtor knows her buyers are being approved for a loan when they absolutely shouldn't be, but allows the deal to close anyway....it's exclusively the mortgage company's fault???

    I guess I'll simply never understand the logic.

    We can preach all day that we had nothing to do with the crisis that faces our industry today. We can lay blame on the lending industry for their greed...and their carelessness in providing financing with no money down, horrible credit and allowing stated income.

    But we established rapports with our customers. We knew Mr. Buyer was a cashier at the local grocery store...and Mrs. Buyer worked at Walmart. We were smart enough to realize that their annual incomes at best were about $50,000 combined. We knew they had four kids because they brought them to every showing. And we knew they both drove brand new cars because we saw them. We also knew that, under the circumstances, they probably couldn't afford to buy a $499,900 home. BUT...if we got a lender to approve it (which we usually did)...we could make $15,000 AND have a future scapegoat!!! How cool is that??

    My kids use these same excuses (i.e. "She made me do it!") to absolve themselves of responsibility, but for us to do it seems downright shameful.

    Dave

    P.S. I know the above examples do not apply to every agent...so PLEASE don't go there. But I also know it happened enough times by the "less than professionals" in all associated industries to bring this new world of real estate upon us. If you were one of the ones who maintained your integrity throughout....there is no need to defend yourself. I applaud you...and have the utmost respect.  But for the others?? Grrrrrrrrr!!!
    12:38pm • #74
    2 Featured Posts

    Darn it...I wasn't logged in when I typed the "Let me see if I understand this..." post above (I confess...it was me. Yikes!)

    Dave
    12:42pm • #75
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    I think the underwriting guidelines are what festered all of this.  We can't deny that some transactions were bred from greed and fraud and some purchasers, sellers, real estate agents, LOs and title persons were parties.

    We can't paint a broad picture for every purchaser, seller, agent, LO and title person, however, just like you pointed out.

    Yes, I said purchaser and seller.  Those that figured out the system and milked it, used it well.

    In the meantime, Alt-A, Subprime and other types of lending that had a purpose were abused and taken away from everyone, including the types of borrower it was created for.
    12:57pm • #76
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    Ahh...finally the truth comes to light.

    There were lots of people buying houses in the past few years that should never have qualified for a loan. I didn't have anything to do with getting them qualified or making the loan.
    1:16pm • #77
    2 Featured Posts

    I think this falls into the category of "not my job" that plagues so many companies today.  It like a cashier that works in a supermarket who sees a customer shoplifiting but says nothing "not my job, that's why we hire a security officer".   I understand that realtors do not approve loans but loan officers do not either.  Some people choose to offer a consultative approach to selling (which may mean losing deals) and some people take the "not my job approach" knowing darn way that someone making $40,000 a year can't afford a $300,000  loan but since someone will offer it, go thru with the transaction.  

     
    1:58pm • #78
    2 Featured Posts

    I think this falls into the category of "not my job" that plagues so many companies today.  It like a cashier that works in a supermarket who sees a customer shoplifiting but says nothing "not my job, that's why we hire a security officer".   I understand that realtors do not approve loans but loan officers do not either.  Some people choose to offer a consultative approach to selling (which may mean losing deals) and some people take the "not my job approach" knowing darn way that someone making $40,000 a year can't afford a $300,000  loan but since someone will offer it, go thru with the transaction.  

     
    1:59pm • #79
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    Pointing finger solves nothing.  Our housing market dilemna is due to everyone's part:

    Realtors listing houses for what the market would allow. (Now it is priced to get buyers in the door and hopefully make an offer.)

    Realtors getting their buyers to make outlandish offers over list price due to the competitive market.  (Now it's even presenting the low ball offer that you never would have presented before.)

    Sellers making an incredible profit on their house.  (Just be glad it sold and you don't have to come to closing with money.)

    Buyers taking on a huge mortgage because interest rates were low, or they could qualify for a subprime loan at rates that were actually good compared to what they had been.  If they couldn't get approved, it was just a matter of finding another lender to get it done.  Where there was a will, there very well could have been a way.  (Purchase price is great, rates are good, might need money down, might qualify!)

    Mortgage Consultants pre-qualifying within liberal guidelines and closing deals that clients wanted but you would never do for yourself....and hopefully telling your client that!  (Now it is a challenge to get a buyer qualified without good credit, money down, and verifiable income.

    Underwriters - qualifed with their stamp of approval within guidelines.  (Today continue to qualify within guidelines and an exception is rare.)

    It wasn't all easy but pretty much do-able.  Was greed the biggest motivator.

    Our market is hit hard from people losing jobs, cost of gas, food, heat, electric, etc., etc.  Where do they put their fragile dollar?  They never imagined our economy being as it is...much less losing their job.

    It's not fun, but Bottom line: it stinks!  But to cast the first or last stone is wrong, to point a finger is wrong, to make federal or state law changes that make it almost impossible for financially strong, good credit, responsible buyers go through hoops to get a loan is dumb! 

    There was much to be said about a poor credit, $0 down payment, stated income buyer getting approved for a mortgage vs. excellent credit, 10-20% down payment, and stated income - but it was allowed.  Now, you have to provide your personal and corporate tax returns - isn't this a challenge?

    Oh well, it's our industry right now.  We will live through it.  But the panic and finger pointing doesn't do anyone any good... I guess I've rambled on long enough!
    2:00pm • #80
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    I some times (many times) feel like I'm a babysitter when it comes to my buyers and the types of loans they want to do.  They always ask my opinion on whether or not I feel it's a good program or a good rate.  I can just tell them that I'm not a mortgage person and that I can just give averages of what I see my clients closing with.  Some wonder why I won't be more specific.  I just tell them it's my job to find them the house, and that I can't wear all hats in a transaction and since I don't know their credit or their debt/income ratios, I can't know what type of loan or rate they would qualify for.  I always refer the buyer back to the lender, but also ask them if they would prefer another referral to make sure they're getting a good deal.
    2:02pm • #81
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    Jim.  Thanks.  Exactly the way I feel.

    Renee.  I believe that until we stop spreading "blame" around and focus on the problem of mortgage instruments that permitted abuse and mortage fraud with a laser, the problem will return only worse than ever. 

    David D. 4.) And if the Realtor knows her buyers are being approved for a loan when they absolutely shouldn't be, but allows the deal to close anyway....it's exclusively the mortgage company's fault???

    David.  How does that Realtor know???  What does the average Realtor know about mortgage financing???  It's not a part of our training or continuing education.  We may run a quick qualifyer for price range to show homes, but we don't take loan applications.  We don't examine credit reports.  We don't require verification documents and examine them for accuracy. 

    For the past 5-6 years, the entire real estate and mortgage financing industry has been telling all of us to "send the buyers to us".  So, most agents do exactly that now.  The average agent couldn't keep up with the myriad of loan types available if they tried.  In fact, I've been reprimanded on this very forum by loan officers who resent the fact that I even qualify a buyer for price range.  Their rationale is that "you don't know all of the loan types that can be . . . ."  So, if I accept that and just send the buyers or take buyers who come to us attached to a lender, that's now wrong and I should have examined and evaluated the loan that the buyers are getting??????

    Sorry.  The financial industry can't have it both ways.  If they want to be the first contact, they have to perform in an honest and legal manner, which, of course most do.  But, it's the loan officers who takes the loan application and is equipped by training and education to determine if and for what the buyers are qualified. 

     

     

     
    2:04pm • #82

    Great post, Lenn. It's nice to hear someone articulate this position so well.

     
    2:05pm • #83

    It does not take a brain surgeon to know that if you have little to no money to put down and do not have a strong verified work history, that these people should never get any type of loan.
    2:05pm • #84

    It's the Bank's mess. Loaning money to people who they should not have touched with a barge pole, all in the name of short term profits. Bank's have a short term memory, it happened before and in another 15 years or so it will happen all over again.
    2:07pm • #85
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    Donna.  Spoken like a real estate agent, doing her job. 
    2:08pm • #86
    820,770 Points 213 Featured Posts Localism Sponsor Outside Blog Hit Router

    Donna.  Spoken like a real estate agent, doing her job. 
    2:09pm • #87
    4 Featured Posts

    Lenn, this surely is a can of worms isn't it.  Like you, I have been doing this for more than a few years.  For some reason, and it escapes me now, I never have been involved with buyers/potential buyers dealings with their lender of choice.  I do not want to know their financial information any more than I want anyone (other than a lender) to know mine when I am purchasing a home.  It is a very personal relationship that I opt not to be a part of.

    Believe me, I was not that insightful for all those years.  Perhaps dumb luck!
    2:10pm • #88

    All good points; I've actually said "no" to one of my first deals about 2 years ago, and the Real Estate agent (working with Contract-for-Deed) told me to "do whatever it takes to get her qualified."  Being a newbie in the field at that time, I did whatever it took.  She still did not qualify.  I said "No" again, and he went to a more experienced mortgage broker.  That mortgage broker said yes, then said no and for her to wait 3 months, and then he would say yes.  Well, she is still stuck in the 'contract for deed' home, 2 years later.

    With that said, a person should have a prequalification letter from a mortgage broker - preferably a LICENSED BROKER since they have to follow more guidelines and laws than just a banker - prior to looking at a home or submitting an offer for a home.  It should fall onto the mortgage broker or loan officer at that point.  But, even a prequalification letter does not guarantee a loan will be approved - especially with all of the changes we see day-to-day.

    We are all on the same side, and as long as we keep the consumer's rights in mind, we will do well!
    Doug Fugate
    2:11pm • #89

    Lenn...

    Hats off to you!  Someone finally put in print what I have been saying all along.  It's also not the lenders fault when they over promise and under deliver to the buyer and are unable to meet the contract timelines.

    Theresa Geyer
    2:12pm • #90
    1 Featured Post

    AMEN!  I'm writing a similar post but with a different twist as I'm so sick and tired of being blamed for doing what clients wanted us to do - find them a home that they were qualified to purchase at the price that was at market value (and appraised) at that time. 

    My question remains - if these buyers don't absolutely have to move right now out of a property they purchased in the seller's market then they should stay put until their property values go up and they can make a little or at least break even. 

    If they got into an ARM or whatever kind of mortgage and can no longer afford those payments I'm sorry for them, but don't blame us.  I do not ask for my buyer's financial information as many don't want to share it with me as they feel that is what their loan officer is for.  And I agree.
    2:14pm • #91

    Lenn-

    As a mortgage professional I can say that I could not agree with you more.  The media like to always lump loan officers, bans, appraisers, title company and real estate agents into on collective pool and I do think that is unfair to real estate agents.  In fact, most of the shadiest deals that I have heard about involved FSBO transactions, not properties listed with agents.

    Also, you have a very high percentage of mortgages involving cash out refinances and Home Equity loans - where does a realtor get involved with that?

    While there may have been a handful of realtors involved in fraudulent activities here and there, I doubt if you removed everyone of those transactions, that we could even come close to avoiding the situation we are in.

    Luke Allison, Flagstar Bank
    Luke Allison - Loan Officer, Flagstar Bank
    2:14pm • #92

    Lenn,  Thank you for laying it out so beautifully.  It absolutely frosts me when I hear newscasters include realtors in the mix of those guilty for this problem.  I always give my buyers 3 or 4 lenders and let them choose the lender and program they are comfortable with.  It annoys me when I hear agents speak about "their lender" - that si not serving the client and it is also "steering".  I do blame us for some of the incompetent agents we've let loose on the public.  Karen
    2:18pm • #93
    2 Featured Posts

    I can tell you where Realtors share in some responsibility.  SOME Realtors, not all, but many put pressure on loan officers to make deals work.  Many times, back in the subprime craze, I was told if you can't get it done I have someone else that can.  Many loan officers depend on Realtor referrals for their next deal... they couldn't take the chance of their "loyal" real estate agents going elsewhere because they had a ethical problem doing a loan.

    Builders, Realtors and lenders alike must share in the resposibility for the mess we are in today.  I hate to say this, but I find very few Realtors actually care enough to strongly refer all their buyers to a lender they know is ethical. 

    Olan Carder
    www.charlottemortgageonline.com

     
    2:20pm • #94

    Dave Daniels--I applaud your post. We are supposed to be professionals and a discussion is healthy. I am a Mortgage Loan Officer  amazed by the consumer demands of access to financing and if we did not provide it then they would go to the TV /cable advertized lenders to get money.

    We  avoided adjustable rate loans as they seldom made sense. The credit Unions and Banks do not and are not required to provide the same disclosures as brokers. For the most part Mortgage Brokers follow the guidelines and are limited as to what is allowed by the lenders....boy has this changed in the last 6 months...excesses of the past are no more.

    That aside..I respect the role of the realtor in guiding the client to our services. The selection of a provider for financing can be based on more than what the bank or others "give to the agent" in the course of doing business...IE: awards dinner contributions to the Local MLS, affiliate membership in local MLS, Golf tournaments, lunches etc... These donations are acceptable to state licensing bodies but the client seldom is aware of the relationships.

    If the relatonships are driven primarily by the level of competency and competitive pricing the buyer would be better served and the referals for future business would grow. The partnership to the contract to buy is driven by the details and in the future challenging times a few thousand dollars more in the buyers pocket can make or break the deal. So it does matter what the cost of a loan is for the buyer, and support the seller to only enter escrow with a buyer that can perform to contract.

    So please select and work with Mortgage Finance sources who are competitive, treat your clients like family and take the time to fully understand the buyers financial profile and the affordabilty issue will be fully addressed. The lending world as we know it has already changed so a discussion about the excesses is not serving the future needs of ourselves or our limited market of buyers.

    We need to look forward and work to reassure the borrower /buyer that we all certainly care about what for most is the largest financial decision for their familes and future.

    Regards,

    Michael Z.
    Michael Z
    2:21pm • #95
    1 Featured Post

    Lenn, 

    I love your blog posts but I have to disagree with you on this one.  While we have little control, we are responsible for steering our clients away from bad loan products.  The other truth is the public doesn't care.  They lump us all together and resent us when their loans o south. 
    2:23pm • #96

    Aren't we way passed the blame game?????It is greed plain and simple and it is on the backs of everyone in this industry one way or another, small or big.....Move on time....you have industry veterans left on the Realtor and Mortgage side...it is time to bond as Professionals and help each other out thru this tumultous time...It is simply a housing correction....mortgage correction....we have been thru close to this before...I agree on a much stronger note now but we will prevail...Relationship Building is the term of the next 2 years I think and if these relationships get strong they will not be tarnished WHEN not if it comes back....Don;t look back, there is nothing we can do now, Look Forward and with a Positive Note...grab your friends in the industry, prop them up and help each other out....WE CAN MAKE IT!!!!!
    Shelby
    2:25pm • #97
    407,201 Points 74 Featured Posts Outside Blog

    It's not even about who to blame anymore but I'm back on this Lenn...what is interesting is the Realtor(R) gets the call to show a potential buyer properties that they request to see. We try to get as much information to make sure that what they are looking for fits what their needs are and some sort of proof such as a pre qual letter that shows that according to what information they gave their LO or MB or bank that they can purchase for that said amount so normally we might call the LO or the MB or even the bank to make sure the info is correct but generally take them out make the offer and then execute the contract....once all the due dilligence is done on our end I feel it's out of the hands of everyone accept the underwriters..after all how many deals have been held up or pushed back because there isn't a clear to close or they are still waiting for other paperwork.

    And then the waiting game..either it closes or it's not approved...so once it leaves our hands and the only thing we can do is call and hope to get an answer the final answer is usually the underwriters so now it's their decision and they are in control of the deal...the time...the approval or not...the appraisal review....etc. So where would the blame be put if all these loans that are in forclosure now? The answer might be in this comment don't you think? The problem is I keep reading about all these MB's and LO's being arrested..what about the underwriters?
    2:26pm • #98

    I am amazed at the higher than thou attitudes of the real estate agants on this blog. All of sudden, nobody understood the programs except for the demonic mortgage guy. Everyone was a victim.

    The programs were absolutely rediculous and everyone knew that but everyone was  more than happy to take advantage of it and cash the checks. The loan officers you refer to did not create the programs or products that they sold, they sold what products they had available to them.

    The real estate agents that are pointing fingers today are the same realtors that would cut off the referrals to their lending partners the minute someone couldn't get financing. Always having someone in the wings.

    Real Estate Agents, the blame falls squarely on Washington and Wall Street so put away your claws.
    michaelalbanese
    2:29pm • #99
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    We have not always agreed in the past Lenn. 

    You hit the bulls eye on this one

    - My Best:

    Connor
    2:30pm • #100

    I found this and a lot of the comments made to be excellent. As a mortgage professional who has been in the business since 1989 I have seen the best and worse of both sides of the aisle. Thats why in 2004 I decided it was time to teach all my customers the loan process and why we do the things we do and ask for the things we ask for, I allow them to talk to the loan officer, processor and me the manager on any aspect of this business. We even encourage them as well as the Realtors we have relationships with to attend any of our meetings.

    They are instructed how to read the rate sheet and help choose their pricing. Why do this? It's time we in all parts of this business begin to really apply the words customer service. How can you say you service someone who truly does not understand what you're doing. We have a website that they can go to for questions and information or links to information to insure they understand the options available.

    We also connect them and the realtors by email for instant status updates and document requests so that everyone is always on the same page. My customers come back because they trust me not because they need me. When in my opinion more people adopt the informing and instructing your customers then I think everyone agents etc will jhave much smoother if not more effective and efficient transactions.

     

    When you point the finger at someone remember there are three fingers pointing back at you.
    tony alston 1st continental mortgage catonsville
    2:32pm • #101
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    Theresa.  Not meeting deadlines or not delivering has not happened with any of my buyers in 15 years.  Which, of course, is why I'm fiercely loyal to the loan officers I refer buyer to.

    Doug.  That shouldn't happen.  If the buyer doesn't qualify for refinance under a "contract for deed" within the time in the financing contingency, they should just lose their earnest money and let the owner sell to someone else.  I've done a lot of those deals and I do not like them.

    Ed.  I qualify many buyers but only for home search price range.  I do not take loan aps or process loans or approve loans.  That's not my job.

     
    2:35pm • #102

    The agent isn't to blame for the mortgage mess.  The guidlines were way too loose.  The institutions that set the guidlines are to blame, and they are the ones taking the losses now.  Even the loan officers, for the most part, were just following the guidelines.  The guidlines have changed, and once we find a bottom, the real estate market will settle back into a more normal pattern of slow appreciation.  The loans will be good and profitable again for the banks, and the loan officers and real estate agents who survive the crisis will be better off for it.
    Chris
    2:35pm • #103

    Wow, so many comments and so few by loan officers...I'm surprised we're sitting this one out.  So, I'll come to the defense of my fellow brethren...at least to some extent.  I will NOT defend those loan officers who knowingly wrote fraudulent loans, however, the mortgage crisis or mortgage meltdown was not caused by fraudulent loans.  It was caused by irresponsible lending practices, however legitimate at the time.  Do I feel like I bear some of the responsibility?  Actually, yes.  Do I feel that Real Estate Agents bear responsibility as well?  Not in the least, I dont see how you could effect the mortgage transaction.  You do put pressure on us to get loans through for your clients on occasion...but it's part of your job to oversee the entire transaction, right? 

    So, who's too blame?  Not that it makes any difference now, but you have to go back a lot farther on the food chain then the loan officer.  If Wall Street says they will buy loans for people with questionable credit and no money in the bank for zero down payment, then lenders are going to start offering those loans.  When the lender offers them, knowing that they will be able to sell them off, then we as loan officers start offering them to our client, your clients as well, I might add.  And by being able to offer those loans, we felt like we were performing a service, both to you and to the buyer, by being able to approve loans and offer home ownership options to those formerly unable to qualify.  And while hindsight may be 20/20, there was no ill intent by any party.  And the blame game at this point is as petty as it is useless. 

    Anyway, I'm sure I could go on and on but the fact is...I love Real Estate agents, most of you anyway, and I know that this has effected you almost as it has effected us.  Fear not, you are absolved of blame as far as me, and most loan officers I know.  Good luck too us all moving forward.

    Chad McDowell, Fidelity Financial Group
    Chad McDowell
    2:40pm • #104

    I have not read all posts, but let's just get down to where the money comes form for a mortgage and who does what in the process.

    Loan Officer works either for broker or lender much as a RE agent works for their broker in charge.  Mortgage broker is the "retailer" of wholesale lenders.  Lenders sell "product" or loans to Investors- usually on Wall Street.  Don't care what state your in it's all the same.

    Loan Officers don't submit files that don't meet guidelines of lenders.  Lenders don't approve loans that don't meet guidelines of investors.  Investors set the guidelines to approve loans and the rates they are willing to accept to make the loans.  Riskier guideline= higher raturn on investment or higher rate.  I don't see how a loan officer, regardless of who they work for or a broker can have any resposibility except if they committed fraud--lied on application-  to get file approved.

    As loan officers we are told by lenders through their underwriting guidelines to bring them a borrower that meets X,Y, or Z criteria and we'll approve the loan.  I don't see how a Loan Officer or RE Agent has any responsibility if they in good faith bring that lender and the borrower they are targeting together.  What did we do but bring a person looking for a loan together with an institution looking to lend money.

    Bottom line is how can investors or banks who held loans on their books blame anyone but themselves when they made the rules?

     

     

     

     

     
    2:40pm • #105

    Oh PLEASE!!  I'm a broker in 3 states and used to be a RE branch manager. 

    We have to take our share of the blame along with everyone else.  If you were using a loan officer that was denying loans to your buyers - that you took to other loan officer that got them closed, how many more buyers did you send your buyers to the honorable loan officer?

    Many RE agents stick their heads in the sand (or other places) don't qualify their buyers themselves, just send them out to get pre-approved/qualified by a  loan originator - who armed with stated income/assessts and low/no doc loans just put down on the app what it took to get qualified and the loans went through. 

    AT THE TIME, buyers didn't care because they got their house, sellers didn't care because they got their money, agents didn't care as they too got their money. 

    Now the market tuned, AS IT ALWAYS DOES, and we Americans are never at fault.  So buyers blame everyone, realtors-loan officers-underwriters, lenders, lenders blame investors, and investors blame buyers and around we go.  And the originator of this thread blames someone else.  This isn't the first time for this - remember the S&L crisis?  Stupid lending practices, same outcome.

    It doesn't matter who is at fault, it doesn't really matter how we got here (other than trying to learn from past mistakes) - the fact is we are here and now we need first to cope and then to fix and get past it.  And that will happen.  Yes there will be pain, there will be a MASSIVE reduction in paper wealth, but it will seek and find equilibrium.

    And for a bit of good news, I saw last week that housing starts were at their lowest level in 17 years  -  YIPPEE.  The market is adjusting, excess inventory will have a chance to be absorbed and along we roll.
    Garyods
    2:43pm • #106
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    Artie.

    Bottom line is how can investors or banks who held loans on their books blame anyone but themselves when they made the rules?

    BINGO!
    2:44pm • #107

    This may be one of the most irresponsible blogs/articles I've read in sometime?  To point the proverbial finger at any one distinct reason for the current situation is ridiculous.  We are in an extremely complex financial and credit downturn, the magnitude that has never been seen before in our country's history.  This type of finger pointing rhetoric only feeds the fire so to speak.

    Furthermore your comment, "In all the years I've been selling real estate, I've never known a loan officer who couldn't say "NO"." is comical as well.  Did we forget who got paid upwards of 6% commission on all the "approvals" mortgage companies doled out.  That's right the Realtor.  And in all the years I've been helping people buy homes I can't remember any Realtor asking me, "Are you sure they can afford this home?" or "let me sell this home a little cheaper so they can afford it".

    Shame on you and all the so called "professionals" that agree with you!
    Daniel Guest-Distric Manager GMAC
    2:44pm • #108

    BRAVO Lenn.  I agree whole heartedly and it is nice to see someone clear the name of real estate agents.  I have never approved a loan while I have been a REALTOR, I have never determined who qualifies for how much.  All I can do is educate buyers to do their research and check more than one funding source.

    At this point, what is done is done.  I'd like to see what we can do in the future to make sure this doesn't happen to this extreme again.

    Kathy Fowler
    HomeSellers Real Estate, LLC
    Enid, OK
    www.EnidHomeSellers.com
    Kathy@EnidHomeSellers.com
    Kathy Fowler
    2:48pm • #109
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    Garyods

    I believe that it does matter who is the focus of the investigations, modifications to guidelines and execution of where the market goes. 

    If the regulators simply take the easy way out and say "everyone in the real estate and financial industry was at fault", they won't fix the mess because they'll be focusing on segments if the housing industry that have no authority or power, agents.  Agents always get the heat from the consumer because we're in the front if the firing line.  Consumers don't blame the loan officers or the underwriters or the regulators or anyone because they don't speak the language. 

    Realtors didn't cause the mess and the focus should be where it belongs. 

     

     
    2:51pm • #110
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    Thank you Lenn!  You said everything I've been thinking, and you put it better than I could have.  Great post.
    2:51pm • #111

    I think everyone could shoulder some blame then, but we all got blamed now as "we the people" have to pay for it.
    2:52pm • #112

    Good article but unfortunately a number of real estate agents directed a number of buyers to mortgage brokers and banks that offered unrealistic mortgage programs.  Good or bad, real estate people will be thrown into the mix as being part of the problem.

    JD.

     
    John Duffner
    2:52pm • #113

    I couldn't agree with this article more.  However, it is a requirement for agents, at least in Alabama, to provide buyer's and seller's with a net sheet (in other words, a good faith estimate).  I am adamantly opposed to this because it is the lenders responsibility to provide the net sheet.  As agents, we have no idea of what the terms of their loan are.  Furthermore, since we are not privy to the consumer's credit report, how in the world can we provide a net sheet when we don't know what interest rate their credit scrores warrants?

    When completing a net sheet, I explain to my buyers and sellers that agents are forced to prepare this document even though we have no knowledge of the terms of their loan.  I advise them that they should rely on the GFE given to them by their loan officer or the HUD-1 provided by the lender.

    The net sheet provided by the agent is a constant source of confusion, particularly when a buyer or seller is having resmorse and needs an excuse to back out of the deal.
    Buyer's & Seller's Net Sheet
    2:54pm • #114

    I'll probably be sorry for this but here goes:

    As an appraiser, I have a slightly different take on things.  In the hierarchy of responsibility for the whole housing meltdown crisis, real estate agents (some, anyway) certainly do bear some responsibility --- as do (some) appraisers.  However, from what I've seen, we're at the very bottom of the blame totem pole.  Ahead of us most prominently are mortgage brokers, lenders' AEs, the lenders themselves, Wall Street, government regulators and Alan Greenspan.

    But to pretend that real estate agents were pure as the driven snow is ludicrous.  My experience with most mortgage brokers and loan officers was one in which I was expected to "hit the number" and/or ignore and not mention obvious defects of the properties.  When I didn't play the no-ethics ballgame, I was effectively fired.  There was rarely a grand announcement (although, sometimes there was), just a phone and a fax that never rang again with that client's business.  Mortgage brokers experienced the same from many agents.

    Now, we can play the game of "You can just say 'No,'" but many mortgage brokers who want to do the right thing know they'll get the same treatment from their agent clients that I got from the MBs --- when we say "No," agents say, "See you later!"  Of course, I know not to indict the whole agent population, but let's get serious here.

    It all comes back to "Follow the money."  When commissioned people are allowed to choose the professionals whose decisions directly affect their paychecks, they'll seek out the people they can control.  That's human nature.  Now, I don't know how an honest mortgage broker would answer as to how frequently they are pressured by agents, but as an appraiser, I can tell you that the kind of coercion I described above was the rule, not the exception.  In seven years of appraising and many, many mortgage broker clients, there are two --- 2 ---who let me do my job without any pressure or whining or implied threats.

    So, we can say, "Just say no," but we all know that if the service provider says that, many agents will just take their business elsewhere.  However, now that credit is so difficult to secure and most mortgage brokers have disappeared, that practice will become harder and harder.

    A couple of anecdotes:

    1) I appraised a home last year for a woman who wanted to refi but her lender told her the AVM (automated valuation model) said her home was worth a few tens of thousands of dollars less than she'd paid just two years before (July, 2005).  In this case, the AVM was pretty accurate.  Needless to say, the homeowner was very upset.  She blamed the seller, the seller's agent, the appraiser --- but oddly, not her own buyer's agent (who, by the way, was telling her that the home was still worth in May, 2207 what she paid for it in 2005 --- BS! I thought to myself).  I took a retrospective look at the comps for the period when she bought the home --- for a home that size and age (which are the norm for this part of town), she paid the second highest price from March to October of 2005.  Her home had been nicely renovated prior to sale, but nothing spectacular.  Nothing about her home was outstanding compared to others available.  So here's my question, for the thousands of dollars that the buyer's agent was paid on this deal (easily over $5,000), would it have been too much to expect that she'd run her own CMA?  I mean I was paid much less than 1/10th of that amount and I produced a lot more detail.  I didn't have access to any data that the agent didn't have, yet it was immediately glaringly obvious that the subject property was priced way too high.  I'm sorry, but I think the agent had some responsibility to protect her buyer.  And this was a well known, experienced agent in town.

    2) I co-hosted a broker happy hour about a year ago.  I was asked to provide a $50 gift card as a door prize and in return would be introduced and allowed time to speak.  After that, I was personally introduced to an agent described by the main hostess as the Number One, most productive agent she worked with.  First thing out of his mouth when I introduced myself as an appraiser was, "Oh, I have the best appraiser --- hits the number everytime!"  So, there's an appraiser who's obviously not saying no, but can you see that the agent has made it clear that he holds the guy's livelihood in his hands?

    No responsibility at all?  C'mon now!

    Okay, now with all that said --- I love, love, love real estate agents.  Used to be one.  I just want us all to realize that we can be part of the solution to this horror if we'll acknowledge that there are bad actors in our own professions.  When we pretend otherwise, we give the bad guys cover and continue to let them take food off our tables while they line their own pockets breaking rules that we're trying to follow.

    Just sayin'..............
    Alison Swain
    2:55pm • #115

    Whoa!  While I agree, passing the buck is not a good move, as a mortgage lender..and as a mortgage lender that takes his job and responsibilities seriously, I just want to say that you can't blame all loan officers and lenders.  There are some ethical and honest loan officers out there.  While I could have made a much better living over the last 11 years, I chose to be able to sleep at night and not be afraid of running into my past clients when I am out and about.  I also have geared my business so that any client I have these days is strictly a referral.

    While I won't blame the Realtors, I will say that there were several over the years that told me that they would not refer business to me because I turned people down for a mortgage that they couldn't afford or shouldn't be getting.  Then..they took them elsewhere and some other lender stuck them in an option arm, or a non-conforming loan with no escrows, or something else that most likely put them into a foreclosure by now.

    In fact, I have even had a Realtor call me f---ing incompetent, because her borrowers with scores in the low 500's and on temporary disability were turned down for 100% financing.  She took them somewhere else and promised to do all she could to keep her fellow agents from working with me.

    Luckily...there weren't a lot of agents like her.  And...regardless...I can sleep at night and am comfortable meeting any one of my past clients on the street!

     

    Jim Burrington
    2:57pm • #116
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    Wow, that last comment was really hostle...I recently attended a foreclosure seminar thru my local board.  We were told to attend the pre-qualification meeting and mortgage application with the buyers so there was no misunderstanding on whether or not the buyer could afford and qualify for the loan.  We were also told that the mortgage reps make a lot or money on the loans, more than an agent makes on a commission.  Most commissions are not 6% they are 3% for one side of the sale.  Most traditional companies then split the 3% 50-50 with other fees, desk, advertising, etc.  If the mortgage reps do not make the money, then why do they "court" the agents for business.  They know where their bread is buttered.
    2:58pm • #117
    407,201 Points 74 Featured Posts Outside Blog

    I'm mostly on the listing end working with the sellers but an answer to the question "Are you sure they can afford this home?" I can't answer for the buyers agent on the other end.

    But when I am on that end ....Yes I have actually asked that question ...when I see things struggling to move along..I'll question the other agent wondering if they really can if I see issues come up or stalling after telling us that there will be no problems. Selling a cheaper home? Any educated buyer will ask to see comps to support what they want to offer and if they choose the "cheaper home" then I would think the agent would submit the offer on whichever they were told to by the buyer.
    3:00pm • #118
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    Buyer's & Seller's Net Sheet

    Very interesting.  Agents provided Seller's Net sheet in Northern Virginia many years ago, but not for some years.  Once we got to buyer's agent, the listing agent provides the net sheet and the buyer's agent does one for the buyer. 

    I always do one just so I know that my buyers are going to have funds to close.  In fact, I do a net sheet as my buyer is completing a financial sheet. 

    You'd be surprised when I show folks how much cash they are going to need how their plans can change.  Same with the financial sheet they fill out.  When I see what their assets and liabilities are, I can often show them how they don't come near qualifying for the price range they wanted.  Those folks don't even get to the loan officer. 

    Now when that buyer has already worked with a loan officer and is already "pre-approved", they're going to believe that they are, whether they are or not.

     
    3:03pm • #119

    REALLY??? You realy think real estate agents play no part in the demise of the market and in this crucial time in our history??  With all due respect, i think you are mistaken.  As a loan officer, I value my customers and want them to return to me when the time is right.  I have ran across many a real estate agent that will purposely  show my client a home that is priced double what they could afford and when they knew what the clients limit was!!!  This happened more frequently when the stated programs were allowed with no proof at all of income.  I talked most of my clients out of the homes they could not afford.  So you see many realtors are to blame as well for being greedy when they in fact knew a client could not afford a home yet showed it to them anyway hoping to double their commision with total disregard for the clients ability to repay the loan.
    valemmons@aol.com
    3:03pm • #120
    2 Featured Posts

    Very interesting that most of the posts that disagree with this blog (except for mine and a few others) are from outside of the Active Rain network, makes you wonder if people are afraid to voice their real opinions here.

    I don't believe that anyone segment is to blame BUT to exempt all the realtors and fault all the loan officers is absurd.  Furthermore, you can't really argue that most Realtors don't understand the loan process and then demonstrate in previous blogs that your understanding of front and back end debt ratios and affordability rivals anyone in the mortgage industry.  In both industries there are people with more experience than others and I would bet some real estate agents could teach some loan officers a thing or two. 

    As far as education and licensing is concerened, what do you think the requirements are to be a loan officer?  In most states THERE IS NONE!  The only person required to be licensed is the broker or lender, not the loan officers who work there.   Now what are the educational/training requirements to sell real estate? 
    3:06pm • #121

    Did RE agents reign back on sellers listing prices because they were too high?  Did RE agents refuse to do business with flippers?

    When your commission is based on the size of the deal the bigger the better, sell the house and move on to the next.  It is the nature of the beast.  Pay a cabbie 50 cents a mile and he can make $15 going 30 MPH or $30 going 60 MPH or $45 going 90 MPH, fasten your seatbelts.

    Pointing the blame to MB's and LO's is lame, in this business it all goes hand in hand.  Did you pick your MB/LO on their integrity or the ability to get the deal done no matter what it takes?  Would you ever ever ever take another client to a MB/LO who sat a client down and told them they could get the mortgage but that they really can't afford it and to look for a less expensive home?  I think not.
    3:07pm • #122
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    Lenn, I completely agree and can say that I have had first hand experience with an unscrupulous loan officer.  We took the right steps, my clients went and got pre-approved FIRST, then we looked at homes, and then they purchased one based upon their "pre-approval", not pre-qual, but actual pre-approval.  Needless to say as lending standards have tightened, the loan was kicked out by the underwriter as these clients were not out of bankruptcy for more than two years.  He told us that he would "farm it out to a different investor" not to worry as the clients are pre-approved.  They moved into the house based on his word.  The loan officer then "farmed it out" and the file was rejected again, only this time by his Vice-President and he was terminated.  So my take on this whole thing, is that he knew exactly was he was doing, committing loan fraud to get this unqualified buyer approved anyway, and got caught.  In the meantime, he harmed my client costing them their earnest funds, the seller in a declining market, as well as the other parites involved doing all the work on the file for nothing.  Cound't agree more, Stop blaming the REALTORS!   
    3:11pm • #123

    when mortgage lenders stopped underwriting their loans they set the ball in motion for everything that is happening to them now.

    when wall street bought truckloads of the junk loans they made their own bed.

    it didn't take a rocket scientist to see the predictable outcome of the 100% LTV, stated income/stated assets loan for folks who were in fact not self employed.  so YES, there is culpability on the part of agents.  i was witness to dirty deeds done by agents, in collusion with their crooked lapdog loan officer, as the clients were butchered by their agents. 

    i can name a dozen names of agents who are directly responsible for ruining their clients financially by encouraging their purchases...there are entire brokerages here in north county that preyed on hispanic buyers.
    mike ford, EncinitasHomes.com, san diego calif
    3:16pm • #124

    IT STARTED AT THE TOP TRUE ENOUGH BUT WE AS SO CALLED REALTORS DID HAVE AN OBLIGATION TO QUESTION WHAT WAS GOING ON AS WELL AS STEP BACK AND STEP AWAY FROM MANY OF THE DEALS . ITS NOT A MATTER OF FINGER POINTING . IF THE SHOE FITS TIE IT AND TIE IT TIGHT .  MY BEST FRIEND BOUGHT A HOME THAT WOULD HAVE NETTED ME A VERY BEAUTIFUL COMMISSION BUT BECAUSE I FELT AND BELIEVED SO STRONGLY IN WHAT I PREACHED I WALKED AWAY FROM THE DEAL . I KNEW THAT IT WAS GOING TO END UP IN FORECLOSURE AND GUESS WHAT I WAS RIGHT 100% OF THE TIME WITH EVERY DEAL I WALKED AWAY FROM . MONEY WAS NOT AND IS NOT EVERYTHING TO ME . GOD WILL PROVIDE WHEN YOU DO THE RIGHT THING . AND JUST BECAUSE THE BUYER WANTED TO DO SOMETHING THAT WAS NOT IN THEIR BEST  INTEREST DID NOT MEAN THAT AS REALTOR YOU GO AGAINST THE GRAIN AND STAND BY THEIR SIDE AND WALK WITH THEM THROUGH THE FIRE . IF YOU WERE ONE OF THOSE REALTORS THAT KNEW THAT YOUR CLIENT MAKING $50K A YEAR COULD NOT REALLY AFFORD THAT $$300K MORTGAGE PLEASE TELL ME WHY YOU WROTE THE DEAL UP ANYWAY ? MANY OF MY FELLOW REALTORS HAVE CALLED ME CRAZY BUT THEY ARE STRUGGLING TO MAKE ENDS MEET NOW BECAUSE GUESS WHAT ? IT WAS ALL ABOUT THE MONEY TO THEM AND NOT ABOUT THE PEOPLE THEY WERE SUPPOSED TO PROTECT . YOU SEE SELLING REAL ESTATE IS MORE THAN JUST SELLING REAL ESTATE . YOUR ALSO SELLING YOURSELF. HMMM . THATS SOMETHING TO THINK ABOUT . 
    RACHEL B
    3:18pm • #125
    568,998 Points 59 Featured Posts Outside Blog

    Lenn, I think you make an excellent point that the real estate agent's business is NOT to approve loans NO MATTER who else thinks so. How we got so out of whack with this comprehension is beyond me. I have the Title companies or the lenders do the net sheets now because I want the right numbers and not estimates.
    3:18pm • #126

    I happen to hold a real estate sales license in NJ and run my own real estate appraisal company. I know what they are trying to do, that is push the blame on someone other then who is actually responsible.

    They are saying that real estate agents influenced the appraisers to appraise properties for more then what they are worth or that the agent sold a buyer a house for more then what they could afford. To that I say is a bunch of .... In my 20 years of appraising I never had a real estate agent influence me to appraise a house for something other then what was supported by comparable sales in the area. Yes, there are real estate agents that want to be helpful and give the appraiser comps, and some of the comps may not be comparable, but those sales don't get used in the appraisal. The appraiser always does his/her research to find the best sales. That is if they did their job right.

    If real estate agents don't know this already, Attorney General Cuomo of NY is trying to pass the HVCC law which will affect how appraisals are ordered and who can speak with the appraiser. The law stemmed from a deal he made to stop his investigation. The appraisal and banking associations are opposed to this law as it is written now. Although the HVCC has good intentions, it will not solve the problem, in fact I and many others foresee additional new, more severe problems. Do you want your sales appraised by inexperienced, unknowledgable or unsupervised appraisers hired by AMC's (Appraising Management Companies) or the value derived from AVM's (Automated Valuation Models)? I know I wouldn't.

    The root of the problem is the loan officers, mortgage brokers and lending institutions. As an appraiser I would get calls from loan officers asking if a property is worth "x" amount of money before seeing the property. They say "Can you do a comp check on this for me?" I still get these calls. How can I or any appraiser or real estate professional say what a house is worth before seeing it. There are too many factors that affect value. They say they don't want to have to have the borrower pay for an appraisal if the value is not there, and when they deny the loan they are afraind they are the ones that will look bad. Then there were the loan officers that after you do the appraisal they ask the appraiser if they can support even higher values. Because the higher the value, the more money they can lend and the more commission they make.

    Since loan officers are not licensed and have no consequences for when they do something unethical, what do they have to lose? If the loan defaults, they already made thousands of dollars in fees and commissions. They just blame it on the appraiser who over appraised the house and the real estate agent who must have sold a buyer something they could not really afford.

    NJ passed a preditory lending law a couple of years ago which they thought would stop mortgage companies from praying on people to refi over and over again in short periods of time. Well I know that didn't work either as all the loan officer does is state on the application why it would be benifical for the borrower to refi. Did you also know that many of the big mortgage companies would have compitions between offices and within each individual offce to see who closed the most loans or had the highest dollar volume and those loan officers and office managers would get bonuses? I bet Attorney General Cuomo doesn't know that.

    So why aren't loan officers and mortgage brokers and lenders licensed? Why are they not held up to the same ethics, professional standards and educational requirement that licensed real estate agents and licensed appraisers are held up to by law?

    Realtors and appraisers are not the problem. If they want to fix the problem, why dont they go after the cause of the problem?
    3:24pm • #127

    Daniel Guest nailed it right on the head. 
    Marcus H.
    3:24pm • #128

    I can't believe I've actually made it all the way through all of these comments...but I did and so I add my own...  23 years as a mortgage loan originator, and have worked for banks, S&L's, mortgage banks and mortgage broker, so I've seen my business from all angles over the years.  I also spent 10 of those years in metro Atlanta, but for the most part - live and worked in Northern CA - the Bay Area. 

    That last is very important.  Note Lenn:  the business is done very differently in different parts of the country, among states, and even in differing counties.  It's not a surprise to me that this blog was a response to a post by another northern CA mortgage lender.  And not surprising that a realtor from the east coast reacted this way.  Having been in the business in two unique parts of the country - it's easy for me to see that, and to understand how it can be so hard to relate.

    As you read the comments - not many from northern CA.  Here's what happened (still does) in our neck of the woods:  Real Estate companies OFTEN combined real estate selling and mortgage lending.  Builders?  Ditto.  Of the top 10 foreclosure areas in the US - more then half are in CA.  Those cities had lots of brand new subdivisions where most of the loans were done by the builders' mortgage company.  Mostly ghost towns now.  So the perspective of real estate agents doing loans is the norm here.  Not all realtors, but lots of them.  That goes a long way toward explaining how it would look so different in your world Lenn then in AJ's (and my world). 

    Other difference in CA - it used to be that you had to have a real estate sales license to originate mortgages, unless you were a bank employee.  And then they created the CA Dept of Corporations license.  If a company had that - they could hire anyone to be a loan officer, with no training and no regulation.  Several large real estate, and non real estate, companies created Boiler Room operations selling mortgages under that umbrella. 

    With all that being said - the real estate/mortgage crisis is only a part of the collapse of the global financial markets.  What small part it may have played was blown up by FEAR and became gasoline on the fire that now provides its own fuel.  There are so many pieces of the puzzle - its impossible to separate them all.  And this post is long enough already - but suffice it to say that bad loans were just one little piece (and not even a corner or an edge) of the Credit Crisis Jigsaw Puzzle.  The presence of opportunists and thiefs at every point of contact to the consumers (including some consumers) is not even a disputed fact at this late stage of the story.  Its also indisputable that not everyone was a bad guy.  You do have to follow the money - but you have to follow it higher and further then just real estate and mortgage origination.  Think I'll just write a blog and tell what I have learned.
    3:29pm • #129

    Let's get something straight.  Loan officers DO NOT approve or deny clients a mortgage. If loan officers made the decision, EVERYBODY would get approved.  Loan officers submit a package to an underwriter at a bank who makes the decision.  The underwriter is in a different office, sometimes in a different state and quite often is from another planet. My job is to gather all the information, pay stubs, bank statements, get the appraisal and ship it all off to the bank for review.  The underwriter's job is to comb through the file and look for reasons NOT to approve the loan.  If they approve it, they usually give conditions (things that need further verification) that I have to get and forward on to the underwriter.

    What governs the underwriter's decisions?  The investor who has promised to purchse the loan on the secondary market.  You wouldn't get an approval if somebody out there was willing to purchase the loan and its unique circumstances. My job is to find a bank that has a program that fits my client at the best rate possible and get it approved.

    What is the Realtor's part?  Clearly, the Realtor doesn't have anything to do with the loan process.  The complicity is more subtle.  How do I get to work with a great Realtor?  They give me a loan that couldn't be done by their "normal" lender...something that  usually needs a miracle to get done.  If I can pull it off, maybe I might get a referral to a better client, depending on how I do.  If I get the loan done, I'm a hero.  If the client goes into foreclosure later, I am a predatory lender.

    Or, how about giving you a preapproval  for say, $150k and when we get the contract, it's for $165k and has  HOA dues of $200.  Had that happen quite often.  Now if I don't find a way to go, I'm the heel.  You never remember that when they default a year later. 

    "All a mortgage loan officer has to do is say no..."  This just shows lack of knowledge about a lender's capacity.  In fact, it is against the law for me to turn down a loan based on what the application says. If I do, I can be sued for any number of reasons.  The application asks specific questions about race and gender just to make sure my business practices are fair to all applicants. I must submit a loan at an applicant's request to be underwritten even if I am sure his recent parole for bank fraud and the house arrest ankle bracelet with that annoying chirp will probably disqualify him.  I am under the same scrutiny as a landlord taking applications from prospective tenants.  We walk very cautiously through this minefield.

    Let's try this.  Suppose I contacted a Realtor about a referred client and said this, "I got this client approved but just barely.  I have doubts about their ability to maintain their payment. I'll leave it up to you to decide whether or not to have me draw the docs..."  Would all the Realtors who would pass this up and say don't close the deal, please raise your hands?  (Long pause).  I didn't think so.
    Buzz Boule
    3:34pm • #130

    Lenn: I love this sentence: "Agents have their job and loan officers have their job." That is the way it should be, but here in California not only must lenders hold a real estate license, but they often set up one stop shops where the same agent finds the property for the buyer, negotiates the sale, and also finds the loan for the buyer. They act as both real estate agent AND loan officer at the same time. Just because it is legal does not make it right. In most of the transactions I have had with these one stop operations I have found that they tend to be seriously deficient in one or the other area. Personally I don't want to get involved in the lending business. Selling real estate is complicated enough. It would be like having two full time jobs and trying to be an expert at both. But that doesn't mean that I live in a vacuum either. I need to know the financing arrangements before I write the offer, and I have more than once seriously questioned a buyer (and the buyer's oan officer) when I saw what they were proposing. We are all responsible to some extent.

    Lynne Mercer
    3:41pm • #131

    This thread is gonna be a barn-burner.................

    LOL
    3:49pm • #132
    260,576 Points 59 Featured Posts Outside Blog

    Wow, great discussion & debate thus far.  Bottom line for me, it's time to find & provide solutions... one step at a time.  While it certainly is fruitful to find where mistakes were made and blame should be assessed to avoid anything of this nature ever occurring again, we have a responsibility to help turn this cycle around.  In the end, in my opinion, it will start and end with each and every Real Estate Professional in all areas of transactions.
    3:51pm • #133
    260,576 Points 59 Featured Posts Outside Blog

    It's already pretty much there @ Alison:)

     

    *lovi-lovi* is my graphic.  See folks, that's a sign!  We need more love in the Real Estate Profession:-)
    3:53pm • #134
    156,279 Points 7 Featured Posts Outside Blog

    In certain areas of the Country only the banks will be able to get the market turned around. We never before had such an amazing amount of over building based in large part on bad banking practices.
    3:58pm • #135

    If the programs weren't out there some wouldn't have gotten a loan.  The loan officers acted on the consumers wishes to get them a loan because the consumers thought they could qualify.  Lo and behold they did!  But the reasons behind it are somewhat blurry.  The no doc loans were written on the strength of a credit score and nothing more really.  These loans work for those that have high assets and no job or a pension or cash business, for instance.  I know I didn't want my full financial documentation getting around, it was great for me.  But take a person whom has great credit and they are coerced into buying a property for someone else or multiple cash flowing properties based on the credit alone and no disclosure of what the right hand is doing... well that's a different story.  They didn't know what they were getting into & someone knew exactly what they were doing and we can still call them professionals to this day.

    Where I lose track of the investors and lenders responsibility is the industries disconnect in keeping good records.  An example, Title companies could have placed a 30 day hold on title commitments being pulled- this way some of the fraud I've seen couldn't have closed, the same home, on the same day, 7 times over!  Ask any title company employee and I'd have to guess that someone must have noticed multiple pulls and probably said something but as long as it's not against the law, it's legal and was explained away.

    Word to the mortgage backed bond investors that are letting short sales go into foreclosure- YOU  GENTLEMEN, could have gotten your money and stopped the rapid depreciation of your own assets by NEGOTIATING for those that were originally qualified to stay in their homes.  Forcing a smaller percentage of homes to go on the market and holding pricing up better for those of us that weren't planning on staying in our homes until the next real estate boom.  But since you understand time value of money so well and not real estate markets or underwriting loan files-I'd have to put in a vote for excerbating the loan crisis as the investors and shooting your own feet in the process whilst the lenders that drew up the contracts for these huge increases in interest rates -sat tied up by their contractual toes helplessly waiting for someone like the government to bail them out.

    the old adage- just because your friend jumps off a cliff's edge doesn't mean you have to do it too!  When a deal defies logic, it seems that it's time to reassess the situation and  it's merits and pitfalls.  hum.

    PS- the only thing wrong with some professionals is that they didn't know enough to help their clients because their clients didn't know enough to ask for professionals that actually knew about advising them on matters of financing, etc. (that basket includes everybody that sat at the closing table and didn't open their mouths- even though they were making a killing in fees - ie- represent the buyers and sellers interests and advise of potential pitfalls using their previous experience). 

    I think older professionals realize the importance of using a seasoned professional- so no wonder professionals got a bad rap across the board. 

    Someone trivialized the process of purchasing a home and paid the least qualified representatives to help them. Choosing their new atty., new loan officer/realtor to close their deal for them based on factors like price and likability/friendship not experience and what they brought to the table like past performance and track record.  As usual you may get what you pay for but isn't it better to get an assurance of a better result if you make sure before you pay for it that others have gotten great results too? 

    Forgive me for saying it this way but one should choose their financial investment professionals they surround themelves with better than they select their brand of toilet tissue.
    lisa c
    3:58pm • #136
    pointing fingers is the ONLY thing that will cause this problem to become permanently rectified. it might be PC to say "let's work on solutions" but that's BS...there are guilty parties and they need to be prosecuted or defrocked and sent packing as the dishonest fraudsters they are. here's a fun fact...i just interrupted this posting to take a call from an appraiser. she has 25 years in the trade. i asked her what percentage of REAL ESTATE AGENTS leaned on her to support their sales contracts...she said 99%. 99% of the contract writers and listing agents were willing to ask the appraiser to compromise her license to suit their needs. NICE! so say what you want the problem of unqualified persons buying homes they could not afford is equally shared by the buyers themselves, the realty trade, the appraisal trade and the lenders. throw your hands up and disown this problem all you want...the fact remains that the real estate trade attracts a tremendous number of persons who are of zero moral's and ethics and many of whom couldn't find their a$$ with two hands. they may not be participating in forums such as this but they are out there and their stink gets on all of us. this will not change until we get some meaningful pre-licensing educational requirements and some professional associations who bounce the worst of us as the hacks they are.
    3:59pm • #137
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