This blog entry was originated by Lenn Harley of Rockville, Maryland, and she gave me permission to post it here today. I thought it a worthwhile read. I am following shortly with my own reflections and take on the backing that Freddie Mac and Fannie Mae have been assured by their sponsor, the Federal Government.
____________________________________________________________________________
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.
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".
Copyright 2008 Lenn Harley / http://www.homefinders.com
Comments (0)Subscribe to CommentsComment