Time Wasters and Heart Breakers: The End of Loans That Blow Up?

Hey Janet, Wow I am glad you decided to keep this post what an insight. Didn't realize that there was an extra charge to the banks for re-locking loans. Great info!

A net of zero.  Lenders we work with are on top of the markets and warn well in advance the possibilities of upcoming changes and what back up route needs to be looked at.........

Janet - See that...we don't know for sure until that darn appraisal comes in. I spoke too soon, though. Yesterday I had my first low appraised value. A property in Ventura County that came in $100,000+ lower than estimated on a tough property in an area of custom homes where there haven't been many sales. Loan will still work, but I got to go back and quote additional "risk based pricing" due to a higher LTV. I'm so glad I have the trust level I have with my clients!

P.S. I have to thank you for this post, which was fresh in my mind when I opened up that report, and helped me stay more level-headed about it!

Janet... I guess I am a little confused by your post...  and I am with Rob Rauf... in my 16 years, the majority of loans that I see fall out are because the loan officer just was lazy, lied, didn't know what they were doing, took a risk and threw the loan up against the wall hoping that it would stick... BUT, told the buyer and realtor that everything was okay. The number 1 thing a loan officer should do is set the clients expectations and should enforce communication from the get go.

As Robert said, yes, you will have some deals die because of title or appraisal issues, but again, in my 16 years, this is a very low amount. Your post makes it sound like this is a large reason, which means in many cases.."most", not "few".

In regards to busy now and not taking on the difficult loans because loan officers are busy with refinances?  Poor management in my opinion... time management. I still work on the hard purchases and will exhaust all resources and creative thinking ideas until there is none... and I make everyone aware of this before they go out and look for a home. If I am unsure, everyone knows. If I know I can do it, even if it's hard, I tell everyone. And the main reason to becoming successful in a great closing ratio is if you aren't sure, you ask your underwriters.

In regards to things and guidelines changing so quickly... I think this is more of an excuse used for loan officers when a deal goes south, that in many cases shouldn't have been originated to begin with. That is what I have seen when doing my research on a client that was turned down last minute. And if not, it was just because the loan officer didn't know what they were doing with credit or income.

In regards to appraisals and appraisal fees... refinances or purchases, 98% of the time I have the borrower pay for this upfront. On a purchase, I put the weight on the realtors involved who should have done their homework and comp checks. On refinances, I have the appraiser pull comps before I order an appraisal, 100% of the time...  that alone should cut down in most cases when value was told to be lower than what was needed. It's called doing your homework up front. And if the appraiser won't do this, you find another one.... and any smart appraiser that I use, if they see an issue as they are pulling comps, they will let me know ahead of time. Most appraisers that I know, pull comps before they go to the job anyhow.

In regards to the rate issues, people going some where else. In many states, you are allowed to collect lock-in fees.  If you are afraid to scare your client off by collecting this, then that loan officer is not educating the borrower upfront in the ramifications to the lender... and how the whole lock and float thing works. If you are confident in what you do and good at it, you can collect these such fees. I just collected another lock-in fee on a refinance two days ago. And yes, many lenders have come out with guidelines of negotiating lower rates and giving part of the lower rate to the borrower so nobody loses out.

In regards to the lenders and underwriters making it more difficult?  It comes down to a basic understanding that the lender is at great risk when buying loans from brokers, especially more now than ever before. With us, being a mid-sized banker, we carry that risk until the investor buys it off of our warehouse line, which is about 15 days after the actual closing.  We have to get them the full package for post closing, after we send them the package after closing.

Lastly... in regards to not underwriting before that lender gets title and or the appraisal?   We underwrite, full underwrite if we have a full file without the appraisal and or the title report. Or, if we get the appraisal in before the rest of the file is ready for underwriting, the appraisal is still sent to underwriting. All of this is called being proactive. And in regards to deals falling apart.. I will say this again.. I believe the majority of the time is because the loan officer just didn't do their due dilligence.  Here is a great example..

Jason Crouch had a deal that was approved by the loan officer..so the loan officer said...  even if the loan officer pre-qualified the client, it should have never gone as far as the buyers putting a contract in. Here is why... the buyer was self-employed.... I think for 1 1/2 years. The loan officer never went into details with his questions ... and the biggest mistake?  Never reviewed the tax returns before he issues his pre-qual letter or approval. This kind of stuff in my opinion is why more loans don't close at the last minute. Loan officers not knowing the guidelines.. or even a guideline that changed 6 months ago, but then the underwriter says no because of a past change. Yet the loan officer blames it on a change that just took place. 

In any case, these are my opinions... and this is not just from doing business in New Jersey... meaning that this is not a local thing. I know this because I have talked to about 15 clients in the last 10 months from California.. another 5 from Arizona... and 3 from WA.  I have closed loans from MI, IN, CT, NJ, PA, NY, MD, SC, & FL in this time period also...  so that is why I can make a decent judgment call on what I think are the main issues.  Again, good discussion here, but I think people are making more assumptions here than what is really taking place. thanks & sorry that this was long.. but I wanted to tocuh base on everything that you talked about..

Janet, very interesting and well written.  If only business could be streamlined more quickly and efficiently.

Jeff, if you're in the mortgage bizz, why are you being so hard on loan officers in your comment? Ouch!  I think the hiccups in this process can't be nailed down, as every deal is SO unique.

Janet... I'll write a blog on this... but I closed 12 loans in 2008 that other loan officers botched. In the last 16 months, I have had over 30 clients call me that were told something else by a loan officer, that wasn't true. I never once said all loan officers. I said that there are those that will do this. And I can give you 15 other loan officers that will agree with this, because we all talk about this once a week. I am trying to educate the consumer. Yes, loan officers use excuses. Maybe you just don't get the phone call, the "after it didn't close" phone call. Here are two great examples.... I am dealing with a loan right now, a purchase in Florida.. the application was done in Nonmember, around the 15th, with a closing date of 12/20/09. The loan officer then asked for an extension to the end of December. They still couldn't close. You know what his excuse now is? That the FHA loan amounts have dropped... he asked for an extension to 1/15/09. It still hasn't closed. Per the FHA mortgage letter, you needed to have the FHA case number registered by December 31st, to utilize the original maximum loan amounts. With the information just given, this loan officer dropped the ball and blamed the changes that took place after the fact, as his excuse. I reviewed the loan and I can close this in 2 weeks. We just had to use the new maximum loan amount and get the seller to hold a second. 2nd example... I got a call last week from a client that was told my a loan officer that they couldn't lock in on the rate until 5 days before settlement. He did some research online and found some of my info... and thought that it sounded funny and wrong. My whole point... there are loan officers that lie or don't know what they are doing. I never said that I was god, perfect, or that I know everything. But if I am not sure of something, I am going to ask an underwriter. You made this statement...

"I am sorry Jeff, I know of no loan officer that is so clueless as to not know about a guideline change that happened 6 months ago, and so immature that he would need to lie about a loan that fell apart (no matter what the reason!)"

I am not trying to pick an argument here, but maybe you work in an area or world that this doesn't happen in. But I could easily talk to 100 loan officers and they will agree with me. I also originate loans in about 7 states myself, so it exposes me to a lot more clients from around the U.S. I had a client this summer from California that spoke to 3 different loan officers in Cali. She could not get a direct answer from all 3... she found my stuff online and then researched my answers and was very happy that I was able to help her out. I just met a new loan officer in my office today, who has been doing this for over 6 years. We were talking FHA loans... and he told me that he can't believe that it's mandatory that a FHA borrower has to have 2 months in reserves now. I said, what? I think you are mistaken on this... he told me, yes, this is true. I went and asked 2 different underwriters and both said that was a false statement. I then asked this loan officer where he got this information from. He said, from another rep. that came into his previous office. I can tell that you didn't like not one of my comments and actually took a stance against each one. But I actually have proof an every comment that I made in here. It's not based on my opinion. And it's not an opinion of those that are brokers, but what brokers are up against, that many bankers aren't... or the bankers that have solid in-house underwriters that know what they are doing.

Again, I would be glad to explain this to you and I even have stats in NJ to the recent fallout because of new hired underwriters into this market. As far as brokers go.... they are falling out and there is a reason why. I would be glad to give you my insight on this. And I am not the only one that thinks this way either. Sorry, just being truthful here... sometimes people don't like the truth, but I can back it up with examples that do happen.

Haven't you heard the statement before, that some people will tell you what you want to hear? That happens and yes, I feel that 50% of the loan officers in this business don't know what they are doing. And I have spoken to 5 loan officers with 10 years plus experience that agree with me, and these are some sharp cookies. I am not making this statement to take anything away from you. This is a general statement. It's one thing to stick up for loan officers... but to stick up for everyone of them? When this actually happens? And to claim that asking for comps and that values change later? I have experienced that once in 15 months.... Again, your market might be different... but I am not just talking about my market, because not only do I originate loans in 7 states or so, but I speak to other loan officers once a week, per a conference call, that are located in WA, CA, UT, TX, AZ, IL, WI, and the states that I am licensed in... so I am not judging this locally. thanks

@ Corey... sorry if it sounds negative, but not all loan officers are trustworthy, period....  and this can go for any profession. I guess I just hold us to a higher standard. Is that wrong of me? 

In regards to your comment, can every hiccup be nailed down?  No, but with the process of elimination, and with my experience, I can pin point the real problem at least 70% of the time.

Jeff and Janet - I have read the debate here and I am concerned at some of the comments. In every industry there are bad apples. We all know this. There are also simply those with less experience and those that do not know what they do not know. It is our job to reach out to them and question where their information came from and assist them in the direction that will lead to the correct info.

* Jeff I simply disagree that laziness, lying or seeing if a loan can stick is ever the intent of a loan officer. If you are in the industry now it is because you like it, are good at it, and are an individual that wants to continue to get better.

When I joined my current company I had never done an FHA loan. Now I am one of the professionals in my area that others come to for advice. When I do not know I go to the Underwriters in some cases but ther are several loans that I have closed where because I read the 4155 I showed them how we were going to get it done.

I also agree with Janet that your tone can be negative toward loan officers in general. This is discouraging. There is plenty of business for everyone. I never bad mouth another loan officer ever and I always give them the benefit of the doubt.

Realtors that I work with choose me because I am black and white and I support my colleagues to the end.

I stopped blogging here for quite a while because I felt there were too many individuals trying to prove they were better, smarter or more experienced than the next. I thought this was a Real estae Network to promote, useful information, collaboration, networking, education and to be a platform for those in the industry to lift up the profession at a time that we are not the most loved professionals. People are scared to make a wrong choice on a loan, a home, a Realtor or Loan Officer. We have to work together to help ease the apprehension through education and expectation two points I thought you did make clear. My only thought is that we could put a more positive spin on it.

No need to prove you are the Mortgage Man. Your knowledge is in your blogs and the details and I do not challenge that. Share that with others and I really think that you could be a leader in the industry.

Janet I really enjoy how you really speak your mind and tell the readers your feelings, You put yourself out there and I admire that. You too have a lot of good information. Many times I think it is easy to talk about the loans that didnt go or boast about the ones that did so we can invoke the comments and be featured.

I left for a while because it became a blog contest to me rather than industry growth platform. I hope that you both know that I feel you both have a lot to offer the Mortgage Industry and that your words have influence. Use the influence to help other loan officers get better, to boost the industry and to help Real Estate agents understand that we always want the deal to work out.    

I was trained in this business to: Say yes!! Get it in the door and we will figure out how to get it done.(this from company owner)

I never did that.... but I know some that did.

Boys and Girls, lets go to our happy place and play a little nicer. Pleaasse! There are a ton of terrific ideas floating around this particular blog and the comments that followed it. In an odd twist of events, there seem to be as many good points here than 'not so' good points. If nothing else, Janet always provides a catalyst for excellent exchanges of ideas with nearly every blog she writes. This one is no different. For what it's worth. my take is this. 1) Change within our industry has never been as rapid as it is today. Loan Officers need to either stay on top of them, or change careers. It's that way in every profession I can think of. Mortgage lending is no different. 2) Appraisals are simply an opinion of value. We all know what opinions are like. With everything that has gone on in the housing market, the conservative perspective is likely the 'right' perspective regardingappraisals. (Can you say declining markets? I knew you could.) That's not right or wrong, it's the facts as they are today. 3) As a home buyer, or a Realtor representing that buyer, I want a loan officer that thought about these things LONG BEFORE they became the big issue they are today. Income is fully documented. Assets, cash or otherwise, are properly documented. Credit is completely analyzed and qualified. The buyer is completely qualified as aprovable with the only contingency being appraisal and title. 'Same as it ever was', as the Talking Heads song went. The appraised value was always a concern. Today more so than ever! A good Banker is a Good Banker. A good Broker, is a Good Broker. As Loan Officers for either, it is only important that we ourselves are knowledgeable, courteous, professional and honest. Let the dialog continue. But puleese, stay in that happy place.

PS - 2 stars in a row!!! Congrats Janet!

Wow.  Anybody that claims that there weren't a good portion of loans blowing up because of changed guidelines, arbitrary reasons, programs going away etc. must not have been any doing business in 2008! 

Are there still some uncompetent loan officers out there?  Of course.  But to imply that anyone who had deals fall through was incompetent, lazy or not experienced enough is out of line.  Let's also not forget that all banks/loan officers do not have access to the same programs.  So the fact the one person couldn't close a loan but another could doesn't make the one who got the deal done superman.  It simply means the consumer was shopping at the wrong place. 

And I completely agree with Matt's comment above regarding the blog contest "i'm better than you" attitude of some people here on this platform.  If someone has to make so much of an effort to prove themselves at the expense of putting others down, there is usually a reason for it.

Michelle