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ARE MORTGAGE COMPANIES ENGAGING IN STOVE PIPING? ARE LOAN OFFICERS NOT PERMITTED TO TALK TO APPRAISERS?? MORE FALLOUT FROM THE MORTGAGE MESS??

By
Real Estate Agent with Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate 303829;0225082372

This post inspired by Janet Guilbault's excellent and informative description of the changing world of mortgage underwriting, Time Wasters and Heart Breakers: The End of Loans That Blow Up?

A comment on Janet's post by Melina Tomson got my attention.  Melina's comment is very timely for me these days.  I have a contract in underwriting but we have not yet received the appraisal.  It's now 3 days past the appraisal contingency.  Thanks Wells Fargo

The excuseswe're getting from the loan officer with Wells Fargo is that the appraisal has taken more time than most because of the acreage.  Because of the acreage??  The property is 3 stinkin' acres in horse country.  I didn't have any trouble finding comps when we wrote the contract and the listing agent didn't have any trouble finding comps when he listed the property.

IS THERE A STOVEPIPE SYNDROME WITH MORTGAGE COMPANIES THESE DAYS??  The loan officer with Wells Fargo says she's not permitted to communicate directly with the appraiser.  GEEZ!!!! 

PLENTY OF TIME FOR EVERYTHING.  The appraiser visited the property last Thursday at 8:00 a.m.  I was there to meet the termite inspector and the appraiser was there along with the listing agent to give access and comps.  Since the appraiser didn't get to the property until the 22nd, I'm suspecting that the appraisal was ordered late by the loan officer with Wells Fargo.  Of course, we'll never know. 

The deadline for the appraisal contingency is clearly in the contract for 10 days.  The loan officer with Wells Fargo said that it was ordered the day she got the contract which was on the 16th.  With so few sales out here these days, one would think that there shouldn't be any delays with an appraisal.  Why did the appraiser not get to the property until the 22nd???

All I can say at this time is THANK GOODNESS THE BUYER SELECTED THE LENDER BASED ON THE RECOMMENDATION OF A FRIEND.  The buyer does have a good rate, but what's the use of a good rate when the appraisal comes in late and past the appraisal contingency deadline??  If the appraisal is low, my buyer could be faced with paying $Thousands of Dollars over appraisal.  For many buyers, this could easily mean a loss of financing.  Paying cash above appraisal doesn't give any buyer a feeling that the property they are buying has good value.  How much cash we're talking about???  We don't yet know, if or how much.  However, my experience over the years is that a delay in the appraisal has almost always resulted in a low appraisal.  The appraiser can't find comps to justify the price.  We have a contract for about 90% of list and my buyer is very comfortable with the price.  In fact, I fully expected an appraisal above contract. 

Needless to say, this delay will cost this loan officer with Wells Fargo future business.  It will cost her lots of future business.  The loan officer with Wells Fargo admitted to the buyer that she didn't see the appraisal contingency in the contract, which I called her about before the deadline and she ignored my call.  But, then, why should a loan officer pay any attention to a mere buyer's agent???

When the buyer contacted the loan officer about the deadline, the loan officer's comments were something like "I can't be expected to read every word of a contract:."  True, but it would seem that the appraisal contingency would be one thing a loan officer would read.  Dates are critical in a Time Is Of The Essence contract, which ours are.  It would seem that a loan officer would at least look at the parts of a contract that are affected by financing.  Especially if these dates were pointed out by the buyer's agent.  But then, why should a loan officer pay any attention to a mere buyer's agent???

THE STOVE PIPE SYNDROME.  Are we entering a time when the appraisers are going to be so isolated that the appraiser or the loan officer can ignore dates in a contract???  Is this the beginning of a period where no one can communicate with anyone else because of the undue influence on appraisers by loan officers in the past???  Are present and future home buyers and sellers going to have to pay for the problems of the past with poor service today and into the future????  

IS THIS ANOTHER RESULT OF THE MORTGAGE MESS??  Just how isolated are appraisers these days???  I realize that some appraisers were involved in bad loans during the past few years, but I've never considered the appraisal to be the real culprit of the mortgage mess.  They, appraisers, were not nearly as involved in profiteering or manipulating mortgage loans to the extent of the Wall Street gangs and the regulators and overseers that enabled them.  Listing agents have always been able to communicate with appraisers.  Are they now going to be ignored because the appraiser is in one stovepipe and the listing agent is in another??

WHAT ABOUT TRANSPARENCY??  If loan officers with Wells Fargo are not permitted to communicate with appraisers, how will the mortgage company or the buyer or seller ever be able to have any confidence in the loan processing or underwriting process?? 

I would greatly appreciate any comments reflecting your experience in these matters of:

  • communication between listing agents and appraisers
  • communication between loan officers and appraisers.

Or, is the experience above simply related to one loan officer with Wells Fargo?

                         mortgage mess

                             "Honey, are we going to be able to close on the contract on our home?"

"I don't know Dear, the appraisal is overdue and there's a chance the buyer may not be able to close".

Courtesy, Lenn Halrey, Broker, Homefinders.com, 800-711-7988, E-Mail.

 

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Comments(65)

Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Michael M.

You wrote:  Lyn, I'm no supporter of Wells Fargo but in fairness to them the appraisal issue is a Fannie and Freddie REGULATION.  Since they control almost all the loans made in this country we're all going to have to play along.

There is no regulation in effect today that prevents a loan officer from advising a borrower that they cannot provide an appraisal report in 10 days. 

Further, there is no regulation in effect today that prevents a loan officer from returning phone calls or e-mails. 

Further, there is no regulation in effect today that prevents a loan officer from reading a contract of sale and an appraisal contingency.

Jan 29, 2009 09:23 PM
The Somers Team
The Somers Team at KW Philadelphia - Philadelphia, PA
Delivering Real Estate Happiness

Len,

Well said. I have been meaning to read this post and I am so glad I did. I had a similar experience with Wells Fargo. Late appraisal and the loan officer telling me they can not communicate with the appraiser.

I was the listing agent following up on the mortgage since the buyers agent was a little too passive about sticking to deadlines and dates stipulated in the agreement of sale. When the mortgage rep. said he was not allowed to make contact with the appraiser I took matters into my own hands. After the mortgage rep. ignored me when I reminded him about the dates his client promised to meet, and after several phone calls I spoke to the appraiser and managed to make things happen.

I was a tad resentful that I was like a dog catcher chasing mutts around the neighborhood. And I love mutts but my patience was worn thin.

Your post makes me think it might be a good idea to include a cheat sheet with the agreement of sale contract when it is submitted to the mortgage company. The cheat sheet should have a summary of the important dates they need to honor. If they got the contract they will have had to see the cheat sheet.

It would be a great world if everyone would be accountable for their actions and when we fall short, just choose to do the right thing.

This trend that no one can speak to the appraiser when we all need to work together to make the machine work... it is just a complete cop out.  Do you know what Wells Fargo is saying when they do not allow their own to speak to eachother regarding a critical part of the transaction? In my opinion, they are saying to their employees, "WE DO NOT TRUST YOU !" And do you know what that says to me? "I DO NOT TRUST THEM EITHER !"

Steph

Jan 29, 2009 11:54 PM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Christopher and Stephanie. 

Thanks for your thoughtful comment.  You can bet your boots that I will include a DATE CALANDER with every contract I send to a loan officer from now on.  Great Idea.  

I'm having a meeting with agents in my network today and this is going to be #1 on my list of topics.

 

Jan 30, 2009 12:16 AM
Barbara Head
RE/MAX Farm & Homes Realty - Houston, MO

I would like to leave a comment on this as well. I had a listing interview with a seller a few weeks ago and provided her with a CMA. She chose to list the property approx. $10,000 below what the CMA came to. I found a buyer that made a good offer due to the listing price. The buyer started the loan process and an appraisal was ordered (in a timely manner I might add) but here is where my issue starts. The appraiser called to schedule the appraisal and ask me for a copy of the contract. We have worked with this company in the past and found that they are very conservative on their appraisals. Anyway I ask why they needed a copy of the contact and all I was given is "We need it for our file and will not schedule the appraisal until a copy is received". I felt like a hostage. When the appraisal came in it was just as I figured, only $2,000 above the contract price. I have spoken with other Realtors about this issue and a few have said "They need it for a base". Well here is my opinion. I did not have a base for my CMA. I do my job, and use the best information available to provide a seller or buyer with quality information to show a market value. I believe that the contract price has nothing to do with market value. If the appraisal comes in below the contract price then the contract should be re-negotiated or cancelled. If the price comes in above the contract price then the buyer got a good deal. But the appraisal should not be based on the contract. The appraiser is using the same MLS comps that I have, but do to the contract price used comps that were as different as night and day and should not have been used. I spoke with the lender about this and they totally agree that neither one has anything to do with the other. Back when I started in Real Estate my broker stated more times than I can remember, the value is only what a buyer is willing to pay. But that is not how things work. I believe that if the appraiser does their job and shows what they believe to be a good sales value based on the subject property and comps we would not be in this housing mess. People would not have given more for properties than they could have paid for because it most likely would not have appraised out to begin with. I live in the state of Missouri, can anyone tell me if I am required to give a contract to an appraiser before they can do the appraisal. I have ask several people and no one can tell me. If I ask an appraiser they say sure!!
Barbara Head
RE/MAX Farm & Homes Realty
Houston MO
barbarahead@remax.net
www.farmhomesrealty.com

 

Jan 30, 2009 12:59 AM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Barbara.  I believe that it is helpful, in the interest of providing the appraiser of a full picture of the transaction, for the appraiser to have the contract. 

I am always happy to give them a copy and I know that most loan officers are too.

There is a lot more to appraising a property than comps although they are an essential.  However, the contract may involve significant closing cost contribution from the seller to the buyer. 

Anything that affects the net proceeds to the buyer is important information. 

Condition is also important.  Reviewing comps representing foreclosures may give insight to an appraiser. 

I wouldn't discourage anyone from using an objective appraisal for pricing a property prior to listing, but when the appraisal for that specific property is done, the appraiser needs to know more than the address.

 

Jan 30, 2009 01:18 AM
Harrison K. Long
HomeSmart, Evergreen Realty - Irvine, CA
REALTOR , GRI, Broker associate, Attorney

He Lenn ... Thanks for this good article, and I am also concerned about TRANSPARENCY needed in the mortgage and real estatebusiness.  Our client consumers need to have confidence in the entire lending experience, and loan officers should be permitted to communicate with appraisers if the situation requires it.  Best wishes. Harrison

Jan 30, 2009 03:27 AM
Lisa D'Onfro
Prudential CT Realty - Clinton, CT

I too had a very poor experience with Wells Fargo last JUNE!  They took forever to order the appraisal, then even longer to review it.  We had to keep getting extensions.  Finally I got an email from the loan officer that the appraisal was okay - then literally 5 minutes later they yanked the commitment.  "They changed underwriting guidelines - I'm sorry there is nothing I can do" was the response!  After many calls and upset buyers and sellers, we got commitment from our local in-house mortgage officer who saved the day.  I will not work with Wells Fargo again if I can help it - the service was sub par to say the least.

Jan 30, 2009 05:23 AM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Harrison.  It was a shock to my client in this case to learn that neither the loan officer nor the mortgage company had any responsibility to meet dates, close on time, etc.  Worse, when I told her that there was no recourse if they pulled the approval, there was nothing she could do.

Lisa.  My thoughts precisely.

 

Jan 30, 2009 06:09 AM
Karl Peidl
Moorestown, NJ
Accredited Loan Consultant

Lenn,

I agree that it will only cause more problems than it will solve.  These changes are not being made by us (lenders), they are being imposed upon us by Fannie Mae and Freddie Mac (the government).   

As far as your question "How much worse can they make things?????"...  That's a question I'd rather not even ponder, not that I even have the time to think about it.  This new mortgage world of ever-changing policies has taught me to simply learn the rules as they change, explain them to the best of my ability to my clients and referral partners, and do my due diligence to prevent the changes from creating too big of a problem.

Jan 30, 2009 08:36 AM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Karl.  Indeed.  It would have helped if the loan officer had given us a "heads up" when I wrote the contract. 

 

Jan 30, 2009 09:59 AM
Ryan Shaughnessy
PREA Signature Realty - www.preasignaturerealty.com - Saint Louis, MO
Broker/Attorney - Your Lafayette Square Real Estate Partner

Be thankful - it was just the appraisal contingency date.  We had a closing delayed for 30 days because an appraiser allegedly couldn't find comps for a property.  I mean how hard is it really to find new, attached townhomes in an urban environment filled with - you guessed it - attached townhomes.  In reality, the underwriter put on his or her appraiser's hat and red pencilled the report requesting multiple revisions.  They didn't want comps from the project because they were 6 mos. old.  They didn't want comps more than 1/8 mile away from property.  If you have new in-fill construction in an established market, you aren't going to find an exact match.  You may have to look at existing homes or adjust your time frame or adjust your geographic scope.  It seemed like the underwriter at that WEST COAST BANK wanted a picture perfect comp.  Buyer didn't understand why they were being charged a per diem for the delay in closing (as provided by the contract) when they timely applied for the loan and were pre-appoved.  By the way, the buyer's agent contacted us, it was sent to our preferred lender who used Citi and it closed in 2 weeks.

Jan 30, 2009 12:04 PM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Ryan.  Any underwriter who continues to request more comps for a contract should be sent to appraisal school.

Fact is, the jerks writing these regs do not know what they are doing.

 

Jan 30, 2009 11:21 PM
Lisa Friedman
Alliance Realtors - Bedminster, NJ
Central New Jersey Real Estate

Lenn, this is all pitiful.  I must say that I did enjoy the cartoon though.

Jan 31, 2009 09:29 AM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Lisa.  Pitiful is the word.  Irresponsible is another.  Negligent is another.

Jan 31, 2009 09:35 AM
Adrian Cox
Loan Protector Insurance Services - Catonsville, MD

I'm sorry this problem threw a wrench into the works. When this law goes into effect, it will also have an impact on the refinance market as well. How am I supposed to structure a loan that will meet the needs of the homeowner without knowing the appraised value of the property? At this time, we structure a loan with approximate numbers, advising the clients that we'll tighten up the details after the appraisal is complete. When the lender orders the appraisal, I'll then have to wait until they tell me what the appraised value is before structuring the deal. There will be times when the customer will withdraw their application, after the appraisal fee has been spent. It's a shame that those who are trying to legislate our industry don't understand our industry.

Feb 03, 2009 01:26 AM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Adrian.  Thanks.  You make excellent points. 

Unfortunately, those in control of making these critical decisions are so divorced from the real world, they can only "make busy", not developing helpful programs.

 

Feb 03, 2009 03:21 AM
Anonymous
Adrian
Ah, the runaway freight train of bad business. We shall call it "Congress".
Feb 03, 2009 05:55 AM
#62
Anita Harmon
RE/MAX Realty Pros - Quincy, MA

As an anal retentive personality, I've started sending all my docs to the lender (and all other pertinent parties) as .pdf files with an email that has a full large print/bold timeline of the transaction including amounts/dates, etc. 

I've had a very good response to this as it lays it out in a very readable formata for everyone.  You cannot do enough (even if it's their responsibility) to ensure that your transaction stays on target.

 

Feb 03, 2009 11:33 PM
Anonymous
Hal Tennant, MMC Mortgage in Middle Tennessee

As a Mortgage Originator I have heard the scenario you describe many times. Actually, it's music to my ears because it allows me to demonstrate how I am different.

How many times have you been solicited by a Loan Officer claiming to have

  1. The best rates
  2. The best service
  3. The best donuts
  4. Yada, yada yada

After my first year in the business, I tired of trying to crack the "Iron Curtain". I currently do not directly attempt to recruit new Real Estate Referral Partners. Remember. its not what you say, but what you do. My motto is "Underpromise and Overdeliver".

Here's how I do it. It doesn't matter whether it's a buyer I generated or a referral from a Realtor, the process is the same.

  1. The first day, as soon as the Purchase Agreement is sent to me, a Thank You and Welcome" letter goes out to the Buyer's Agent and the Listing Agent. The letter clearly describes all the steps I will take to get the loan closed on time.
  2. In the letter I promise to keep both agents in the loop - comunication - once a week until closing.
  3. Here's where it gets good. They will receive updates at least 2 to 3 times per week - every time something happens - appraisal ordered, title ordered, insurance received etc. By the way, I've never had an agent complain about too much communication, even if it's bad news. I also keep the Title/Closing Attorney advised.

Listing agents almost always say, "No one has ever done this for me before". They are so amazed that many have started sending me business.

I don't mind sharing my "secret" with other Loan Originators because most of them won't follow through. I consider myself service oriented not sales oriented, but the end result is sales.

Hal Tennant, MMC Mortgage in MIddle Tennessee

 

Feb 04, 2009 12:12 AM
#64
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Anita.  Good for you.  One thing I learned a long time ago is that, as soon as a loan officer get's behind or their processor gets behind, that dang "black hole" opens and . . . . . . .   well, you know.

Hal.  Good for you.  I have never received an update from the loan office with WF that inspired this post.

 

Feb 04, 2009 03:29 AM