I have a revision to my last Bits N’ Pieces. I incorrectly identified the writer of the letter to the editor that I was responding to as Ms. Lavone Turnipseed. I have been informed that Lavone Turnipseed would be MR. Turnipseed to me. I made an assumption, and you know what they say about assumptions.
I am not sending this correction to the paper – Mr. Turnipseed did not mention it in his rebuttal letter in the Verde Independent, so I’m leaving it alone there.

To read what I'm referring to, go to http://www.verdevalleynews.com/main.asp?Search=1&ArticleID=37732&SectionID=36&SubSectionID=1192&S=1

and my reply at

http://www.verdevalleynews.com/main.asp?Search=1&ArticleID=37732&SectionID=36&SubSectionID=1192&S=1
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Last week we invited a panel of mortgage brokers and bankers to speak at both the Cottonwood and Sedona MLS meetings.

In alphabetical order, our panel consisted of:

Denise Dedrick of M & I Bank, 928.203.4484
Jim Hostler of Lender’s Direct, 928.225.7418
Mark Miskiel of The Lending Company, 928.634.7987
Shelly White of Northern Arizona Mortgage, 928.634.4251
Shelley Williams of People’s Mortgage, 928.821.0782 (Cell)

I chose the members of the panel with my customary scientific precision. At the Tuesday morning MLS meeting in Cottonwood one day, somebody said how great the appraiser panel had been a few weeks before, and why didn’t we get together a lender panel? I yelled across the room at the 5 lenders present at the meeting, “Hey! Y’all want to do a lender’s panel?” They said “Yes! Yes, they did.”

Following is my re-cap. I have taken some poetic license and amalgamated similar points into one (I assume) coherent sentence. This turned into a very long report so you’re getting a two-parter, half this week and half next week.

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The points that were made during the panels seemed to consist of 3 separate threads:

1: What do we as REALTORS® need to understand about the loan process?

And,

2: What can we as REALTORS® do to help the process of getting our Buyers a loan or selling our listing to a Buyer who needs a loan?

And,

3: What do our Buyers need to understand before getting involved with today’s loan process? What are their expectations versus the current reality?

Our panel felt that REALTORS® need to understand and accept that the lending process has changed in a big way.

A good straightforward vanilla loan will take 45 days to complete, and that’s after the preliminary work to get a bona fide LSR has been done. An intricate loan can take much longer.

It can take weeks to get our hands on an Loan Status Report because there is now so much more that a lender has to know about the borrower before they can issue one. Because the brokers and bankers are now licensed, the days of them just willy-nilly shooting out an LSR (just because we want one) are over.

Get your Buyer pre-qualified up front. When the lender tells you the maximum that the Buyer can pay for a house don’t try to push it higher. This max can change overnight depending on interest rate fluctuations and changing guidelines. The program that your Buyer just got pre-qual’d for could be gone tomorrow.

Communicate, especially in the beginning! Communicate with the buyer, communicate with the lender. The REALTOR® is the go-between and sometimes the translator from mortgage-speak to English. We are all a team, working towards the same goal. As the facilitator, remember that reminding is fine while nagging just takes up valuable time.

Make sure that the lender knows up front about property condition. A house has to be habitable to get a loan because they all made crosses with their fingers at the mention of 203K rehab loans. Private roads, unpermitted additions, property flips, humongous seller proceeds when the seller hasn’t owned the house for very long – these can all take time to explain and resolve.

If your Buyer lives in Far Away, allow an extra 15 days for sending docs back and forth.

Out or state buyers are loaded with fraud red flags; they’re automatically suspected of perpetrating “buy and bail” schemes (Buy a new house at today’s prices and interest rates and walk away from the old, possibly upside-down house.) and are scrutinized even more closely than locals.
Flips: we absolutely have to disclose property flips. If the seller purchased the property less than 18 months ago the lender needs to know that – it will require extra documentation and possibly 2 appraisals.

Short sales: can anything be done by the Buyer’s lender to facilitate a short sale? No, not really. A Borrower can get a loan in certain circumstances in as little as a year after short selling a house. This requires tons of documentation regarding the hardship that caused the short sale, and why that hardship is no longer valid.

Don’t encourage a Buyer to try for a stated income or Non-qualifying loan – they no longer exist. If they are self-employed check to see if they’ve filed their taxes on time and if they have voluminous documentation to back up those taxes. Getting a loan for a self-employed person is going to be like being audited. (When we asked the panel about stated income loans, they all had a hearty laugh.) I was later contacted by one of our Affiliate lenders who told ne that he does do rehab loans. Getting your ducks in a row is critical if you're going to advise your client correctly.

Use local lenders. The Buyer’s personal banker in Kansas is not going to know the answer to the questions that the underwriter who lives in the basement in New Jersey is going to ask.

Speaking of underwriters, we all need to understand their mentality. Before these panels I always considered underwriters to be a bunch of dribbling idiots. I now understand that an underwriter (or asset manager or bank loan modification guy) might have been flipping burgers at McDonald’s just last week.

Did you know that if an underwriter approves a loan that subsequently defaults they could be fired? Yep – just like that. Yes, some of them might be idiots, but that’s not the main thing that we’re dealing with – they’re scared. Don’t get me wrong here – all underwriters are not morons. Most underwriters are smart professionals, trying to do a good job. As always, one unprofessional apple gives the whole barrel a bad name. I’ve mixed my metaphors, but you know what I mean.

Underwriters have pet peeves. One guy might insist on P & Ls every time no matter what, another might get wadded up about whether the borrower’s taxes were filed on time without extensions, another might get upset that the borrower hasn’t been on the job for 20 years, another might not like that somebody has gotten married and changed their name more than once.

Every loan is subject to a thing called buy-back. Buy-back is a Big Deal. An underwriter approves a loan, and the originator sells it to an investor. The loan defaults. The investor then goes through the file with a fine toothed comb, desperately looking for a mistake or fraud or any sort of loophole. If he finds one (and before, he always found something) he can make the originator buy the loan back. This has happened a lot in the past few years – buy-backs have caused quite a few companies to go under, and the possibility of being hit with a buy-back is one of the thing that makes the underwriters so hard to get along with.
Remember: default = fired. Buy-back = fired. Underwriter = occasionally unprepared and afraid.

This opens the discussion of the “layers.” Even though one lender has certain guidelines, they always have to keep in mind that they’re going to have to sell the loan to an investor. So even though one company’s guidelines are not as strict as another’s, they’re all protecting their exit strategy on that loan and the strictest guidelines will prevail.

Tune in next week, same time, same channel. Thanks!