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Wednesday, December 19, 2012

Expectations and the loan process

Expectations December 2012 Rob Christman the other day wrote.
LOAN Officers often mention how borrowers, who may not have obtained a loan in years, or Realtor's (who do one or two deals a year) seem "misguided" when it comes to realizing what the current lending environment is like. Some borrowers come through it, only to emerge and say they were "brutalized" by the current mortgage underwriting process. Not that I am here to tell LO's how to do their jobs, but if they can lay some groundwork it might help all parties involved. For example, borrowers might be well advised that "sourcing funds" is an extremely important part of our anti-laundering procedures and enforcement is horrendous for the lender/originator. (In large part due to how property flipping can be used to cleans cash deposits.) Most people outside the banking and lending industry don't understand SAR reports. Sourcing funds is also an extremely important part of meeting the new letter of the law of understanding the borrower's ability to repay as well as establishing a savings pattern. Most people purchased homes when mortgage underwriting was a joke. It's important for every borrower to know that obtaining a loan today is a whole different story, especially traditional (non FHA) lending. It seems that successful LO's aren't afraid to tell clients that credit blemishes and credit scores are much more important now than they were. With average credit scores skyrocketing over the last 3 years, what was once a great score like 700+ is now somewhat less than an average score - most non-industry types don't know the trend. Appraisals are more critical than ever before. The lender's underwriter and the investor's due diligence underwriters/auditors read everything - so should the buyer. (Ha!) Appraisers are struggling to do more appraisals for less money, and it is okay for a lender to challenge a finding in an appraisal, but be prepared to pay for a second appraisal or have an inspection to support your challenge. Prepping the borrower is more important than ever and leaving the critical disclosure of today's mortgage lending reality up to the Realtor or processor is foolish and lazy. Referrals come from insight, education, and performance by both the LO and their processor. I am repeatedly told by originators that they set expectations early and often and remember adults need to hear something 6-7 times before it really locks in (just ask my wife).

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