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 By: Scott Evans |
Want to Close Loans Quicker?
In the new world of mortgage disclosures, HVCC and ridiculously overzealous underwriters, timeframes to close a loan have grown. It is not uncommon to have a closing take 30 plus days. But in the midst of all this, we have found some ways to make the process quicker and smoother for us and our clients. Consider the following:
1) Take a complete loan application – while this may seem very basic, it is easy to forget to ask something simple that will trip you up. For example, a recent client of mine that I had refinanced about a year ago worked on base plus commission. I never asked about his income and it turned out that he had switched up the compensation to a slightly higher base and no commission. In this case, he had a 25% reduction in income and all of a sudden didn’t qualify.
2) Ask if either of the spouses have any “side” businesses. With every lender pulling a 4506, even a small loss being counted against someone can trip up a deal.
3) Run the address through USPS to be sure you have the address completely correct. The ripple down affect from the appraisal, title etc…can drive your processor crazy.
4) Make sure your client knows (make a phone call immediately after sending the disclosures) the importance of returning the documents quickly. Go over in detail on the phone with them what you need (I.e complete bank statements etc…)
5) Make sure they know what has to happen to get the appraisal ordered and the importance of getting the appointment set quickly. Many lenders have gone to these crazy email acknowledgements (to transmit the TIL) and unless the client knows to look out for it, there will be delays.
Hope this helps…..more change is on the way. How you adapt on a weekly basis will determine your frustration level as regulation weaves it way into our lives with ever more vigor!
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Scott Evans
Scott is the Founder and President of Family Mortgage of Georgia located in Marietta, GA. He has grown his business organically over the years by creating "raving fans" instead of "customers". His organic approach to marketing and database management has allowed Scott to build residual income from "mortgages under management". |
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By: Scott Evans |
If you’re wondering what’s going to happen in the mortgage industry come January 1st, join the crowd! It has been a long time since I have been this confused. There has been more change in our industry in the last six months then I have seen in my 12 years in the industry. As mortgage brokers, the biggest change of all is potentially coming on January 1st,…RESPA reform and that dreaded new Good Faith Estimate. But a lot can change between now and then. There are many forces working to either delay it or re-think it. So, it is possible that after worrying ourselves sick, the whole thing ends up looking different than we think after all. Look at the Red Flag rule. It has been delayed 3 times so far this year.
To make matters more complicated, there is much left open to interpretation. The biggest unknown to me is who really is defined as a mortgage broker and therefore subject to these disclosure guidelines? If I read it correctly, any firm that is not planning on servicing their own loans is defined as a mortgage broker. This means many correspondent lenders, “net branches” and even mortgage bankers could be subject to these new disclosure rules. Many of these same firms are trying to recruit small mortgage brokers claiming to be able to skirt this very issue. What if they can’t?
For me personally, I had another issue that was on the top of my list as I was contemplating what my options were…I don’t have FHA and really need it at this point. It would not be a huge part of my business but I am still losing deals. Low and behold, this past week, FHA has proposed policy changes that would go into effect January 1st that essentially do away with an individual mortgage broker having to be approved by the FHA. Instead, As long as you are doing business with a lender that is approved, you would be able to originate the loan. If this is true, then that solves one large issue for me, and I’m sure many of you.
At this stage, it is prudent to be talking to as many possible people as you can. The best thing to do is to is consider as many options as possible and have a choice in mind that you can “hookup” with if the time comes where that is prudent. In the meantime, if you don’t really want to do anything different, I don’t see any big hurry. You have until the end of the year and most likely longer before we really know what the final outcome is going to be. Feel free to call me if you feel like talking!
| About the author: |
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Scott Evans
Scott is the Founder and President of Family Mortgage of Georgia located in Marietta, GA. He has grown his business organically over the years by creating "raving fans" instead of "customers". His organic approach to marketing and database management has allowed Scott to build residual income from "mortgages under management". |
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By: Scott Evans |
Hi folks, it’s been another interesting month in the mortgage business. Add to the underwriting delays, unexpected rate hikes and general frustrations of originating mortgages – HVCC has been an absolute nightmare.
When I saw the NAMB Call to Action, I took a few moments to document my personal HVCC experiences and sent out the following via email to my database. I think it would be great if all of us did the same thing, because at the end of the day it’s the consumer who ends up losing out.
I am a mortgage broker in Atlanta Georgia. I have been in business for myself for 12 years now. I am writing to share some concerns about the implementation of HVCC that we have experienced since its implementation on May 1st. Let me highlight some of the larger issues:
1) The appraisals are taking significantly longer to be completed than when I could order my own. The consequence of this is that we can’t lock in our interest rates for the consumer until we have the report in our hand because a) we don’t know whether we would meet value and b) when we will actually receive the report (time frame). As you know the shorter the period we can lock the rate in, the better the rate we can obtain for the consumer. The worst part was that later in May when the interest rates spiked (literally overnight), many of our clients were not protected with interest rate locks and now may never be able to refinance.
2) The quality of the appraisers is a significant issue. We have had numerous complaints that the people are dressed inappropriately, take very little time to assess the house and are in general not professional. My understanding is that this stems from the fact that they are paid by the AMC’s, significantly less than what appraisers were being paid under the old system. Therefore, the good appraisers aren’t willing to work for that cheap, creating a system that breeds the retention of less experienced appraisers…or at a minimum, the good ones that really need the work; need to spend less time on each report to make similar money.
3) the most common complaint from real estate agents is that the appraisers don’t know the local area. They come from far and wide and in general have know idea about the neighborhoods, school districts and all the idiosyncrasies of the local area that affect value. Think about your own local neighborhood….if an appraiser came from 60 miles away, would they really be able to provide the best review of the comparable sales not knowing anything about your area???
4) The most frustrating thing for consumers is that they must pay upfront to “play the game”. Let take refinance transactions. Before HVCC, I would spend my own money (usually $25 per loan) to have my appraiser do what we call a “pencil search”. It would be a quick look at comparable sales to see if there was at least a chance of obtaining the value that we needed. They would either say, 1) won’t be an issue, 2) it is close to meeting value but I can’t say for sure or 3) there is no way we will be able to make value at this time. The benefit to the consumer by me providing this valuable service was that they at least knew whether it was worth spending the money on an appraisal. If it wasn’t going to meet value, why have them waste their money. If we weren’t sure, at least they knew it was a calculated risk. Under HVCC, it is like going to Las Vegas and sitting down to a craps table. You have know way to know what you’re going to get. In the last 45 days, I have had over 20 customers spend $300 – $400 for an appraisal, only to find out that it was useless.
5) If you feel like the appraiser made mistakes, the AMC’s will let you send in your concerns and they will have the appraiser revisit it. This is also a flawed system. Think about the average consumer. They don’t do this for a living so how are they supposed to come up with support to challenge an appraisal. Only if they happen to know a real estate agent that is a friend will they be able to produce any information that may be able to change the ultimate outcome. But because no one can talk to the appraiser directly, our limited experience with this is that the appraiser just works on justifying their position, not taking anything else into account. Think about it, what is the incentive for them to do anything but justify their original report. They don’t have to speak to anyone, so it is real easy to just list the reasons why the additional information wasn’t used and leave the report as is.
6) These reports were supposed to be “portable” according to Fannie Mae. Reality we have found is that they aren’t. I have 10 lenders we use as a mortgage broker. 3 of them will not accept appraisals that were not ordered through their AMC, the other 7 say they will. But here is the catch, the only way they will accept it is if we can provide a letter (on bank letterhead) saying that the appraisal was done in compliance with HVCC. We have yet to find a lender that will actually write a letter like this on letterhead. Even though all of the appraisal reports have disclosures that say they will, that apparently isn’t good enough. So once again, if we have to go in a different direction (and there are many good reasons why this may occur and be in my client’s best interest), the customer would be forced to pay for a 2nd appraisal and hope that that one still worked.
While I understand the intent of this new regulation, it is having and will continue to have, ongoing negative repercussions on consumers and home values in general. If we allow inexperienced appraisers with little local knowledge continue to providing these critical reports, there are far reaching consequences for the industry, consumers and the housing market in general.
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Scott Evans
Scott is the Founder and President of Family Mortgage of Georgia located in Marietta, GA. He has grown his business organically over the years by creating "raving fans" instead of "customers". His organic approach to marketing and database management has allowed Scott to build residual income from "mortgages under management". |
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By: Scott Evans |
I’ve been getting that question a lot lately, and I bet you have too! It’s certainly a very legitimate question. Interestingly, many customers are saving more (or less) than they realize for any number of reasons. For example:
The escrows they are paying monthly may be inaccurate.
You need to compare the principal and interest portion of their payment only.
They may have been in the loan for a number of years.
Therefore they’d be paying more on a monthly basis than if their loan was re-amortized.
And then there’s what I call the “invisible part”
Part of the monthly savings a client will realize is in the reduced interest, which obviously impacts their monthly cash flow. But when applicable, I also like to illustrate how with new terms the client begins paying more toward principal due to a lower rate. This is the portion a client typically doesn’t see because it doesn’t show up in their payment each month.
So those are a few examples of how many of us approach the issue. The question becomes: How do you get to the bottom line in a way that doesn’t completely confuse them? Here’s a step by step example of how I approach this:
- Take the loan amount and multiply it by the interest rate savings. This gives them their annual interest savings. Next…
- Divide that number by 12 to get the monthly interest savings.
- Take the total closing costs and divide it by the monthly interest savings. This will determine the client’s pay back period.
- At this point, I have a discussion with my client about how long they plan on staying in their home. Ultimately, this is how we determine, as a team, if it makes sense to refinance.
Let’s go ahead and try it with a simple example:
A client has a 5.75% rate on a $250,000 mortgage. Let’s assume total closing costs are $3,500 and we can drop him to 4.75%. A 1% reduction on a $250,000 loan will save the client $2,500 in interest in Year 1 alone (equal to $208/month). Take the closing costs of $3,500, divide that by $208 (monthly interest savings) and you determine the client’s payback period is 17 months.
I especially like conducting this consultation at my office or over coffee somewhere convenient for them. By collaborating together on the math, I find that I’m empowering my client to make a more educated decision. It’s worked great for me over the years, and I hope this little tip helps you too.
| About the author: |
|
Scott Evans
Scott is the Founder and President of Family Mortgage of Georgia located in Marietta, GA. He has grown his business organically over the years by creating "raving fans" instead of "customers". His organic approach to marketing and database management has allowed Scott to build residual income from "mortgages under management". |
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By: Scott Evans |
Let’s say that you have a prospect call in and you’re really not sure their house will appraise for enough to allow for a refinance. Sound like all your prospects these days?
In order to alleviate their fears about paying for an appraisal they can’t use, here’s a step-by-step decision making process I’ve found successful:
Determine up-front if their loan is owned by Fannie or Freddie
This way, you’ll have a fallback position. For example, the best case scenario you could hope for is that their home indeed appraises for a straight-up refinance.
a) If you have determined up front that the loan is owned by Fannie Mae… even if the home appraises for less, you have the option of taking the loan DU Refi Plus.
b) Your worst case outcome is if their loan is owned by Freddie, in which case they’ll have to refinance with their original servicer.
In any of these scenarios, at least you know that if the prospect pays for an appraisal, they will have the option to refinance the loan (at least in most situations). So it’s not as much of a gamble – and you have overcome a large objection.
Another strategy you could try is to set up a network of people you trust on the retail side with the big banks. Whenever you get a prospect that has to go back to their current servicer for the refi (Freddie loans), at least you can refer them to a friendly person who is likely to treat them nicely since you referred them a deal. Your prospect will be most appreciative since you took the time to educate them – and they won’t be just calling 800# hell. 
| About the author: |
|
Scott Evans
Scott is the Founder and President of Family Mortgage of Georgia located in Marietta, GA. He has grown his business organically over the years by creating "raving fans" instead of "customers". His organic approach to marketing and database management has allowed Scott to build residual income from "mortgages under management". |
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By: Scott Evans |
I wanted to share a strategy that has worked to minimize prospects from shopping me all over the place. Although I work mainly off referrals, I find that by the time they are usually referred to me, they have already been out talking with others first.
I don’t know about all of you other brokers, but I am finding that often the rates offered by the “retail banks” are much better than the wholesale rates we are being offered. That is a conversation for a different day… don’t get me started!
So how do you combat it?
I start by explaining that our goal should be to get their loan done with the least amount of hassle. With all of the national lenders taking 60-90 days to close a loan, preparation is the key. We start by determining the best loan structure and then work on estimates. We go through the conversation about the difference between paying points or not paying points and that most of the low rates they hear about involve paying points. I tell them that they can have any interest rate their little heart desires, it just a question of how much money they have to pay to get it. And then we determine what a good combination of rate and points would be as a “target”. I then explain that the best way to position yourself to get that target rate is to start the loan process including paying for an appraisal. Once we get everything back and have a complete package, we submit the loan to the investor that will get it done the quickest and that is a good fit from a rate perspective. The goal is to get within 15 days so that we can lock on the most aggressive pricing when the time comes. We are fortunate to have delegated underwriting with one investor and have a couple others that are underwriting in 10 days or less. That is key.
This collaborative process ensures that you’re “on the same team” as your customer… working toward an end result that saves them the hassle of dealing with the big banks.
Can you imagine having to do a loan with one of the big guys right now? Save your customers from this nightmare!
| About the author: |
|
Scott Evans
Scott is the Founder and President of Family Mortgage of Georgia located in Marietta, GA. He has grown his business organically over the years by creating "raving fans" instead of "customers". His organic approach to marketing and database management has allowed Scott to build residual income from "mortgages under management". |
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