I’ve written before, “Everything That Was Old is NEW Again.” The “old” ways of buying a home and getting a mortgage are coming back; please fasten your seat belts and move your seats to the upright position: we’re landing.
I spoke to my friend John McEntee, an attorney, the other day. He told me how 5 clients he had tried to refer to me had decided to go to the banks directly for their mortgage loans. (I guess they figured they would cut out the “middleman” and save a few bucks; fact is, mortgage brokers get lower/discounted rates you can’t get at the banks!)
John complained of the terrible state of service at the banks. In one case an appraisal had been done on the house, the appraiser had forwarded the appraisal report to the bank, but the bank lost it. Twice.
Another client faxed over their docs—paystubs and bank statements—to the loan processor at the bank. The bank processing people couldn’t find the docs. John said, “You call and you can’t get an underwriter on the phone, and when you do, they’re all very good with their sweet customer service voice, but they can’t get anything done.” And he wasn’t complaining about any single bank in particular; all the banks had similar problems.
We’re seeing the same thing at our firm. Our emails and phone calls go unanswered quite often at the Lenders we work with. We spend a lot of time jostling between harassing the banks while simultaneously providing a good customer service “face” to our clients and referral sources (we always try to provide the service to such a level the client has no idea just how bad things are with the banks).
I had a meeting with a Regional VP for a BIG bank in our office last week. My complaints were similar to John’s. The problem with my complaints is that WE are processing the loan application. Because of our experience, we kinda sorta REALLY know what we’re doing. So, when we send a file to the bank, it’s complete. Underwrite it and close it! Set it and forget it!
But, we’re having to deal with overwhelmed and inexperienced Underwriters, especially with regards to FHA loans, and we’re being ignored same as the average consumer.
Now, while a lot of the OLD ways are returning to our industry, this abysmal level of service is not one of those things. In the old days, back in the nineties, loans took time to approve and close, but you always had someone you could speak to. Customer service was never truly “exceptional” but it wasn’t disgustingly abysmal, either.
What has made a dramatic return to the industry is the notion that a loan “closes when it closes.”
That is, when the loan application is FULLY processed, FULLY underwritten, with all documentation in order, then the loan can close. And getting to that fully-processed stage requires time, patience, and, often, more documentation.
Here in New York, home buyers use an attorney to represent them for a home purchase. In New York a sale of real property cannot take place unless a written contract is executed between the two parties (Seller and Buyer). Thus, we use attorneys.
The contract is the foundation upon which is built the entire sale/purchase transaction. The terms of the contract lay out everything from the appliances and/or rose bushes to be included in the sale, to the purchase price and time permitted to obtain a mortgage loan.
In recent years during the fantasy boom, contracts here in New York began to call for commitments in two weeks and closings in 30 days. Say good bye to that nonsense.
Now we’re back to the OLD way. It takes time to process and close a loan. I’ve said to many Realtors and attorneys lately that we’ll be seeing a return to 60 day commitment periods and 90 day closing periods written into purchase contracts.
I’m sure these recent ugly customer services issues will work themselves out at the banks. As we settle further into that old mindset of “full documentation,” “common sense underwriting,” and a properly processed loan application, all parties involved will work together to smooth the wrinkles of this new OLD process.
And things will slow down when it comes to processing a loan application and purchasing a home. That’s the old way and it’s new again; as it should be.