The State of the Mortgage Industry

Dare I say the mortgage industry is worse than ever? One would think increased regulation leads to greater efficiency, better performing loans, and advantages for the borrowers. The Rolling Stones put it best - "You can't always get what you want!"

Underwriting turn-times average 3-6 weeks. Once an application is submitted, you will not hear anything for nearly a month. Tack on another couple of weeks to review any additional documentation required by the underwriter and your loan takes about 2 months to close. How's that for efficiency! Oh, did I mention we used to be able to close a loan in 1-2 weeks? (My record is 3 days!)

The HVCC (click here to sign the petition) guidelines are destroying the integrity of the appraisal industry. Would you like to wait 4 weeks for an appraisal that could have been produced in less than 24 hours? How would you feel if appraiser A came back with a value $110,000 less than appraiser B who was at your house one week earlier? The service has been horrendous and to make matters worse borrowers are paying more for the service. The average HVCC compliant appraisal costs a borrower an additional $100, and approximately 50% goes to the appraisal management company (AMC) for simply assigning an appraiser to complete the appraisal. (Note: Our appraisers used to charge $275 for a single family appraisal; AMC's charge $385 in most cases)

The volatility in rates must be driving rate shoppers insane. The average rate quote is only good for about 2 hours, then it's back to square one. I had a borrower turn down a 4.875% rate last week, needless to say his rate is now 5.5% -- a $163/mo difference! I am afraid that without government intervention, the days of rates below 5.00% may be gone and we are now on the fast track to "inflation period" rates...my best guesstimate is 6.5%.

To make matters worse, lenders do not seem to care. On Monday, I had an operations manager from a top 10 lender say to me regarding an upcoming deadline, "The seller can wait a couple of days to close. Does he really think he'll sell the house again in 2 days, we'll close the loan in a couple of days when we have time". (It cost that lender about $3,000,000 in business from us that we otherwise would have sent to them.) The statement shows no respect for contract law and put the buyer at risk of losing his deposit. The comment demonstrates the sentiment of overworked, underpaid representatives in the mortgage industry who are forced to comply with hundreds of new procedures and guidelines imposed by members of Congress that have zero understanding of the business. Would you want an attorney handling your brain surgery? Probably not. Then why would you allow a politician to set forth the guidelines that govern the mortgage industry. As if we didn't have enough problems!

There is a laundry list of problems that plague the mortgage and real estate industries. Unfortunately the list does not seem to be getting any shorter. Be patient. Do your homework. And understand to the best of your ability the process you are about to embark on before you dive in head first. Feel free to use me as a resource for updates on procedure changes, rate fluctuations, or trusted referrals. And as always, make it a great day!