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Have You Been "Red Lined"?

It is illegal.

It still happens – sort of.

Oh, I don’t have any actual proof but I do know that there are lenders who ask for the impossible documentation and qualifications on applications for loans in certain zip codes.

In Atlanta it is 30310.

"Red-lining" means the practice by which a financial
      institution may designate certain areas as unsuitable for the making
      of mortgage loans and reject applications for mortgage loans or vary

Five Keys to Quick Closings from the Lender's View

So the offer has been accepted and the closing date is 27 days away. Seems like amptle time, right?

Depends

If you want that file to close on time there are FIVE KEYS to drill into the borrower that will help regardless of the lender. You see without the FIVE KEYS there is no lender who can be guaranteed to close the best loan on time.

The mortgage broker in most cases will take care of ordering title, ordering insurance, ordering the appraisal, and scheduling the closing but there are certain things a buyer or real estate agent can do to expidite and if they do these things, regardless of who’s responsibility it is, the loan can almost be guaranteed to close on time.

1) Get the borrower’s RESPA documents and any other required initial documents back to the lender the day after receiving the package. In today’s climate most packages are sent to the borrower overnight. My company includes an overnight envelope with our UPS label already affixed so there is no excuse. If the borrower has questions they should FIRST review the package with the LOAN OFFICER. Sorry, as good as the real estate agent may be there will be dozens of answers the borrower can get only from their LOAN OFFICER. This does not mean the agent cannot review the loan with the borrower but just like we don’t want loan officers writing offcer letters and buy/sell agreements the agent really does not need to be making changes or comments about the loan documentation. Don’t be offended – there is no way you can possibly know all the answers.

2) Do not put the appraiser off. In fact, if the appraiser has not contacted the borrower within twenty-four hours call the lender and see if you can call the appraiser directly. Most appriasers will call immediately to schedule the appraisal so this generally isn’t an issue but keep in mind it may be.

3) Gather documents the lender may not have asked for even if you applied for a loan which does not require them. If you are with a manual underwriting lender they may come up with some crazy stuff days or hours before closing. Get copies of all of your income and assets documentation. Find your most current statement from all of your credit cards and loans. Keep ready the last two years of income tax documentation and all pages of the last 12 months of your bank account(s). You may not need these but you should always keep them together and ready anyway.

4) If you have had any judgments or collections against you including a divorce or a deceased spouse which may come into play make sure you have all of your legal documentation at hand should the need arise the morning of the closing. Bankruptcy discharges and all the documentation that go along with what was supposed to have been included in the bankruptcy are very crucial.

5) No matter how hungry you are or how long it has been since you sold a home do not drive the loan officer or processor nuts with phone calls. A once a day conversation is all that should be required to get the information you need. If you are working with a lender like Novation Mortgage you’ll probably have a website you can login to for instant updates about the status of the loan.? Everytime a loan officer or processor receives a call and they have to answer a question that means they have to stop working on their current task (which may have been yours and someone else called), get back into the mindset of the loan you are calling about and probably do some research to answer your questions. That means your five minute phone call could cost twenty minutes of work time for the processor or loan officer. Multiply that times about 10 calls per day and that’s how phone calls clog up the system.

Is this a guarantee that your loan will close on time? Hardly. There are title issues, insurance delays, lender workload (especially near the end of the month or the end of the year), appraisal issues, and even attorney issues. The keys are to remove the five possible delays.

Generally the top causes of loans being delayed in closing are:

1) Borrower not being expedient in returning documents
2) Seller slow (HUD especially) in returning executed agreements/addendums
3) Insurance agents/companies returning incomplete or incorrect insurance policies (you have NO idea how often this happens)
4) Borrower not being able to provide the necessary documentation and thus losing their qualification for the original loan program
5) Appraised value coming in lower than the contract value
6) Changes in borrower’s status: marital, employment, income, credit (somebody is GOING to buy a new truck or quit their job or leave their spouse)
7) Government contracted closing agents (argh) who don’t (a) care about your closing and (b) have a clue about what they are doing because they worked at Timmy’s Ribs and Burgers last week.

I hope this gets your mind thinking about how to get it to the table smoothly and if we all communicate and work together without acting like evil step-sisters we can do it!

The Crunch is On – 13 banking days to Christmas – Close NOW or 2007!

We’ll be having an early morning meeting tomorrow. If it’s in the pipe and it needs to close in 2006 all the documents are due by this Friday. If it’s new and it needs to close in 2006 all the docs and appraisal needs to be in by Friday.

Next week will be very difficult on underwriting and closing as well as closing agents.

Are YOU ready? Are your BUYERS co-operating?

Ho ho ho – GITTERDONE!

Two Words: Federal Endictment

There are many people who will do almost anything for a few bucks. If you’ve read my blog postings here and other places you know I’m no friend of the fraudster whether or not they claim to have some special super secret formula. Here’s the most common “formula” I’ve seen lately and it’s gaining in popularity.

I write often about the illegalities of cash back at closing and bird-dogging both of which artificially inflate the sales price of a property. Go ahead – fire back at me – this is my field of expertise and, as a lender, I’m very accustomed to defending my position.

The 144% Loan

It happens all the time. Sure, mortgage brokers get accused of being unscrupulous but they don’t even compare to some large national banks. In fact, mortgage brokers are only as good as their lenders. We encounter national bank over-loaning regularly when trying to help borrowers out of difficult situations. Today is no different.

Last week I was buying some Christmas trees from a man who was recommended by a friend. During our course of conversation I told him that I am a mortgage lender and began his tale of woe. All I can tell you is that he has been screwed by a large Bank in America.

He showed me his loans; a first with a payoff of $96,000 and a second with a payoff of $43,000. Simple math says $139,000 worth of loans need to be paid off.