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Out of area lenders

If only clients would listen to me.When I advise my clients to use a lender whom I know and trust, it’s not that I have any special ties, receive kickbacks, or anything else underhanded or shady.  It’s because I am looking out for the best interests of my clients.Picture this – client comes in pre-approved by an out-of-the area lender….  In spite of my concerns to my client but client has already started the process and does not want to start over.  Lender asks for my recommendations for attorney/title company, appraiser, etc. I consult with my client to ensure that he approves, and proceed….  Hopes and dreams have been smashed because an incompetent, unknown lender does not have any reason to work harder, does not have any relationships to maintain, has no concerns re accountability.  There will always be another internet lead.I knew things would be un-recoverable with this particular lender when I called one afternoon and was told that “she’s at lunch.”…  Not the answer one wants to hear when clients’ concerns and lives are affected.*I have done transactions with out of state and out of area lenders before successfully….  The difference between out of state and local is simple – the local firms are staffed by people into whose eyes I can look.

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How do I know I’m Getting the Best Deal (on a loan)

Shopping for a loan is hard. Comparing loan terms and offers can be harder. When I recommend a lender, there is an incredible amount of conveyed trust in that recommendation.

A client asked me the other day –

“How do I know who has the best terms?”

So naturally I asked a lender I trust for his answer.

Matt Hodges with Presidential Mortgage wrote:

Well, there’s the following:

1. Rate & points & fees & lock in time frames

2.  Meeting commitment/close dates

3. Breadth of products

4. Uniqueness of products – i.e. closing prior to starting your job, gift for 100% of down payment, 100% LTV deals, etc.

We all should be .125% in rate apart on any given day, but you might see outliers.  For example, I had a rate shopper asking for a conventional 20 year loan and I was able to quote 3.875%, and no one else was better than 4% and some were higher than that.  There are a few exceptions to that pricing point, but in general it’s the value a loan officer brings to the picture to get to the finish line with the least amount of upset and on time.


I’d add to Matt’s last sentence with this: there is tremendous value in a lender (or any professional for that matter) who will:

– Foresee and anticipate problems

– Acknowledge problems

– Communicate problems

– If it’s their mistake, own the mistake and …

Fix the problems

Also. I like local lenders; as a buyer’s agent, they make me immensely more comfortable. As a listing agent, I value a local lender (whom I know to be good) tremendously – and convey that to my clients.

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One Reason Why Real Estate Closings Are Being Delayed

“I had four closings last week, and three were delayed because of the banks.”

“I had three closings this week and they’re all screwed up because of the banks.”

“Our movers said that every single one of their moves was delayed because of the banks.”

These are just a few stories I’ve heard over the past month. Parts of the Charlottesville real estate market are picking up, but one aspect that is adding tremendous frustration to the process is the lending side of the equation.

There are a lot of variables that can affect a real estate closing, but there is one truism – don’t schedule your move for the day of, or the day after (and to be safe, wait at least two days) closing. In Charlottesville, you don’t get the keys until the transaction is recorded.

This is not personal; most of the lenders are really nice. The system right now could justifiably be construed as a disaster. The “system” being those people who touch the loans is a mess. From the lender to the processor to the underwriter to the closers, the system is screwy. So …

Be prepared. Be prepared to be patient, to answer more questions than ever before – from multiple years of tax returns to a copy of your college diploma – if the lenders ask for it, it’s not because they want to annoy you, it’s because that’s what the system tells them to do. If they ask for it three times – that’s a pretty clear indication that the system is broken; don’t fight it, just do it.

From The Perfect Loan File in Forbes: (read the whole thing)

It all comes down to your proof. If the lender asks for a specific document, give them exactly what they are asking for, not what “should be OK,” – because it won’t be. This is where the approval process tends to go off the rails, when the lender asks for specific documentation and the borrower supplies something else. Here, too, is where both sides get frustrated. So if the lender asks for a bank statement and there are 5 pages for that bank statement, send them all 5 pages, and not just the summary. If you send them the summary page and they ask again, don’t complain that the lender keeps asking for the same thing when you never sent it in the first place. This may sound elementary, but the vast majority of mortgage approval process woes stem from scenarios just like this.

Why are lenders being so much more redundantly, infuriatingly stringent? Because they need to be able to sell their loans on the secondary mortgage market (you know – Fannie and Freddie). Now that there is some risk associated with making loans, lenders are being overly cautious. Related: How to Explain the Mortgage Crisis to an 8th Grader.

Such is life. Knee-jerk reactions are human nature (see: HVCC). We’ll get through this, but for now, be prepared for frustration, and use a lender you trust; I greatly prefer local lenders (with one exception).

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Who Touches Your Loan?

Lesson learned – work with someone who knows the people involved, who can make things happen (ethically and legally) and who can foresee issues. Knowing the people – one of the main reasons I strongly advise working with local lenders . As a buyer, there is quite a lot that happens behind the scenes of your loan. “Meet” a few of those people: – The Processor. – The Appraiser. – The Underwriter. – The Loan Officer. – The Closing Department. (in Charlottesville, that’s the attorney or closing company )

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Subprime mortgages in Charlottesville

There has been a lot of furor the last several weeks about subprime mortgages and the impact that they might/will have on the housing market and the economy as a whole….  The table below can help us ascertain the potential risk (taken in the context of the entire report -pdf):From the report:This study provides the first comprehensive and systematic look at the geographic variations by region and metropolitan area for the soon to be released federal government data covering lending activity in 2005….  These loans are generally more expensive for borrowers with interest rates higher than prevailing prime rates, presumably to compensate lenders for the added risks associated with lending to borrowers with weaker credit histories….  Be prepared.Check out the third slide in this excellent post on tightening lending standards.Business Week’s Map of Misery shows the statewide averages of subprime woes.I have asked a couple of local lenders where I might find this sort of data, with not luck.

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Wacky mortgages and scary forecasts

of the subprime ARM loans written in Virginia were 30 days or more past due in 2nd quarter 2006.Things are about to get immensely more complicated, now that the Senate is holding hearings assessing non-traditional mortgage products….  I was told the other day that there are only two local lenders who have not written any Option-ARM mortgages.  I am pleased to consistently work with one of them.The next 12 to 18 months are going to be very interesting, and very full of opportunity for some and sadness/desperation for many.Quoth Jonathan Miller:I have come to belive all news is presented in the most negative light possible, especially news about the economy….  For this data, I would have to bold it all.And finally, if you want to see the laughing hyenas taking pleasure in all of this, spend some time at the housing bubble thread….  From Comstock Partners’ commentary:Ø 32.6% of new mortgages and home equity loans in 2005 were interest only, up from 0.6% in 2000Ø 43% of first-time home buyers in 2005 put no money down.Ø 15.2% of 2005 home buyers owe at least 10% more than their home is worth.Ø 10% of all home owners have no equity in their homesØ $2.7 trillion in loans will adjust to higher rates in 2006 and 2007.Ø 70% of borrowers who took out pay-option ARMS in the past year have loan balances larger than their initial loan.Ø Homeowners face higher payments as mortgages are reset.  Generally, monthly payments rise between $200 and $500 depending on the size of the mortgage.Ø According to Reality Trac, August foreclosures were up 23% over July and 53% over a year ago.Ø The number of homes for sale is at record highs, and inventories are 59% higher than a year earlier.Ø New home sales are down 22% and existing home sales down 11%.Ø The NASB housing market index has recorded an all-time decline.Ø The housing affordability index is at a 15-year low.Ø The house price-to-income (rents) ratio is off the charts.  According to HSBC, in 18 states accounting for over 40% of national home values, the price-to-income ratio is 3.6 standard deviations above the mean.Ø The OFHEO index of house prices deflated by the consumption price deflator has soared to a record high of 350 from 250 in 2001.  From 1976 to 1996 it never was above 220.Ø According to the NAR the year-to year prices of existing homes are now flat.

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