Example of the silliness

Here is an example of the udder ridiculous nature of the industry now. Working with a elderly borrower a Signing Agent fails to notice that the borrower during closing put down 2009 instead of 2010 on a 4506 government tax return request form. Now while admitting the error was with the Signing Agent who only has to review 40+ signatures on a package, this would seem like a silly error to hold up a funding. Not so! Lets ignore the fact that every closing package has a errors and omissions form (most have two, one for title and one for lender) that allows either the title or the lender to correct inconsequential errors. The title company required the Signing Agent to go back to the borrower to get it resigned. Then it needed to be resent by overnight at the Signing Agents expense so funding can occur 2 days late.

Now this form (4506) has been in closing packages for years and up until the season of "gotcha", has rotted in over 95% of files without anyone looking at it much less using it. Now with the season of "gotcha" upon us, every 4506 is being used in QC (Quality control) right away. This in spite of the fact that the borrowers have already signed one at application and it was used to qualify. So now we pull the borrowers tax returns twice! How is that helping prevent fraud? What is going to change between the first pull and the second? You are getting it directly from the IRS...what is going to change?

So this correction resulted in 8 phone calls to the borrower and Signing Agent, two faxes, three emails and a FedEx. When all a closer had to do was invoke the E&O form and make the correction themselves. The 4506 is NOT a legal notarized document. It is NOT date sensitive with the exception it usually expired in 90 days of closing. What is the sense of wasting all that time, resources and money on a redundant form? You waste the borrowers time, the Signing Agents, the closers and yes quality controls time. At least $100 in expenses went to ONE form correction! Before the time of "gotcha", before the lay offs of the competent, before the weaklings took over, this would have been taken care of by fax, regular mail or some closer would have just made the correction based upon the authority of the E&O form(s).

Nobody in the industry has the spine anymore to stand up and say "Enough is enough!" We have a new GFE (which, according to the morons at HUD, a "streamlined" form which went from 2 pages to 4) that the borrower does not see until close to closing, can't understand (nobody can) and does not even sign! We still have that useless TIL with a APR that has no basis in reality and you have quality control underwriting that serves no purpose but to slow down the system. Loan applications are up, approvals and closings are down...gee...yah think?

The real heros of the loan process

It is time to take up the cause of the Notary/Signing agent. These are the people who close your loan outside of the title company location. They often are driving many miles at all hours to get these loans (as few as there are now) closed. They are busting their butts off to make sure they make the Fed Ex on time, all the
motorization's are correct, and that all docs are signed . The mortgage industry has NEVER respected what these ethical, detailed and hard working people do. Along with all the other STUPIDITY of the mortgage industry going on, things have only gotten worse for the Notary/Signing Agent.
The first injustice is the absurd size of packages. They have gone from an average of 35 pages in the '90's to an average of 120 pages now. Has the compensation gone up for the Signing Agent? NO. It often costs over $15 in paper and toner costs and that does not include the time to print/collate. Yet most title companies and signing agent schedule services/title companies have not only not increased payment for packages printed by the Notary/Signing Agent, but some have even reduced the fee! In addition to the size increase is the ridiculous complexity of the closing packages. Every second rate lawyer employed by the lenders is adding disclosures that not only do NOT add to the understanding for borrower, but add redundancy and confusion. The idiot lawyers are killing this industry as much as the incompetent spineless underwriting!
Next is the overall payment to these Agents. Costs of gas have gone up over 33% in the past two years but the payment to these people has gone down about 20%. The blame lies with both the lenders and the hiring title companies. Neither one will admit that while their fees have gone up over 25% to the borrower, they have screwed over the very people who finish the job-the Signing Agent/Notary! Some title companies even now hire unqualified simple Notaries rather than certified Signing Agents (certified by the National Notary Association). Signing Agents have to past a comprehensive test, background check and carry errors/omissions insurance. They are just as qualified (and in many cases MORE qualified) than your typical closer at a title company location
Somebody has to say enough is enough. These qualified good people are being screwed over as are the borrowers in a process of asinine, corrupt, incompetent lenders. The quality of service is going town the toilet and every lender is to blame. I feel sorry for these dedicated people who are in the trenches daily making up for the incompetent lenders and helping borrowers finish a frustrating process.

Rates at all time low...so are approvals

We are having interest rates at less than 5% and yet there is no refi boom or surge in housing sales. NOBODY is getting approved and now others are finally starting to grumble. It is time drop the conforming scores back to 620+, it is time to bring back STATED for self employed and it is time to bring back compensating factors in guidelines....the strangulation of the borrower has to stop.
Check out this article.

It is NOT getting any better out there. Lenders are changing guidelines at whim, re verifying till they find a "gotcha", and making closing packages ever more difficult to close. They are adding new lame and unneeded disclosures and making demands of title companies and signing agents that go beyond reasonable!
When I read how the modification program had only closed 13% of the qualified applicants, I had to laugh. It has to be much lower from my observations. I have interviewed 15 Bank Of America borrowers who have gone through the process. All of them said the same thing; They kept getting collection calls and certified letters demanding payment, fees and back charges as if they were not even enrolled in the program. Everyone I talked to said that they made the payments and did what they were told in the initial phone call for enrolling in the program. But apparently B of A has no clue what it is doing and has made the program a joke with it's incompetence. Add that to the stupidity of B of A underwriting and you have what was arguably the best lender in the country (Countrywide), being trashed with by the most inept, clueless bank in the industry.
Like I have said before...go back to the underwriting we had 7 years ago and we can get out of this slump much faster. Tightening of guidelines, raising credit scores, pushing down appraisals and gutless underwriters are killing the real estate market and the entire economy!

It is just getting worse...Stupidity is spreading

It just is getting worse! Last weekend in my Sunday paper, the USA Weekend supplement had an article about the new mortgage forms. The clueless author (Richard Eisenberg) either got suckered in by someone or else he did not do his research. First of all he claims that the new Good Faith Estimate (GFE) will save consumers an average of $700, but gives no basis for this claim. In fact this form will do NOTHING to save anyone any money. This is just typical BS coming from the good folks at HUD. You know the ones that gave us the Truth in Lending form (TIL)? It says nothing that the old form did not tell us or other related forms say that are already in the standard closing package. Everything offered by this stupid new form is more of the same "disclosure" that was always available or assumed by anyone who did their homework when applying for a mortgage. Mr Eisenberg is even as dense to refer to this as a "streamlined" federal form when in fact the old one was A SINGLE PAGE!
The touted advantage of being able to compare "apples to apples" is a myth. First of all this was the same line we were given with the introduction of the TIL and it has proven to be one of the most useless and confusing forms ever created. Second of all it ignores the fact that there are differences in lender pricing, daily fluctuations in mortgage rates, costs variances between types of loans and long term costs of buying points ( Are you listening Ilyce Glink?).
The industry is being choked by government posturing, unnecessary regulations and stupid paperwork. Add that to the spineless underwriting, suffocating guidelines and incompetent management of the major lenders, and you have a system broken This is keeping thousands of well qualified borrowers from helping us get out of this mess we are in.

Beware of the BBB logo and use

As a marketing guy I notice the little things that arouse suspicion in advertising and I am keenly aware of the tricks shady mortgage companies use to establish credibility. The biggest red flag is the blatant use of the Better Business Bureau logo and name ads. The more prominent it is in the ad, the bigger your suspicion should be of the advertiser. The fact is, the BBB is a toothless tiger. They blow a lot of hot air and have little effect on how business is conducted today. Businesses that use them are trying to establish a credible reputation based on the outdated preception many people have. If the BBB logo is in every ad or is part of their TV/radio ads...run the other way! The BBB can not help you recover lost fees or payments. All they do is send a letter requesting the business address the issue and have no legal or contractual power to force anyone to do anything.
EVERY mortgage company that I have come in contact with that features the BBB in their advertising has proven to be less than reputable and some are outright criminals! It is better to check with your state's Secretary of State office and the local mortgage banking association. Or you can go the traditional way and work first with your local bank. Rates vary little between banks and mortgage brokers. The advantage brokers offer over banks is often a wider range of mortgage options and companies. But you need to be cautious with fees.

Stated Income loans and the lies about them

Recently received an email (spam actually) about a new method of dealing with "Liar" loans. It put all stated loans into the same basket and implied that stated loans where basically all lies to get qualified. This is the kind of simple minded view that most outside observers have including clueless lawmakers. For the record, STATED loans were designed for self employed people who have trouble showing their income. They take deductions and expenses that most others do not have. You cannot look at pay stubs, W2's or tax returns and get a good picture of the income. As an underwriter you would look at the type of job the person did, what others in the same field get for compensation, what the bank records look like for a income flow monthly and what the tax returns showed for deductions. Then the underwriter would determine if the stated amount is reasonable.
Going back the email that referred to "Liar" loans, it seems to try to take advantage of this confusion between traditional stated loans and the moronic loans offered by the Sub-prime at the peak of it's short-lived life. People who are (or were) w2'ed income were often placed with the sub-prime stated income loans to qualify for a higher mortgage amount. There were grocery cashiers making $70,000 on paper! The normal income and debt ratios are there for a reason. If you are over that ratio, you cannot afford the higher loan amount-period. This conforming type of stated loan worked within expected default rates for many years. With a w2'ed borrower you know exactly how much they make. Self-employed people are not so easy to pin down. Thus you need stated income loans for these people using common sense indicators. The reason everyone is referring to stated income loans as liar loans is the misconception between the stupid loans offered by sub-prime and conventional lenders. States have gotten involved with new regulations and laws to make conventional stated loans impossible to get. Again, what I have said before about the mortgage industry, Fannie/Freddy and congress is that they are punishing the wrong people. Conventional stated income loans were not the problem or even a blip on the industry crisis. The problem was with the sub-prime stated income loans sold to unqualified borrowers with ARMs to add insult to injury. Wake up mortgage people...the problem is solved. There is no more sub-prime industry and the borrowers that took these loans are in foreclosure or heading that way soon. Now go back to where conventional guidelines worked (about 4 years ago or so) and give both full doc and stated borrowers what they deserve-a chance. If we are going to get out of this housing depression you need to make loans. With the strangled guidelines applied now, over 80% of qualified people are being shut out.

More proof that the idiots are in charge

We have all heard the horror stories of lenders screwing up on refinances and purchases but it seems that in all aspects of banking the big guys are messing up. Last year Bank of America foreclosed on at least three homes that they did NOT have a loan on! At least one of these homes was paid for and never had a mortgage with B of A or any lender (http://abcnews.go.com/Business/bank-america-sued-foreclosing-wrong-homes/story?id=9637897). Since taking over Countrywide, B of A has slowed approvals down by 80%, increased closing package size by over 20% and in general has messed up what was one of the best mortgage lenders in the country ( formerly Countrywide). B of A is not the only one by far but it seems they are doing everything they can to piss off their customers even on the banking side. A friend of mine had a line of credit in place for years with B of A. He was never late and often used it for payroll when large account payments came after pay periods. He ran up the balance and then paid it off when checks arrived. Without notice, he found out that is line had been closed and B of A cleaned all of his bank accounts to pay off the outstanding balance. He had to scramble to make payroll and moved his accounts to a more friendly local bank. But he went cash short near Christmas, incurred bounced check fees, service fees and actually had to take a loan on his life insurance to continue in business till new credit lines were in place. This man has a profitable and well established business.

Chase mortgage seems to be impossible to work with as well. One client I had went almost 11 months to refinance. Both borrowers had over 40 years of perfect mortgage history, long time state jobs, a 55% equity stake and were current Chase customers. Chase changed 800 numbers three times during this process and just disconnected the old one rather than transfer to a new number, they went through five processors, three LO's, and never talked to a supervisor more than once before being passed on to someone else. They had to contact their Senator's office to complain before Chase would finally approve and draw docs. Once the senator's office got involved it took 7 days to close. The closing package was such a mess that it took over two hours to close, involved over 200 pages and even required the borrowers to initial all signatures (legally this is questionable and indicates their lawyers are fools). If you sign a document, why initial the signature-makes no sense.

You do not have to look further for proof of the "Peter Principal" in action. The best and brightest have been laid off and the incompetent are in charge. Tighter guidelines, underwriters with NO ability to use common sense, credit score dependency without regard to real credit history and conditions that go far beyond what is necessary. Patience and firm aggressive pressure is the only way to get a loan done in this market. Best advice to give a borrower...make sure you work it everyday and talk to your LO and the processor frequently. Allowing the process to take care of it self will result in the file dying like thousands of files do weekly.

The beginning...

I have been in the mortgage industry now for over 20 years. I have done just about every job possible from processor, loan officer, broker, managing a brokerage, account executive, underwriter and closer. I have seen a lot of changes and VERY few have been good. I honestly believe the mortgage industry to be populated by some of the most incompetent, self centered, greedy and moronic people in business today. And it is getting worse! Yes, I am still fighting the good fight within the industry and love the satisfaction I get when helping people get into a new home. But nobody is telling the brutal truth what is going on and most within the mortgage field are nothing more than sheep following the herd to the next slaughter.
That being said, I think you will see in the following posts that common sense is very uncommon and nothing good will come of the changes we are seeing in the industry. I saw this entire fiasco coming back in 2003 and everything I foretold has come true. I will be brutally honest about what is going on, what to expect when wading into the mortgage morass and how you can deal with it. I will post about once a week with a new topic and encourage my readers to comment and offer their opinions.
Topics coming up:

• FHA, how dumb are your new changes!
• Conforming loan changes that scream "we are clueless morons"
• TIL, the stupidest form ever created and getting worse!
• Credit scores, what a unfair and lousy way of doing business
• Closing packages and how we are killing our trees for stupidity
• Closing fee ripoffs
• Why "stated" programs were lost and why self employed people are getting screwed
• Arms...the good, the bad and the ugly
• Regulation that does no one any good
• The bleeding of home equity
• Home values and how appraisers are going from optimists in value to clueless cowards