Saturday, January 24, 2009

Is your Mortgage “Expert” Keeping up with Industry Changes?

Changes in mortgage guidelines are occurring at a record pace. Many in the industry are not keeping up, causing painful lessons for consumers.

BLOOMFIELD, MI – Most consumers have come to believe all that matters in getting a mortgage is shopping for the lowest rate & closing costs. Every lender is the same, their expertise & experience mean nothing.

Sadly, this past week three homebuyers found out differently, the hard way.

They all had the same story – after being pre-approved by their lender, they had found a house, signed a purchase contract, applied for a mortgage with their lender, and halfway through the transaction, had their mortgage application rejected.

Each lender also had the same story - they claimed a recent change in mortgage guidelines was the reason for their rejection.

I got involved as they were each referred to me, to somehow save their transactions.

The sad fact was that in each case, the guideline change the lender blamed had actually occurred months ago, not recently, and I could do nothing for their transactions. I did email them proof that the guideline changes had occurred months before and recommended they confront their lenders for a return of their application fees.

Why do these things happen? Don’t all lenders follow the same guidelines? Isn’t getting a mortgage the same everywhere?

From early 2002 until April, 2007 getting a mortgage was very easy as mortgage guidelines were extremely loose. Many lenders joked that if a consumer had a pulse, they could get them a mortgage. People of all backgrounds, with no experience, jumped into the mortgage business for the easy money.

Then the Mortgage Meltdown hit, followed by the Real Estate Bubble popping, the Credit Crunch and the Recession we’re in now.

Today, mortgage guidelines are very different than they were April, 2007. Subprime, Zero Down, No Doc, Stated Income, Option ARM, are all gone along with loose mortgage guidelines.

Many mortgage people that got into the business after 2001 are struggling to adjust to the new lending environment. They’re used to just asking questions about FICO scores, income and assets. They don’t know how to ANALYZE a transaction to even ask the right questions to avoid nasty surprises, much less keep up on industry guideline changes.

Many of them claim to be experts by citing their time in the business, number of completed transactions or their ability to deliver the “best” price. I don’t see how any of that type of “expertise” helped the three homebuyers who got rejected this past week and had their home purchase dreams shattered.

Michigan passed a law April, 2008 requiring all loan originators (except those at federally charted banks) to pass a test by April 1, 2009. The test is heavily weighted with questions on federal & state lending regulations and underwriting guidelines. Many are failing it or are avoiding taking it until the last possible moment.

So, if you’re looking for a mortgage to buy a home or refinance, maybe you should be searching for more than just the lowest rate and fees. Maybe you should be asking loan originators what their credentials are and for proof they’ve passed the state test.

No comments:

Post a Comment