Hello all: I hope you have great plans for the weekend. Here, it's beautiful once again. We've had a fabulous streak of nice weather.
I seem to be increasingly encountering difficult underwriting guidelines. I'm curious if you're seeing them too. The latest was on a loan that was supposed to close next week. Now, I'm not so sure. My borrower wanted cash out on his primary home. The problem was he recently took it out of an LLC (he had to in order to get the loan). When we tried to do a cash out refinance, it was approved by my underwriter initially and then nixed by the lender as these types of loans require six months seasoning on title. I know this rule has probably been in effect for the past year; the thing I asked my underwriter is why didn't we know this sooner. Her explanation was she just found out when submitting to the lender.
I heard recently that one lender was taking 78 days on average to close loans. We lock all ours for 55. What I'm seeing is our underwriters (we underwrite in-house) are bogged down by checking so many guidelines before issuing an approval. And sometimes when the approval is issued, the conditions can't be satisfied right away.
I have to admit it gets a little frustrating at times. I've heard this recently. We're all working harder for our money. I recently had to find a home equity line of credit for a borrower because they forgot about a dormant one they had on their home. Of course, they wanted to keep it but the lender wouldn't allow that. So I took the time to call a banker friend of mine to set my borrower up with a new line of credit.
It probably sounds like I'm ranting here but so be it. I love what I do and plan on making this a long-term career. If you're on the other side, please have patience. Those of us in the loan business will get your loan done. It's just taking longer. Hopefully the "oh by the ways" will diminish as we continue this economic recovery. Have a great day!
Paul McFadden
Paul, I have not had the same problems... there are a few issues, but time is not a problem at least on the Mortgage banking side of things. we do broker a few things and there is a hurry up and wait scenario that you have to plan for.
Most of the guidlines that are popping in are just reverting back to years ago... (DeJa Vu all over again for me) some are smacking you in the face like the seasoning requirement. I would think that if you show the LLC was owned by your client there may be a loop hole on that one... You just need to be able to find an UW with common sense!
Good Luck!
Robert: I'm glad to hear that. We also are mortgage bankers but, with volume consistently at $75 million or greater/month have gotten bogged down. It's better now that rates increased. It allowed our underwriters to catch up a bit and I expect turn times to get better. Thanks for commenting! By the way, there is no loophole with an LLC. This is a Fannie Mae guideline. I'm pretty sure my borrower will accept a rate-term refinance; it's just these last minute things that give us all gray hair!
Paul,
If the current owner and the owner of the LLC were the same you could probably paper around this. But, there is always a "but" even though most states alow one person to own an LLC, the IRS wants at least two. If you'd put a family member or friend on the LLC and not on the new mortgage you've got a 6 month problem.
I'm a big advocate of owning investment properties in individual LLC's wich in turn should be owned by a well planed trust. If for any reason a person wants to protect their property they'll need a good attorney and tax adviser. I'm nether an attorney or tax adviser, but here is what I believe. LLC's limit your liability to the equity on the subject property. LLC's are taxed just like any other personal property. If you're inncompliance with your state law you get the protection your after. If the IRS doesn't recognize your LLC so what there is no change in the FEDERAL tax.
It's time to replace you underwriter! This is nothing new!
One final though, why would anyone change the title until the loan were approved? This could have been a funding condition.
Bill
Bill: Thanks for your thoughts. Unfortunately, we can't get around it. I think a refi. rate-term is in order. My client can always get a HELOC if need be. We underwrite in-house and our lead underwriter knows the playbook cold. We adhere closely to that as compliance is huge these days. Thanks again!
The problem I see is that you can keep up with Freddie and Fannie guidelines but each lender is putting their own "overlays" in to underwriting these days making it very hard on my clients and I.
I even had a person inside of Flagstar bank tell me that their uw dept. is using gut instinct when evaluating files! good god man...
P.S
When people on these blogs claim they are having no issues getting banks to lend on their files they are full of it.
CJO
Christopher: I agree with everything you say including the part about LO's being able to get deals through the pipe quickly. Either their company isn't doing any business or they're not doing very much themselves! The overlays seem to be pretty random from one lender to the next as well.
Paul,
That's the nature of the beast nowadays in the mortgage business. Underwriting guidelines are in a constant flux and you do the best you can to get loans through. One of these days ... ?
Esko: Thank you! I believe things will get easier as the economy continues to improve. Those of us who are conservative can only shudder at the thought! Take care.
HI Paul,
I just had a comment today on one of my old blogs...and it occurred to me...that something that wasnt' brought up on this one..should have been.. That is, that the Loan officer, originator, or WHATEVER they call themselves...HAS TO DO A BETTER JOB of asking questions, and handling things on the "front end" than they did yesteryear...
For example, if you have someone say, ....turn the deal down for ratios....ask yourself...why are THEY calculating income differently than YOU DID...Why didnt YOU see it, and maybe, have the customer pay something off....I have even seen deals TURNED DOWN because the debt ratio was less than 1% too high! In MY DAY, there were COUNTER OFFERS!!! What the heck happend to them huH???
Thanks paul! -D
Thanks for your response. Sometimes it's me who makes the mistake and sometimes its a guideline change or overlay by the lender. Either way, its telling me we've got a ways to go before we get back to having easier deals. It seems like as much as half of my deals these days have issues. And a lot of these are great borrowers with "make sense" loans. The problem is they're self-employed or just changed jobs, etc. etc. At times its frustrating because we just have to wait. Oh well, those of us that love this business will stick it out! Take care.
Hi all,
Question: I appllied for a moragte laon via WF, 7/2/09, received a good GFE, %5, on a 430, 000.00 loan, 30yrs, both my wife and I have good credit (701 and 735), I have a radified contract on my current home.... why is it taking so long to haar back from them? only word from them was that they are wating on IRS, but I already gave them hard copies for 2007 and 2008, I don't understand. Any help on turn around time on loans with Weels Fargo? Thanks
Ben: I've heard Wells Fargo is taking up to 90 days to approve and close a loan. Hopefully, this will work for you. These days, every t has to be crossed and every i dotted. Let me know if I can help further! Thanks!
Hello Paul,
These are exactly my concerns when I have Short Sales to close in a short time (believe it or not!). We just received underlying lender approval, but the new lender didn't even have the purchase agreement. Its an FHA loan and must fund by the 25th of August. The new lender tells me we can make the date.
I sure hope so!
Julie Booth
(my first day on Active Rain)
Julie: Welcome to the Rain! I wish you well. Thanks for commenting! I think you're probably safe getting this closed on time. I wish you luck-keep me posted!