Jul. 6, 2011: Why Borrowing is a Privilege and Not a Right

Jul. 6, 2011: Why Borrowing is a Privilege and Not a Right Rob Chrisman

[I am away from the computer on a daily basis, and my access to e-mail is sporadic and not timely. In my place are daily commentaries from a series of very knowledgeable mortgage industry people with different backgrounds, and they have been given very little direction about what to write about – the latest is below. Our views may or may not coincide, but I thank them for their time in volunteering and helping out.]   In mortgage lending, we have come back to the days where buying & borrowing for a home is actually a privilege, not a right. Is the public aware? Do the Realtors care? Are the loan officers prepared? All the press, licensing requirements and regulations point in this direction, yet still, we are faced with the ever present; “but this is a good deal”. Of course it is, and we all want them to fund, but can they? Not in this back to the ’80’s culture swing to underwriting requirements with the 2011 rules and regulations. Attorney’s breathing down our throats at every turn, looking for any minute error, risk of holding assets to cover every loan funded in case good borrowers go bad; how can we be expected to turn a blind eye? It’s not that your loan professional is nit picking, your lender is difficult to work with, or the process takes too long. It is what it is and we had better get used to it. Otherwise, good loans are going bad before they ever had a chance…for as little as a simple disclosure mistake. Bottom line, it’s a mistake that we just can’t risk the ramification of ignoring.   Real people are doing hard time; Borrowers for lying on loan applications, Loan Professionals for omitting information, Brokers for paying referral fees, CEO’s of lenders for all of the above and more. Massive fines are being levied for as much as using the wrong word in an advertisement or incorrect disclosure (there’s that word again)…The salt in the wound? True mortgage industry leaders are leaving as the risk is just too high. And we shouldn’t be risking the lively hood of the rest by asking them to ignore a ‘simple mistake’.   Processes are put in place to protect us all. Granted some very over bearing, but the more we fight the more processes are devised. We’ve seen it in the late ’80’s again mid ’90’s and now (2010-2011 gave us some dozzies). However, if we don’t get on board / work to make it better, it won’t get better.   Compliance with the SAFE act, while painful, is a reality.  Of course it’s utter nonsense that the major bank loan officers are not subject to the same testing and scrutiny that the broker community is. Work with the professional associations that are advocates for the level playing field.  Write your elected officials about the disparity put in place as a result of the Dodd-Frank Bill.  Silence on these critical issues by the majority will only exacerbate the problem   Further, the interpretation of these rules and regulations have been interpreted in a variety of ways, further lending to the confusion about what is and is not correct when disclosing.  The current environment does lend itself to the application of common sense.  Check with each reputable wholesaler and you will find little nuances in each firm’s compliance department that make the overall process hardly uniform.  Sadly it’s a reality that will not easily go away.   In the meantime, investigate how loans were packaged and underwritten in the “good old days”.   With the Lender comp confusion (who pays for lock extensions or added charges that more often than not arise); could it be another nail in the coffin of YSP and the no point, no fee loan? Word is; it is beginning to hit the lenders bottom line, and could prove to be significant enough while in this declining rate environment. Added to the pain, lenders are seeing their performing loan servicing portfolio bleeding off to a lower rate refi’s, along with new locked loan pull through being  dismal as borrowers and brokers alike, move willy nilly for as little as .125%. Writing may be on the wall, time to sell points…   Remember the phrase: Lord please give me another refi boom, this time I promise to not “flush” it away? Well, isn’t that what we are beginning to see, again!? I’m hearing a lot of chatter from people getting back in the business to “take advantage of the refi market”. With many saying: “what’s NMLS”?  It’s going to get brutal when these former brokers get back in and put a spoke in the wheels, both your production and your lenders processes.    The professionals need to get out there and market themselves! How will you manage it, especially when we know we need to be concentrating on helping your allies build the purchase pipeline? Sounds like we all need to get with the program and work within the old or what ever technology, and not complain about what takes cash to fix, until we show profits to begin re investing in the infrastructure. It’s not going to change by yelling but if we work what once worked, surely we can come out on the other end profitable and with good business/ relationships to show for it. As far as motivation and organization? There are many tools available through the good old personal coach to group time management classes etc. But the bottom line, we are all working harder for less, but more is out there, so let’s go make it happen!   And lest we forget: borrowing is a privilege not a right and we are mortgage lending professionals.   “We must reject the idea that every time a law’s broken, society is guilty rather than the law breaker. It is time to restore the American precept that each Individual is accountable for their actions” – Ronald Regan   “We’re in the business of compliance and occasionally fund loans” Seasoned mortgage professional       Respectfully submitted by: Andrea Redfield Happily supporting the Residential Mortgage Broker Community for more than 20 years