* * * * HARD CORE REAL ESTATE TALK * * * *
Thanks to the Mortgage Pro Week in Revew: 6/30/2008 throught 07/06/2008 by Alan 'AJ' Nisen, I found some very good reading material by ActiveRain members from the mortgage loan industry.
NOTE: ADD this link to the content in this post. It's very interesting.
One of the featured articles includes real estate agents in the group responsible for the mortgage mess. Including real estate agents in the blame game for the mortgage mess appears to be a knee jerk reaction. However, the writer doesn't say how the real estate agents were responsible for the mortgage mess. We know how mortgage loan officers can be responsible for approving loans for unqualified buyers. I have yet to hear how a real estate agent can be responsible for a loan officer approving an unqualified prospective borrower.
"Get pre-approved before selecting a real estate agent" is the advice from mortgage loan officers and HUD. If mortgage loan officers can pre-qualify a prospective home buyer before the consumer has selected a real estate agent, how does the real estate agent become responsible for the actions of the loan officers approving loans for consumers once the consumer has an agent???
The mortgage loan officer is not responsible for the institutional creation of the Alt-A, the Neg. Am, etc. loan instruments. Those loans were created at a much higher level than the mortgage loan officer. In fact, Fannie Mae and Freddie Mac guidelines approved many loans that were doomed to failure. Surely, the mortgage companies that employ loan officers have Policies and Procedures for their employees.
- On Tuesday, Fannie Mae (nyse: FNM - news - people ) executives told analysts that 43.0%, or $946 million, of the $2.2 billion in losses incurred during the first quarter involved Alt-A loans. They also said that the company's "Alt-A book will continue to drive an outsize portion of our overall credit losses." Fannie also reported $344.6 billion current Alt-A exposure and a limited strategy for stemming future losses. Forbes, May 6, 2008.
REAL ESTATE AGENTS ARE AT THE BOTTOM OF THE FOOD CHAIN. I've read the license law in both states in which I practice real estate brokerage. Neither have any duty on the part of the broker or agent to advise or have any knowledge of mortgage lending, rates, terms or conditions. How can real estate agents be held responsible to police the actions of mortgage loan officers?? Not only are they not trained in the intricacies of mortgage loans, they have no authority to police the application and approval process or criteria for mortgage loan approval.
Why does everyone try to suck the agents into this mortgage mess? Agents have their job and loan officers have their job.
- Does the agent blame the mortgage loan officer when the agent fails to provide required disclosures?
- Does the agent blame the loan officer when a buyer closes on a home without the HOA docs?
- Does the agent blame the loan officer when the agent practices undisclosed dual agency?
- Does the agent blame the loan officer when the agent provides an inaccurate CMA?
Real estate agents and brokers do have many duties for which they bear responsibility. Mortgage loan approval is not a duty of the real estate agent. There are many levels of knowledge and exprience of real estate agents. However, mortgage lending is not a required competency for real estate agents. I have always been of the opinion that it takes about 100 transactions before a real estate agent really has an understanding of real estate brokerage. If agents are responsible for mortgage loan failures, you'll have to add a few years experience for competency. Few agents even attend or participate in mortgage loan applications. If we are responsible, we would have to have been involved in the approval process. Real estate brokerages have published Policies and Procedures for their real estate agents. Those guidelines do not include mortgage loan approval authority.
Loan officers often say that they wouldn't approve bad loans for buyers if the agent didn't "pressure" them to do so. This statement astounds me. Pressure from an agent is hardly an excuse for failing to follow the law or guidelines for a mortgage loan.
All the mortgage loan officer has to do is "SAY NO"!
The blame game has to stop when one sector of the real estate industry tries to suck everyone into the mess and refuses to police themselves and accept responsibility for the causes.
If the mortgage loan industry is not going to accept the responsibility for making mortgage loans to consumers who didn't meet the guidelines, the persons making those loans will continue to perpetuate this problem and the consumer will continue to be badly served.
Consumers do not understand mortgage loans even when they shake their heads up and down and say that they understand.
Many real estate agents do not understand mortgage loans, even when they shake their heads and say that they understand.
Mortgage loan officers DO understand mortgage loans and if they approve a loan for an known unqualified home buyer, they may bear responsibility for their actions. FHA and VA have "charge back" features that go a long way to prevent unqualified buyers being approved. Loan officers know when a buyers is qualified and when they are not.
In all the years I've been selling real estate, I've never known a loan officer who couldn't say "NO".
"Good news! I can qualify you for a loan with a 1.5% start rate."
THIS MAIL HAS GENERATED SOMETHING I HAVEN'T GOTTEN IN QUITE A WHILE
I'M GETTING FLAMED!!!
Note, that the whiners don't have the guts to publish their views. They primarily flame me with e-mail exhibiting a considerable level of commission envy.
I never quite understand why loan officers complain about the "6 or 7%" that real estate agents collect at the end of a sale. Fact is, they all have the freedom to do the same thing we do.
Take the real estate course
Pass the real estate exam
Get hired by a broker
Invest in promotion and farming for customers
Work your butt off to meet qualified buyers and/or sellers
Work your butt off to get some buyers and/or sellers to settlement
Collect the commission
It's a free country and I suspect that anyone who can get a job as a loan officer
could get a real estate license and strive for those easy commissions.
It's a free country.
Wednesday 7/26, 2008
Well folks. This has been an exciting read. I'm not quite caught up yet and may not ever be.
I just returned from a meeting with a loan officer and his underwriter getting caught up on their processes for approval, etc. I like to meet with new mortgage company folks to look them in the eye.
For one thing, it gets my calls answered or returned quickly and my folks get good care. That's important because I refer 2-3 buyers to mortgage companies every day.
I've already sent this loan officer about 25 buyers (about 6 have been rejected) and thought it was time we met. It was a very productive meeting. But, I won't be doing his job and he won't be trying to qualify folks who don't meet their the guidelines. I'm not taking those buyers anywhere else.
My agent and broker partners to whom I refer buyers will benefit from the meeting and communication will be better than if we had not had the meeting.
The point of this comment is that real estate agents and mortgage loan officers can have a good mutually beneficial relationship working together. Agents can't hide their heads in the sand and try to make square pegs fit into round holes. A buyer is either qualified or they are not.
However, our competencies are quite different. I do my job and the mortgage company does theirs.
It'works very well.
Thursday, July 17, 2008
As the pusillanimous "google" points out above, below, thinking he found something incriminating in one of my past posts, I did say "I don't have a problem with 100% loans.". In didn't when I wrote that post and I don't now.
And for the record, I don't have a problem with Alt-A, negative am, pay option, etc. loans. Exotic? Sure. However, used responsibility by loan officers, they open the doors to home financing that would otherwise be closed to many responsible home buyer such as self employed persons, persons who are on an upward mobility track in a professional field like medicine.
However, I do know that the consumer should be provided with an amoritization table so they have actually seen how their payments and mortgage balances will move. Disclosure and information would have saved a lot of consumer the anguish of foreclosure if they had simply known. In the past 10 years or so, I have had one, just one, loan officer provide a 10 year amortization table to my buyers. So I do it. Am I stepping on the toes of the loan officer? No. I'm just letting my buyer who wants to buy a home at the limit of their qualifying range know what to expect.
We also through the house (along with a wonderful home inspector who agrees to perform this extra service for my buyers) and let them know what to expect in the way of home maintenance and upgrade costs for the next 5-10 years. If a buyer spends his last dime to buy a home and the air conditioner, while working new, is at the end of it's useful life, that buyer is at risk if he has to pay $5,000 for a air conditioner and only has sufficient income to meet his mortgage payment.
So, there is nothing wrong with 100% financing if it gets a family into a home they want and need as long as it can be established at the outset that they are prepared financially to make the mortgage payments.
It's very difficult for families (even a family of one) to save cash these days. However, everyone has to have shelter and if buying a home with 100% financing is an alternative to renting, I'll help them all I can. However, I don't expect loan officers to put my buyers in loans that put that buyer at risk of foreclosure.
If, on paper, the buyer works two jobs and earns $25,000 W-2 earnings and they are approved for a $500,000 house with a 100% mortgage, that's not one of my buyers.
================= FLAME RECEIVED IN MY E-MAIL =====================
While I appreciate your comments on active rain I have to disagree and this is why:
- Most Real Estate Agents only care about their commissions
- Most Real Estate Agents couldn't figure out a payment
- Most Real Estate Agents are stupid
When you point the finger you are enforcing my last point. You all have driven up the price of homes and filled the balloon with hot air. Not the balloon had popped and you want to blame us?
Step back and look at your industry and the ethics and professionalism there.........lacking to say the least...............You are the theives who charge 7% not us.............A home has to increase in price in order to be sold to pay your sorry ass.
Thanks for listening.
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