Duking it Out Between a Rock and a Hard Place.
What Homebuyers SHOULD Know
VS What They WANT to Know
As a mortgage lender, I find that much of the time I am in that proverbial "between a rock and a hard place".
After almost two years now of working with the new Loan Application Disclosure forms (mainly the Good Faith Estimates and the Truth-in-Lending Disclosure), I wish I could say that clients were finding these important documents, and the whole mortgage process, more "understandable". But I don't think I'm seeing that. Sorry to say.
I'm duking it out with myself regarding this issue. I believe I understand, as their experienced mortgage lender and advocate, what's important for them, the client to know and understand. And I'm also required to make that information available and also ... once again ... "understandable".
But on the other hand (and what I'm duking it out with myself over), what I hear and see being expressed by my clients as to what their needs are is quite different. Most do want to know they are protected as consumers, but do not want to hear the particulars.
Basically, I hear from my clients that they want to know these 3 things:
- What's my total payment going to be monthly?
- When will I know when my loan is approved?
- How much money will I need for Closing?
And therein lies my quandry. There's so much MORE they need to know and understand. For their own benefit. By law they need to hear it. But ... a lender saying it and the client actually hearing it are two different things.
I have to admit, I still am sometimes greatly amazed, that as important as financing is .. and just how greatly it impacts the lives of my clients ... that the application process remains such a hated, overwhelming process just to be endured. I'd think clients would want to be more engaged. Be going through things with a fine tooth comb. But from the majority, I am seeing the opposite. There's little interest in taking active part in it. Other lenders have expressed to me that they are seeing much the same.
I've tried to analyze why this is the case. And yes, I know many will say it's the overwhelming number of financial documents required, personal information demanded, tedious minor (seemingly insane) underwriting requirements needing to be met that wears them out. And there is truth to that. But I picking up on this attitude prior to the start of the process, so that can't be the answer entirely.
I'm personally beginning to think that most home buyers have only "so much" emotional capacity to tap throughout the process of buying a home. And it's been worn thin by the time they get to arranging their financing.
Let's face it. Home buying ... the actual viewing and consideration of homes themselves within the current market ... is largely unrecognizable in comparison to the home buying process of the past. Home buying can be hard work, especially when still worrying about the financial aspect of buying while doing it.
So ... how do we within the real estate industry, both agent and lender, tackle this problem? Because it DOES affect us both, as well as our mutual client.
I know when I was growing up, my parents demanded that my chores and homework came first. Playtime second. Maybe this is the discipline with which buying a home should be approached also. Get the financing education and mortgage process more substantially behind a client first. Get the loan paperwork and approval secured ... then move on to the more enjoyable part of home buying. The actual viewing of homes. I personally think this could prove very helpful.
Agents would know what properties they can, or cannot, show prospective home buyers more clearly as a result. There would be less wasted time .. less wasted effort ... less wasted emotion and energy on everyone's part.
Perhaps the education of a potential homebuyer should begin with the information, "training", and reinforcement as to the best and most efficient and beneficial order in which to start the entire home buying process?? Maybe this could restore some of the pleasure buyers should be feeling and experiencing when purchasing a new home?
This is not going to be a remedy for every situation, or client. There will be those instances where it just will not apply. But for others, what say you??
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Gene Mundt, Sr. Vice President
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The Federal Savings Bank
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Gene:
Very nice post and love your profile pic lol. Have a great week.
Alan and Michele: Thank you! And that's my little cutie-pie grand-daughter, Marilyn. All of one year old and the apple of grandpa's eye ... as you can tell. Shameless of me, isn't it?? But a grandpa has to brag ...
Gene
Real estate agents can help a lot by preparing the buyers for the boat-load of documents that will be needed, the on-going process, and the fact that the lender is working toward the same goal we all are.
Very true, very true. What they should know, they don't. What they need to know, they couldn't care less about. The process to most is boring, the details, the explanation. I find it true with buyers when I discuss "real estate agency." Their eyes gloss over. I agree, the home buying process needs to be a little more "fun" but it's business. Lay out the basics, tell them what they want to know, then tell them, "I'll handle the rest!" Maybe that'll work?!? ;-)
Joetta: Agents can be of HUGE assistance, not only to their clients, but to lenders and the process as a whole. My best and most smooth transactions occur when that is the case. Your clients are lucky to have you working on their behalf ...
Well, maybe for some, Carla. But for others, they don't want to know anything .. right up until the time they hear something they don't want to hear. There are SO many landmines within transactions anymore. I'm finding that more and more often, agents are participating and getting involved in the mortgage process too. Sitting with clients during aps. Getting into the nitty gritty. I can't tell you how helpful and beneficial that has proven to be during those files. A united front by the professionals involved DOES make a difference ...
Gene
Because it is an increasingly tedious (and odious) process, I like my buyers to use my preferred lender because he makes it so seamless and painless.
Gene, I had a buyer recently close on his new home. He complained how difficult the whole lending process had become. Unfortunately, lenders need a contract in hand before they do all the legwork you speak of. Otherwise, I would be advising clients to do just what you suggest.
Great post--straight forward and to the point is always my approach. If you teach your buyers and sellers they will not feel so overwhelmed and taken aback. Thanks for the insight!
Gene, Even with the new forms, the amount of data just overwhelms. Like you said, they only seem to want to know the bottom lines and not everything else.
Gene - OY VEY!!! You're singing to the choir on this one, my friend. This after spending 40min earlier this morning trying to explain to a referral (who is already in escrow with some big, national, retail bank) that I don't care what the unlicensed WF bank rep told them - they're not qualified!!! And I'm apologizing to them! SERIOUSLY???
I don't know about you Gene but the frequency of these types of calls (people in escrow being denied a loan) has become alarmingly more frequent this year than any other time in my nine year mortgage career. I found out in a 10min conversation with the referral that they weren't eligible for a loan and the fact that some unlicensed WF bank rep led them along for three months is just disgraceful.
Furthermore, when I asked the referral if the WF bank rep explained to them any of the reasons why I was telling them they weren't qualified, they said "no, not until now". Gene, this persons eligibility issues should have been explained to them from the get-go, before even taking an app!
It's obviously not a case that borrowers need to be asking more questions (this prospect had no clue that their current situation was even a problem) but rather that unlicensed bank reps are simply not explaining lending guidelines and requirements to these applicants. I believe it's a case of that these unlicensed bank reps actually don't know the guidelines and requirements and that they're just not paid to pre-approve; they're just paid to take apps - PERIOD!!! I don't know, I could be wrong but it just doesn't appear to be the case.
Yesterday, I had a prospect contact me about getting pre-approved and when I explained my pre-approval process to them, they became kind of obnoxious and belligerent about my requests and proceeded to tell me that some unlicensed BofA bank rep they talked to didn't ask for any of that. AAARRRGGGHHH!!!
I don't give a rats patootie what some unlicensed BoA bank rep did or didn't do or said or didn't say. These are my requirements for getting a pre-approval from me. If you don't like it, then go get one from that unlicensed BofA bank rep and see how far it takes you. NEXT!!!
I know I seem like kind of a hard @$$ about it but as you know, my friend, I have to be if I ever expect to get my borrowers to the closing table!!! Ok, my little mini rant is over now and I'm getting down off my soapbox now. Have a good day Gene and hang tough, just keep doing what you're doing and don't ever forget - YOU'RE THE PROFESSIONAL MLO!!!
Gene - my question is the same as Tammie's (#7) - don't you have to have the signed contract before most of this can be done? Or are you talking about getting an approval up to a certain amount that you have determined they can afford?
The idea of making home buying more fun resonates with me!
Had to stop buy to take a look at the new cute photo! Hear what you are saying, most just want to know what it's going to cost, although the more experienced buyer will likely ask for a breakdown of closing costs.
It's a little like agency. Sellers and buyers should understand and make an informed decision, but it is not a 5 second explanation, so they get bored and move on. I swear sellers do not fully understand what a dual agent will NOT do for them. It's my crusade to educate but it's tough.
Do we make everyone interview for a loan, or an agent for 1 hour before they can do anything, nice concept but not reality. Time is precious and we are all on warp speed daily, all of us.
Gene,
Brilliant and very well said. It shows how much you truly care about the folks you help. Having said that, I am amazed by the folks that don't read the sales contracts, buyers' agency contracts, listings agreements, leases, etc in any detail. I am always happy to answer questions and help them understand the documents or direct them where to get additional support.
Great point to cover your mortgage bases first, prior to running to second base - looking for homes!
All the best, Michelle
Hi Gene, Excellent indepth review of the new docs. The feedback I hear from my LR is much like yours. Dang !!! BTW, that is one cute critter !
Margo: YOU are exactly what every lender prays for. A strong and loyal referral partner! Your lender is a lucky lender ...
Tammie: Specifics are important, no doubt. But much of the preliminaries can be accomplished ahead of time. But you're right, a specific property is needed to complete ALL the underwriting. I do think that more of the process could be done more ... shall we say in a more mentally comfortable manner for the client ... should the process begin in another order. JMO ...
Tonya: If past history teaches us nothing, it should provide us a long list of reasons to educate and inform our customers well. Sounds like you have that nailed down ..
Liz and Bill: You're right ... the word "streamline" just doesn't figure into modern mortgage processing. Clients will eventually see how we are processing now as the norm. It's just taking time .. and there is a understood reluctance to adjust. I understand it, but it doesn't change what MUST be done in order to qualify these days.
My friend Donne, now YOU are singing to the choir! Oy Vey! lol ... and I so totally agree with you. I am experiencing much the same as you. I have one "underling" right now that hailed from a bank and I'm not sure he's going to make it with our company. For the very reasons (and more) that you state. This LO cannot and will not change their ways, make the effort to learn, or understand that THEY must now do the work. Not someone else. And I too, have run into the client that first dealt with a major bank .. and learned nothing, and did not hear the truth on top of it. Of course, they didn't successfully complete a loan either. ANY and EVERY lender should have to be licensed and thoroughly educated. We'll have that bottle of wine together and continue this talk in the future!! Always good to hear from you ...
Margaret: To nail an approval down completely, yes ... right now you are right. A contract is needed. But much more of the preliminary work and specifics could be accomplished should we have the process move from Lender to Agent, versus the customary Agent to Lender. I can tell you from my point of view ... I'd LOVE to be in the referral seat, just as agents are. A refreshing .. very refreshing change for me as a lender. (I say that somewhat selfishly, admittedly). But I think the emotional aspect of the whole home buying process might go much more smoothly this way too. Right now, it's all fits and starts .. instead of gaining momentum towards a purchase. I think we can do better ... so looking for ways to accomplish that. Having been in this business so long, I can remember when closings and buying a home was a much happier occassion. Now? It's more like survival ...
Corinne: I understand what you are saying, but I think in the long run maybe MORE time is used-up utilizing our present method. Too much back and forth, missed communications, etc. And there are so many scenarios for buyers to hear. They get confused ... fading in and out of listening. You're right. Everyone seems to be going at the speed of light. But some things, such as spending thousands and thousands of dollars, still demand time and attention. Considering how much someone is considering lending to a client, it should be better understood that considerations are going to be involved. There HAS to be a better way. Maybe discussing it here will help us discover it ... I keep on hoping!
Thanks Michelle! You make a great point. NONE of the process is simple. And ALL of the process needs attention. Getting that message through is important. In the long run, a client benefits greatly by temporarily giving his life over to the process. I wish I could convince more of that fact ...
Gene
PS Corinne! Thanks for noting the new pic! Our little lion roared up and down the streets while trick-or-treating. Really got into the fun of it all. How early they learn!!
Gene
Bill: That little critter lights up our life ... and is soon to be joined by a new little cousin in about 2 weeks. Not sure the AR profile pic space is big enough for 2! And you're right. Most lenders I'm talking to about this voice the same opinion and moans. We all wish that this could go more smoothly ... both client and professionals. Thanks for writing ...
Gene
Hi Gene...
This is a fantastic post and I agree with you completely. Thanks for articulating what's been swirling around my head for quite some time. I spent over an hour going over initial disclosures for a loan with 4 borrowers. I don't know what's more insane...the time it took to complete them or the fact that the amount of paperwork is out of control.
I think part of the problem is misperception on the part of the borrower and the other part has to do with the behavior patterns of the American consumer. I think you'd be hard-pressed to find someone who wasn't aware of the housing situation in this country. With that being said, there's a couple reasons people aren't buying:
1) They believe that they won't get approved, for a myriad of reasons, and they don't bother (some are right, many aren't). There is still an issue of people who insist on trying to purchase a home they can't afford
2) Many people have no disposable income and are living paycheck to paycheck. This will take care of the rent, but it doesn't take care of extra things that go along with homeownership, and people fail to realize this.
3) Overall, consumers who are aware of the economic turmoil and are trying to avoid financial meltdowns are increasingly avoiding long-term debt. Whether it's the lack of savings, the lack of job stability, or the lack of trust in their employer, government, etc), committing to a debt instrument that will take the next 30 years to pay off is something many don't want to even contemplate
Returning to your point, though, I also think that education is the best way to reverse some of the trends we've been seeing. The problem is that government insists on doing it their way. So any initiatives will have to be done at a municipal and/or corporate level. And not just for the low-income borrowers, everyone. I'm sure there would be a much simpler, more efficient solution than anything the government has (or will) come up with.
For whatever reason, many people think that they'll just go buy a home, and the mortgage is just a piece of the puzzle. Like it's an afterthought. Many assume that they'll be approved on merit and socioeconomic status alone. We loan officers, along with realtors, need to do more to teach people how essential the mortgage is to buying a home...especially in today's lending environment.
That picture is totally adorable - and I know you'll share some of the soon to be arriving new baby as well - please!!
Your approach to working with borrowers clearly shows your professionalism, experience - and that you really care about them. But it is so very true that many seem to go into information overload before they can absorb all that really is important about buying and financing a home. (And I don't know the answer to that little dilemma).
Love the information! I can definatly respect what you do and I too see the clients can be the same with the RE informtion until something goes wrong and they ask why didn't you tell me when you tried to. / Keep punching away
Nice post and congrats on the gold star. I wish more buyers went to you before they got to me. Either way it's a good life.
Oh what a careful balance. I think you're right on the main q's they want to have answered. And, then you are the professional to help guide them in what else they need to know. It reminds me of that whole essay from Socrates "you don't know what you don't know."
Gene: I work with an MLO for exactly these reasons. I think most borrowers understand the need for good credit scores, having funds and a little bit about debt to income ratio's. It's the other kind of issues that only an experience MLO can really know.
I see too many agents and buyers rushing out to look at homes before, the buyer understands the process.. including the loan process. Some counseling and preparation at the beginning pays off later on for all concerned.
Personally I think it comes down to trust. they trust that you are telling them what is true. Cut the details and get to the point- the 3 things that you pointed out!
Oh, 1 more thing to add. The lion is ADORABLE. Love the whiskers.
JP: Thanks for the kind comments. Your comment about mortgage financing being an afterthought is a good one. It seems almost like a nuisance to many. I agree that we must do a better job of educating. But where is the leadership in that coming from? As lenders we are left to accomplish that primarily on our own, with little assistance from the overall industry or lending organizations. I think that focus needs to come from the top too. We probably could pop a top on a few over this topic ...
Nancy: Either do I .. and that's frustrating. I'd like to return to the days when it was a bit more enjoyable for the home buyer. I'm sure they'd agree. And yes, we're excited about the upcoming new baby. The prospect of adding to the family again is great ...
Gayle: I'll do that! Hopefully this turns around for us all soon ...
Joe: I appreciate what you say. I'd feel great to be able to refer a few your way ... hopefully soon?
Debbie: It IS a fine balance. You want to impress upon clients that this is of importance .. but you can't push too hard. You lose them entirely then. I appreciate you writing ...
Cathy: There's alot to know, so it can't be expected that clients will grasp it all in its' entirety. A good working knowledge would be a happy medium .. and it's what I hope for. I believe it's in their best interest ...
Joan: Oh Amen! Preparation is key ... right along with education. We continue to try our best, right?
Ellie: I understand the sentiment, but we cannot ... because of the current rules/regulations and all the documentation we must make available, do that. We're really leaving ourselves open to problems should we abandon trying to educate entirely. I have to know that I at least tried to fulfill my obligations and responsibilities. As much as they may be overlooked, ignored, or disliked.
And I appreciate your kind words regarding our little lion. She was enjoying her that day, for sure ...
In a perfect world, having every buyer educated would be the ideal. But it is difficult enough to educate them that they need to get approved before they start, let alone know the intricacies of the process. It is almost caveman-like. "Me hungry. Need food." Great post again, Gene.
I am always relieved when I find out my clients have already talked to the banker prior to me showing them any homes! These are the buyers that are super engaged and want to know all of the details and I love that! They do seem to be a once in the blue moon thing but it is nice when it happens! :) What a squeezable lion you have there! lol
It would be nice if HUD offers regular home buyer's seminars to consumers explaining the process.
I know agents have these but consumers are afraid to go becuase they think they will have to sign up with the agent.
Absolutely Gene. This is something we strive to always do. The reality of individual situations sometimes make it difficult, but it is our goal.
Right on the money as always Gene. Homebuyers still just want to know the rate and really do not bother with getting educated (at least not about the things they should be educated about). The new GFE was a decent attempt, but not having a signature line was not the brightest idea. If they really want to help the home buying process AND help educate the consumer, cut down on the unnecessary paperwork and lets just stick to the important documents/information. That will keep the buyer more involved and willing to learn more.
It IS almost primative .. you're right, Jane. And this may be very elementary in assessment of what it much of the problem, but I think the media adds alot to our misery. They wax on and on about all the problems surrounding the housing market and obtaining a loan. Their prophecies come true, as people are braced for the worst when they arrive at my door. Sometimes you get what you expect .. and in this case, I see it happen all too often. As usual Jane, you have me chuckling with your offering ... but thank you for the kind words. You're the best ..
Rosalie: Thank you! She gets those squeezes all the time from her grandpa! I think with a combined effort and strict enforcement, our r.e. industry could turn much of our ills around ourselves. Demanding that clients first speak to a lender should be easy to accomplish. We'll keep working on it ... thanks for commenting!
Gita: There are opportunities to attend learning and seminar sessions in many places. When I host something, I try to make it in a "neutral" location. Something like a library or public place. That way those in attendance feel there is a buffer to those advances that might be perceived occurring elsewhere. Making clients feel as safe and secure prior to choosing a lender is very important. You're so right about that ...
Gabe: Thank you! Your comment is reassuring to hear. Maybe with time ...
Gene
John: It's overwhelming for many, that's so true. But buyers must come to the conclusion that there is no better advocate for their behalf then themselves. We in the industry can put everything into place, but we cannot force their minds open or make them make the effort. I'd definitely be for less paperwork!!
Gene
I totally agree. It's the same with our RE contracts. They just want the house, not all the explanations but they NEED TO UNDERSTAND what they are signing!
Gene:
Love to read your posts. They are insightful and thought provoking. As a Realtor, I counsel my buying customers to talk to a lender before they start looking for a house. That one simple step eliminates a lot of problems. But I hadn't thought about what a lenders requires of the buyer. You have crystallized my thinking on this matter. I think meeting with my customer and a lender might help me and my customer understand the necessity for everything a lender may require.
Erica: Yes, they do. And we lenders' (and agents too) feet are held to the fire on this. But we can only lead them to the water. We can't make them drink ...
Thank you so much, Evelyn. I appreciate your kind words. And I so agree with you on making it to some of the preliminary appointments with your client. I wrote a blog about this very thing just a short while ago. I have had great results when agents have taken the time to do this. It truly benefits the client in many ways .. and ultimately the professionals involved. The successes and smoothness of these transactions have been remarkable. I hope you give this a try .. and then let me know how it worked out for you and your client ...
Thank you for commenting ...
Gene
Gener, Congratulations on the feature. It was very-well deserved. Good points.
Thanks Don! I always appreciate your generous and kind support. Hope you have a great and prosperous weekend ..
Gene -- You have hit it on the head! Donne makes some great points as well, though the people in banks dealing with mortgages and clients are all supposed to be registered by now. Having said that, I have a client who is dealing with his bank about a modification -- and the person he is supposed to talk to isn't registered. Are we going to have to report them all to get the other side of the aisle cleaned up?
In the meantime, we can at least do a preliminary review and determine if the client qualifies, and if so for how much, before they are all tired out looking at houses that it turns out they can't afford. Maybe the realtors could get a good loan officer to review any bank lending statements to make sure they clients do qualify.
Way too many loan officers are still issuing Pre-Qualifications/Pre-Approvals without reviewing any documentation first. While it may be quick and painless that way, it very often leads to disaster in the end. I see the supposed "Pre-Qualified" buyers all of the time.
Steven: Donne is great ... I'm a huge fan. I think you are right when you state that the realtors may hold the key to this issue. I'm not saying I want to second-check or guess anyone else's work, but their taking a strong stance on the lenders they suggest their clients work with is needed and warranted. Hope business is good for you out in Tacoma ...
Rodney: I believe like you .. and until the industry demands more and then takes measures to enforce it more strictly, we'll see that continue. The market has to winnow out the poor lenders now ... and the clients suffer until that's accomplished.
Gene
Gene,
Yes, education is the key. It'd be nice if the Agencies provided resources and marketed the necessity to educate potential homeowners (and even current ones). That way, when LO's go through the trouble of working on grassroots efforts to conduct seminars or workshops in their local areas, more people would intuitively know about them from the efforts of Fannie and Freddie. FHA does a decent job of it already. But ironically, FHA is not a program I suggest to many people anymore. Until the top starts creating the "common knowledge" with consumers, we'll still be on our own.
JP: True. Plus, if it does get said .. they don't provide much, if any, assistance to help the individual LO making the effort much support. We're truly each an island unto ourselves ...
Gene