This week a client was referred to me that wants to buy a house. 
During our initial phone conversation, one of the first things I always ask is whether they have a lender and are pre approved for a loan.
He indicated that he did have a lender, that he found online. (Uh-oh). And, that he was preapproved. The Brevard County Real Estate market is considered a distressed market. It is so important for a buyer to have a local lender and a local appraiser that understands our market.
My next question was whether or not he had received a Good Faith Estimate from the lender. He had not. (Uh-oh #2). Every buyer should be provided with a Good Faith Estimate when being Preapproved for a loan. This gives the buyer an estimate of his closing expenses and prepaid expenses. It will also provide an estimate of his monthly mortgage payment amount and his anticipated interest rate.
The buyer gave me his lender's long distance and toll free phone numbers (uh-oh #3) as I always talk to the lender at the beginning of a transaction, before we head out to look at any houses.
I called to get more info from his lender. I called 3 times in 2 days (uh-oh#4) with no response. His voice message said, "I will return your call in the order in which it was received." (uh-oh #5).
I have to know what type of loan he will be financing the house with, so I know what type of home he can buy. I finally found that this buyer is purchasing with an FHA mortgage, with a 3 1/2% down payment. So, he won't be able to purchase a home that requires extensive repairs. The roof has to be "newer" and so does the air conditioning system. There typically can't be broken windows. The house must have heat and a stove and it typically cannot be in some phase of remodeling. If this buyer was getting a conventional loan with 20% down he would be able to look at completely different properties, as there would not be many restrictions on what he could buy. In paying cash, a buyer could purchase any home he wants.
When I was talked to the lender, I received the Good Faith Estimate (as did the buyer). My teeth nearly fell out of my mouth, when I looked at the figures. (uh-oh #6). The fees were some of the highest I had ever seen. The interest rate was too high, the estimate was full of unnecessary junk fees. I couldn't believe my eyes!
I recommended this buyer get additional estimates from LOCAL lenders to compare fees. I know that he can do much better than what he was quoted.
In this market, as Patricia Kennedy pointed out, in a recent post she wrote, not only is it important to come in with a strong offer to purchase a house, but, listing agents also look at the pre approval letter with the lender info to determine whether they will accept the offer.
If a buyer winds up in a multiple offer situation, which many buyers here in the under $125K price range do, the best offer is going to be choosen based on which one has the best chance of getting to closing. Here in our market the listing agent often times wants a local, reputable lender, that knows the market, that has a processing center right here in town. They know if they tell us, upfront, that they can do the deal, then they can do it. They want the smoothest transaction possible, that won't get snagged or delayed. They don't want any surprises.
In our market, a nameless faceless lender, with exorbinant fees and a long distance or toll free number, that doesn't return phone calls, from somewhere across the country, is not going to help your offer along, to get you the house that you want to buy.
If your offer is accepted, will they be able to get you to closing?
All lenders are NOT alike. And, all online lenders are NOT alike.
Get a couple of estimates and talk to a couple of lenders.
Be sure you do your homework BEFORE you head out the door to look at houses.
FOOTNOTE: I later found out, after the buyer talked to a local lender, that he is self employed. The buyer indicated that he had not discussed his employment situation, nor the fact that he had recently opened a new business during his interview with the online lender. So, now, I am waiting to hear whether this buyer will be able to buy a house at all!
Sandy Shores REALTOR®, Melbourne/Palm Bay FL Real Estate
Brevard County Real Estate & Investing
I also buy, sell, rent, own and manage Investment Property.
Hi Sandy, we need to be carefull from distance lenders.
John Pusa
Hi Sandy, You are right, not all lenders, or Mortgage Brokers are created equal. It's always a good idea to comparison shop to be sure to get a good deal!
Sandy
Outstanding post and insight, thanks for sharing your thoughts.
Good luck and success.
Lou Ludwig
Sandy, I'm sorry to say you're right. Someone I know is dealing with one of these "lenders" now and they haven't listened to me. I'm glad you're bringing attention to this.
Good advice i just wish they listened to us more often
I am dealing with this now. I just wrote a post on my other blog...local lenders required!
A good lender is the one you can reach. One that is fair in costs and that gives a fair rate. Boiler room mortgage guys need to be out lawed
Sandy - Great post for buyers...buyers need to understand the importance of having a good, local lender on their team when looking for a house. Each state/conctract has different terms/requirements which the toll-free faceless/nameless lender probably doesn't understand or can't meet those requirements.
One of my greatest fears in a real estate transaction is when a Buyer says they have their own lender. That can often be the source of more headaches imagined. Yet, on the bright side, I've actually had a few superb transactions that came from that source. . .BUT, I always have an alternative lender on the back burner, should the Buyer's choice begin to waffle or get shaky.
My son just closed a transaction, where the Buyer had their own lender. That lender ended up costing that Buyer plenty, by charging a considerable amount to extend a lock on the loan, caused by a delay that THEY had caused.
Sandy, you have written an outstanding post which outlines what all REALTORS should do as standard practice. Bravo! Local lenders understand the prevailing market, have sources of available investors, schedule face-to-face meeting with clients, and have a reputation to safeguard. Additionally, long-distance mortgage consultants don't care if the purchase goes to settlement- especially after fees have been paid. A GOOD FAITH ESTIMATE is one of the most valuable educational tools for buyers and their agents. Great job!
Sandy - I appreciate your feelings on this blog. I agree with some of what you say and disagree with others. I am not here to challenge you so please do not take this the wrong way, I just want to make a few statements regarding distant lenders. Am I one? You bet. I lived in CA most of my life and moved to NC 3 years ago. The bulk of my business is still in Seattle, Walla Walla WA, Portland OR, All over CA and of course locally in NC.
Distant lenders can be cause for alarm because you never know what you will get so I understand the fear and apprehansion. However I have agents 3,000 miles away that won't use anyone but me because they know I get the job done and am available 7 days a week. Okay enough about that.
To qualify as a federally related loan there must be a property. Pre qualifications without a property do not require disclosures.
Why? Answer: Who is paying for what? What is the final agreed purchase price? Who will the title and escrow company be? What are their fees? What are the rates going to be once in contract? see where I am going....there is no data to support an acurate good faith estimate. A good faith estimate is a bona fide estimate of charges. Without this info it's nowhere near bona fide. More importantly I think the question to ask is what is the loan officers fees for originating the loan. All of the other fees are third party charges and are not charged by the loan officer.
Not returning a call is totally inexcusable and should send up a red flag. I competely agree with you there.
A lender does not need to be local regardless of your local market because guidelines are national. Most banks funding these loans are scattered throughout the United States. Realtor-yes. Escrow-yes. Lender...makes no difference except in one circumstance-county specific public assistance programs for home buyers.
Again, I appreciate your post and hope that my comments are helpful information and not taken as an attack on a great blog. Thanks Sandy!
Grest post definitly have them use a local lender
My bad experience with an out of town lender had to do with phone calls and never knowing for sure what was going on. Then there were delays and scares wouldn't make closing, was not something want to repeat.
Sandy: I wanted to second the sentiments expressed by Nevin in comment #11. Whether this lender was across the country or next door to your office, they would have been a poor representative of the lending industry. You either conduct yourself as a professional, or you don't. Location has nothing to do with it.
Many of my customers that reside right in my own area did/do not meet with me face-to-face. They prefer to communicate and conduct their business through the technological wonders of this age. They call, text, scan, email, fax and more ... but do not step foot in the same room with me until closing. With the title companies being able to close loans right in a person's home, sometimes that does not even happen at all. I personally like the more old-fashioned way of doing my business, but have delivered and enjoyed many closings in the other manner. It's the customer's choice and transactions can certainly can be processsed and closed that way successfully. Does it possibly take a little more effort and homework to do so? Yes, I believe it does ... but a concerned and professional mortgage lender will make that effort.
That said, I totally agree that there is no excuse for the poor communication, poor service, and exorbitant fees this lender offered you and his client. But again, I'm sure they conduct themselves in this manner whether their customer is across the street or across the nation.
I'm sorry you had to deal with this issue, but I have to beg to disagree with you that the cause for the problems is the lender's distant location. Thanks for providing the opportunity to voice my opinion.
Gene
I think you might be confusing a Good Faith Estimate (GFE) with a letter of pre-qualification or pre-approval. These instruments will better tell you how much the buyer can spend. At the time of the pre-qual the lender can give a pretty good Estimate of interest rate based on the aplicants FICO Score.
When it comes to a Mortgage Broker, you might want to use someone local. When it comes to an actual lender they are seldom local but thats where the money comes from. Don't confuse your lenders with your brokers.
Excellent Post! People need to know what their mortgage person is doing for them.
Hello Sandy, I am new to this entire system; however, I did read your comments and I am sorry that you had to deal with this issue the way you did. Personally, as a Mortgage Loan Consultant my Real Estate Agent whether it is the Buyers Agent or the Listing Agent on a Transaction, I always communicate with all parties. The only time that I do not is when it is requested by any of the parties not too do so. I agree with the gentlemen in # 13. Loan officers that do not call you back when you call ( within the same day) you need to find another. I always have told my agents that I work when you work.
Our business whether we are Real estate agents , Loan Officers, or Title companies we are All in the Relationship business. This is how we make a living.
Take care,
Lisa
Sandy,
I agree with you 100%. I am a lender in the DC/MD/VA area. I do encounter clients that find "online lenders" and when I see their GFE's, they are almost always WRONG!
It does not take a rocket scientist to look up local taxes, county and state tranfer and tax fees. ALL LENDERS are legally required to disclose a GFE and Truth and Lending after pulling credit. If your client had their credit pulled and was not offered a GFE, then the lender is VIOLATING the LAW!!!
ALL of my Good Faith Estimates are always within $300 of the true HUD 1. For the most part, all of my clients are surprised at closing with money due back to them!!!!
A good lender will do their homework and will NEVER bait & switch. If the costs are too good to be true, then your client will get a rude surprise later!!!
Sandy thank you for the post. While you bring up some great points I really feel you should not generalize by saying use a Local lender that means nothing. I have tons of local lenders that do local and nationwide stuff that have just as bad fee's. You should how ever deal with lenders that are up front and easy to stay in touch with. Good general advice to those looking for a home loan right now.
Sandy - I currently have a buyer who found a lender online and I probably had just as many uh-oh's as you did.
Hi Sandy - I know exactly what you mean. I just closed an escrow I wasn't sure we'd close. And this lender was a name lender, but with no local offices - only one location on the opposite side of the country from us. They are a large company, all in one building, but one department doesn't have knowledge of what the others have, so that getting info is difficult. Everyone there is very nice, but it is an unusual way of running a loan.
At first I would leave several messages and still never get a return call, the fax number they gave me had a recording saying it was disconnected, and there was no better response to emails than to phone nessages. Finally, we were transferred to another loan rep, and then things started to go a little bit more smoothly - at least we got return calls. At last, my client is in her home and happy, so even though escrow had to be extended and we had some anxious days, we thankfully got it done.
It just makes me more fully appreciate the local lenders I usually work with!
Sandy, ALWAYS get comparisons to the online lenders. Some of them are good by the way. Love your uh-oh's.
Good advice, Thank you for posting and reminding us all to be careful and thorough.
I have had also had a couple of close encounters with long distance lenders that were less than pleasant. How many "uh-oh's" does it take to stop a closing.
Sandy.. good thing you have you caution sign posted.... I see way to many uh-oh's
I know most of the mortgage people will disagree with me but I believe there is a huge benefit to both the buyer and the Realtor when a local mortgage person is handling the transaction.
I understand (and have done) out of state transactions, but dealing locally is better for everyone.
Thanks for your comments, I have added to all of my listings under "Financial Comments" Pre-Approval & Financing with Local Lender Preferred. I did this after a recent debacle I experienced involving an out of state lender and an appraiser that came from two counties away.
I don't need to go into the whole story but there were so many reasons this was doomed least of which was the Appraiser being in voilation of her own USPAP guidelines that appraisers MUST follow. Having owned an Appraisal practice five years back I was astounded by the fact that the Appraiser accepted the job.
Communication and lack of familiarity with the laws & customs of a particular makret really make the use of an out of town lender (under writter) ect a very bad idea. We have to protect our Sellers somehow.
Local lenders in our area are the only ones that seem to be able to get the job done. I love your "uh-oh" warnings, but some of our buyers cannot be moved from their on-line encounters with lenders of the worst kind (out of area), and the lenders promise the sun, moon and also the stars until just before closing! Then watch out!
I think we all face the same challenges from the Internet lenders and the deals that "sound too good to be true" to the clients.
Great post and good advice to your buyer, it is always wise to shop around for a loan because there can be big differences between lenders. And, a local lender and a local underwriter can help ensure a smooth transaction for everyone.
Sandy,
I think that there are lenders from out of the area that can get the job done just as well as a local lender. However, the local lender has something on the line that the out of area lender does not - his or her reputation. For this reason, I would generally agree with you, using a local lender makes sense.
Sandy,
Ditto all the comments on 'faceless lenders.' I've become a "distance lender" to several Active Rain REALTORS because of Active Rain, where people have come to know me because of my blog. I'm no longer 'faceless.' This is a great place!
Mike in Tucson
Sandy, we've seen this problem in our area as well. Getting a transaction to the closing table is difficult enough today, and we have to work closely with lenders from the beginning. I've made it a business decision to only work with buyers who are working with local lenders, or those lenders who I am familiar with. More than not, I have seen delayed and totally bungled deals where buyers ended up with surprise fees on the HUD1 when they chose 'an internet lender'. I hope you don't mind if I re-blog this to my local area as your information is valuable for buyers today.
Sandy, you had lot of red flags along the way.
We always respectfully say that we will work with any lender of their choice but encourage them to check out a couple of local lenders to compare.
We advise them that should they decide to go with the internet lender we will not have the relationship or knowledge to stay on top of the transaction like we will with the internet lender.
The choice is always there for them to decide.
Some go locally and some stay with the internet lender.
Some go fine, some don't and they admit in the end they should have listened to us.
This year we had a homebuyer fall on her face when the lender out of area, dropped the ball and at the walk through called and said he couldn't do the loan.
We called our fav lender and she closed it a week later, we asssigned the appraisal and were done. The lender we used is a local banker.
It's definitely best to deal with someone you know or at least someone local in the lending field. Who wants to waste time and possibly lose out on buying the house of their dreams and possibly even losing their earnest money deposit because they are dealing with a clueless lender.
Sandy, AMEN! I always tell my clients that they are better off with a local lender whose door I can come knocking upon if we need something done.
Sandy, I feel your pain! My radar goes on high alert in this scenario and while I am fully aware that there are competent lenders not in my state, the inability to reach them when I need to, on top of the other flags you describe, is all I need to begin recommending we look at other options.
Just had the buyer of one of my listings a few months back use an internet lender who then used a title company 2 hours away to close the loan. The buyers agent had no information about who the lender was and would not insist he be provided with it. We kept getting pushed back on the closing date over several weeks. I could not get a return call from ANYONE until I had an attorney call the title company and tell them she had been hired by the seller. The phone rang that day and I got answers!
The only reason my seller hung in with the buyer was because unless we got a backup offer he was willing to see if it closed.
Did you see BrokerX blog about the new mortgage tool that is like Lending Tree? More of those National lenders to come.........
OMG-
Just this week I had nearly the SAME incident. Thank you for writing this...you saved me the time...
Closed on a deal Thursday that was clear to close on Wednesday, no wire until FRIDAY and it was a SHORT SALE....when we where at the table, the title clerk kept calling the wire dept. of that bank (I'd really love to name them) and the supervisor was on a call and could;nt be disturbed...
NEVER again will I do a deal like this.
Sadly buyers can get pulled into the online lenders with rebates and the like but I have twice had to find buyers a local lender to pull a rabit out of the hat, both times he did. I try to persuade buyers to go local even if they want to find there own lender.
We have experienced this problem as well. "I have an old friend who is giving me a deal" We heard that from a recent first time homebuyer. Oh, they got a deal all right. The fees on the final HUD made my skin crawl. It was just too late to say I told you so. Thanks for getting the word out. BUYERS.... ARE YOU LISTENING???
Despite the fact that Internet-based lenders talk the talk and walk the walk, we have also found that the closings do not always go as smoothly as planned.
Sandy- In theroy I agree with you and most on line lenders are bad news. But I have a question about getting a good faith with a pre-qual??? A good faith includes things like taxes and insurance information so how can you get a good faith without an actual contract?
My favorite lender provides a prequalification letter and disclosure of her APR. And she's not really "local" to me, she's in Atlanta and I'm in central Georgia, but she does use local appraisers and attorneys to the property and does a great job.
Bottom line, clients should trust us as agents to recommend lenders we know can get the job done.
I agree whole heartedly with your post. I am a lender in Orange County, CA. All of my transactions are local to me and I will just refer out of area clients if necessary. Every state has different rules and I'm busy enough just working with my local clients. It probably helps that I return my calls quickly.
Sandy, super tutorial......returning calls is a must I always tell my clients that it is very hard for a lender not to be responsive when you are in his/her office face to face!
Great post. It is very important that we have the knowledge to help our clients with the entire real estate process. We are not lenders, but it is good to have enough knowledge to know when your client can probably be served better. It is also good for us to have a preferred network of various specialty's that we trust and know are good at what they do, as well as being fair and reasonable.
Sandy,
We had a very similar experience just recently on one of our listings with a buyer relocating from the midwest. They insisted on using their credit union back in Ohio for funding, which was brokering out the loan, and wouldn't you know it they blew right through the settlement date by a week.
Couldn't agree with you more, not all lenders are created equally!
it never seems to amaze me how many clients are trying to save .25 on the rate with some lender online or over where ever and then it always seems to have nothing but surprises ;-)
Local people are the best to deal with. In general lending service is down and I think this is for a number of reasons. Most lenders are being thorough on the pre-quals before issuing the letters (a good thing) but just the shrinking market is making customer service less important.
Sandy:
Just as soon as I see that internet approval I caution my buyers about the potential for a problem at closing. Thanks for sharing your story. This is a relationship business and that includes loan officers. More often then not I can convince my clients to use someone I have a relationship with.
The internet is a great tool that buyers have come to embrace more than ever. A good loan officer will take the time to learn local requiremnets in any area in which he/she markets.
I'm in Maryland, so does that make me an "accross the country" lender when I do a loan for a Brevard County buyer? If yes, then how do you explain all our bank branches you pass as you go about your daily business?
I recently did a loan in Beverly Hills, CA. When I sent the GFE to the buyer I ccd the buyers agent with it. Next day he called and we spoke for about 30 minutes. He had shown my GFE to his "local" lenders and none of them could touch the price. In large loans, a 1/4% lower in rate makes a huge difference to the payment. This agent has gone on to referring other clients to me, and I'm 2400 miles from his office.
To be fair to your statement, there are internet brokers that are very poor in how they conduct business. I too have rescued some deals for some of my local agents that the "accross the county lender" screwed up.
Fly By Night Lenders..I thought they all got weeded out with the last financial hoorang...hmmm. Was this the banker?
Hey Sandy,
great post...I have come to hate online lenders...go local!!!
I had a buyer that started out with a local lender. But it took too long for him to decide on a home so he no longer was qualified. The buyer started looking online and found several. I informed him of the things that could happen with online service. He didn't receive a GFE as we all know he should have in the beginning. Luckily however, we did close, on time, no, but we closed.
The out of town lender might actually be very good, but is the loan officer very good? How much experience does the loan officer have? Has the loan officer closed loans in your particular area in the past? Does the loan officer generally handle refinance transactions and not familiar with the nuances of a purchase transaction? Does the loan officer have references from other real estate professionals they work with on a regular basis that they could provide?
This was a great post, & as someone who works mostly with local RE Agents, I agree with & have witnessed your experiences. Mortgage reps as a whole should have more traiing on how to preoperly qualify someone, & should always do their best to communicate. Nobody is helped by a quick meaningless low-ball quote based on a 30 second conversation. It takes more than this to qualify.
Excellent advice. I, too had problems with long distance lenders. They advertise one thing then when you see the figures----thats when sticker shock sets in.
Out of state, and even out of town lenders cause more than 90% of the problems we have with transactions. In 10 years, I've had only two actually close! I have since made a list of local people that attempted to use these out of town lenders, and with their permission actually give newer buyers their contact information or the written statements they have provided to me.
Lenders who are not familiar with your market need to butt out. Until the last national election cycle, Alaska was spared much of this. Within days of the Republican convention, I had over 10 out of state lenders contact me looking for business. It became apparent that most didn't even know we were part of the USA until that time.
We need to work the market we are familiar with and so do they. I'm licensed to sell anywhere in the state of Alaska, but I'm not competent to do so. I know my limitations. I do quite well working what I know and the better lenders can survive in their own areas of expertise. :-)
Sandy: Thank you. When I started in this business I heard the saying "all real estate is local". We could infer that to mean that a person should work with someone that knows the market. I hope your client comes to their senses. I rarely do out of state loans even though I'm able to. I'd almost prefer to refer this out to a local expert. Thanks again for pointing out the obvious. I'm hoping your thoughts are widely dispersed as this is great information. Take care.
Sandy - Great post! I got a phone call this week from an agent who had gotten my name and phone number from another agent. He had a buyer who had found a loan officer thru Lending Tree. The loan was all messed up and the loan officer was clueless. The whole transaction was on the verge of dying. To make a long story short, the buyer called me and I was able to straighten everything out for them. They will be closing on time (with me!). The deal was not really complicated - they just needed a knowledgeable loan officer who understands the local market.
Yes, unfortunately people get swept up in the television advertisements they see for these so called "discount lenders" only to be shocked by the lack of service and exhorbitant fees. We had a buyer with one of those national mortgage brokers who shall remain nameless, but let's just say the name rhymes with Lickin' and they also specialize in accounting software. Anyway, it was impossible to get a hold of the loan officer, our client's loan got passed from one transaction coordinator to another, totalling four before all was said and done. It was just a headache from the beginning. We too now strongly recommend LOCAL lenders that we have worked with. Great post and best of luck.
Sandy
I have just gone through this on behalf of my sellers.
I was presented with an offer on a newly listed home. At first with the low offer, the sellers rejected but the buyer and their agent were persistent. So when the price was more in the ballpark I began to pick apart the preapproval from a "well known lender".
The preapproval given to me had to address of the lender, no contact person's name or their phone number. I told the buyer's agent that I needed this before the seller's would consider any further negotiation. The buyer's are anxious for this house so I did get what I wanted much to the reluctance of the agent. He really could say I was being unreasonable when I told him, what would you do the roles were reversed?
Here is the however part. My sister and I, who are partners, began calling this mortgage contact person and getting nothing but voice mails. This was going on for the better part of a day. Finally instead of leaving a message I pressed the "0" and spoke to the first available person.
I then began the adventure of finding out just what type of a place this was, where they were and how they operated. The best part was the contact person's name on the form that I had was not even the person that interviewed the buyer!
Back I go to the sellers with this information in hand. After much discussion our counter to the buyer was that they use one of our local Banks that sells their loans at closing to this lender.
Well, that was 3 days ago and I am still waiting. The bottom line, always use the local lender!
Great post, Sandy. And so true. This is happening everywhere, unfortunately. And I must add that there are even local lenders who I won't use... their "up-front" pre-qual work is not good, they won't answer the phone or return your calls in a timely manner, closings are inevitably delayed, and you're never sure when, or if, you'll ever close. It's much better to have two or three that you work with constantly, whom you can rely on, and who knows they can rely on you.
It's really important that the mortgage consultant and real estate agent have communication. It's a team effort to get to the closing. That's the trouble with some of these online corporate lending companies who hire drones to sit in a cubicle and take calls in the order received. I have a friend who works for one such company and they treat their employees with the same coldness.
The mortgage consultant should take just as much time and effort to work for the client as the real estate agent does and if they don't keep the real estate agent informed about what type of loan program will take place and if there are any issues that may arise, then the whole transaction is like the right hand not knowing what the left hand is doing. Often there are hurdles to be gotten through and if the loan consultant and the real estate agent work together they are better equipped to assist the client. For one thing, the agent needs this information in order to write a good contract that will protect the interests of the client or perhaps ask the seller to cover some of the closing costs. But if the agent has no idea, how can they add that to the purchase contract?
I never understood how some lenders would completely shut the agent out of the process. No wonder agents get the heebie jeebies when a client is working with a lender they don't already know and trust.
When you do short sales like we do, and deal with Countrywide which if a contract bust makes you start ball over again, having thaty nameless mortgage company violates my duty to the rescue of my distressed homeowner. We now require that all buyers who have a namesless tyupe lender asll qualify locally. If they won't do that, we recommend that the sellers pass on the offer. After we explain that they could be in foreclosure becasue of delays, they understand.
I had 2 clients heartboken by internet lenders that strung them along until a week before the close date, and after I kept calling the lender at his poolside office, he finally told them that his company did not have direct endorsement and he couldn't do VA. He took their loan app fee and appraisal fees and did not get them a loan. I tell my buyers to check with local lenders only or their bank if there is a branch here.
Sandy,
Your post sure got the network talking and debating. That's great. Everybody has a chance to chime in. To many, local lenders do have an edge for obvious reasons.
As a relatively new Real Estate agent I have already seen excellent and horrible loan officers. And interestingly enough, distance has not been a factor, however I alway stress to my clients that if I or they can meet their loan officer face to face it CAN make all the difference in the world during those last days in contact when it seems like there is always something that comes up as an issue. Good service is hard to come by and when we find it we stick with them. Thanks for the post.
Great post, Sandy. It's amazing that so many people are led to believe that they can get the best deals from the internet. From my experience with working with clients, they just complicate things more because (like you mentioned) they don't know the local market. They don't know how each area's closings happen (like in NY with the Table Closings and here in CA with the Escrows). They can't educate the clients on the Property Taxes, nor do they know the Closing Costs (some states even pay taxes on the loan itself). Also, they are never a clear and smooth transaction because of the lack of communication that takes place. As we all know, communication is extremely important in the Real Estate transaction. Sorry, I don't mean to criticize the Internet companies (like you mentioned, they're not all the same).
Out of state lenders are the worst that I have seen. No suprise to realtors. The banks with out of state back offices are the next worst. You are just a number.
If an FHA or a VA loan is necessary, I do not allow my buyers to use an out-of-state lender. I have learned that they just cannot get the job done like an in-town lender can. My experience has just led me to that conclusion.
Realtors, here are a couple of tips to test the honesty, knowledge, and training for a buyer's proespective lender.
(1) Disclosures: There are several regulations which can trigger the requirement to disclose costs and terms of a mortgage with 3 days of application: RESPA, TILA Reg B, TILA Reg Z, HMDA, ECOA, and FCRA. Each regulation has separate conditions for requiring disclosures, and the definitions of "application" varies from regulation to regulation. Too make the issue more confusing, there are overlapping areas of definition and regulation.
a.) Lenders' compliance managers generally apply the most restrictive regulation's definition
b.) The most restrictive definition of "application" is Truth-in-Lending Act Regulation B. This regulation requires disclosure within three days of of receipt of a written or oral application for the extention of credit. The trigger is met when the borrower asks for credit (completes a FNMA Form 1003) and supplies "all the information that the creditor regularly obtains and considers in evaluating applications for the amount and type of credit requested". Note that obtaining a credit report is not necessarily a trigger under Regulation B although nearly ever lender regularly obtains and evaluates a credit report as part of the decisioning process.
c.) Mortgage brokers CANNOT render a credit decision (since brokers cannot lend), so bear in mind their prequalifications are little better than educated guesses.
d.) RESPA's and HMDA's definitions of "application" are NOT triggered by the borrower's permission to order a credit report. Submission of "a borrower's financial information in anticipation of a credit decision, whether written or computer generated, relating to a federally related mortgage loan" (RESPA definition) is all that is needed to require disclosure.
How to test the loan originator: Ask the loan originator which regulation (RESPA, TILA B, TILA Z, HMDA, or FCRA) he/she is using to determine when disclosures must be issued. If he/she doesn't answer TILA Reg B (the most restrictive), that is a sure sign you're dealing with someone who is poorly trained or doesn't care about his/her career enough to know the law. The bolier room types will guess the answer is RESPA.
(2) For home purchase loans, did the lender or broker send the borrower the "Buying Your Home: Settlement and Costs" booklet? This is required on all applications for a Federally related purchase mortgage loan. Most mortgage brokers will just give you a blank stare if you ask about this HUD booklet... which is a shame, becuase the first 100 are free from Uncle Sam.
I do agree that a local lender would be prefered but at the same time local does not make the lender better, the same concerns apply and as a broker (real estate) I try to get buyers to at least get pre-approved by a morgage broker I know will do the right thing
Great Post, Sandy.....did you also note BrokerX's post????
I've had good and bad experiences with both local and non-local lenders! What's my bottom line? If they do not communicate (phone, e-mail,etc) with me and the clients, I say "Bye Bye" and recommend my lenders to the buyers. It's all about delivering good customer service!
Best Wishes to you!
Pat McGuire, ABR; E-Pro; CDPE
Sandy,
Great post, as many have already said.
Let's look at it a different way. You fulfilled your role as a professional by asking the questions that uncovered the existence of the distant lender (broker) - internet lender - whatever. You did your job by trying to contact the lender to find out pertinent information about the type of loan that the lender was considering for this buyer. You dutifully found out that the FHA loan that was being considered meant that the buyer must restrict his shopping to certain properties that would most likely meet FHA loan guidelines. You did your job in convincing your buyer prospect to talk to a local lender so that a truer picture of the buyer's qualifications could be developed (also saving him from possibly being ripped off by the first lender). You did not find out about the prospects employment until the second lender uncovered a potential deal killer of new self-employed status. So you are not perfect.
The point that I am making is that you went to work for your prospective buyer to try to put the buyer in the best position to buy a house. Good for you!
You are evidence that we do more that drive people around to see houses and pick up fat commission checks. I know that is not why you wrote your post, but that was my take-away.
Thank you for your hard work.
John Juarez, REALTOR
Windermere Properties of the East Bay
John@CarlMedford.com
510-673-0686
As a loan originator and a real estate agent, I would agree that most out of state loan officers are going to create problems with the home closing. But, really there are too basic problems here. One, is that they are out of state and therefor do not know the area as well. There is not much they can do about it. But, for me the gigger problem, as has been evidenced in the othere comments, is that they often are unavailable, or just plain to busy, or expensive, or dishonest. Unfortunetely, all these prooblems and and will occur with local lenders as well. so, we have watch every transaction and really check out the lender. I have been fortunate not to have ever not closed a deal due to financing. ( I have been a real estate agent for 12 years and a loan originator for only 3.)
I hate to say it, but a self-employed borrower with fewer than two years of self-employment income is a cash buyer only.
Sandy,
I have a nightmare story about the online out of state lender...... I did get the deal to close with my local lender.
Ann
I agree with your post.
I see no reason to use out of area LO's.
I also see no reason why LO's can't disclosure their fee on GFE up front. Even if they aren't legally required until a property if found.
But even when your clients use a big name bank, a lot of their documentation goes out-of-state to corporate headquarters and the processor there, that have NO IDEA of states rules and regs. Every lender has hurdles to jump.
Just a couple points for clarification ... I would wish to point out that there is a difference between a lender's quote obtained through an online source (such as those on Zillow, Trulia, etc.) ... and a loan officer that maintains an online presence and provides one-on-one services and guidance through a variety of methods after communicating with an individual.
Although many L.O.s have an online presence, business, and reputation, they do NOT participate in the practice of offering quotes on major real estate sites. I personally am one of these and will not take part in those site's opportunities. Why? For the very reasons many have expressed concerns regarding this practice. I just don't have the faith that I am obtaining enough information in this manner to make a quality, credible, and reliable quote for a customer ... and have expressed this sentiment in one of my earlier blogs and in many comments here on AR.
I do however, offer my services online and can/will (very capably) represent and service a home buyer/owner almost anywhere in the nation. I personally believe that it is fair to say that most lenders do the bulk of their communications with customers and referral partners, in this day and age, through technology and the old-fashioned face-to-face communication occur more and more rarely. To infer just because you are located in the same town that this is not the case, is probably a little misleading.
I will agree however ... special attentions and efforts may be necessary for the officer to perform his services well when conducted over longer distances. But without a doubt ... special attention and efforts are called for in most local transactions anymore as well. Hardly any transaction is presently closed easily.
No matter if a lender under consideration is located close by or far away ... those in search for a lender have important homework to do regarding that decision. Their decision should be based upon fact and the qualifications and reputations of the lenders they are comparing ... not generalizations.
Hi Sandy. I agree with you totally regarding the "on-line' lenders. How about this scenario that happened to me a few months back? The on 'line lender" that my first-time buyer thought he would use,(QUIC*EN loans) told my buyer that he also had to use their in house Realtor to write up the offer to get the super deal that he was offering. Essentially, knocking me out of the saddle. This, after he knew that my buyer was using me as a Realtor. This also happened to be my listing that we were making an offer on,and a short-sale,to complicate matters.
Needless to say, I counseled the buyer, and told him this was unethical..what the lender was telling him he must do , and that I didn't care to work with the lender, and neither should he. If it's stinks at the beginning..it stinks the whole way through! Happy ending..I set him up with a terrific local lender, and we close next week.
I should have blogged about this :)
Yikes, that's scary but it happens all the time. Glad that you verified this and sent him in the right direction. I had an offer on one of my listings the other day and the prequal letter was $20,000 under the list price? What's that all about? He shouldn't have been in the house anyway I figure in my book.
Hey..that was me #83 with the response. Forgot to log in!
Sorry..
Linda George,Re/Max Connection
You're talking my language.
Local, known, experienced, responsibe and trusted loan officers needed.
Otherwise, you might be rolling the dice. You just simply do not know.
Good Post Sandy, we all have been there, where the buyer shows up already "prequalified" and if we assume his letter is legit, we could be in a lot of trouble, asking questions about the lender is not as easy we we think, there is that "privacy" part we must be aware of. As a listing agent I will always check with the lender before I suggest to the seller that this particular buyer is qualified.
Antonio
Sandy I feel your pain. Just last week I had a deal fall apart on one of my listings because the buyer went with an internet lender. My sellers decided to take a chance even though I couldn't get in touch with the loan officer to verify the pre-approval(big uh-oh). 20 days into contract and no one, even the buyer's agent, can't get anyone to tell us what is going on with the loan. 2 days before closing, the buyer's agent gets lucky and the LO actually answers the phone only to tell him that 'oh we can't close this one for this buyer'. Don't know when they were planning on telling anyone including the buyer. That is why I hate getting those pre-approval letters from online brokers because it's never a good experience.
I have never understood why someone would work with an unknown - faceless - long distance - voice, in some unknown place to secure one of the biggest financial commitments of their lives.
The good news (not for the out of state telemarketing loan arranger) is that with the roll out of the Nationwide Mortgage Licensing System (NMLS) their days are numbered.
Florida is one of the last states in the country to join the mandatory licensing and registration system.
Currently in our sunshine state any out of state mortgage company with a correspondent lenders license (no warehouse line), or above, can turn unlicensed loan officers loose on borrowers because their license allows their loan officer to originate with out being licensed. The new rule will require all loan officers - broker, and lender to be licensed in each state that they originate. Starting Jan.1, 2010 Florida starts migrating ever to NMLS rules.
Another Great post Sandy! Buyers do not always understand how important a good lender is to a sucessful transaction. I believe it is even more important with the new lending regulations. A local lender used to be able to step in and save the deal quickly. I may direct some of my new buyers to this post. Sometimes I think the buyers think there is some kind of financial benefit to the Realtor if they use a recommended lender. The only benefit is a smooth transaction. Thanks~ Amy Jones
Absolutely 100% on target! Only someone with a local reputation to protect has a vested interest in a successful, bump free closing.
Sandy, Excellent blog. I am a mortgage broker in ATL, GA. I will share with you that I get distressed agent calls nearly weekly about their buyer who is using an unscrupulous lender and the agent recognizes the "uh oh's" along the way. They beg me to advise them on how to get this "lender" to deliver as promised because the buyer wouldn't or won't switch the lender or not enough time in the timeline left to do so. To hear buyers being involved with such originators infuriates me to no end - not sure if i'm more frustrated with the unscrupulous (or negligent) originator or the buyer at this point. The buyer's approach is that mortgages are simply a commodity - shop it like a car, tv, pc,... Hey, this is what the media tells them. Unfortuantely, it is usually too late when the buyer comes to the realization that they will not receive what they thought. Do these stories always relate to out-of-town lenders? No, but I beleive the very high majority of them do. It's simple... the situation of being miles apart, not knowing the state specific laws & fees sets up the transaction environment as one such where the lender can "pull" anything he/she wants to from across the miles, at any time, and never has to face anyone or talk to anyone, ever about their actions. It's fact, the "internet lender" does not rely on referrals to grow its business (I didn't say out-of-state lender, i said "internet lender" here). They rely on the next blind buyer searching thru on-line search engines - they are plentiful and they know it. Every lender knows that when a buyer is sitting at the clsg table, the majority do not have the option to postpone their clsg if fees, rates, etc., don't agree as originally promised. Don't buyers ever wonder why majority of the surprises show up at "the table"? Why then, do buyers choose to play in a sandbox where knowing going into it, that it is possible that there are snakes hidden within? My Gosh buyers!, work within an environement that cuts down these risks. (I am in GA and i still close loans in Florida & Alabama but i don't market these states. I only do mortgages for those agent's clients whom i have a working relationship with and came as referrals.)
The bottom line, as we all know, is the success of the transaction comes down to the individual loan originator they are dealing with (whether that be local, out-of-state or "internet"). Is the originator simply an "order taker" or are they a true professional in the business? You'll find with "order-takers" your deals can more likely fall apart once it gets to underwriting where they decline the loan because that's where they first become aware the buyer became self-employed just 6 monthws ago - ouch!. Buyer loses out hundreds of $'s in appraisal, inspection, etc., fees already spent. A true professional would have assessed this entirely in the pre-approval and declined them upfront. Have they integrity? That's a tough one but a little research, asking around, trusted referral sources and then just simply interviewing the originator will tell one lots. Unortuantely, as long we live in a greedy world (buyer & originator both) there will always be foxes lieing in wait in sheepskin.
The real agent job is not an easy one. Selling your buyer on using a trusted referral mortgage person is turning out to be one of the hardest sells in this internet age. It becomes very easy once the problem arises but then it's too late. Don't give up...
Great Blog Sandy. Online is great, however, sometimes (as you proved) this is not always the case.
Not many people appreciate the signs that we put in the front yard of many of our listings that says "this house comes with a mortgage so that you can buy it". That is until their lender fails to wire the funds at closing and our Gold Services Mortgage Partner needs to step in and close the loan in 3 days (used to be same day or within 1 day, but now because of the new TIL guidelines, it has been moved to a minimum of three days to close with new APR disclosures).
Buyer verification is a necessary thing these days. We try to get our listing clients to appreciate that we will pre-approve all buyers ourselves - even if they have a pre-approval letter. This gives our sellers assurance that we will be able to close the loan if the other lender doesn't come through. This differentiating factor is becoming more and more apparent these days.
We think that it's just another way of delivering value to our clients.
It is so difficult to use an out of area, much less out of state or online lender. If I don't have the lenders cell phone number to call them as a last resort, then I don't want them representing my buyer's loan. I have a local lender that I prefer who has got all of the loans I have give him to closing and he tells me what's going on every step of the way. He lives up here too, so I know he knows the properties and the area.
I love the responses that have come in on this post. I have read each and every one of them and I appreciate and respect all the different view points. It's always great to write a post and see what other agents, lenders, etc., are experiencing across the country. It's help me do my job better when I am able to see different points of view. Thanks for all the great comments.
Sandy,
I sell in a resort town. I dread it when I hear a Buyer say " I already have a Lender ( who is ALWAYS not local!)". It will be our worst nightmare! And it ALWAYS gets down to the day before settlement ,when some ISSUE raises it's ugly head!
Please use LOCALS,who know how to get the job done!
Kathy Opatka
Kathy, We do have to be so careful if buyers indicate that they want to use an internet or out of town lender. It makes for an incredibly difficult transaction, if it even goes at all.
That's good advice Sandy. Sandy Shores. That's a great name for real estate!