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Thursday, October 20, 2011

Does every deal have to be a struggle?

I was so happy 45 days ago to finally get a “regular sale”, a sale that I even thought would be an easy sale. I have a buyer who has a great credit score and who is putting about ½ down on the property and I still am have headaches getting this sale through the ubiquitous and mysterious “underwriters.” I’m not even sure that we’ll close next week as planned.

What has happened to make this process so hard that even good buyers on good sales of good properties is a major pain in the behind? I know it drives the loan officers mad too and they end up tearing out their hair trying to meet all of the requirements of the dreaded underwriters. Underwriters must belong to the same secret society as the oft sited “investor” that sits behind the scenes in short sales and foreclosures.

I keep getting the story that all of the banks have dramatically increased the documentation requirements and have instituted multiple layers of review for everything. They have turned a process that a couple of years back could have been accomplished in 15-30 days into a 45-60 day nightmare. OK, so maybe mistakes made during the 15-30 day era also led to the home value meltdown debacle; however, that is no reason to clamp down so tight that would-be borrowers are strangled out of the market.

I suspect that part of the problem is educational – both for real estate reps and home buyers. Neither group has received much information about the new rules and requirements, so both are still operating under old assumptions about the process and the timetables involved. However, a bigger issue may be that the process has shifted from being customer service oriented (towards the borrower) to being protect-the-investor-at-all-costs oriented. Underlying all of that is an unspoken “buyer be damned” attitude. Apparently all buyers are now viewed as untrustworthy by the underwriters. If they have cash for a down payment they have to prove that it’s not from some money laundering scheme or, heaven forbid, a gift from mom or dad.

The new reality is apparently that 60 days is the new 30 days for non-distressed sales. For distressed sales – foreclosures and short sales – we all pretty much know that there are no rules – it could be 90 days, it could be 9 months. Patience beyond that required for Sainthood is the norm for them.

Like any system that is still seeking a new equilibrium, the mortgage process has now overshot on the over cautious side and needs to come back towards some middle ground. That may not require abandoning any of the new documentation requirements, those are probably a good thing; however, the review and approval and move the paperwork along parts of the process need some attention, as does the lack of transparency in the entire process. It seems to me that he underwriters also need to be refocused upon customer service to the borrowers and not just concern for the interests of the investor.
 We need a process for regular sales that is more transparent, easier to understand and explain and closer to the old 30 days to close model. Otherwise, the underwriters are going to evolve to be the undertakers of our business.

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