Chris Butaud, CPA MS Taxation, Guild Mortgage Company

American Dream Pie

A long, long time ago,
I can still remember
How the money used to make a pile.

And I knew if I had my chance,
That I could whoop those bankers' pants
And beat their rates and service by a mile.

But Ben Bernanke made me shiver
And Dodd and Frank were co-conspirators
Lobbyists on their door step
Big banks' cash in their clips.

And I can't remember if I cried when I
Read the press' dittoed lies
But something touched me deep inside
The day, the broker died.

Refrain:
So bye, bye mortgage brokers who tried
To compete with mammoth lenders
Who had Ben on their side
And consumers started wondering why the rates got so high
Instead of lower on the day brokers died
Lower on the day brokers died

Did you write the banking laws
Replete with central planning flaws
Cause Obama told you so

Do you believe in cost control
Can government save your mortgaged souls
And can you teach my how to recover real slow

Well I know the banks are in bed with Ben
They brought, golden sacks in covered wagons
With power to abuse,
It's a regulation ruse.

I was an independent mortgage man
With a heart to serve
And a ton of fans
But that was all before the ban
They day, the broker died

We were singing (Refrain)

I met a girl who sang the blues
Her house now gone to a deed in lieu
The banker smiled as he took it away.

It's written in the sacred lore
How brokers could've helped her more
Till Ben said that the brokers
Couldn't be paid.

And in the streets, the children screamed
For bailout debts would be theirs it seemed
Not a word was spoken
The growth engine was broken.

And the three that I admire the most
Father Son and Holy Ghost
Are still my only hope and boast
On this day, the broker died.

Refrain

Have you noticed that it is harder to get deals financed these days? (Don't answer that, it's a rhetorical question.) The reasons are legion, from stricter credit scoring models, to tighter loan-to-value and debt-to-income ratio requirements, to higher asset requirements, to underwriter review of 100% of borrower tax transcripts.

The cumulative effect is that an underwriting process that used to resemble getting your earnings temperature taken is now the equivalent of a financial colonoscopy. And just like in the medical field, if you look at something long enough and closely enough, you're bound to find something to fret over.

So, what's a Realtor to do whose fortunes rise and fall upon expectations embodied in lender pre-approval letters? (To say nothing of the equally problematic (if harder to measure) missed opportunities related to qualified borrowers who never get a letter because their loan officer doesn't understand how to document legitimate income!) Of course, your loan officer doesn't have to be a CPA to provide adequate service, but you are doing your clients and yourself a disservice if you are not partnering with someone who is very comfortable navigating individual, corporate, partnership and Limited Liability Company tax returns. (I know it's self-serving, but, like they say about bragging, "It's not bragging if it's true" - and, I would add, widely relevant.)

This is not a low bar that can be met by taking a one-hour class on "underwriting the self-employed borrower". We are talking about the IRS and the Tax Code here. Consider something as (almost) universally understood as the ability to add back depreciation to a borrower's income. Seems simple enough, until you realize that there are myriads of places that depreciation can be found on a personal income tax return alone (Schedule A, Form 2106, Schedule C-part 2, Schedule C- part 3, Schedule E-page 1, Schedule E- page 2, and Schedule F...) You get the picture. The difference between a real deal and a satisfied customer and no deal and an unhappy non-customer might just rest upon your loan officer's familiarity with some fairly oblique income tax forms.

None of us can wish-away the profound changes that are impacting our livelihoods every day. We can choose to be proactive in how we answer them. You're still making a living selling real estate, which means that you are probably rethinking everything on a daily basis in order to survive. It may be time to rethink the level of financial sophistication you expect from your lender relationships.