Danell Merren

When I started working as a housing counselor for the non-profit side of my company, ICCF, over ten years ago, we advised clients that closing typically took about 45 days. It seems we've come full circle and that it is taking that long again.

Then I started doing mortgages about five years ago, and we always locked people for 45 days. On "slamdunks" we could typically get them done in 3-4 weeks, but it wasn't common for the company I worked for to close them sooner. There was a process, and people went in the "line-up", and you held your "favor tickets" very closely hoping to not need them. I specialize in first time homebuyer programs like FHA, MSHDA, RD etc., so the Realtors I work with typically expected that the layering of the programs would cause longer closings.

Then I, as many, discovered zero down Conventional loans, and I found that 90% of my customers wanted them- since a 3-5% down payment would barely make a dent in their payment, why not keep the cushion in the bank for emergencies (when they had it). By bypassing the govi programs, I was amazed at how quickly we could close loans! Three weeks on Conventionals was my standard line, and I have such an amazing processor, that I could do MSHDAs even in four weeks! I watched in awe once as she moved mountains to close a buyer who had just sold her home in six days as to prevent her pain of moving twice! Operative word was watched, past tense. That was almost two years ago today, before the totaly bottoming out of the market, the ax of zero down mortgages.

We are back to the tried and true government products leading the market. The majority of what we are doing now is FHA which was a product I leaned on heavily before the zero downs made their fame. We are back to needing 45 day locks, and some of the banks we work with are even doing 60 day locks at no additional cost to the buyer!

The longer closing time though is not a direct correlation to government products now leading the market. Even closing a loan for the "slamdunk" Conventional borrower is taking 45-60 days! There are several reasons, in my opinion, that it is taking longer to close loans:

• Banks are working on skeleton crews, therefore, the time the file is in underwriting once it gets to the bank is dramatically longer than it used to be (i.e.- instead of 1-3 business days the file sits in the line-up for 7-10 business days before it is reviewed).
• Over 50% of buyers are buying foreclosed properties (and getting signed purchase agreements from the banks takes longer than from a private party).
• There is no such thing as "alternate" documentation anymore-we have to fully verify jobs, rent, and assets, whereas bank statements, paystubs, etc. used to be sufficient (or less- i.e.- stated income loans, NO doc., low doc., etc.).
• Even after the above documentation occurs, a lot of banks are doing follow-up verification to make sure the client is still working after we've submitted the file.
• The property itself which is the collateral is more important than ever and underwriters are scrutinizing appraisals.

So I am taking the proactive stance that the whole process can still go smoothly as long as we set up realistic expectations on the front end!

What do you all think?

I have this wonderful customer, Kelly, that has done a world of good for my business! She's the kind of person you just wish you could clone! Her positive energy and ability to network make her an awesome part of my "team". She's an awesome hair stylist, and I'd like to return the favor. So, I am going to feature her on my blog this month! She's offering an unbeatable special to get more clients in her door. Read below!

Kelly at Capelli Salon is offering an awesome Winter Special!

Kelly's Arctic Winter Special (adopted from her Facebook page with permission)!!

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Oh, man are you gonna love me for this! It's Winter, People. And, it's cold. AND, I am your favorite hair stylist.......or I will be after you come in for Kelly's Arctic Winter Special.

As a reward for you and your friends making it this far through the arctic winter, I'm offering 25% off to existing clients on ANY hair service...and 50% off to new clients on any hair service! I know. It's crazy! But, I am here for you and your hair. I want to make your world a better place.

This offer of goodness is valid only with me, Kelly! at Capelli Salon, through March 21, 2009. Spread the word, tell your peeps, copy and paste it like it's viral. Be sure to mention Kelly's Arctic Winter Special when you make your appointment. Put our # on speed dial.....616-356-2194. I'll be waiting with scissors and product in-hand.
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Isn't this special amazing?! So, check Kelly out at Capelli Salon in Eastown. You'll be so happy you did, and you'll save a lot of money doing it!

To Protect Yourself During The Mortgage Process:

DON'T:

• Stop paying on any current mortgages

• Don't pay your bills via a debt management company

• Quit or change jobs

• Cancel your lease

• Apply for new debt

• Make any large purchases on credit

• Pay off any debts or close any loans (unless instructed)

• Have your credit pulled repeatedly

• Transfer any balances on credit cards

• Don't pay any upfront costs associated with the transaction with cash (i.e.- earnest money deposit, appraisal deposit, inspection monies)

DO:

• Realize your credit may need to be re-pulled, therefore, continue making all debt and bill payments on time

• Understand that typically all collections must be paid prior to closing

• Realize all gifts should be in the form of certified or cashiers checks (it is best to get the gift at closing, not before)

• Provide all documents promptly to ensure closing on time

• Talk with your agent about big purchases you plan or need to make

• Call for instruction before making unusual large deposits

• Notify us IMMEDIATELY if your situation changes in any way

• Relax- we have the financial side taken care of!

I recently wrote a post http://activerain.com/blogsview/908519/Do-As-Youd-Tell-A-Customerabout taking our own advice in the industry. In it I joked that even I forget sometimes that we have to Source (show where the monies come from) all of the monies a customer has in the transaction. I'd like to expand on this a bit.

I specialize in First Time Homebuyer Financing, so I work with a lot of wonderful and eager new homebuyers. I must admit that this is truly one of the best parts of my job! They LOVE to learn, but sometimes I fear that I overwhelm them with information, that I'm almost "throwing up on them with information". A previous manager at a different mortgage company once shared the old adage, "Keep it simple, stupid", meaning don't say so much that the borrower can't follow you.

However, my processor and I have run into several times lately where we feel we can't share enough insider tips. Many of my clients use traditional banking very little and, therefore, they use cash and money orders to pay their bills. While debt counselor Dave Ramsey would love this, it can often be a huge headache for our customers and for my processor when it comes time to process the loan. So, we've actually started giving customers a Dos and Don'ts Flyer that we have them sign (http://activerain.com/blogsview/917658/Top-Dos-and-Donts-in-the-Mortgage-Process). I always hesitate to give this to customers because we would never want it to appear patronizing, but we've come to realize we cannot assume that our customers will know to pay by check, that the check must correlate to their own checking account, and that the funds should be their own funds and if they aren't, we'll have to document a large paper trail of how the funds got to the borrower, who gifted them, that the gifter had sufficient funds to gift, etc! It is simply easiest for everyone if the borrower has enough funds to pay earnest money, appraisal money, and inspection money from their own accounts upfront right after they make an offer on the home!

I have a lot of borrowers who use down payment assistance programs like the IDA matched savings program, City down payment assistance, F.S.S. funds from their housing assistance, etc. All of that is great except that those funds don't come into play until the day of close! So, the lightbulb seriously went on for me yesterday that many of my clients don't have any money now, not enough to cover the common $1,000 earnest money deposit requirement on REO properties, the $350 for appraisal, and the $300+ for inspections! Oh my gosh- they need over $1,500 to get started! Gone are the days of $100-250 earnest money deposits, pay the inspection and appraisal at closing. It occurred to me- I have to let the borrowers know this!

So we get the point now- we have to show that the borrowers funds into the transaction are their own, and, if they aren't, we have to prove that they came from a reliable gift source and that the gifter had the funds to gift (i.e.- we need a bank statement from the gifter!) . Keep in mind, each loan type has their own rules. Fortunately for me, most of my clients lately are FHA and FHA has the most lenient rules about gifting- gifts can come from relatives, employers, grant programs, and in theory friends (but this depends on the bank and how they interpret this).

But rent should be paid by check too, long before the client ever meets the Realtor and the lender! Clients and Realtors often think that a receipt should suffice or a landlord reference. My advice- unless you are renting from a major (large) apartment complex, you need to pay your rent by check! Why you may ask? So that we can prove you paid your rent on time with canceled checks for one year! Underwriters who are trained to analyze risk will not put much weight on a private landlord- let's face it, the trust in the mortgage industry is gone!Your landlord could be anyone- your friend, your parent, your neighbor, anyone with a phone number or address for the bank to call. And a receipt book? Anyone can pick one of those up at Office Depot or Meijer. The only way to prove you paid a private landlord on time is if we can trace the payments back to your bank account! What if a borrower doesn't have a checking account? Then the borrower should use a savings account and get cashiers checks- these are traceable to the account. What if the landlord holds the checks for a long time before depositing them and it doesn't clear the customer's account quickly? First, I know a lot of private landlords, and most of them, including myself, need that rent asap to pay that mortgage, but if your borrower has a landlord that sits on checks, then get cashiers checks that can be traced as immediately coming out of the bank account.

I recently had an Underwriter ask for a years worth of canceled checks from a borrower who had a Verification of Rent from a Management Company! The only guess I had about that was that perhaps the underwriter had heard bad things about that management company- companies get a reputation. In general, my advice is to pay by check!

Sometimes all one can do is laugh at themselves! So, I decided with rates having gotten so low again that I would take a HUGE leap of faith and lock my husband and I into a 15 year mortgage at 4.625%! After all, someone has to have some faith that the mortgage industry is tightening, but there is still business to be had out there! We were very excited, and in fact still are as we closed today- yay!!! Assuming all goes well, we will have our mortgage paid off shortly after our first child goes off to college (or maybe earlier if we play our cards right). I, personally, am not planning to move before then!

But doing my own loan (technically a co-worker was the LO on this one) was an eye opening experience. It brings you back to reality about how it feels to be a customer! It reminds you of being human and how what we think is so common sense is totally not common sense to our customers! We work in the field, so of course it is totally natural for us to know that every amount of money we pay as we go should be paid by check or cashier's check- for example, the earnest money should be paid by check, the check at close must be a cashier's check, cash and money orders are not acceptable, cash at home will not fly, etc.! But how easily I diverted back into a lay person mode. I have two examples of things that I did during the transaction in which I had to ask myself, "What would I tell a customer right now?!"

The first experience was when I was walking around my house gathering up documentation. I was looking for my own two years of W2s. I could find 2007, but for the life of me couldn't find 2006. I kept asking myself, does my processor really need this? Did my husband shred it when we had a contractor build shelves in our storage room? Well, I had the a-ha moment when I realized that I'd ask a customer to get this from HR, payroll, etc. So, I did just that and then experienced the same frustration when their urgency wasn't the same as my urgency- note to self- KEEP DOCUMENTS FOR YEARS! Then I reminded my husband that my processor would be sending a VOE to his HR so to please ask HR to expedite this, and his question was, "You guys need a formal VOE? I gave you two pay stubs... won't that suffice?" I smiled as I thought, I've trained the team well, he really knows the mortgage lingo after all these years, but then I had to clarify, "Oh honey, that was alt. doc. and remember, that's over. It's all about full doc. now, and we need a full VOE in every file!"

The last Laugh Out Loud moment was after I had gone through my bank drivethrough yesterday to get my cashier's check for today's closing. I was so proud. I had it in hand before my processor called to give me my final numbers. She's very good, and she's always within a dollar, so it never occurred to me that her figures would be slightly different- well, needless to say, she was 77 cents off- that's right- just 77 cents. So, I proudly rounded up the 77 cents from my various stashes around my house. She laughed as she said, so calmly just like she would talk calmly to a customer but with more casualness, "Dude, do you think they will accept cash at the closing?" Oh my gosh! The light bulb totally went off, and I laughed out loud! It was so funny. Of course not! What was I thinking? Now I had to write a personal check for 77 cents! But it was a great learning moment about coming back down to reality and realizing that what we think is so natural, we really shouldn't expect a customer who doesn't work in this industry to think about!