QUESTIONS?

CALL US: 703-319-2198


The Mortgage Loan Process

Many have complained that the process of getting a mortgage post crisis is very difficult. Here is what you should expect: 

Re-regulation of the mortgage industry has collectively been a treat for all of us, both as industry providers and borrowers. The regulation has created significant risk both in the form of potential litigation and potential loss of principle from the perception of unenforceable mortgages. The mortgage providers have responded with a letter of conduct that, beyond appearance, is downright punitive.

When you apply for a mortgage your application must be 100% complete and accurate. Your credit report will be pulled and matched against your application. Your employment and all of your asset accounts will be reconciled against one another. The lender will utilize secondary applications that will tell them if you have obtained additional debt between the point of application and closing.  Everything will be validated.

Additionally, there will not be any benefit of a doubt provided to you as a borrower. Your tax returns will be validated with a 4506 allowing the lender to receive your transcripts from the IRS. Your bank accounts will be reviewed line by line and any deposit of $50 or more will require source and seasoning. Lastly, don’t be surprised if you go to closing and the lender holds up funding to question your signatures. You may have signed the forms in front of a notary only to receive a Fedex with the same forms requiring your signature. The lender reserves the right to compare signatures and possibly not fund the loan.

The lenders have also created a colossal assortment of loan product underwriting overlays at their discretion. As an example, if the VA Loan Program allows for a veteran to obtain a loan with a 620 score and certain credit variances, the lender may require a 640 or a 660 score with much more stringent credit parameters. The end result is denial of the loan.

I am just touching on the surface with this topic. The question many of you may be asking is why. Is it just related to the crisis or is there something more to the equation? I would like to share my opinion with you that it is much more than a conservative stance post crisis.

Regulation Z, Federal Truth in Lending-HOEPA, borrower must demonstrate the ability to repay the loan. This is the deal breaker and the reason why there is so much intrepidation to lend in my opinion. “Who” is to determine that the lender scrutinized the loan sufficiently when it goes bad and the borrower ends up in default? It’s not a question that can be taken lightly because this could lead to a lender being ruled against and having to face excessive litigation expense or even the prospect of an unenforceable mortgage.

The lenders are not willing to take this risk so they pound the table with their demands and cherry pick those that are pristine for loans while the others fall to the wayside. The lenders discriminate loan by loan and property by property as they see fit.

Many of you may look at government and say this is ridiculous and the lenders should just revert back to pre-crisis attitudes and start lending with more lax guidelines. This sounds logical but I wouldn’t support it. I saw what the government did to GM senior bond holders during the crisis. The government came in and said “this is how it’s going to go down”, GM was recapitalized and that was the final word.

If you consider the precedent of heavy handed government involvement in private industry and the intense level of litigation against the lenders over the past couple years, I wouldn’t expect the mortgage experience to get any easier anytime soon.

To summarize, until equitable resolution is no longer in question and there is more clarity on the continuing rollout of more Dodd Frank Regs, I would expect the very conservative stance from the lending community to continue and many people will not be eligible for loans.  

Blogging from the front line.
 
George H. Omilan
President-CEO
NMLS# 873983
 
If you like this blog please comment.

 

Comments

Error:
Please enter this text

Comment Submitted!

Recent Posts

Blog Tags

Reverse Mortgage Retirement Planning Annuity Traditional Mortgage Fiscal Cliff Medicare Short Sales Debt Mitigation supplemental retirement income Reverse to Purchase Mortgage Retirement income insecurity forgiven mortgage debt mortgage debt forgiveness act solutions for underwater properties home equity access HECM Reverse Mortgage Government insured mortgage lifetime income with a Reverse Loan modification modify your loan with your lender Home Care foreclosure Mortgage Loan Process FHA HUD Construction Loan Hard Money Loan mortgage debt relief act FINRA HECM to Purchase HECM for Purchase Long Term Care Rentership Real Estate Economy Financial Assessments Mortgage Deliquency Seniors Social Security Sandwich Generation Financial Planning private label reverse mortgage growth factor reverse credit line LESA Retirement security assisted living Eligibility for Reverse Mortgage Estate Plan Age in Place downsizing Trump Treasury occupancy requirements Senior Advocate mortgage debt Senior Care Gray Divorce Jumbo Reverse Mortgage Principal Limit Factor Non-recourse loan investor financing No Doc Investor Loans Specialized Forward Mortgages Jefferson Mortgage Group Non QM bankruptcy QM Commercial Real Estate Investor Loans Real Estate Investment Loans self-employed borrower bank statement loan Jumbo Mortgage Loan MIP HECM Changes mortgage Asset Qualifer Asset Based Mortgage VA Low Score VA LOAN manual underwrite Unrestricted Approval success story 2021 Changes Inflation cashflow Blanket Loan Reverse Mortgage Eligibility 55+ Fed Interest Rates Housing Market Housing Prices Mortgage Rates Real Estate Market Diversification Prequalification 2023 changes Lending Limit increase High-Value Homes Business Cash-flow ATR Rule Seller Contribution Low Credit Score Credit Score down to 500 Non-Qualifying Loan DSCR Debt Property-based loan LLC Jumbo Reverse Second Trust Second Trust Second Trust