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Mortgage Loans Not Getting Closed? Your 1003 May Be The Problem
Mortgage Loans Not Getting Closed? Your 1003 May Be The Problem During the course of my day I have occasion to talk to mortgage loan officers. As I talk to potential new hire LO's, quite often I find myself talking to unhappy individuals; people who are frustrated because they just don't understand that the mortgage industry has changed.
The last 6 months to a year, the mortgage industry is different than it has ever been before. In fact, it is so different; many people don't understand their job anymore. I believe that as an LO, you have to have an understanding of what your actual job is and at least some basic training requirements necessary to succeed in the industry before you can set yourself up to actually be a loan officer.
Before you can hang up a sign that says, "I'm a mortgage broker or I'm a loan officer", ...thinking that because it's easy to get a license and to become a loan officer, you need to realize that in the mortgage industry it's not always easy to know what is required of you, unless you have the proper training.
It used to be straightforward to be a "loan officer" and the industry formerly would support people who didn't have a concept of what they were doing. This was because the mortgage industry simply could not hire enough people to take all of the mortgage applications. There were millions and millions of loans being written and virtually any "warm body" could write them.
The AE's helped the new LO's, their lenders helped them; they had support systems, albeit loose support systems, that they could call to get help.
What you have now are 236 less lenders than you had a year or so ago and you have companies that don't even have AE's or Reps any more because they simply can't afford to pay them.
These companies have a fraction of the mortgage activity that they use to have. Consequently, they have underwriters who are completely overwhelmed by the influx of government loans because this seems to be the product more of our lenders are encouraging.
The real problem comes when you couple the emphasis on FHA and VA government loans in the industry with LO's who are trying to submit government loan applications and think they can submit them like they did during the sub-prime era. This is absolutely not possible.
So what you have are people who have no experience submitting government loans that are presenting documents to more than one lender because they may have been denied previously. Quite often the LO needs to restructure and re-submit the loan, basically because the loan officer doesn't really understand how to properly submit the 1003.
They don't understand because they were never forced to learn during the crazy days of the sub-prime marketplace.
History has thrust us into a position where our loan officers now need to know how to originate loans. LO's all over the country are sitting by themselves with a very limited support system, which is made up of fewer "support" people than it ever has had in the past.
You have mortgage company's like ours who are adding additional support personnel for our LO's because we have recognized the drop in the vendor support. But unfortunately, our company is in the minority of mortgage companies that are actually expanding and growing during this downturn of business and can afford to provide sufficient support personnel to assist our LO's.
For many LO's, it appears that they need some of the most basic training, like for instance, how to simply complete an application and the 1003. I know that it sounds silly that it would take any training to fill out forms or to ask questions, but in my opinion, it is even more necessary today than in the past.
We see thousands and thousands of loans. Of those coming from the general population of the new LO's that we hire off the street, I would not be surprised to learn that 90% of them send in applications to processing incomplete.
With the new, stringent requirements imposed by most mortgage companies today, the loan officer needs to understand that they now have to complete all fields on the 1003 and also with correct dates that comply with regulations.
Let me provide you several examples of what we are not seeing completed on the 1003 today;
*Years of schooling isn't completed,
*Borrowers birthdays aren't given
*Documentation necessary if there were less than 2 years of employment is not provided
*History of ownership
*How many children in the family *Correct mailing address
*Correct dates that are in compliance with regulations
*The list goes on and on...
These may have been completed in the past by the lender's Rep or AE, and they may seem like little things reflecting back on the past days of the "Wild West sub-prime years", but today, your declaration has to be perfect if you want the application to get past underwriting.
In today's demanding marketplace, the HMDA section has to be perfect and the REO has to be done, and has to be done correctly. These are items that often may have been left blank a year ago, and "slipped by" because someone would have completed it for the LO.
When we were in the subprime heyday, 1003 applications quite often were written haphazardly and unfortunately nobody really cared because the LO had an AE doing follow up for them.
Occasionally, a lender would force the LO to complete the information and would end up telling the LO exactly what to put on the 1003. The lender would end up contacting the client for information, and in turn, create a photocopy of the application in which they had written exactly what the LO was to put in the blanks. They would then send it back to LO and have the LO write in the correct data. They would then have the borrower sign it and send it back to them.
Obviously, while we all know of companies that used to do this, it was never an acceptable practice. I'm not implying that it was fraudulent from the standpoint that they were falsifying information, but they did tell the LO exactly what they needed to put into the 1003 and we all know that is in violation of our industry's most basic compliance regulations.
While our company never allowed this practice, and I do not have a lot of interaction outside of our company, I doubt that there are any reps left who are going to provide this "service" for the LO...that century doesn't exist any more.
Those lenders who had that level of "service", or at least, what loan officers perceived as service, were basically good lenders that regarded their "services" to the loan officers as a necessary evil to get their loans closed; that is just what it took to get the job done and mortgages processed.
Well, let me tell you; that environment no longer exists. What you have now are conventional lenders like Flagstar, Chase, Citi Banks; huge conventional lenders who have never provided these "services" because they assume that the LO knew what their job is.
My position is that at this historical point in the mortgage industry, we need all mortgage companies to focus on providing their loan officers' more basic training. We need to recognize and correct this egregious training shortcoming BEFORE new regulations and compliance issues are "slapped" on LO's by an industry that is already regulated to the hilt.
If we as an industry start providing the proper support and training, and insist on higher standards of training and compliance, we will see more professional LO's providing proper paperwork and as a result closing more mortgage loans in a fraction of the time it is currently taking due to incomplete 1003's and unfinished documentation.
After all, isn't this why we are in the mortgage business?
About the Author:
Phillip P Gilliam has been helping professionals in software, marketing, finance and business management for over 37 years. Phil has a wife and three daughters and resides in Florida. He attended WSU in Dayton, Ohio and obtained a CmfgE in Robotics. He presently is the CEO and President of Discover Software Inc. www.home-mortgage-refinancing-mortgage-company.com/
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