You may recall my warning from Oct 16, 2013 Real Estate Agent Beware! where I painted the ghastly picture of a flood of loan officers resembling that scene from Braveheart. You know the one where William Wallace and his army of loan officers…er, eh hum, I mean his army of rebels charge down the grassy knoll enveloping the real estate professional and builder….er, I mean, the Royal Army.
Well, it’s about it to get 100 times worse!
Why? These ‘refinance boomer’ loan officers no longer have refinance loans to work on, their bills are piling up, their companies are slashing comp plans to make up for the massive dent they’ve suffered in loan volume revenue, and they’re turning their attention to YOU – the real estate professional, the professional home builder, AND your clients to supplement their loss on income. We both know the purchase transaction is a completely different animal than the refinance transaction.
Look at these numbers
Mortgage lending has hit a 17 year low as the Dodd/Frank (Ability to Repay & Qualified Mortgage) rules crippled some mortgage companies with increased regulatory and compliance costs combined with rising interest rates deterring home owners from refinancing. Mortgage lenders did a total loan volume of $226 billion in the first quarter of 2014 – the lowest quarterly amount since 1997, according to Bloomberg. Wells Fargo, for example, saw loan volumes in excess of $100 billion for 7 straight quarters until June 2013 (when the Feds introduced their ‘tapering’ strategy) only to see $36 billion in Q1 2014.
A survey released by the American Bankers Association shows that 56-63% of loans for the last 3 years have been refinances. Friends….those refi’s are gone! The pie has shrunk, significantly, but the same number of mounts are trying to eat from it. That’s a recipe for disaster for you and your clients. Please don’t fall for their offerings of too-good-to-be-true interest rates, promises of stress-free, on-time closings, or their gimmicky no-closing cost loans. There are no free lunches, there’s no lender that’s going to write a check to do a loan, the costs are being recouped somewhere.
How can you protect yourself and your clients?
Ask questions….lots of them. When A) a loan officer comes knocking on your door or B) when your client comes to you and says ‘hey I’ve been prequalified by OvernightRefiBoomMortgage.com’ you need to start asking questions:
- How long have they been in the business? This doesn’t always matter, but if they’ve been in the business for less than 5 years then that’s an indicator they jumped in and surfed the refinance wave.
- What has their purchase-to-refinance ratio been for the last 5+ years? A healthy ratio is 75-to-25, with purchase transactions making up the greater number.
- What is the difference between a prequalification and a preapproval? A loan officer worth anything should know this answer. A prequalification is absolutely worthless.
- Ask them for a sample copy of their weekly status update report. There are several parties involved in a purchase transaction and the LAST thing you need is to be the one updating everyone on the status of the mortgage process.
- What is the average number of days they AND their company takes from application to clear-to-close? A good number is 27 days. Anything greater than this and you will experience delays without a doubt. If they have no clue OR if they can’t access a report showing this……then I repeat, you will no doubt experience delays.
The mortgage industry has enjoyed the low hanging fruit the last several years and you probably haven’t been attacked as much as you are or will be in the very near future. You most likely know the difference between an adept loan officer, unfortunately you’re clients do not.
I’m more than happy to share any material I can in effort to help, including my weekly realtor/builder status report that goes out to all parties involved. Let me know if I can help firstname.lastname@example.org