Recently, I listed and sold a condo in New Orleans. Now, the entire condo buying and selling experience has changed from years past, with fewer lenders willing to step up and do the necessary work to get a complex approved by FHA. It used to be that by answering a few quick questions a lender could get what was called a “spot approval”. Those days are gone and while the rule changes may have been made for valid reasons (although I’m not quite sure what they are), they have served to make the entire process a little more cumbersome, especially for the seller and the condo association.
Jumping through all of the FHA hoops was tiring enough, but dealing with an out of state Wells Fargo underwriter served to make almost everyone involved in the process want to scream…including the loan originator who worked for the same company.
Lapses in communication by the underwriter, repeated requests for documents and information that had already been provided and an apparent inability to actually review the documents they had in hand all served to draw out a closing a full 30 days past the date set in the original purchase agreement. Keeping the buyer from moving in, the seller from moving on and everyone else in a reactive mode, cringing at what new hell they might dream up as the torture de jour.
While the loan originator (who is the front line contact with the buyer and the agents) has a local office, the underwriter sat waaaaay over in Jacksonville, Florida. They didn’t have to make small talk at the water cooler with the originator, they didn’t pass each other in the hall and get a quick update on the status of the loan approval. The underwriter had no incentive to actually get the deal done within the deadlines of the contract. Instead, they focused on the minutiae and stopped or stalled the process over and over again as they requested item after item above and beyond their original request list.
I got tired of asking “is there anything else you need to finish processing this loan?” only to find out days later that yet another document was required – or, even worse, that they were asking for things that had already been sent to them. They even had the gall to throw in a last minute, previously undisclosed seller FHA fee while we were sitting at the closing table signing the settlement statement.
Get to the point, Lisa
The point is that when a buyer uses an out of state lender, everyone in the transaction is faceless to the underwriting staff. You are just another file that they have to get processed instead of being a customer.
That’s why we always, always, always advise our buyers to use a local lender. Someone you can get face to face with. Someone who is working with you, not just on your file. Someone who isn’t reliant on phone calls and email to communicate with the underwriter, but instead can walk down the hall and poke their head into an office for an update.
If you need someone like that, we’d be happy to give you a referral to some New Orleans area lenders we have successfully worked with in the past that didn’t make everyone want to beat their head against a wall.
Buying a home is supposed to be fun and we don’t like to work with people who suck the fun out of it. You shouldn’t either.
For more information about home buying or selling on the West Bank of New Orleans, or relocating to or from NAS JRB New Orleans, please contact the West Bank Living Team. It would be our pleasure to have the opportunity to assist you with any of your real estate needs and have a little fun while doing it!
Lisa: I think you're right, although local options aren't always available. When they are, I imagine they should usually take priority. Great post, thanks for sharing! :)
You may have mentioned it, but there is also the delay of overnighting documents when the mortgage company won't table fund.
Lisa, My hardest deals to close are always one in which I can not go to the lender and have a face to face.
First, you are a great writer -- you really make the scenario come alive. Second, you are so right! Really right, Totally right. I won't hijack your post with the whole gory story but the worst transaction ever was last summer with a Chase internet broker and underwriter. They were in AZ and we're in IL. They did not answer the phone, only email. It was an FHA loan for a very qualified relo buyer. Closing was delayed three weeks, one or two days at a time -- even went to the closing once only to be sent away after six hours. The stress literally put my sellers -- and next door neighbors -- into the ICU. Neither could come to the closing. The buyer and my new neighbor still are so apologetic. This would never happen if those lenders had to see me in the grocery store or run into me at church.
I am reblogging. Thanks for your post.
Well deserved feature. There are some out of town lenders that know our situation here but then there are many who do not!
Lisa, You are absolutely correct. Some of the worst situations arise when a buyer uses an out of area lender, or better yet, an internet company across country. Now, maybe some of them are good, but I've seen some nightmares costing buyers lots of money.
Very good advise. Someone in my office tried this and it was a nightmare.
I had great difficulty too this year with an out of town lender. Always took 24 hours or more to respond to an e-mail which is ridiculous. Great post! Congrats on the feature.
I just came through some pretty torturous FHA loan processes with buyers...thank goodness for a local lender who answers his phone at all hours and goes to bat for his clients! The unbelievable requests from the underwriters were like nothing I've seen in over 30 years of real estate!
All I can really add is - oh yeah - you totally nailed this problem!! (Though the other complication I've seen is an out of state underwriter requiring something be provided that doesn't even exist in our area...)
Lisa: I'm sorry you had a bad experience with this transaction and closing ... and I do agree with you ... and disagree at the same time. Some of the issues you describe most likely would have occurred even with the lender being local. There is no real explanation or defense for some of the underwriting and poor communication habits of some companies and individual lenders ... but their behavior doesn't change just because you're located around the corner from them. Poor service remains poor service. One commentor mentioned overnight delivery for funding, etc. too ... something that might or might not be an issue with any lender whether close by or across the nation. Wiring of funds so they're at the closing table is a service feature some lenders have (I do) ... and that is something to be considered when a client is first looking for their lender.
Do I think it's great to have strong and healthy relationships between local lenders, clients, and other real estate professionals? Without a doubt. But can an out-of-town lender do a great job of servicing and representing a client? Definitely. As with any transaction, it's about the individual lender and the efforts they are willing to make to provide good service.
Gene
This can be disaster in dealing with short sales where when someone like BOA gives you a stict closing timeline, or when you have someone hanging on by a thread trying to avoid foreclosure it is a ethical duty to insure a closing. We reuqire that people using some out of state lenders that do not have local offices get prequalified with someone local. I had one person hand me an online approval that had a 540 credit score. Fat chance of that closing.
I agree, being able to have those face to face interactions makes things go a lot smoother; but sometimes you have to go with the flow.
I had a similar experience last year with a VA REO Buyer. The nonresponsive Lender, who she used against my advice, cost her $400 in per diems!
I always try to get my Buyers to use a local Lender--even if it's one of their choosing!
Lisa,
These are just the facts. Most lenders will try to dispute them. Out of town lenders are always perfect until there is a problem. Internet funding is always wonderful, until you need it on time.
Stay local. Support those folks that take the time to know you, your clients and your city.
Oh, and I guess stay out of the water.
Government dropped the ball again.
peace
Amazing....And I understand your blog comments and feel the frustration you must have undergone. But not all lenders are the same when it comes to treating the market as a "national market".
I think (just my thought) that you really have to know a bit about the lender you are working with, if they truly have a national reach and more importantly what their process and procedures as well as turn times and commitment to customers are like (and about). It need not be a huge problem in this day and age to reach across state lines a provide residential mortgage services, but it is incumbent upon the lender to be well versed in the local customs and have established partners in any market it plans to be active in.
Sorry about your experince, thanks for your blog comments but lending on a national basis can work and work very well.
Lisa--I have used out of town lenders with no problem, and also used them with HUGE glitches in communication.
However, that said, I am struggling to find a good LOCAL lender who lives up to my standards.
I agree...I've done a few deals this year with lenders from out of state and the process was a little bit longer and muddied...
You are so right about that faceless and out of reach entity...They need to be local so if need be you can wring a few necks! Wait, did say that or just think it???
Using a local lender is not the answer to your quandry. Local lenders can limit access to underwriters just as easily as a lender located states away from your location. The fact of the matter is that in today's environment loans are simply hard to get done. Most of the larger lenders are quoting very long turn times, and with all the regulations and rules they have to accomodate, they are paranoid about making sure the loan is well documented and complete. This seems to be done to a point of extreme frustration for everyone involved. Don't think the underwriters and loan officers are not steamed just like you. They are dealing with quality control issues that are changing almost daily, rules that are not applied consistenly between lenders, and a host of other issues that are making underwriters wish they weren't underwriters.
I suppose the best advice is to make sure your buyers know the lending process is going to take time, and that it may be frustrating at times. This is just how lending is done in today's environment. It's just not easy, and the rules and requirements are taking out all the chances for good customer service. I tell people to be ready for an unpleasant experience, and a process that is going to test your resolve. If it turns out better than planned, then we all can be grateful.
Bruce Bills
www.ratewindow.com
Hi Lisa! You go girl with your gold star! I regularly use Wells Fargo and while I do love my local mortgage rep, he does answer to someone in Ohio, I think it is, and this creates delays and inconveniences. He's wonderful, but the process is cumbersome.
If they don't understand your local market then you're probably toast.
Lisa, I recently lost a whole deal because the out of state lender was not familiar with the laws here in Texas ... great article here! pippa
I see most of the lenders here are defending the whole idea of out of state loans.
Not me. I am a lender who fully agrees with you that the best course of action is to use a local lender.
Thanks for the perspective and for posting this on Active Rain!
I have a deal now with an out of state lender - but the buyer's in the military and this company caters to those individuals - I have the seller, I'm just going to hope for smooth sailing.
HI Lisa -- I have experienced this as well much to my chagrin. It's frustrating when this occurs. It's much harder to get accountability sometimes with out of state lenders in my experience.
Thanks for the comments everyone!
Janet wrote: "I am a lender who fully agrees with you that the best course of action is to use a local lender". That's my point in a nutshell. Most of us are champions of shopping locally and supporting our community economy, yet we don't apply that same thinking to the lenders who we refer our clients to.
As a listing agent, I have no control over who the buyers are using to finance their home purchase. But, I do have the chance to observe the differences in how a transaction progresses when using a local lender vs a national one. Most (but not all) of the time, the local lenders win hands down. The exception to this would be military buyers who are using USAA or Navy Federal. Those are stellar examples of companies who have their processes down pat and close deals on time with as few hiccups as possible.
As mentioned by several of you, things are done differently from state to state and region to region. If a lender is not familiar with local customs and laws (which is a huge deal in Louisiana since we still practice Napoleonic code) the entire process can be frustrating.
Thank you, thank you, thank you. so many people shop and reshop loans over and over to get the best rate. That doesn't mean anything if the sale can't close because of the lender! I just had one recently blow up because of such an issue. They are working with another lender now, but if they had listened in the first place.....
Hi Lisa, good one.
I have had several exceptions recently however. Most of my buyers are from out of state, very financially stable. I ask them if they have a relationship with a bank or credit union 'at home'. The last 3 out of area lenders were excellent, right on the money, and had great service. And very low loan fees. One had NONE - and a low interest rate.
It was a bit of education about NV customs and laws. To start with, closing here means the minute it records. In many states closing means when the parties sign their paperwork - sometimes at the same time. Here, it can be days apart, then it goes back to the lender, then funds, then records.
Close of escrow = the minute it records. We don't use the term settlement.
I have had much more trouble with out of area title companies, communication with them, plus they have their usual customary closing costs - I tell them, I don't care what you think is customary, the contract says who pays what.
So true! Fortunately most of our buyers choose a local lender. We tend to have so many problems with out of state underwriters and lenders. Several closings at our office have been held because (at the last moment) the underwriters demanded that there be a termite inspection. Problem...no termite inspectors in Maine. Why? There are NO termites in Maine. It took days and days to get them to fully understand this.
Out of town makes this 10 times harder than it needs to be!
Lisa it sounds more like you were dealing with a short sale than a trusty mortgage broker:)
Lisa, I feel so sorry for you! I refuse to work with any buyer who will not use a local lender. When I list a property I usually recommend to my seller that they require a local lender on the buyer side also. If I can't walk into their office I don't want to deal with it.
Some lenders might take exception, but it is the rare, rare lender that can navigate an out of town loan.
I will agree that with most transactions, the local lender is the way to go.
I completed a transaction fairly recently with a couple buying their first home. One of them worked for a global banking company and their hands were tied regarding the lender to use because of a conflict of interests. They used a bank that was waaaaaayyyyy out of the area (not quite as far as the west coast) and it actually was not a bad deal at all. The lender was very open to communication and everything went fairly smoothly. The only issue was that they underestimated our NY closing costs, but we were xpecting that, so all was well.