Why Real Estate Agents Should Stop Playing Loan Officer

I wasted a few hours this week cleaning up the messes that real estate agents created for their first time home-buyers.

End result – loan officer still looks like a jerk, but now the borrowers are really confused about who to trust.

I’m going to combine about five separate scenarios and conversations that I had this week into one rant just to get my point across.

First of all, the mortgage industry is changing very rapidly.

True  mortgage professionals are paying attention to things like:  HVCC, concerns of HR1728, Mortgage Insurance companies changing their guidelines, Fannie’s new condo rules, FHA fico score requirements, Loan Level Price Adjustments, new FHA appraisal guidelines, adjusting interest rates in an unstable market, and a constant stream of mortgage Twitter chatter that only adds to the noise.

For those of us primarily working with FHA First-Time Home Buyers, we’re also keeping tabs on the $8000 Tax Credit being used as a down payment, as well as how long the Fed plans on purchasing Mortgage Backed Securities to keep rates lower.

Just as real estate agents are learning about short sales, bank owned properties, and transparency, mortgage originators have a full-time job keeping up with industry news so that we can lead our clients down the right path.

I don’t think that I need to throw another 9 links in this post to demonstrate that there are a lot of things real estate agents and loan officers need to understand before we can express with confidence to our clients that we truly have a handle on their unique scenario.

Imagine what the effect would be on a first-time home buyer if puked all of this overwhelming information on a them in the first 10 minutes of the initial phone call?

I had to do this all week just so that the agents and borrowers would understand why I wasn’t able to issue a quick pre-approval letter and GFE simply based on a 15 min phone call and credit score.

We’re in a tough market, and I totally empathize with the hard working agents who are competing for new business by giving the highest levels of service possible.

However, in an attempt to provide “motivated” buyers instant gratification, you’re screwing things up for the loan officers who are only here to help everyone accomplish their goals.

There is a system that loan officers have to follow in order to earn the trust of new clients, especially first-time home buyers.

We have to help them define their short and long term investment goals, budget for a down payment and closing costs, determine an affordable monthly payment based on their entire financial scenario, and then plan an exit strategy.

The process of obtaining mortgage money is way more than shopping for the best rates of the minute and then throwing a worthless pre-qual letter up against the wall just so that you can get that offer in ASAP.

We can’t just deal with the details later.  It doesn’t work that way anymore.

I’ll never understand why an agent would be willing to spend an entire weekend showing homes to a new borrower before they’ve had a chance to meet with a loan officer.

“But I’ve got three lenders who work 24/7 for me that can get anything done.”

My response – Why toy with the emotions of your clients?  It is cruel to tell them that you’ll have one of your preferred banks work up a quick pre-qual the morning before you take them out to view properties.

I had one agent this week tell me that I didn’t understand how real estate worked –  that we had to move on these properties before someone else put in a better offer.

I heard the excitement in the hopeful homeowner’s voice when she was describing how perfect this new condo would be and how they’ve been searching for a while to find the best fit for their new family.

Imagine their disgust in my company’s ability to “perform” under short notice when I explained how they would have to wait until we could qualify them and the property.

“I don’t understand, (Agent) said that we would be OK since we had good credit and a decent down payment.  My dad didn’t have to deal with this when he bought a house three years ago.  Why wouldn’t banks want to give us money, I thought the government has programs for new buyers?  My agent told us that she had lenders who could get things done…  I don’t trust you, maybe we’ll shop around until we find someone who is willing to tell us what we want to hear…..”

It sucks being the bad guy, but this could have easily been avoided if the agent painted a more accurate picture of the Las Vegas REO home buying process for her young borrowers.

So what happens from here?  Lenders will continue to criticize agents for being pushy, and agents will continue to call us idiots and scam artists.

Regardless of how it sounds, I’m not really against agents.  Our mortgage company is primarily a purchase shop, so we highly depend on referrals from agents and past clients.

We just have to learn how to respect each other’s roles so that our clients don’t suffer.

My personal agents know better than this.  Well, most of the time, but I’m still appreciative of their loyalty.

Either way, here is the correct process:

1.  Borrower gets approval from loan officer

2.  Real Estate agent shows borrower new homes

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Why Should Real Estate Agents Stop Playing Loan Officer?

• Because lenders have a difficult enough time trying to earn trust in this market without agents causing more doubt

• The interest rates your other clients got last week don’t apply to your new borrowers’ scenario

• Per HVCC, originators are not able to help influence value

• You can’t just easily submit the same loan to multiple banks until an approval sticks

• An actual approval letter requires an underwriter, not just a loan officer’s signature

• A “Good Job” doesn’t necessarily qualify as acceptable income or employment

• A “High Credit Score” is only one aspect of a credit report that an underwriter will analyze

• A “Big Down Payment” still may have to pass a source and seasoning test

• “Owner Occupied” means that they actually have to work and live in the same town

• “Under Valued” does not = a lower LTV in a purchase transaction

• A roommate’s share of the mortgage payment does not = additional income

• Rental income on another investment property may have to be verified

• Equity in other properties does not constitute as liquid assets

• “Pre-Approval” letters are only as trustworthy as the loan officer issuing them, and even then they still may be worthless

Obviously, there are some lending scenarios that are no-brainers.

But I generally need to ask a borrower a series of 20-30 questions and run a full DU or LP approval before I can give a listing agent my honest opinion about whether or not that deal is going to close.