Rates are down today. New fears of Chinese economic slowdown causes markets to drop. Stocks, bonds and oil are all down. Gold is up. Today’s comparison mortgage rates with no lender fees are 3.875% on a 30 year, 3.25% on a 15 year and 2.75% on a 5/1 ARM. (click here for details)
The mortgage world has gone through massive changes (over-regulation) during the past few years. Today, my friends from the movie Office Space help me take an in-depth look at how those changes affect you and your closing.
But first, it’s #FollowFriday! I highly recommend you show Dave, Douglass, and David some Twitter love. They’re awesome Tweeps.
- Dave Woodson (Indiana real estate consultant)
- Douglas Trudeau (Tuscon Realtor)
- David Marine (Blogger for Coldwell Banker)
I tell you how over-regulation may set you back in today’s episode:
Changes in the loan industry forced mortgage companies to cut expenses to survive. Since employee compensation is the largest expense for most companies, staff is usually the first to go if they need to make cuts.
This is why you see headlines from lenders (Bank of America and others) throughout the country cutting thousands of people at a time. They are trying to stay profitable. It’s also partially to blame for higher unemployment numbers, but that’s another video altogether.
When employees are cut, their job is either eliminated or absorbed by another employee. The remaining workers take on more responsibilities.
Even though it may make good business sense, the increased workload for employees means that their job will take longer to complete.
Then what happens?
Mortgage rates dip to record lows and everyone is applying for a mortgage.
Good news for lenders, right? Well, yes and no. The truth is, most lenders got so lean and mean that they are not staffed properly for this refinance boom.
They should hire more people to fix this problem, right? Unfortunately it’s easier said than done. It takes about 60 days for your lender to hire and properly train new employees. Rates may go back up in that time period, and then what would the they do? They would have to lay off the people they just finished training. That doesn’t make sense.
With the extremely volatile market, most lenders are moving forward with their current staff. This is where it starts to affect you. Your lender may or may not be properly staffed or have a system in place to close your loan in 30 days.
This can lead to a major difference in rates or costs based on lock times. Is your lender recommending a 30 or 60 day lock? I talked to one person yesterday that said one of the big lenders required at least 90 days to close.
It’s not just lenders that are backed up; appraisers are swamped as well. It may take a week or two to get an appraisal right now. That doesn’t help turn around times when you want to close your mortgage.
What if you lock for 30 days and your lender can’t close your loan because they are too busy?
Do you have to pay for the extension, or do they have you covered? This is a conversation you must have with your lender before you lock your loan.
With new loan officer compensation rules, your originator cannot cover that cost any longer. It has to be paid by either you or the company they work for. Some lenders will require you to dish out the cash for any extension that is needed, even if it isn’t your fault.
It’s all about asking the right questions up front so you don’t end up in a situation where you get burned. There are lenders who are staffed properly and will get your loan closed in 30 days. They may not be in your home town, but you may find them on the internet. Happy hunting! (Let me know if you need help)
Let’s change the way people shop for a mortgage…forever!
PS. To ask a question, get advice, or find out if you’re getting the best deal possible on your loan, just post a comment below. Daily comparison rates, calculators, and other cool features are available in the free Rates in Motion LoanApp by going to your smart phone and clicking on this link, activation code is 9203780002