REAL ESTATE REALITY
A Little Background
For more than 17 years, Steve Armstrong held the position of Senior Account Executive for institutional savings and loans in their wholesale residential real estate lending division. Steve was the "go-to" point of contact for 40 of the top mortgage brokers and represented hundreds of loan agents throughout Northern California. Whether your a buyer or a seller of real estate, as your realtor, Steve's experience in both residential sales (more than 500 new and resale properties sold since 1977) and mortgage lending (over 10,000 loans funded) is an incredible asset to have in your corner. Since most real estate transactions involve a new real estate loan, you can depend on Steve's experience to recognize red-flags in a transaction when most real estate agents, their managers or their brokers simply would not consider there to be potential issues. Knowing what to look for and what to ask early in the process can help avoid potential problems. Steve asks the tough questions, so you don't have to, providing peace of mind and the best opportunity for you to close.
How will Steve's expertise in mortgage lending benefit me? As a buyer or seller, you may not think it's important your realtor understand "investor guidelines" and "secondary market" conditions in the mortgage industry. In fact, few realtors have much more than a basic "mortgage 101" understanding of the mortgage industry.
In reality, if the buyer of your home is obtaining new financing, as a seller, you are basically joined at the hip with the buyer. Delays affecting buyers, affect you as well. If the buyers loan is delayed 1 day, 2 days, 7 days or more, your plans, commitments and proceeds are also delayed by at least the same timeframes. Since most residential real estate transactions involve buyers obtaining a real estate loan, it's essential the loan actually "funds" in order to close escrow and seller to receive their proceeds. This simple fact makes funding the loan (the act of the lender wiring the funds to the title company) a big deal in a real estate transaction. Steve's expertise in a mortgage lending increases the likelyhood of a successful and less stressful transaction. Nothing is worse for a seller than for their property to be literally taken off the market while waiting for the buyers to qualify, only to have to put the property back on the market and start over again when the buyers loan is turned-down. Even more frustrating is knowing all this could have potentially been prevented if only the listing agent asked the right questions and was able to spot "red-flags" that could negatively affect the buyers ability to qualify for a real estate loan. Steve has the experience to perform such due-dilligence, recognize a problem, and ask the tough questions before the purchase contract is signed providing the best opportunity for your sale to succeed at the onset of the sale.
What REALLY goes on behind the scenes at a mortgage company? If you really want to know, first we must start at the top and discuss the foundation and rules for which most every decision in mortgage lending is based on... investor guidelines.
INVESTOR GUIDELINES...are the terms and conditions a loan must meet in order for the lender (mortgage company, mortgage banker, bank etc.) to sell the loans they orginate to secondary market entities such as Fannie-Mae or Freddie-Mac. Virtually, all loans must be underwritten and packaged to be sold and "shipped" immediatley to secondary market entities once the loan is "funded". Upon sale of the loan, the lender receives the loan funding back into their system to lend again on new loans. Lenders earns fee's on each loan and many times added income by retaining servicing-rights of the loan.
Loan approval-Most lenders use automated underwriting platforms for loans which will be sold to investors such as FNMA, Freddie-Mac etc. A decision or "findings" are issued within minutes of the loan processor entering and submitting to the automated system. If the loan is "approved/eligible" the approval will include the conditions of approval which must be met before a loan can close or fund. If the buyer cannot satisfy the lenders conditions and requirments of the investor, the loan won't fund, escrow won't close, the transaction falls through, releases are signed between the buyer and seller and the home goes back on the market.
Prior to the mortgage meltdown, the market was ripe with investors willing to buy "mortgage-backed securities". There was plenty of margin for error if a lender missed a condition or investor guideline. "Iffy" loans were tucked into a huge block of loans and sold off to Wall Street. Larger banking instututions could also keep the loan in their portfolio to "season" and sell at later date. That's no longer the case. Although more portfolio lenders have entered the market recently, they only account for a very small percentage of the overall market. Upon funding of a loan, most every loan is immediately sold to Fannie or Freddie or a very limited number of other investors. FHA and VA are still potential suitors, however sellers prefer conventional financing over FHA or VA as both FHA and VA guidelines are more rigid in regards to condition of the property or mimimum property requirements.
Since 2008, many who've obtained (or tried to obtain) a mortgage loan probably felt they were "put through the ringer" Asking "why is the lender being so picky" or I can't believe the're asking for that" or "I've already provided that document to them...they wan't it again?" Part of the reason mortgage bankers and institutional lenders are so "picky" is they are absolutely paranoid of funding a loan they can't sell. If a small regional mortgage banker has just one "unsaleable" loan it's a devastating event. To the institutional lender, it can be equally as devastating. Think about it, a institutional lender such as B of A, Wells Fargo or Chase fund literally hundreds of millions (even billions) of dollars in mortgage loans every month. If just 1/2 of 1 percent of those loans don't meet investor guidelines and are unsaleable it would be catastophic to a large bank and it's shareholders.
Since 2008, multi-tiered quality control processes have been put in place for all lenders in every department for every step of the process to insure a loan is saleable. It's not unusual for a underwriter (the people who review your loan package) to have their decision reviewed by their supervisor. Further, the supervisor's review will likely be reviewed by the supervisors-supervisor. Employees in mortgage lending are under extreme stress and scrutiny. if an underwriter makes a wrong decision and clears a condition that shouldn't have been cleared, it could result in demotion or termination. Today, there simply is no margin-for-error in funding a loan that ultimately can't be sold to the secondary market.
Buyers and sellers become frustrated when the lender demands and continues to demand more documentation all the way up to closing. What many borrowers don't understand is that the processing of a real estate loan is dynamic all the way to closing. Here's why. As documentation is submitted from the borrower to the lender, upon review, the figures documented will often differ from the figures entered into the automated underwriting system at the time of application. This can cause the underwriter to have to re-run D.U. based on the differing hardcopy data and lead to added conditions or even the possibility the loan could be denied or "ineligible".
Conditions of a loan approval- fall into to 2 catagories. The first is, "prior to document" or PTD conditions. PTD conditions are generally related to the buyers qualification such as verification of income or assets, employment etc. PTD conditions are intended to be submitted and reviewed prior to release of loan doucments to the title company. As stated above, if the income or asset documentation differs greatly from that entered into the automated underwriting system, the underwriter must enter the revised data and rerun the approval. The revised information and updated loan approval (or findings) could trigger additional conditions or negate the original loan approval. "Prior to funding" or PTF conditions are generally escrow conditions, necessary to be completed but generally not related to the borrowers qualification. With that said, instances when a loan agent feels pressured to move the loan transaction forward and may request (more like beg) to request a PTD condition be changed to a PTF condition so that loan documents be delivered (emailed) to the title company. Doing this is like playing "Russian-Roulette" with a real estate transaction with extremely important loan conditions still outstanding. This is very risky on the loan agents behalf, providing a false sense of security to all involved in the transaction. Most involved in real estate, believe when loan documents arrive in title company, all the "heavy-lifting" has been completed and it's downhill from that point. Meanwhile the loan agent may be frantically trying to gather or piece together documentation, or worse provide documentation that raises additional questions by the underwriter, thereby actually weakening the loan file. Meanwhile, moving plans and moving vans are springing into action based on the fact both the buyers and sellers "signed-off". In this scenario, the possibility of the entire transaction coming to a crashing halt depends on the loan agents ability to both answer the underwriters latest concerns and satisfy a very important condition. This situation happens more often than one might think. worst-case, the sale falls-apart with both buyer and seller and their agents never knowing what hit them.
It takes years and thousands of loans to reach the level of expertise and understanding Steve Armstrong's gained in the mortgage industry. Steve knows lending guidelines, understands the process and speaks the language. As your listing agent, this knowledge is a tremendous advantage to you as a seller. As a buyer, Steve's experience in real estate lending will help make the task of obtaining financing much less stressful as well.
How important is the loan agent in a purchase transaction? It's extremely important your loan agent specialize in purchase money transactions. There are many experienced "refinance" loan agents but in reality, very few truly specialize in purchase transactions. Loan agents who focus on purchase transactions are worth their weight in gold. Loan agents that specialize in purchase loans understand the complexities of a purchase, the importance of meeting contingency dates, the demands of a purchase contract and the effect delays have on people's lives. Many homebuyers feel an obligation to use a friend. relative or the loan agent who refinanced their last home loan. Do yourself a favor and use an experienced purchase transaction loan agent. Caution against allowing a loan agent with little "purchase" experience to "practice" on your purchase-money transaction should be used. Steve can recommend several highly qualified agents who specialize in purchase money transactions.
Isn't selling your home still very much “old school”? In reality, the elements necessary for your home to sell have not changed much over the years. Location, presentation of your home and list price are still the "key" points to selling your home. In order for your home to have the best opportunity to sell, potential buyers need access to your home and access to information about your home. The MLS remains the foundation of virtually every home search a buyer or realtor makes for information on available properties for sale. What has changed is how buyers search for homes. Thanks to technology, buyers now have updates on the most recent MLS listings at their finger-tips through websites such as Redfin, Zillow, Trulia and many others. Still, the foundation and "data-grab" for all search engines is the MLS. Click on Steve's homepage tab and start your search for your new home by selecting the county you wish to search on the bay area map or price range tabs.
Is there an advantage to listing my home with a large franchise? If there was an advantage, you can bet Steve would be associated with a large franchise. When discussing the number of offices or agents within an office, often you'll hear agents say things such as "You will have the backing of "X" number of agents working to sell your house etc." In reality, the size of the office, the number of agents in an office and the number of offices within the franchise have little or nothing to do with whether your home will sell or how fast it will sell. Access to the Multiple Listing Service (MLS) and membership in both the National Association of Realtors (NAR) and California Association of Realtors (CAR) insure all member realtors are on a level playing field.