Action Plan #4 – Timeline!

So the CFPB extends the date of TRID until October 2015 but that doesn’t change the fact that our action plan needs to be shared and implemented for everyone to understand and be ready. A two month extension just gives those already prepared an additional two months to share solutions and expand the “Gap of Excellence” between those that have committed to being ready to comply, and those that would run around spreading fear or complaining that it isn’t “fair” to have to do all of this work. As you know, I prefer to work with those who have made the choice to become the professionals.

Today we really need to drill down on the timeline. While each market will be slightly different, and certain loan products may result in different turn times, it is important to establish a framework and set expectations so you can communicate effectively during the loan process. This can be done by understanding where the important milestones are, and all the tasks associated with them.

We began by doing a “Full Document Pre-approval” for those clients that saw the value in being prepared and affording themselves the best opportunity to be selected as the winning bid by providing all the documentation needed for you to issue this pre-approval. This pre-approval letter should explain the documents reviewed and contain specific language that alerts everyone to their obligations toward a timely closing. In fact, a short video would also be a great idea.

This timeline begins with the contract. The purchase contract needs to be specific as to the intent to comply with the timeline and the responsibilities of all parties to their piece of the process. If you MUST have a ten-day inspection period, then just understand that you can’t ask for a 30 day closing. Many home inspectors will be happy to inspect the property and provide a report in 48 hours. If issues are found, negotiating these items further delays the process. So again, be clear that you will close the loan within 28 days OF A COMPLETE LOAN SUBMISSION PACKAGE! This includes the contract and all documents and fees required to proceed.

Within three business days of application we need to be sure all support services are ordered and we have a timeline of their competition.  What are the turn times for:

  • Appraisal
  • Title Insurance
  • Home Owners Insurance
  • Inspections
  • Repairs
  • Processing
  • Underwriting
  • Supporting documentation like Condo questionnaire

All of these items can and will be different based on your area, property, and loan program. It is important that you are clear as early in the process as possible as to these potential delays. Especially if you are using a loan program like USDA where underwriting turn times can go from a few days to a few weeks overnight!

The second important milestone is submission. When you submit a COMPLETE file into underwriting is an important point in the process. The better you have done your job, the fewer conditions likely to be dealt with. Once you have your file submitted, you have to begin to line up the remainder of the timeline.

The third important milestone in the process is loan approval. This should be no less than five to seven business days prior to closing. It is at this point we can dial in the balance of the transaction. You can talk about rate locks and any other unresolved items. Once the rate is locked and you have all the final numbers supplied by the outside parties, you can issue the Closing Disclosure. Again, depending on who will be issuing the CD and their time frame to deliver, you should be ready to close easily within a traditional thirty day window if everyone is working together.

Establishing the timeline early is important to clear communication and a hassle free transaction. The better everyone does their job being prepared EARLY in the transaction, the more likely the transaction closes smoothly and well within the time allotted. If everyone gets better, the entire experience is better for everyone!

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CFPB Relents

The CFPB has given in to extreme pressure and has sought to delay implementation of the “Know before you owe” or “TRID” until October 1, 2015. I will be blunt and straight to the point; this is ridiculous. There has been more than enough time for the mortgage industry to get ready and just do the work to be ready. Instead, millions of dollars and countless hours have been spent lobbying, whining, and complaining about the changes, and now that has bought a two month delay.

This is a great example as to EXACTLY what is wrong with the mortgage industry and much of society as a whole; instead of doing the work that needs to be done, just whine and complain about how unfair it is or how you are a victim, and spend more time and money working against the process than the time it would have taken to just do the WORK!

In fact, much of the reason so many loan originators, managers, and mortgage companies as a whole who are NOT ready for the original August 1, 2015 deadline is because they spent all their time complaining about the changes instead of just doing the WORK! The same holds true for originators and managers who complain constantly about how HARD they work and how little production or profit they actually generate. These same people are EXACTLY the people that should have just looked at the rules, understood the requirements, created a plan, and been ready to go. Instead, whine and complain. Moan and groan. Just like the originator who would rather spend three days complaining to everyone in the world about a document needed or a condition for that he or she KNEW was required to get the loan approved, fighting against producing that document instead of already having it in the file!

This is EXACTLY why so many originators and mortgage companies and banks really just need to be shown the door and let them go find something else to do instead of wasting time and money complaining about something that a good portion of the industry already does or has taken the time to be ready for. In fact, if I was working for the CFPB, or if they wanted to know EXACTLY who to investigate, fine, and get after; follow the MONEY! Who is behind all the lobbying? Who are all the people who are complaining and aren’t prepared? Why aren’t they ready for August 1st? What have they been doing?

I work with some of the best mortgage professionals in the country. They are ALL prepared and ready to go and could have been working under these new rules ALREADY! They didn’t complain or lobby. They read the rules, learned the requirements, and then put together a process by which they would be in compliance early enough so they could master the skills needed and then go share that process with the very people who the rules were designed to protect.

Now, I have made no secret that I think these requirements are not really going to protect the consumer at all. The reality is, we have dozens of pages of disclosures and documents that the consumer is given that are designed to “protect” them that the consumer NEVER reads or will NEVER need because they understand that they have to pay back the money and do. More disclosures and changing the timeline won’t stop people from taking loans or failing to pay them back. But if we HAVE to deal with the CFPB; and we HAVE to deal with disclosures and timelines; then we should have just done the work and been ready.

For all of you that have done the work and are prepared, take the extra two months to further widen the gap of excellence between you and your competition! Get out and share what we have talked about here and ask the question, “Why aren’t the other guys ready?”

The difference is staggering. Those that have made the effort and are prepared should help widen that GAP OF EXCELLENCE between the true experts, and the people who spend most of their time complaining about things, instead of just improving, growing, and refining themselves. You get two more months to widen that gap! Take full advantage of this opportunity to show that you are prepared and the consummate mortgage professional!

The market needs experts and professionals, not whiners and complainers. Learn the material; understand the process, DO THE WORK! This will help you widen the GAP OF EXCELLENCE between you and the competition to grow your business!

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Action Plan #3 – Pre-approvals

Here we are, the third step of the plan and every day we see more and more misinformation being put out on the streets by people, who quite frankly, should know better! That is why we are here, to keep information flowing to you that is accurate and directly from the source or by the very people involved. If you have not gone to the website and downloaded the Price-Waterhouse report and the CFPB letter, you are really missing out on an opportunity to share the FACTS instead of perpetuating the fiction.

The latest CFPB letter goes into specifics and states that closings should NOT be delayed because of the new rules. This is something I have talked about time and time again. If you have a specific plan set to a timeline, you should NOT see any delays in your transactions. In fact, many of the items sited as being “new” regulations have been around for years. In fact, in states like Arizona, the three day disclosure rule prior to closing has been the law, just greatly ignored! My current favorite piece of misinformation is being put out by a major New England Title Company that is telling Realtors® that after August 1st there will no longer be pre-approvals. Can you imagine?

Let’s get down to the facts. For years now the law has stated that you can’t require a borrower to supply documentation in order to disclose terms of a loan. It says nothing about asking for documentation to certify or guarantee your work. Since there isn’t currently a great understanding in our industry as to the differences between pre-qualifications and pre-approvals, we all need to take care to let people know what has, and hasn’t been done in regards to looking at certain information and verification of claims made by potential borrowers as to their income, assets, employment, and credit.

This is where you can win the day by being absolutely clear as to what has been done, and what hasn’t been looked at. Make it simple and keep it to the extremes. A pre-qualification letter should simply say that based solely on the potential borrower’s claims as to income, assets, employment, and creditworthiness, that they would be eligible to qualify for “X” number of dollars at “Z” terms and conditions. And that nothing has been supplied or reviewed to offer this pre-qualification other than the verbal claims of the borrower.

Now you know and I know that not many Realtors® would be happy making a deal based on that information, but since the law states that we can’t require documentation, we can only go by what the client states, regardless of the potential of inaccuracies.

Now, if the client would like a “Full Document Pre-approval” which you describe in detail all the documents you have physically reviewed to make the determination of what the buyers qualifications were and the likelihood of them being approved for a loan under specific conditions, you might just have something that the Realtors® in your market would be happy to see and feel comfortable making a deal with.

Lenders have to do a better job explaining WHY it’s important to take the time in the very beginning to qualify the borrower and see the very information they will use to be part of their loan application, so that the CLIENT has a better understanding of the reality so they can make an informed choice. In the long run it is better for the client to do a little work upfront to benefit in the long run. Many of my people are showing their clients how to save their information in a file so they can easily email that information to a potential lender for review so they can get real information instead of a guess as to what they may or may not be able to do.

The documents that are reviewed should be at the very least:

  • Last two years W-2s
  • Last two years tax returns all schedules
  • Last full month of pay stubs or YTD P&L if self-employed
  • All bank statements or account statements containing any and all assets.

Reviewing this documentation may lead to other questions or require additional supporting documentation, but will help set the framework of what the potential transaction will look like. It will also save a great deal of time once and offer is accepted because you lender already has most of the paperwork needed for the loan!

You can still close in less than 30 days if you do the work up front on your files. A solid “Full Document Pre-approval” will help your client, your referral partners, and you, do a better job in less time for your transaction! There are differences and as loan professionals you need to set yourself apart by being better at the beginning of the deal, so the balance of the deal flows smoothly! Sharing how you do your job and the quality of your work with the Realtors® in your area, will help identify you as the qualified professional that they want involved in their transactions!

Your pre-approval letter can be the key to getting more referrals and closing more transactions. People work with people they trust! Be the one that earns the trust by doing a better and more complete job up front!

Please go to the website: to see the Price-Waterhouse report and the CFPB letter!

Questions or comments:

Action Plan Week #2

The action plan this week is to continue to share the information about the August changes. What you will want to do is to familiarize yourself with the new forms. Many companies have already prepared them so now is as good a time for you to review them yourself and be prepared to start sharing the new forms with your referral partners. Have a set of current disclosures and a sample HUD-1 handy for this important comparison.  You have to master these forms yourself in order for you to explain them. Take your time and study well. You can’t allow yourself to not know this critical information!

You also need to keep reminding people to read the Price-Waterhouse report and to understand that they all have an obligation to participate in the process to ensure a smooth and hassle free closing in less than thirty days. Remember, many are saying it can’t be done. There are already people telling Realtors® to expect a two week delay in closings because of the new rules! Even IF the CFPB chooses not to enforce the penalties right away, and that hasn’t yet been disclosed, why wouldn’t you seize the opportunity to show that you are ready to go and compliant while others are not? Once again, differentiation is a good thing. Being prepared while others are conceding they can’t perform, or are not yet ready to comply, only shows you have a higher degree of professionalism, and that is never a bad thing!

Rate volatility seems to be only in one direction, UP! You need to be having conversations with everyone about rate locks and extensions. You also need to keep in mind that in quite a few cases, adjustable rate loans may just be the answer for your client. Time to revisit that part of the rate sheet and get back into qualifying standards and MI requirements because it is a conversation that you need to be prepared for!

All of this continues to prove the value of setting proper expectations and getting everyone prepared for the process. You don’t create the markets, nor do you set the rates. You have no power over appraisals, and you can’t control the regulations. You can only understand what is happening and prepare everyone by telling the truth.

June is the month where you are likely to peak with pre-approvals, pipelines, and closings. You are likely to have more people and situations to manage than any other time of the year. This means you have to be as proactive as possible and eliminate issues as early in the process as possible. Keeping connected and in contact is essential. Be sure you have your systems in order and that you are keeping connected to clients and referral partners on a regular basis. Be sure you are attentive and responsive. Nobody likes to be forgotten and absence does NOT make the heart grow fonder, it makes people go someplace else!

Go back and review the Price-Waterhouse report and the e-book. Be sure you are sharing the report and the podcast about these changes I did with Terri Murphy with your people. Change will lead to opportunity if you are prepared!

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