The loan process today is a lot like traveling in New Orleans without a GPS.
Since the streets in New Orleans run in a U-shape, even a compass is useless. That’s why you need a GPS or, in loan terms, a good mortgage advisor to navigate the twists and turns.
Today, the documentation required by lenders to get a loan is taxing and often ludicrous, however, if you want to get approved, you have to follow their directions.
Here’s a chronicle of one loan refinance Coldwell Banker undertook with a national bank on May 16. Based on years of experience in the real estate industry, we never would have used this bank, but circumstances dictated we had to due to the Harp 2 loan program requirements.
The reason for this story is not to gripe, but to prepare those going into the loan process.
As stated, on May 16 we started work on the loan.
On May 18, we dropped off requested information, including three years of tax returns.
(Let me add that the mortgage advisor for the bank was great and I felt sorry for her, as it was the corporate office that was the challenge.)
On May 30, the bank asked for clarification on several issues.
“Awesome,” I thought, “they are moving right along.”
The good faith estimate arrived on June 4. On June 5, the loan was submitted to underwriting and that’s where the stagnation began.
Not much happened between June 5 and July 7.
Based on the advice of a mortgage advisor, we locked in the interest rate July 7. She thought by doing this the process could be expedited and the loan closed quicker.
On July 31, even though I preach patience, I did not practice it. I tried to find out what was going on. On Aug. 17, I received an e-mail stating my loan was out of underwriting and it should close within the week. Yippee!
By now, 90 days have passed since we started the process. On Aug. 24, yet another e-mail arrived. The underwriter needed more information about why Coldwell Banker transfers money between banking accounts. The explanation is sent the next day. Reason: We are a small business and we need to pay ourselves so we can eat and provide shelter for ourselves. They also want proof that we are owners of the company. We had sent them three years of income tax returns, but that did not suffice, so off went a copy of my business card. That seemed to satisfy them.
Sept. 4 arrives and the breaking point is reached. An e-mail is fired off that if the loan is not closed by Sept. 11 a complaint will be filed with the United States Comptroller of the Currency. That seems to move things along because on Sept. 6 the underwriter says he needs just one more piece of information. We respond immediately.
On Sept. 12, I get a call at my office from someone at “the bank” who immediately apologizes for calling. They meant to call my accountant to verify, once again, that I own the company.
I reply that since you called my company and I answered the phone, I probably still own it. Not good enough.
They call my accountant and he verifies that in fact we own the company. Unbelievably, the loan documents arrive, we sign them and think we are done. Close, but no cigar.
As I am writing this, my accountant calls and says, “Ray, the bank just called again to verify that you own the company. Does anyone there know what the h* they are doing?”
But all should end well. The loan will probably close in the next few days.
After going through all this, I realize obtaining a loan is a far more tedious than it was five years ago. But have patience and don’t blame the front line people. In my experience, they are at the mercy of those working on your loan in corporate processing centers. Today’s loan process and underwriting standards are far different than they were. Be prepared.
Ray Pugel is a designated broker with Coldwell Banker Bishop Realty. Contact him at (928) 474-2216.