Need Mortgage Financing? Use a Lender with a Local Presence

Over and over, I implore my clients to use a lender with a local presence. That doesn't necessarily mean a local lender, like First National Bank of Jeffersonville, but does mean using a lender with loan officers located in and regularly servicing this county, like Wells Fargo and HSBC. But buyers are often enticed by the seemingly lower rates offered by online lenders like LendingTree (Banks compete, you win) and eLoan. But in the end, you get what you pay for ... or don't get.

Let me give you a case in point. A friend called me today and said they were working to refinance their house with LendingTree. LendingTree said the appraisal came in low, and they couldn't finance the loan at the great rate that they promised (and my friends paid a hefty application fee to lock in) because the appraisal didn't support the value, but they could probably finance the loan with PMI (private mortgage insurance), adding 1/2 percent to the cost. I told my friend that I would be happy to take a look at the appraisal report and  look for any comps that might support the value. (By the way, the appraisal value that they're seeking for the loan is very appropriate. This is not a case of pushing value.) LendingTree refused to provide the appraisal, but said they could forward any other comps to the appraiser to "review". But that those comparable sales needed to be within the last 90 days. Wow! A 90 comp requirement is really short, particularly in an area where in the WHOLE COUNTY we only sell about 800 houses a year or 200 houses a quarter! Basically, I think my friends should just throw in the towel with LendingTree, lick their wounds and move on to another lender. By the way, the loan officer handling their loan is in California and doesn't know Sullivan County from Westchester.

One of the things about working with a lender with a local presence is that they understand that we are a low density rural area with low sales volume. While nationally their companies may impose stringent time and distance standards for comps, they all have developed relationships with their underwriting departments and educated them about the relatively low volume of sales and the need to loosen comp guidelines. Note that this is NOT the same as loosening guidelines for creditworthiness, which should be applied the same across the board. (The ability to repay the loan is the same in Scarsdale as Swan Lake.) Lending officers who are local can work with their underwriting departments to appropriately evaluate appraisals in a low density rural area to help qualified borrowers purchase houses that are appropriately priced.

In these uncertain times of tight credit and nervous mortgage investors, borrowers need an advocate for them who understands the local market, and not just a friendly sales voice at the end of an 800 number who has to use Google maps to find out where we are.

Comments

[james]

We have several loans for several properties, one in Sullivan County. We have been loyal and exceptionally happy customers with Jeff Bank (First Natl Bank Jeff) and cannot say enough goood things about them. I completely agree with David and will take it one step further that if you use local businesses, ones that actually give back and invest back into the communities, it pays back. In the case of Jeff Bank, not only do they know the market (and often the exact property you are buying), but they have excellent customer service and competetive rates.

[Tony Ritter]

IMO - the individual mortgage officer that the purchaser enlists to secure a mortgage is much more important than the bank or lending institution - regardless of whether the bank or financial institution is local or national - big or small.

I have used a person who operates a home/office in a small town near the Upper Delaware River (Western Sullivan County, NY) but represents a multinational bank thats listed on the NYSE in more than a few transactions which happily for the buyer, seller - and me - closed.

What this person brings to the transaction - since this person, in fact, lives here - is first and foremost - service and intelligence - and also -knowledge of the area, building codes, current prices, local attorneys, local title companies, surveyors, etc. - but has a big bank with a healthy balance sheet behind her with - due to their muscle - much better rates - and terms - than, at times, a local bank can muster with regards to construction loans or conventional home mortgages.

Kindest regards from Narrowsburg,
Tony Ritter

[Tony Ritter]

Addendum.

Two good articles written today.

Times Herald Record: {Middletown, NY}

http://www.recordonline.com/apps/pbcs.dll/article?AID=/20070819/NEWS/708190342/-1/NEWS

Subprime mortgage mess: Hard times for homeowners

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and

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The New York Times:

http://www.nytimes.com/2007/08/19/business/yourmoney/19bankrupt.html?_r=1&ref=business&oref=slogin

Loan by Loan, the Making of a Credit Squeeze
By STEVE LOHR

About 1.7 million households will lose their homes to foreclosure this year and next, according to estimates, nearly double the number of the previous two years.
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[Doug]

100% agree. My family has had very good experiences with Jeff Bank. They are always kind, courteous, and responsive. Not to mention, their rates are competitive and they service all their own loans, so you always know who you're dealing with. Sounds like a commercial, but I truly do believe most local borrowers will run into fewer issues by using a local lender or at least a local originator.

[Chuck]

DK - like I was saying I wanted to give you any experiences I have while we are trying to close a few deals, and lo and behold did we run across a new one.

A closing set for tomorrow was delayed because the bank (Wells Fargo) required at the last minute the credentials of my client's Accountant. And then, after reviewing the credentials of this long-established CPA, the bank required my client submit all financials to their accountant for independent review. This is on top of the bank inspection of said financials.

It's a brave new world, and only the qualified will be buying for the time being.

[David Knudsen]

Chuck, thanks for the update on that. So far, I've been pretty lucky --- the 3 deals I have involving mortgages all seem to be going smoothly. Keep fingers crossed. But they're all conventional/conforming with 20% down and the buyers are all conventionally employed (no self-employed). My own mortgage with Wells Fargo for the coop in the Bronx also seems to be on track.

My big concern right now is what happens when a mortgage lock-in expires. As you're well aware, the attorneys representing buyers and sellers here in Sullivan seem to move at their own pace, oblivious to external factors like mortgage expiration dates. Before this credit mess, it wasn't that big a deal to extend a mortgage rate lock for a week or two if the closing was delayed. But I fear it won't be so easy now. We just don't have the luxury to wait for 3 or 4 weeks to get fully executed contracts. A reasonable goal for fully executed contracts is 2 weeks from an accepted offer, and attorneys need to begin working with each other to achieve that.