At the beginning of October new guidelines took affect that changed the way that lenders interact with borrowers. The new TRID rules require earlier and supposedly easier to read disclosures to go to borrowers. Both at the beginning and the end of the process. These new disclosure requirements have lengthened the time it takes to close on a loan and now more than ever it’s important to choose your lender wisely.
In the past it was very common for lenders to swoop in to the closing at the last minute with documents and closing figures. Sometimes this happened the day of closing which left the buyer/borrow in limbo wondering how much money they really needed to bring to the closing. Many times buyers were forced to get a cashier’s check for an estimated amount plus a little extra to make sure and then get a refund from the title company. We’ll the good news is that these last minute shenanigans are no longer possible. It is now required that the buyer/borrower view and acknowledge the newly revised closing disclosure three business days in advance of the closing. This eliminates the last minute paperwork on the day of closing but it doesn’t seem to have eliminated the drama. It has just moved it up a few days.
As lenders are getting their act together and setting up systems around these new rules the disparity between good lenders and the not so good ones has become even more apparent. Here is my wishlist for a lender:
- Do a thorough pre-qualification/pre-approval process so that there are no surprises later. This goes beyond checking boxes on a software program. This involves experience and knowledge that anticipates and handles potential stumbling blocks in advance. In my experience a brand new lender working as a part of a team in a bull-pen at a big national lender doesn’t excel here.
- Communication throughout the process should be easy. Having one person who knows what is going on at all times has been the best scenario for me. Having a team or an office that is handling the loan leads to communication gaps that can last days.
- Having someone who takes personal responsibility throughout the process allows things to get done when the chips are down. I have found that a local lender who is looking to build ongoing relationships with both the borrower and the agent will go the extra mile and get it done.
- Having a lender who has a proven track record is, in my opinion more critical that saving an extra 1/8th of a % point on the rate. Many times the advertised rate doesn’t actually make it to the closing table and having a lender who will get the loan done on time is good insurance. Many buyers don’t realize that if their lender doesn’t perform it’s they who are on the hook. The penalties for not closing range from not closing to not closing AND losing their earnest money. The lender will not pay you back the lost $10,000 even though it was their fault.
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I’m writing this because I have three bad experiences with out of state lenders this year that added stress to all involved and definitely put the buyers at financial risk. The first one was a big national company who advertises directly to the consumer on sports broadcasts. This lender seemed organized until a day before the appraisal deadline they asked me, the buyers agent for a list of local appraisers. The appraisal should have been ordered at least two weeks previously and they were just now realizing that they didn’t have one in the queue. It turns out that they needed my help because none of the local appraisers wanted to work with them. The appraisers that I talked to said that they were busy enough and didn’t think that this big out of state company would pay them if the property didn’t close. So in the end they found an appraisal company out of Minnesota, I’m in Colorado, to do the appraisal but that it wouldn’t be in until four days after our scheduled closing date! We were able to extend and close two weeks late but it certainly wasn’t convenient and the buyers almost lost a great price on their townhome.
The second and third instances were with the same bank. This out of state bank offered a great deal to physicians. But their processes were so bad that both closings were delayed and it took some major hand holding by myself and the buyers in order to get it closed. One was a week late and the other was three weeks late. In both instances the buyers were able to get an extension (vacant homes) but it cost them on a per-diem basis. The most frustrating thing about this bank was that there was no-body who took personal responsibility and their internal communication between departments was really bad. When the files went to underwriting they would disappear behind the dark side of the moon for days and or weeks with no news leaking. As we were working hard to finally get a closing disclosure signed the person who was working on it sent it to the title company and then left for the day. Of course there were a few mistakes but nobody to fix them. If it didn’t get taken care of that night it would mean that the closing would move from Friday to Monday and the buyer would incur an extra $600 in fees. Luckily at this point the lead lender was able to rouse some after hours people to make the changes and we closed.
If you’d like to avoid this type of drama use a good local lender. Yes, I have some recommendations. Just ask.