Key Findings for Real Estate Agents: There was an extensive report done by a research, marketing and communications firm based in Washington, DC. The firm has more than 30 years in the field of research with deep experience in the fields of financial services, housing and technology. I want to show you the results of some of this research as it relates to the mortgage industry. It will help Realtors and mortgage consumers better pick a mortgage lender.
What were the key findings for real estate agents?
Below are four major findings from the research that Realtors see as their main problem with mortgage lenders:
1. Speed of Mortgage Closings Is a Major Problem for Real Estate Agents and a Major Factor in Recommending Lenders.
2. Reliable Closing Dates Are a Major Way That Real Estate Agents Evaluate Lenders.
3. Many Agents Still View Appraisals as a Significant Problem With Mortgage Financing.
4. Reliable Preapprovals Are a Prime Reason That Real Estate Agents Recommend Lenders and Unreliable Preapprovals Are a Key Reason Mortgage Closings Are Delayed.
Interest rates
Notice the one thing that was not mentioned in the above…price. Interest rates barely register as a problem in mortgage transactions. Another part of this study will show which I will reference later in this blog. Realtors know the main problems with lenders since they are involved with real estate lending so intimately for their clients. They interact with mortgage lenders on a regular basis. Mortgage borrowers never think about execution and only think about price. They regularly put their transaction at risk for a slightly better deal or maybe only the appearance of a better deal.
Clearly what has proven to be the most critical item in shopping a loan is performance. Yet, I never get asked about execution, turn times, experience, reliability, or anything related to how I will perform. The only question I ever get from Realtors is related to if I have any creative financing and what I can do that is “special”. And the only question I get asked by mortgage borrowers is related to price, and how low an interest rate I can quote. So are all of the mortgage horror stories we hear so much about self inflicted? You be the judge, read on about the key findings for real estate agents.
Speed and Reliability in Recommending Mortgage Providers
(1 = Not Important; 10= Very Important)
The ISSUE is listed first, then the RATNG as to how big a problem it is. Then how many RESPONDENTS:
. Reliable pre-approval letters, 9.65, 1,214
. Reliable in meeting closing date, 9.41, 1,207
. Prompt underwriting, 9.01, 1,193
. Quick pre-approval letters, 8.98, 1,210
. Fast closing date, 8.56, 1,160
It is interesting to me that the study shows that Realtors want a fast pre-approval letter. At the same time they complain that they are not accurate enough. We’ll talk more later about why a little patience will be a great reward with this issue.
Below are the Most Significant Problems With Mortgage Financing.
They are listed by numerical rank of the problem. Then the % of respondents. Then the problem.
1. 69%. Pre-approval letters not reliable
2. 63%. Scheduled closing dates missed
3. 61%. Appraisals below contract price
4. 61%. Closing date in excess of 30 days
5. 50%. HUD-1 statement not available one day before closing
6. 48%. Poor service from centralized call centers
7. 46%. FICO score and credit requirements
8. 45%. Closing costs higher than expected
9. 44%. Poor service from local loan officers
10. 40%. High closing costs
11. 38%. Centralized call centers refuse to give loan status reports
12. 38%. Excessive mortgage insurance premiums
13. 35%. Debt-to-income ratio requirements
14. 32%. Downpayment requirements
15. 29%. Rate changes and/or rate lock expirations
16. 26%. Pre-approval letters expire while house-hunting
17. 24%. Pre-approval letters expire while waiting for seller approvals
18. 24%. Local loan officers to refuse to give loan status reports
19. 23%. Employment and income verifications
20. 20%. Mortgage insurance company will not approve loan
21. 11%. Other
22. 3%. High interest rates
Price was rated DEAD LAST as a problem. These are well over a thousand realtors, who are involved in tens of thousands of transactions. They clearly believe their clients are getting a great price as far as the terms of the mortgage go. Only 3% have reported price as a problem, amazing! Yet, consumers have taken a 3% problem and made it almost 100% of their focus! Does this seem lopsided to you? Why don’t consumers ask any questions about any of the other important topics?!
Here is how I handle some of the above issues:
Pre-approval letters not reliable:
Mine are. But only because I take the needed time to be thorough, ask questions, ask for documentation, and do the thorough research needed to be accurate. Realtors and mortgage borrowers expect a pre-approval letter to be generated in a few minutes. In reality a truly reliable one can take days. If you get one quickly with few questions, it is not reliable.
Scheduled closing dates missed
The only time I miss a closing date is when some or all parties are not cooperating in getting us things as quickly as we need. Read more on this here.
Appraisals below contract price
We have a local appraisal panel run by a reputable Appraisal Management Company. It is staffed with local, knowledgeable, long time appraisers. We have very few appraisal problems. And for the very occasional lowball appraisal that comes in, it usually means the buyer overpaid. We are doing them a favor in showing them a lower appraisal.
Local loan officers who refuse to give loan status reports
We regularly push email status to all parties at each step of the loan process. And we use a nifty online loan status reporting tool. See more on that here.
The top problems which are related to pre-approval, timing, appraisals and overall service are something I am rarely asked about. Yet they represent the majority of the problems in the mortgage lending industry! This is stunning that this has gone ignored for decades!
Maybe this impartial research, done by a professional firm, will finally open some mortgage consumers eyes as to what they should really be shopping for. I see numerous banks interest rate pricing every day. It rarely varies by more than 1/8% in rate day to day, usually it is even less. Yet that seems to be enough to make most consumers ignore the large issue and go looking for a solution to a problem which does not exist…which is getting the best deal.
Getting the lowest price is important?
1/8% of 1%, it is the smallest fraction that the industry prices its product in.
1/8% of 1%, it is ONLY approximately $8 per $100,000.
1/8% of 1% is about 3% of the total cost of a 4% interest rate.
1/8% of 1% is about 2% of the total cost of a more historically average 6% rate.
1/8% of 1% is nothing when compared to the nightmare that the low cost, operate on a shoestring lenders put you through.
1/8% of 1% is tiny when your lender tells you you won’t go to settlement on time.
1/8% of 1% is not even worth mentioning if your loan does not go through.
1/8% of 1% is negligible.
People pay bigger premiums in life for much smaller and even silly purchases. And I would argue that a 1/8% difference usually does not even exist. This is so because the allegedly lower cost service provider who has the 1/8% better deal may have higher fees, a shorter lock-in than is needed or preferred, a pre-payment penalty. Most clearly the study shows what happens when you focus on price…POOR SERVICE!
The mortgage horror stories that exist today are legendary! It is time for the consumer to realize they need to put their focus elsewhere and that the pricing will take care of itself. This is so thanks to hyper aggressive competition in the mortgage industry. There will be more that I blog about as a result of this extensive research report I have obtained. Next up is appraisals. Stay tuned.
Learn More: Questions to Ask a Mortgage Lender
To contact me to discuss these key findings for real estate agents, your mortgage scenario, mortgage rates, or other mortgage questions, click here to schedule a call or you can email me directly.
Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.
Most Realtors don’t care about price because they aren’t paying for the loan.
They care about the stuff that gets the deal done so they get paid.
I hate points that are unnecessary. I had a client that has $80,000 to put down. But not enough for 20% down. 10% is $50,000. So he was going to be paying $10,000 in points to not have to come up with the last $30k. Actually $20k since the other route has points. Effective interest rate is 50%!!!!
He said “oh I didn’t think of it that way.”
Do lenders make more when there are more points for 10% down, or does that go all to the bank?
Those points do sound excessive. I can confirm that a higher loan-to-value will be slightly higher in points, but not $10,000 worth!
On a $500,000 sales price and $450,000 loan, that 10% down payment should be about a .25% discount point to maybe as much as a .50%
discount point (depends on credit score), and that should be $1125 to as much as $2250 in point costs. Not $10,000!
And the points do go to the bank, not the direct lender or broker.