6 Reasons Your Next Loan May Take Longer Than It Should

The way the real estate market has slowed, you would think lenders would be just waiting to pounce on and approve next loan that comes through. You�d think our �turn times� would be faster for underwriting, drawing loan docs, funding and recording. You�d think loans should virtually fly through the approval process. You�d think all that, and yet you�d be wrong.

So just exactly why are loans taking longer than they should right now? Here are 6 reasons that come to mind:

Reason #1: Layoffs

Like any business, when things slow down the mortgage industry lays people off. This slowdown started in late 2005. Companies have had plenty of time to wake up and smell the coffee. Wholesale lenders have laid off underwriters, doc drawers, and funders and attempted to restructure their processing centers. Most are now under-staffed and service is suffering.

Reason #2: Seasonal Factors

Thanksgiving, Christmas, New Years, and Presidents Day all punch holes in the work week. People leverage time off by combining vacation days and holidays, causing further staffing shortfalls during these times. As I cough and hack my way through the last few days, I am reminded of the toll that colds and flu can take on the remaining workforce.

Reason #3: Systemic Changes

Fraud is the mortgage industry�s �F� word. With F-bombs falling everywhere and lenders going under every day, there is heightened sensitivity to anything that smells like an early payment default. Last week I had two loans suspended while the lender pulled the borrower�s tax returns from the IRS to double check the income stated on the loan applications. Internal changes to our systems can cause unanticipated delays.

Reason #4: Declining Values & Appraisal Problems

This year is predicted to be a huge refinance boom with all the ARM resets coming due. But falling values are undermining that notion very rapidly. Extra homework is required to make sure the client�s money isn�t wasted starting a refinance we can�t finish. Lower values mean higher LTV�s and more challenge structuring a loan that will work. Lenders sometimes call for desk or field reviews of our appraisals, adding extra time to the process.

Reason #5: Tougher Lending Guidelines

Like the movie Risky Business, real estate was a party out of control. And mom and dad came home early and found the house trashed. Party�s over, we�re grounded. Mom and dad are making new rules. Every day brings new underwriting guidelines. Wage earner stated income loans were an early casualty. The 100% stated income loans are being withdrawn by the remaining subprime lenders. These changes can pop up in mid transaction and sending your deal skidding off the road.

Reason #6: Bad Lenders

When I ask agents the #1 reason that deals fall apart, the answer is always �bad lenders�. That means any lender who is inexperienced, unprofessional, incompetent, dishonest, unethical, uncommunicative, or otherwise unable or unwilling to do the job. A lot of the time, special disdain is reserved for bad lenders who are also the Realtor involved.

What can you do about it?

There are some things you can do to minimize the disruption and delay. First, work with a knowledgeable, experienced lender. This is no time to hand your loan over to your nephew who just got into the business. Second, be flexible. Your close of escrow date wasn�t written on one of the tablets Moses brought down. It�s a target. Last, expect delays. At least you won�t be disappointed.

Got an opinion or thought on this? Leave a comment below. I dare you.

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