Premiere Mortgage Services Inc. - Dana Bain

Who's Going To Originate these loans?

February 10th, 2011 8:05 PM by Robin Bain


Shh… Frank & Brian Speak: So Who’s Going To Originate these Loans?



Has it occurred to anyone that we are going to have a shortage of qualified loan officers and appraisers in a couple of years? Now, when I say a couple of years, I mean when the housing industry finally and honestly turns around and makes a recovery. By the way, isn’t it funny (in a not funny way) that whenever something “kind-of” sounds like it might be positive real estate news, someone in of the media predicts the “beginning of the recovery.” This is similar to an anxious sprinter that keeps leaving his block early, only to go back for a restart. I believe we will all know when a recovery truly begins. Our eager desire, anticipation, and prognostication will not make it come any sooner… but lets get back to the point. When we do finally begin to realize our recovery, who is going to originate the loans? I don’t know if you are aware of this, but NMLS has wrecked havoc on loan officer numbers over the past year. Sure, I know that we had too many people in the industry and Steve and Charlie needed to go back to their jobs selling Buicks and Mocha Frappa, and Darly and Cletus were fraudsters and had to go back to their jobs welding …. The truth of the matter is that at this point, thousands and thousands of good qualified loan officers are simply out of business. Sure, they needed to become better sales people and maybe they should have opted for Kias instead of Jaguars, or “starter-trailers” instead of “starter-mansions.” I know there is personal accountability for independent contractors that run their own business. What I am talking about is simple: there will not be enough qualified loan officers to push the loan volume necessary to get us out of this mess if, and when, that time occurs.

In Arizona alone, prior to NMLS, there were approximately 18,000 loan officers. Post NMLS there is approximately 3,200. Sure, 18,000 may have been too many loan officers, but they were all finding a way to make a living. So, if any industry employment level drops off by 20 percent, it is a bloodbath. In fact, in my beloved state of “The People’s Republic of California,” if there is even a whisper of laying off five percent of our state employees, there is all but rioting in the streets. If state employee unemployment were to drop 20 percent it would be chaos. So, consider the plight of Arizona. The state had over 82 percent of its loan officer work force depleted. To be clear, by any industry standard, to lose those types of numbers would not be considered a hit to the industry; it would be considered the death of the industry. Yet, Arizona Loan Officers are cross bread with enough “can’t kill’em cockroach” to keep on fighting (by the way, good for you!).

So we would all agree that the numbers are staggering and that is bad for Arizona Loan Officers. However, what about the clients they service? Sure, from 2007 until a yet to be determined date, it has been ok, because the loan volume is greatly diminished. What happens, though, when loan volume grows legs and arms and decides to climb out of the toilet? The only way for that to occur is with the help of your friendly neighborhood, and endangered species, the loan officer. So with over 82 percent of their numbers depleted, its going to be a total pain in the ass to close loans. I can hear it now; a would-be home purchaser calls a “call center” to get a loan. The highly inflected and rather accented voice tells the would-be client “your wait will be approximately 26 weeks. Sure we are waiting on short sales now and its driving everyone crazy, but you just wait and watch how crazy everyone gets when you have pools of people that want these homes and want them now. It will be a nightmare.

My biggest fear is the collective “we” will simply not have the manpower to get these loans originated in a timely enough fashion to get us out of this mess. Think about it. Again, 82 percent of Arizona’s loan officers are gone (by the way, Arizona is not unique. Every state has numbers that mirror Arizona). That is bad enough, but what makes it worse are the loans themselves that now have ten times the number of burning rings that everyone needs to jump through to originate. Really, underwriters are now looking for reasons to turn down loans rather than approve them as was the case in years past. Sure we only have a handful of products to sell, but loans have become difficult to close. Since I know a bunch of Loan Officers are reading this article, I do not need to go into all the detail about approvals, condition sheet, and re-condition sheets.

OK I will give one example. I had a loan turned down for a client that had retained $150 thousand down payment on a $215 thousand dollar house. His credit score was a 760 mid score, 10 years on the job, and his back ratio was 26 (I swear to you I’m not kidding). The reason for the denial: the state of the kitchen cabinets. You see, the kitchen was missing a couple kitchen cabinet doors and it made the pictures in the appraisal. I tried to reason with the underwriter by telling her that the at the loan to value of 33 percent, having a roof was a plus. So I spent my weekend installing doors in this kitchen… doors that were going to get ripped out the minute the deal closed. I am sure you have done the math by now. I made a couple hundred bucks and invested 45 days in the transaction and 25 hours on the kitchen. That means I would have been better off working the banana boat ride at Wally World for 4 bucks an hour. Point being, navigating a loan right now is a total pain in the ass and now more than ever we need highly motivated, learned, loan officers to help navigate the waters of a transaction. The people that can actually wear the captain’s hat are disappearing in record numbers; a huge problematic exodus.

So what happens? Well, I suspect it will simply drag the recession out longer than it needs. Sure, we will eventually mobilize and spirited individuals will find ways to thwart the deeply troubling problems NMLS has caused but it is going to take time. Now here is the kicker. As I sit writing this article, we have three more major hurdles in front of us. Hurdles that stand to make the carnage at our feet look like a walk in the park. First is January 1st, the date where Loan Officers must have their designation. If they do not they are getting their walking papers. The second point is the March NMLS Credit Reporting deadline. That, by the way, is when all loan officers must have their credit report pulled and reviewed in order to continue writing loans. Oh yes, we are talking about the same loan officers that have hung on by threads over the past few years. Loan officers that collectively, surely, have pretty beat up credit reports. Finally, we have the final rule on compensation. This is when we all learn if we even want to originate loans anymore after they take away are ability to make a living.

So, after the next three waves, loan officers might start to feel like the only one left in the stadium rooting on the team. It really changes things. So, when the culling of our loan officer numbers is finally completed, I ask you – who in the hell is going to write these ever increasingly difficult loans? Anyone? Our national goal to clean up the industry has cleared out the industry. You do not clean colors with bleach, you do not hunt squirrels with bazookas, and you do not alienate the entire industry you are depending on to help you out of our recession. Yet that is exactly where we find ourselves. Right in the spot where all our actions were supposed to put us, and it’s not good. (TBWS) was founded in 2007 by a group of highly successful real estate and mortgage industry entrepreneurs. Born in the most battered market in the real estate and mortgage industry history, was conceived after decades of observing how the most successful professionals always seem to work smarter not harder. Frank & Brian can be reached at…-frank-brian-speak-who’s-originate-loans/

Posted in:General
Posted by Robin Bain on February 10th, 2011 8:05 PM


My Favorite Blogs:

Sites That Link to This Blog: