Over the ten years I have been selling residential real estate there have been many questions that I could label “million dollar questions,” but perhaps the number one question is why do lenders hold up closings? Granted, if I had a proverbial crystal ball I could probably help relax many inquiring minds, and I definitely would not have as many gray hairs! Let’s look at some of the reasons lenders hold up closings.
1. Too many people, too little training. Big lenders have many employees. In most cases one would think that with so many employees the company would be more efficient, right? But this is not the case with big lenders. All those people actually make getting a loan approved and closed MORE difficult. I have been trying to figure this one out for years, so I will chalk it up to a lack of internal communication (see below), training and a BIG disregard for deadlines. It is no wonder most Americans despise working with big lenders.
I do have a solution to the above issue, and to me it seems simple but of course I think in black and white. Departments should be created where people are trained to do only one or two specific jobs. They do their part and the loan processing then moves to the next department, almost like a conveyor belt, until all the steps are completed. The lenders would save money by streamlining the process, and escrows would close sooner (or at least on time – what a concept!!)
2. Failure to communicate. This category goes hand in hand with number 1. Big lenders not only have a hard time with internal communication, but they have just as big an issue with communicating between real estate agents and mortgage professionals. In fact, with one sale I have pending right now, the lender (Citibank) asked me – the listing agent – and the buyer’s agent to refrain from communicating with them during the loan processing! Part of the reason I can offer great service to my clients is because I stay in constant communication with all parties involved in closing the sale, so this went against my ability to provide great service and frankly, made me upset (I definitely won’t be referring any of my buyers to Citibank’s mortgage department). As a result of this lack of communication we are not going to close late. Unbelievable – or perhaps I should say “believable, but very, very upsetting.”
3. No Oversight. This is not a new realization. Lack of lender oversight has been a complaint for decades. In fact there was an article in the paper this morning about big lenders violating the terms of the $25 billion national mortgage settlement (the agreement to clean up shady foreclosure practices). What a surprise! The list includes Citigroup, Bank of America, Wells Fargo and JP Morgan Chase. Where is the oversight, and why can these big banks do whatever the heck they want? This is a disgrace, especially for America as a nation.
I am sure there are many other reasons I could add to the list, but I think this is a pretty accurate description of what is going on in our lending industry, at least with the big banks. I have not had these issues with smaller lenders, in-house mortgage lenders or credit unions. This particular blog also did not discuss why lenders hold up short sales – an even more mysterious question (and one that I have written about several times). I sure wish these big banks would clean up. Not only would it make real estate a more pleasant business, but it would also help the housing market and allow more people to buy homes.