Until recently, most buyers I worked with found that the best option for a mortgage loan — from the standpoint of rate, responsiveness and ability to get the loan closed — was working with a large national lender with a local presence (and local loan officer.) Local and regional lenders typically offered even more responsive service, but didn’t offer competitive rates. And national or online lenders without a local presence, even with great rates, were often a disaster in terms of getting a loan underwritten and closed.
Lately, though, those national lenders with a local presence just aren’t coming through. I’ve had a number of situations lately where the loan applications get mired in a Catch-22 underwriting black hole. Underwriters reject appraisals, and ask for more and more comps. Underwriting standards have tightened to the point that it can be impossible, in a low density rural area like Sullivan County, to find responsive comps that meet their narrow parameters for geographic distance, time and size. National lenders, in an effort to standardize the appraisal process, now typically funnel all appraisals through regional appraisal firms. I’ve had appraisers come from as far as 80 miles away, who are not members of the local Multiple Listing Service (which is a key source of comp data). Earlier this year, an appraiser was assigned who didn’t even know there was a Sullivan MLS — and when I requested a reassignment to a local appraiser, it was declined. (Note: I didn’t request reassignment to a specific appraiser, but only requested that an appraiser be assigned who had local market knowledge and access to local sales data.) In fairness, I’ve also had good local appraisers assigned by the national lenders, but it seems to be a crapshoot.
On the processing side, clients get frustrated because they’re asked over and over again to submit the same paperwork. Often its because underwriting is taking far longer than expected, and some paperwork submitted a month or two ago — like the most recent bank statement — has ‘timed out.’ There are often last minute requests that force clients to scramble. Compounding the problem is that the lenders seem to have constructed a wall between the loan officers (who know the local market) and the underwriters and processors (who work out of far away processing centers), so the ability of a local loan officer to act as an advocate and go-between during the underwriting process is severely limited.
The situation seems to be very different with local lenders — credit unions, or local banks like Ulster Savings or First National Bank of Jeffersonville. Clients who have used these local sources for mortgages seem to be having a much smoother time. They use local appraisers. Their underwriters understand the local market, and seem more willing to adjust time and distance parameters to encompass a workable universe of comps. They’re more willing to consider some qualitative factors in their decisions, like some lakes that have generally higher value than others. Don’t get me wrong — these aren’t pushover lenders with loose lending standards. In fact, in terms of creditworthiness, they’re probably tighter.
Given the recent experience of my clients, I’m finding I”m less likely to recommend the big national lenders as a first choice — unless I’m convinced that we have a “perfect storm” of responsive comps. Even then, I’m not totally confident the process will go smoothly. I really hope some of these national lenders will adjust their procedures to be responsive in low density, low sales areas like Sullivan County. Its in the buyer’s interest to have more competitive lending options.