I remember when I first learned how to process a loan. Concepts I had never learned as a media arts major in college or from my minor in business rolled off the tongues of underwriters, funders, and doc drawers like some financial tower of Babel. I took accounting, statistics, and college algebra but nothing prepared me for suddenly needing to balance an understanding of debt ratios, continuity of income, seasoning of assets, title insurance, gross and net appraisal adjustments, property types, credit history analysis, lock deadlines, closing contract timelines, MIP, funding fees, RESPA, TILA, ECOA and on and on and on.
This isn’t the heavily regulated present I’m talking about. This was the common sense human decision making process in 1992. Apps were typed out or filled out often by hand with borrower sitting in front of you. Credit history was explained with a panaramic look at all credit use with compassion for the bumps we all endure through out life addressed in heartfelt letters.
I was fortunate enough to learn processing from several veteran underwriters who took me under their wing to help me understand not just the guidelines themselves but the logic behind those guidelines. The stories they had about the evolution of this or that guideline were fascinating, and I found that they had a great deal of passion for helping people buy homes they could afford, or afford the homes they had bought.
As time went on, I found there was always an appraiser, an escrow officer, a funder, a realtor or a credit report company manager willing to give expertise and share experiences to deepen my understanding of what they did and why they did it. I also gained respect for how challenging and important their role was in the process. Housing was about relationships with everyone working together for the most part. I was a student and they were the teachers. Anyone who has been in this business since before it went into hyper-automation probably understands what I am talking about.
When FICO scores, AVMS, AUS and internet loan application hit the scene, these relationships began to change. Human decision making was replaced by computer models, and complex credit scoring algorithms that were supposed to predict success in mortgage borrowing regardless of down payment or equity. At first it seemed like a good thing. Loans got done faster, and more efficiently. Information was easier to gather and review. Then convenience and efficiency gave way to an eventual reliance on those computer models to increase the speed and volume of sales and loans. If you still did things “the old way” you were behind the times, a dinosaur in the new fast money housing finance and sales world. People were no longer being required to make decisions or analyze data. Computers were spitting our AVMs. FICO scores were relied upon to divine the probability of default without regard for income or asset, or historic market values.
Houses started selling at double digit appreciation rates for a year. Then two years. Prices peaked in 2006. We all know what happened then. Like many other housing industry professionals I spent a great deal of time in a perpetual state of defensive hostility as the relationship based environment I had enjoyed for so long disappeared. It was replaced by a regulatory police action that strapped an oversight cuff on the lending industry’s ankle, limiting communications with appraisers, and underwriters, and people that I had learned so much from before.
I understand the need to dismantle the system that led to so many abuses as automation took over. Now that five years have passed and the housing system has a built in security prewire, it’s time to think about how we can all co-exist in a new housing paradigm. IT'S TIME TO START TEACHING AND LEARNING AGAIN! We all have a common thread that should keep us grounded in a spirit of teamwork: the desire to see homeowners succeed.
I have realized that when I do come across a situation where lack of experience or knowledge is readily evident, it is an opportunity for me to build a relationship by teaching. It always pays forward. I also find that when I pause, count to ten, and actually ask about the rationale behind a RESPA policy, an appraisal adjustment, an underwriting layer, etc, I gain a perspective and understanding that is contrary to my preconceived notion. In other words—I learn something new.
Painful as it is at first, next time these issues come up, they are resolved quicker if I spend a few minutes teaching, or gaining my own education, instead of complaining the first go round. That underwriter that was shown patience may be a regional manager a year from now who helps push your deal through because you helped her out or helped one of her new employees sort through the crazy complexity of post Dodd Frank reforms. I use that example because I had two closings today that sailed through underwriting after we found a common ground on an issue that caused a three week closing delays on a transaction just a few months ago.
Anyone who has read this site or had the good fortune to join the MBS Live chat can see the spirit of a teacher at work in everything that every contributor to this site provides to all of us. I manage my pipeline and provide a far better level of service by truly understanding what goes into every rate and fee we quote, and educating myself about the complex forces that are moving our industry every minute of every day.
This site takes me back to those early days when housing was all about building relationships. The chat, the blog, the articles, the news all provide a platform for intelligent discussion that reflects a respect for how complex the housing web is in the post apocalyptic housing world.
All this leads me to ground rule #2 of a “new beginning” platform: I will build relationships by teaching whenever I can, but will also remain open to being a student and learning--to seeking and sharing knowledge.