by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
I pulled a Cramer today. The pressure has been mounting for some time, now.
Roberta Lee, a real estate broker in Norco, CA left a comment on an article I wrote on Active Rain:
My son is in the mortgage industry. He took the time….. 🙂 to enlighten me…..”Mom this isn’t a buyers market or a sellers market, it’s a lenders market.”
Ain’t that the truth, Roberta? I had two, um, situations this week that influenced the Cramer that erupted at 3PM this afternoon. Both involved incompetence and arrogance by the wholesale lending “professionals”. THAT is going to be a problem that needs to be addressed immediately.
Customers are scared. I know and you know that this stuff happens every ten years or so but it’s pretty scary when it’s happening to you. I do a fair amount of business in negative amortization loans. That product has been repriced to reflect the investor’s perception of increased risk but the portfolio lenders are still in the game. I’ve come full circle and have started placing loans with the banks I used in the 90s. None of my old friends are there, anymore. They’ve been replaced with the cast of High School Musical.
One rep doesn’t truly understand her products. She parroted the sales manager’s script when I questioned about a recast and argued relentlessly while I did the math. She was off by about nine months…those nine months matter to an engineer (my customer). When I asked her to be more precise with her answers, that customers’ financial futures were at stake, she flippantly replied that it wasn’t her problem these “morons” are in trouble. She lacks what business school professors might call, um, a “consumer-centric” philosophy.
Another bank rep couldn’t understand why my customer was nervous when she broke a promise to me. The problem was exacerbated by her poor knowledge of her bank’s closing process, so she told another little white lie. This delayed the closing another day. When I explained why customers were stressing in this market, she started talking to her office mate…and was offended when I called her rude.
So, I erupted today. After I calmed down, it hit me. Neither Hannah Montana, nor Zach and Cody care because it really doesn’t affect them. Calculating a precise mortgage payment is alien to them because they’ve never had to make one. Now I’m not suggesting that you have to HAVE a mortgage to be in the mortgage business but our thing does require comprehension of how to solve for x.
The American mortgage market isn’t in a liquidity crunch, we’re in a knowledge crunch. There is plenty of money available, we just need to re-apply the fundamentals. Here are four things originators can do in the next ten days to dramtically increase their knowledge:
Learn how to operate the Desktop Originator.
Print lending guidelines and read them.
Buying a HP-12c financial calculator and learn how to use it.
Remember the old payment books the title companies gave us? Get one and learn how to extrapolate payments. I know that the computer spits this information out but a thorough understanding of HOW the program computes it is, as Greg says, a “black pearl”.
Originators, listen up! Choose your jungle guides wisely. This knowledge crisis can work to your advantage. Look for the bank reps with the big binders, filled with guidelines, under their arms. Demand that your reps sit in on a loan application with you. Visit an underwriter. The days of the hot little boys and girls playing banker are done. It’s time to find someone who is committed to this business as much as you are. It’s a lenders’ market and it shouldn’t be. It should always be a borrowers’ market.
EDYN Real Estate says:
Brian,
Do you have any articles on “Truth In Lending” and how little that means?
August 12, 2007 — 8:22 am
The Oracle says:
The arrogant idiots at the banks that you describe are the tip of the iceberg.
This country is truly in trouble due to the “High School Musical” attitudes that you describe that are permeating the US workforce.
People don’t realize how much business is going offshore because the business buyers are tired of overpriced services being rendered by arrogant overpaid employees.
Example:
Graphic designer firm in the US charges $75 to $125 per hour for easy site revisions.
Compare that to $7.50 to $15 per hour for top designers in India.
Great designers, very hardworking and willing to produce top notch output. None of this “well take it or leave it attitude” that has permeated our society.
August 12, 2007 — 8:53 am
Robert Kerr says:
Heh. A lot of incompetent people became lenders in the RE gold rush of the last few years, Brian. In ’05, if you could fog a mirror, you could open a business and originate loans.
I’m surprised you haven’t run into more of them.
If there’s a silver lining it’s that the credit industry as a whole will have to shed their inept employees quickly as this shakeout progresses.
That should be good news for the established credit professionals who know what they’re doing.
August 12, 2007 — 10:17 am
Phil Hoover says:
Hiya Brian ~
Nice meeting you @ Inman!
The idiots are everywhere, including real estate.
I swear they’re the only ones breeding 🙁
I am stunned over agents who can’t figure out how to return a phone call, show up on time, fill out a purchase agreement, take a decent photo for MLS, B/W flyers on 18# canary copier paper, don’t check their e-mail/voicemail, etc.
Yet, they drive around in their Hummers with “Million Dollar Producer” license frames and brag that they’re #1!
Small wonder our clients are in open revolt over our fees!
Had an offer on one of my listings with 12 items left blank ~ little details like time for loan approval, responsible broker, prorations, agency representation, etc.
Yeah, I know ~ I’m anal, right?
I actually talked with a Keller Williams agent a couple of weeks ago who admitted being in real estate for three years and she was “hoping” to make her first sale sometime soon.
Where do these people come from?
And why are they all in real estate and lending?
August 12, 2007 — 10:41 am
BR says:
Phil, it’s our (realtors) fault.
When I took my classes for RE I remember being told when asked how the market is, say “it’s GREAT,” as in be positive, be motivated, and motivate them! The problem is, we’re asked that on a daily basis: 7 days times 7 people = 14 people a week per agent are told the market is great(and they hear “this should be your new job- Make a career in RE” when all you meant is, let’s buy & sell)!
I’ve never been one to sell up the profession, and when asked about my career I simply say, it’s tough work, paycheck to paychek- ate Ramen all last week; in hopes they’ll think twice!
Even worse, every 5th commercial on TV lately is a RE school telling folks how easy it is. Every out of work fast food reject is in line to sign up with their first $99 class!
I don’t know about lending, but I’ve been asked to teach classes or give lectures on RE. I’m thinking about saying yes and going in and running folks off, think that would fly?
I had an agent make an offer on a property last week. She sucked so badly I asked her if she had thought about getting out of the business. She said no and I said, “you should give it some thought.” She asked why and I said “because you’re awful.” Am I mean? Probably. I basically told her that the fact that she could not return my calls, return an email, or send a fax within the time expectation that SHE herself set, I asked her what good she was doing her clients, or the profession. She was offended, I said I’m not sorry but I did give her a sincere smile.
Maybe I’m a jerk, maybe I’m arrogant, but people like her give the profession a bad name. I for one am fed up. Will I get a bad rep as a jerk? Maybe, but when they realize who I was speaking of, they’ll probably all say, thank God someone told her, her Broker sure won’t.
Okay, fine, maybe I just thought most of that in my head as she smiled at me getting into her Caddy- probably off to let down her next client- what a shame.
One day however, I know there will come a time when I’ll just snap and say what is really on my mind. All I can do is pray; pray that someday she’ll go too far. Or better yet, go back to fast food.
August 12, 2007 — 8:06 pm
Chris Lengquist says:
Brian, great post. I’m often amazed at real estate agents who don’t know how to qualify a buyer for house payments. True, I use the very old fashioned 28/36 on a 30 yr am, but it gives me their base qualification.
It also allows me a great look into their debt structure so that I know just how to advise them.
Simply saying “that’s the lender’s job” to me is a complete lack of fiduciary duty. Just my $0.02.
August 13, 2007 — 9:10 am
Luxury Mortgage says:
Brian, everything was going great until I read, “I do a fair amount of business in negative amortization loans”. Are you “pushing” clients in this direction or are you simply “filling” a clients request for a neg. am. Note?
-Jason Fox / Luxury Financier
August 20, 2007 — 2:37 am
Brian Brady says:
Jason,
If it’s appropriate for the financial plan I’ve discussed with their financial adviser, I push, push, and push for that neg-am loan.
If the cash-flow savings helps them meet their long -term retirement plan by investing the difference in their 401-k or tax deferred annuity, I push harder.
If they’re saddled with debt that can be exterminated in three years by applying the difference, I push VERY hard.
..but I’m not really pushy.
October 3, 2007 — 11:56 pm