Thursday, June 10, 2010

IT'S NOT OVER UNTIL IT'S OVER...

When working with buyers and sellers, I sometimes use what my clients consider to be cliches:

"Don't count your chickens until they hatch."
"Buying (selling) a home is a process, not an event."
"It ain't over till it's over."

They're not cliches!

Truth is, in this environment there is no such thing as a "clean" deal.  And to emphasize that point, Fannie Mae has just rolled out its loan awaited LQI - or Loan Quality Initiative.

What is the Loan Quality Initiative?

Well, in simple English, it means there is no such thing as an "Approved Loan", ever.  At least, not until you get to the closing table and funds are wired by the lender. 

Under LQI, any lender wishing to sell a loan to Fannie Mae must re-verify pertinent credit application data prior to closing.  Obviously, if a buyer loses his job or changes employment, the approval is likely going down the drain. 

But what if, while a buyer is under contract, a collection agency files a $37 collection against him for an unpaid teeth cleaning bill from 1974?  Bye bye approval.  Hello default, and potential loss of earnest money.

What if the buyer purchases a new sofa for his new home on credit, one week prior to closing?  See above.  What if a buyer talks to a car dealer and gives permission for his credit report to be pulled (which can affect his credit score) while under contract to purchase a home?  Flush.  

We are undoubtedly living in the tightest, most restrictive lending environment in the past 40 years.  Lenders are scared, plain and simple.  They don't want to lend.  I see it every day.

From backup credit reports to secondary home inspections to third appraisals, lenders seem to act as if they are paid not to make loans.  It's crazy, really.  And it's a huge reason the economy is not turning around as fast as anyone had hoped.   

So when you're sitting with your loan officer for that initial consultation, don't zone out.  Don't daydream or otherwise lose focus.  Because when the loan officer tells you to cut up your credit card and not replace it until after you have closed on your home, she means it.