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“In House” or Direct Lending Explained

house-stacked-with-coinsSTALLED LOANS DURING OUR “BROKER DAYS”

Back when we “brokered” all of our loans to other “wholesale” lenders, major underwriting issues would arise, as they often do with all purchases. Our files would then come to a halt and prevent us from closing on time.

We were not allowed to speak with our underwriters directly so we’d reach out to our account rep, and he’d first ask if we knew if the file was underwritten in Michigan, North Carolina or Florida (I’m serious). He’d then track down the underwriter and the underwriter’s manager and then get back to us.

Addressing a single issue would often take several days, making it all but impossible to close on time.

Another issue was “turn-times.” The wholesale lenders were so large that they could not accurately predict their volume and turn-times. They’d promise us approvals in 48 hours, but that often turned into four, five or six days. The same thing happened with condition-sign-offs, docs, fundings, etc.

And this is another reason why we were forced to leave the broker channel. We could not begin to guarantee speed and service.

OUR UNDERWRITERS SIT NEXT TO US

Now that we’re part of a mortgage bank, our underwriters are right next to us. We talk to them daily. They’re our best friends. We go for long walks on the beach, have slumber parties and make s’mores together.

OK – I made that up. I don’t even like s’mores. They’re way too sweet.

Anyway – my main point is that we now realize that we must have underwriters sitting next to us to guarantee service levels. And that is what “in house” or “direct” lending entails. B/c we underwrite and fund our own loans, we’re able to have in-office underwriters and we’ll never have it any other way.

“QUASI-DIRECT” LENDER

Final point: I have a friend who works for a huge mortgage bank. He does all of his business in California, but his loans are often underwritten in Ohio. I would call him a “quasi-direct lender.” Yes, his firm funds its own loans, but his underwriters are so removed that he experiences the same problems we did when we brokered.

Jay Voorhees at (925) 855-4491
Real Estate Broker, CA Bureau of Real Estate, BRE# 01524255, NMLS# 335646