Closing a conforming (Fannie/Freddie) refinance for a W2’d employee with good credit can take less than 30 minutes of effort on the part of a lender.
This is because lenders can now use artificial intelligence to underwrite clean files, and verifications of employment and assets are pulled automatically via the lender’s loan application platform or POS.
If we happen to get a Property Inspection/Appraisal Waiver (PIW) with our automated loan approval, all we need from our borrower is two W2s, a signed credit authorization, and paystubs on occasion – and then we can send out disclosures and order loan documents.
So, yes, this is great news for lenders and borrowers who meet the above criteria.
THE OTHER LOANS…
The problem is that a huge proportion of borrowers don’t meet the above criteria, particularly if they have stock options, restricted stock units, side jobs, self-employment income, credit issues, significant investment income, partnerships, or no appraisal waivers.
This is also the case if the mortgage is necessary to finance a purchase – as monkeys do a very poor job of reviewing purchase contracts and/or addressing the myriad issues that can arise with purchases (low appraisals, excess credits, incorrect language in contract, restructuring financing because of repair needs, etc.).
Complex borrower situations with thick sets of tax returns can easily take up to five hours just to pre-approve! They can then require many more hours of effort to push the loan to close because there are so many conditions that have to be met for regulatory and salability purposes. The process can be brutal on the jumbo front – to be frank. The process is even more brutal if the mortgage involves a complex purchase (this is the case for all lenders, btw, not just JVM).
The point of this blog is three-fold:
- Anyone (including and especially JVM) can close a refi in 10 days when all of the “easy loan criteria” are met. So, when you see lenders bragging about “10-day closings,” take it with a grain of salt.
- Comparing “easy loans” to hard loans invites a lot of frustration. We sometimes have agents tell us “my last transaction was way easier with such and such lender,” but those transactions invariably involved W2 borrowers, clean contracts and even appraisal waivers. Comparing such a transaction to a tough jumbo transaction is like comparing a badminton match to WWII.
- Monkeys can’t do the tough deals. This is another dead horse I beat all too often, but all of these online firms bragging about tech, simplicity, automation and speed screw the pooch over and over when it comes to tough deals because they simply lack the talent to get them done. We know this once again not only because we get the deals that blow up at those lenders, but also because some of the senior managers at those lenders tell us as much.
I am using the “monkey moniker” because I listened to a podcast recently with the founder of LoanMonkey – a perfect example of one of the many tech-oriented refi machines that have popped up everywhere over the last few years. And – in that podcast he was trying to explain how he is now going to turn his focus on purchases and jumbo transactions, as are many other similar firms.
And in response to that – I say good luck and come on in…the water’s freezing! 😊
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167