We have seen a few major mortgage companies go out of business lately, despite a strong market for mortgages overall. One of the reasons they went out of business was their inability to sell loans on the secondary market.
Mortgage banks fund loans with large warehouse lines or lines of credit. They then sell the loans on the secondary market to other “investors” that either resale the loans or aggregate them and turn them into mortgage-backed securities.
But investors will not buy loans from mortgage banks unless they are 100% compliant – with underwriting guidelines, all regulations, and TRID. No matter how perfect a borrower is and how strong a loan is, it cannot be sold unless it is 100% compliant. There are no exceptions.
This is important to understand b/c strong borrowers ask us to make exceptions all the time, as do Realtors.
When mortgage banks get stuck with too many non-compliant, non-salable loans, they go out of business.
This is what has been happening recently b/c of TRID and increased regulations in general.
Jay Voorhees
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646
