Here are my notes from yesterday’s Mortgage Industry Panel from the National Auctioneers Association’s Convention in Denver. When known, the name of the panelist answering the question is noted.
A. Wesley Schuneman
Founder, Ultimate Funding Group Mortgage Brokerage
Mortgage Banker, First National Bank; Residential Mortgage Lending
VP Commercial Lending Mountain Plains Farm Credit Services
Q: Are lending standards currently too tight or not tight enough compared to 1985?
A: (Kevin) Contrary to what you’re hearing in the media, it’s still relatively easy to get a mortgage loan right now.
A: (Wes) Underwriting guidelines will continue to get tighter. We have a few more years of tightening. The industry will overcorrect before the pendulum will swing back the other way.
A: (Ken) Agriculture loans are underwritten in a much different way than residential. Loans are still widely available for agricultural buyers.
Q: What is your firm doing to prepare for another significant drop in home values?
A: (Ken) Requiring more downpayment. The lenders I work with learned from the S&L bailout.
A: (Wes) We’re close to the bottom here in Denver. We have a decent market. I’m not expecting further, drastic price declines.
A: (Kevin) We’re preparing for more LTV changes from lenders.
Q for Wes: What does the future look like for the mortgage broker?
A: from Wes: Higher standards and raising the barrier to entry will be good for the industry. The mortgage brokerage industry needs a cleansing. I anticipate further erosion in the number of licensed mortgage loan originators.
A: from Kevin: I’m more hopeful than Wes. Competition is good for the industry. Fewer players isn’t necessarily a good thing for the consumer. You may see some former brokers shifting to a bank during these times, and then back to being a broker in the future.
Q: On short sales, Kevin, why are banks taking so long approving short sales and is there any hope for getting answers faster from loan servicing?
A: Loan servicing does not have an efficient system in place to process the overwhelming number of requests for a short sale. It’s going to take time to work out all the short sales and foreclosures.
A: It would be better if all the foreclosures right now were HUD REOs because HUD has a good system of disposing of their REOs.
Q: Why haven’t banks embraced auctions as a way to dispose of their REO inventory?
A: The systems in place right now are for the banks/asset management companies to reach for a Realtor first, and to try and sell REOs using systems that are already in place (MLS) to reach potential buyers.
Follow up Q: Why aren’t banks wanting to move their REOs? Why list the home for month after month? Why are banks holding on to their REOS?
Panelists did not know. Jillayne’s answer: It is possible that the banks are trying like mad to spread out their losses over many months/quarters. It is also possible that if a bank quickly disposed of their REO inventory and had to claim the losses, that a bank’s insolvency would become more transparent to regulators. It is also possible that there is such a huge backlog of inventory, that it’s a time/resource backlog issue.
Q: Should FICO scores be completely tossed out, returning us to a world where real humans touch each file?
A: (Wes) The idea of using any kind of scoring system at all isn’t inherently “bad.