There has been a lot of quiet talk among senior level management in the past 9 to 18 months about a “problem,” or “situation” that, while it exists and is spreading like a new strain of the flu, nobody really wants to admit to having the problem or really come out and admit it exists. Something you don’t want to admit to because it has the potential to put you out of business or affect the bottom line.
It’s the preverbal “head in the sand” mode coming to the forefront. It’s like family members realizing that Uncle Bob has a drinking problem and nobody really wants to talk about it, hoping it will go away.
There is also an increasing number of so called “experts” out there that think they know the solution and have jumped on the bandwagon in hopes of scoring some quick dollars without really caring what happens to you as an originator.
There are many of them that are long winded and believe that they need to fill your head with statistics and percentages and data that you really don’t care about. What you do care about is how to deal with this “problem.”
So what is this unspoken issue that is rearing its ugly head? Repurchase demands, of course. There are lots of stories in the news, on other blogs, in business weeklies that talk about the issue. Fannie, Freddie, Ginnie and the MI companies are all seeking ways to recover from the devastating effect of huge loan losses due to high foreclosures occurring across the nation today. The two biggest GSE’s, namely Fannie and Freddie, are revisiting all of these bad loans on the books and are attempting to unload them due to the enormous pressure they are receiving from a Congress who is biting at their heels daily and just waiting and wanting to be rid of the financial burden they are costing the American taxpayer.
And so starts the eventual roll downhill. Fannie, Freddie, Ginnie and the MI companies, all experiencing record losses over the last few years, are pushing billions upon billions of dollars in bad loans back to their primary customers, namely the eight or nine big banks/lenders in America, B of A, Wells, Chase, Citi, Flagstar, etc. to try to plug the leak in the dam from these losses. And what are these big boys doing? Yep, you guessed it, they in turn are going back to the point of those who are still in business today and are trying to get you to buyback these loans.
Their reasons? They are many, purported appraisal issues, or occupancy, or undisclosed debts, or, surprisingly, stated income, even though the product was there.
They are making outrageous claims for repurchase. They are pretty much pushing back anything and everything they can in the hopes that if they throw it against the wall that some of them might actually stick. You have to remember that the people they have reviewing these loans and pushing them back are more often than not merely inexperienced, barely trained contracted underwriters who lack the experience in our industry to know what they are looking at and whether or not there is a legitimate claim for repurchase.
Sure it makes you reach for the bottle of Mylanta and the package of Tums. You see your livelihood going out the door. You wonder how you are going to survive this mess.
Here at Quality Mortgage Services we pride ourselves at having the knowledge, experience and trust of our many clients to guide you through these troubled waters. There are a few things you need to do and know to make it through this challenge:
Recognize it isn’t going to go away. Sticking the demand for repurchase into the back of your desk drawer isn’t going to make Wells or B of A or any one of the others stop their process, as a matter of fact, their next step if you ignore them will probably be to sue you. And you and God know that they have the attorneys to do it. Find an employee who can stay focused, multi-task and above all, stay calm. Let that individual handle the repurchase demands and give them the resources they need to individually resolve the repurchase claims. Make sure your files are complete. If not, request all other relevant documentation from the investor making the demand. When handling theserepurchases requests in house, make sure that the individual auditing the file understands the product and program guidelines the loan was approved under. It has been our experience that oftentimes the investor will try to push back the loan that met the underwriting guidelines at the time.
More importantly, and probably a better solution, is to call in an industry expert in quality control, quality assurance and repurchase demands such as Quality Mortgage Services. We have been servicing all of the industry’s needs for over 20 years. We have a team of auditors that have the required experience to attack repurchase demands in your defense. And we can guide and lead you in order to help avoid these unpleasant challenges in the future. Your Loan Officers, Processors, Closers and Funders need to always be vigilant and aware that mortgage fraud exists, that there are always those trying to buck the system.
We have been here for the industry and we will protect you and your business now and in the future.
Tommy A. Duncan is executive vice president of Quality Mortgage Services LLC. For answers to your QC and FHA questions, please contact Tommy at (615) 591-2528, ext. 124 or e-mail [email protected]
You may also visit Quality Mortgage Services LLC on the Web atwww.qualitymortgageservices.com.