Episode Transcript
[00:00:01] Speaker A: Hey, gang. Welcome to Ed and Ken's mini podcast. It is Tuesday.
It's a little after 9:30.
That's what it means, man. It's our time. Ken, how are you, brother?
[00:00:12] Speaker B: I'm doing well, man. I look forward to this time every single week. And maybe, maybe twice this week because.
[00:00:19] Speaker A: You'Re coming to Philly, no doubt. What's happening, brother? We're going live today.
[00:00:23] Speaker B: We might be in the same room and you know how dangerous that can be.
[00:00:26] Speaker A: Yeah. We're going to be eating cheesesteaks with mayonnaise and pickles and all kinds of crazy stuff. So let's get it going. Today's going to be a little spicy, so let's open it up.
[00:00:35] Speaker B: Let's go.
[00:00:36] Speaker A: I get a call from one of my tribe members, a coaching client, and she said, ed, I had the. I had one of the roughest weeks of my life with this transaction. We got the. She's representing the buyer.
She got the. They got the clear to close three weeks ago. No problems. The buyer didn't change anything. They didn't open up any new credit things. They didn't get fired, they didn't change jobs, all that stuff.
They have a 9:00am settlement tomorrow.
They get a call at 5:00pm that, that the mortgage company cannot settle.
What this agent had to go through to make things happen three days later.
[00:01:20] Speaker B: The.
[00:01:23] Speaker A: The, the abuse that she took, and rightfully so, wasn't her fault, but rightfully so from this client was something I don't want anyone to go, ever to go through. And it's unacceptable. So tell me, Ken, I'm not.
I love doing business development stuff with you. I love training agents up. I love stuff saying, hey, my guy's Ken Jordan, you gotta use them.
Why? How does this happen, dude? Like, really, how does it happen?
[00:01:57] Speaker B: It's a great question, Ed. And, and, and to set it up there, I, I said this earlier.
[00:02:06] Speaker A: What.
[00:02:06] Speaker B: Takes years to earn and seconds to lose trust.
And this, this is exactly how mortgage professionals, let's just say people who are in the mortgage business, this is exactly how they build a reputation. You can't, you can't walk away from this easily. If this, if you're the loan officer where this happened, you can't walk away from this easily.
You know, it's going to hurt your reputation, the person that it happened to. No doubt we'll be telling more people we live in a very, very small real estate community, much smaller than a lot of people give it credit for. Some, especially now in the world of social media.
And it's a killer. You can't let this happen. It's absolutely unacceptable. The question is, why did it happen? Right?
And because I'm not in the transaction, I don't know why that particular loan did not close.
But what I can tell you is that there's four reasons why a loan does not close on time. Okay.
[00:03:12] Speaker A: After, after getting the clear to close.
[00:03:15] Speaker B: After getting the clear to close. So I'm going to start with the clear to close.
Semantics, Ed.
Semantics. Clear to close with some mortgage companies really means clear to continue. CTC just means clear to continue. They got through what they feel is the, the ctc, but the title hasn't been reviewed yet. They got to, they're calling it ctc, but the final verbal hasn't been done yet. The tax certifications haven't been received yet. So they have like a, a borrower CTC and then a collateral ctc. Like semantics. Okay, so, so that's part of the issue that I'm seeing in the industry. But at the same time, there's there, there's four reasons why it happens. Number one, and the most obvious is experience.
Sometimes lenders, loan officers, they don't know they haven't been doing it long enough or they haven't been working with the team that's making the decisions and executing on the approval long enough. If you're a direct lender, maybe that person hasn't been in the business long enough. Maybe they just started with that company. If they're a broker, maybe it's a company they've never done business with before.
Right? So there's a lot of experience issues that could cause what we call late stage declines.
And it's just absolutely a nightmare for everyone involved. And you're right, that agent referred that lender more than likely.
And what it does is it almost like it almost incentivizes the agents to just not refer anybody. Right? Because why would I refer anybody if, if this is what the result is going to be? But the reality is when you're putting that offer together and to this agent, when you're talking to her, doesn't mean she should get, she should never have a preferred lender, maybe not that lender, but what it means is when you're putting that offer together and you're able to tell that listing agent, hey, this borrower is going with a loan officer that I trust that helps your offer. But you can't say that they're going to the loan officer that I trust if you don't trust that loan officer. Right. So that's where it becomes incumbent upon us to take those, take that time to build that trust. Now, reason number two for a late stage decline or a situation like this, and that is the loan officer found out information that they should have known earlier in the process, okay? Now a lot of times when a lender finds out information that they should have known earlier in the process, they're not going to show that card. They're not going to be like, oh, I should have known this, but I didn't ask or this got missed by an inexperienced junior underwriter. That's another issue that pops up in our industry.
So they're going to a lot of times give another reason other than the reason, which is you should have known this on the front end if you ask the right questions and collected the correct documentation.
Now last, the third reason why you might get a late stage decline is called a trigger condition. Okay? A trigger condition. And this again, I'm not necessarily speaking to this particular circumstance, Ed, because I don't know how that happened, but trigger condition is, hey, everything's going well. I just need your April bank statement. That's the last thing we need to show sufficient funds to close.
And April bank statement comes in and there's a payment to WSFS Auto. That's not that, that, that, that wasn't on any of the other bank statements. Now we have a new condition, okay, a new condition because now we have to verify. What is this? Is this a debt? If it is a debt, when did you open it? How much is it? Do we have to count that in your debt to income ratio? And if we do have to count it in your debt to income ratio, are you still approvable?
What most people don't understand is that Loan DU Desktop Underwriter and LP Loan Prospector, those are the two automated underwriting systems.
They're so sophisticated, they take into, so they keep taking into account so many considerations to issue an approval that the flip side of that coin is one little thing. Could flip your approval if you're at a 49.9 debt to income ratio and you go to 51, get guess what? Loans denied. Right, Loans denied.
And now you're scrambling to find a different product or another solution.
And the fourth reason that the loan doesn't close on time is just flat out incompetence. Just someone who's not paying any attention. Someone who doesn't track their files, that doesn't do updates, that doesn't regularly meet with their processing team, that doesn't have the relationship with their underwriter where if there's a problem, the underwriter feels comfortable enough to call them, doesn't understand guidelines.
That's, that's a, an issue in this industry. And more so today than ever before, as we, as the industry has shifted a culture into sales. Sales. Sales, sales, which, yes, mortgage companies are sales organizations. And when you forget that, you tend to lose business. But you're a professional and this is your craft, right? Yes. You have to go out there and find business. You actually have to prospect. You got to put your, your hat on, go out there and develop relationships as a loan officer. But if you forget, it's like a contractor forgetting how to swing a hammer. If you forget, if you don't, if you're not on your guidelines, if you're not up to date on what's allowed and what's not allowed, this is the kind of stuff that happens.
[00:08:58] Speaker A: Okay, so you were a lot nicer giving that explanation than I would have been.
And a couple quick things.
[00:09:07] Speaker B: Agents.
[00:09:08] Speaker A: I always ask agents, what is your referral rate? Like from past clients and through the years, I've always been like, all right, let's dissect what you did, what you didn't do, your follow up. Did you send them a card afterwards?
All that stuff Lately, what I'm seeing is, oh, my gosh, if somebody has a low referral rate from previous clients, dude, I'm finding out it's like 75% due to the experience that their client had with the loan officer. It's huge. So this is a big deal.
Big deal.
Question. What's the difference between a broker and a bank? I'm a real estate agent, and I'm like, all right, well, who should I work with?
[00:10:01] Speaker B: It's like the hatfields in the McCoy sometimes.
But the reality is a, a broker is someone who originates loans, okay? And they have a roster of lenders that they will prepare and originate loans and have that lender underwrite process close and fund that loan. Now, my experience early on in my career as a broker, we would originate the loan. Some banks we would send our clean conventionals to. Some banks we would send our FHAs to.
Some banks we would send our really rough FHAs to. The rates weren't great, but we were sending the rough FHAs there. And then some banks had this smoking hot rate. Nobody else could beat it, except they didn't give a if that loan closed on time or not. But you sent it there because you're trying to honor a low rate. You're out there promising the world, and now you send them the loan and you're like this and you know, you're hoping that, that you don't end up with egg on your face. That was my, early on in my career. Now a direct lender, okay, is you underwrite, process, close, fund, all in your own name.
And then some direct lenders retain servicing rights of that mortgage and some direct lenders release servicing rights to that mortgage. Now on the direct lender side, the direct lender who does not retain servicing, a lot of times they have what's called correspondent relationships. They have relationships with different lenders that, who are going to buy that loan after it closes. So you still under a process close and fund, but you already, when you're locking that loan, you're locking it with the expectation that that particular lender who's offering that particular rate is going to buy that loan when it closes.
And then they will either service it, sometimes they, they purchase it and then they, and then they use a third party sub servicer. But let's not get overly technical. And then you have the direct lenders that under a process closing fund and then they retain servicing of that loan. Now the loan still may get sold to Fannie Mae, sold to Freddie Mac, sold to Ginnie Mae, but they retain the servicing rights.
Obviously some have, you know, every channel has its, its, its benefits, its pros and its cons. For me as a direct lender with correspondent relationships, what I like about the way that my company operates is that we have full control underwriting process, close and fund. The underwriter underwrites this loan. Same underwriter for me, that's going to be underwriting my next loan and my next loan. And I get a sense of how they think. I understand what their risk tolerance is. I understand not what loans they're going to deny or what loans they not going to deny. But I understand like if I see a situation, this underwriter has a propensity to ask for this particular condition. When this situation pops up, I can see around corners and I can get that information on the front end, which makes it more efficient for me. And then also as a correspondent, I do have access to multiple rate sheets. And some weeks, some investors have better rates than others. And that's, that's our channel. That's, that's how we operate. But that's the difference between a direct lender and a broker.
[00:13:28] Speaker A: All right, cool. I wrote down the word anticipate because you control the process. You can look around the corners and anticipate it's. I would never give some, it's basically like a third party, the control of the loan and then it gets whispered down the lane and the. And when the communication falls apart, it falls apart big time. So what I'm thinking of is with what I do, when agents come to me and what to do a consultation on what I call a business audit, right. The first thing I will ask them is, and this is so funny, they've been in the business for 10, 15, 20 years and they're like, hey, I just want to become more profitable. That's really what my job is. Help you become more profitable. I will ask them, does your company. I already know the answer. Does your company charge a royalty or a franchise fee? They're like, no. And I'm like, actually, yes, they do. It's 6% and it's uncapped. Like that's the first thing you got to get rid of.
Right. That's going to save you based on your production. No, I just did one of these the other day. No lie. 40,000 just on the royalty.
Right. So I'm able to look around the same corners as well. And it seems like a no brainer. And this is where I, I always want to pull the curtain back on the real estate and the mortgage industry and go, no, this is the truth.
And when this agent was telling me, I couldn't believe my client, what she was calling me and who she was threatening. And I went, I don't blame her.
Yeah, I don't blame her. If, if I am clean, a clean buyer, I didn't change anything. I didn't order anything. I didn't even order anything from Amazon in the last two months. Like, nothing, nothing changed.
And my, my mortgage guy or girl calls me and says, hey, we can't close.
If I'm the agent or the client, I'm literally going to be at your front door.
Like, literally.
[00:15:45] Speaker B: I'm. I believe that. Hop on a plane, Spirit Airlines, 24 and a half hours later, right? Yeah.
[00:15:52] Speaker A: Back in the day, asked some of the old Los from Trident Mortgage back in the day, literally, I ran down the steps and literally pound it on the glass.
Get off the phone. We're talking right now.
[00:16:04] Speaker B: Ed, what you just mentioned is an important, often overlooked part of why agents should not just let their borrowers go wherever they want. Right? I mean, it seems like an easy thing. Like you pick your own lender. That way it doesn't reflect poorly on me. Number one, people will always remember the transaction.
Doesn't matter.
You still there?
[00:16:27] Speaker A: I'm here, yeah.
[00:16:28] Speaker B: Somehow my screen is running People will always remember the transaction. Okay, so they won't, they may not remember that you were even referred. The, the, the, the, the lender. They're just going to remember was it a good experience or was it a bad experience. Right. So control the experience and you control referability like you just said. Right. The second thing is anticipation. You can't set, you can't manage expectations until you set them. And you can't set expectations unless you know exactly what's going to happen.
[00:17:02] Speaker A: The clients today want to be led. I, I just did a Facebook live on out outdated rules.
Like what real estate agents go, oh, I, I always give three options because that's what my broker in the late 60s told me to do.
Holy man. No, Your job is to lead the freaking transaction.
[00:17:25] Speaker B: Yes. Right.
[00:17:26] Speaker A: And this is what I'm gonna say. Okay, great. Do you have somebody? All right, great. I'm going to talk to them.
Oh, you gave my client a, a rate of 1.9%, huh? That's funny. Everything else is whatever, six or six point, whatever. Like, like, I, my job as the agent is to lead the transaction. I'm going to get back to my client and say, hey, the choice is yours. However, here are the pros and cons.
This is what I just went over with a, with a, a group of listing agents. The, the, the old way of going and going. Well, Mr. Jordan, my data says that your house should sell at $722,000. Do you know the dangers of overpriced, by the way, if any, any clients or consumers are listening to this? If an agent comes into your house these days with that strategy, throw them out.
There's three options.
Option A, option B, Option C. Here are pros and cons. Here's our pros and cons. Here's our. Here are the pros and cons. What would you like to do? Agents? Leave the transaction.
That's what you get paid to do, right? Don't be afraid to get sued. That's stupid.
No, I'm not going to say, hey, you have to use Ken Jordan because he's the only one out there.
I'm going to say, based on my experience, Ken Jordan and Princeton Mortgage are the best of the best communicators. They have outstanding rates that are usually better than any of the other ones out there.
[00:18:59] Speaker B: Careful, careful. That's a wrestler.
[00:19:01] Speaker A: They have, they have. Talk about break the rules.
[00:19:05] Speaker B: They have.
[00:19:06] Speaker A: I listen.
[00:19:09] Speaker B: No, you're right, you're right.
[00:19:10] Speaker A: Here, I got, I got to make something funny here.
I have to go into My family's storage in Philadelphia when I'm at home, right, My wife and I, my ex wife and I get along great.
I asked her, should I bring a suitcase to bring some of my stuff home? And I said, without you and my wife, I need some sort of adult supervision.
[00:19:37] Speaker B: You got, God bless her, you know, she's still looking out for you, isn't she?
[00:19:41] Speaker A: We'll see, man, we'll see. I need adult supervision. Help me out. Should I bring an extra suitcase for the stuff that's mine in our old storage unit?
Side note, completely lost track of where we were.
[00:19:55] Speaker B: All right, so, so here we are at minute 19. Let's, let's, let's come up with some, some action items. And, and here's, here's going to be my action item for the real estate agents out there.
Interview the lenders, sit down with them, let them understand what your pain points are and then let them give you what they believe will solve the pain points. But yeah, don't let them just pick their own lender because you, you, they, no matter who makes the mistake and everybody's going to be doing this and you're going to be dodging bullets at the end, no matter who they go with if there's a problem. And the second thing is the whole three lenders thing, you're better off having three people you trust. Refer one, refer one, refer one if you're going to go in that direction. Because what happens when you refer three is you create a shark tank where everyone's incentivized to over promise and under deliver because they know that they have no idea what the other person's going to be promising. And you know, I'm going to have to like, yeah, so I could do, it's like, you know, I can name that, tune in how many seconds, right? I can close in seven days, I can close in six, I can close in five. And then now you got a problem on your hands because there's no way you're closing in five.
So, so, so, so, yes, I get it. You want to, you know, you want to have a couple people that you trust. But yes, you're right, the three lenders to one person.
I don't know the legality of it. I'll let the, I'll let you, you know, talk about that. But, but I do think that that's the environment. It creates a.
[00:21:21] Speaker A: No doubt. And the one thing, another reason why I recommend you is because when and if ever, it doesn't matter where it came from, if there's A ripple. If there's a problem, you and your team charge the storm.
[00:21:33] Speaker B: Yep.
[00:21:33] Speaker A: You don't avoid the storm. You run straight into it. So this is the go do for the week for the audience.
Create an ecosystem of partners, of strategic partners. That's like putting together a, like SEAL Team Six. Like the elite of the elite.
We have no room for mediocrity at all in our business anymore. There never was, but especially now.
So you need.
You need the best of the best as your lender, your title company, your who you surround yourself with in the training, insurance, homeowners insurance.
Everyone put the team together and there's lots of hints this. They have to be a personal fit and a professional fit.
They have to know what they're doing.
They have to have all their ducks in a row. They have to have a great reputation.
But over here, right, if you see them on social media acting like a fool, you know, drinking at 2:00 in the morning, like, that's. I don't care how good you are, you're not going to be my person.
You're not gonna. I can't risk that. I don't want to be associated with that.
[00:23:05] Speaker B: That's great advice, Ed. And I look forward to seeing you this week, my man. Friday in the house, 10:30.
[00:23:12] Speaker A: We're at somewhere in Conshohocken, or it may actually be Westchester.
[00:23:16] Speaker B: Okay.
[00:23:17] Speaker A: I'm getting feedback from the. The agents this Friday, 10:30. And impromptu agent mastermind and collaboration.
[00:23:26] Speaker B: Love it, man. Love it.
[00:23:27] Speaker A: Can't wait to see it very quickly.
So it's going to probably be in Conshohocking, but somewhere in that vicinity.
[00:23:33] Speaker B: Awesome, man.
[00:23:34] Speaker A: I love the spicy conversation today, dude. I'm privileged and lucky to be in business with you, dude. It's fun.
[00:23:40] Speaker B: Same here, man. Same here. Thank you, Ed.
[00:23:42] Speaker A: All right, see you, brother.
