Top-flight loan officers in search of job security have been fleeing the confines of nonbank lenders for the megabanks, in search of job security and a future. But it now appears some of these LOs are headed back to the nonbanks because the big boys take much too long to close a loan.
What's at stake here, quite simply, is loan commissions. Not only are there reports of firms like Bank of America and Wells Fargo tightening the hatch on how much they pay in commissions, but because these lenders take so long to close a mortgage, some Realtors won't give certain branches referrals anymore.
A former B of A loan officer who worked for the lender in the Houston area said he left the bank to work for a nonbank because closing times were so bad, a situation, he said, that didn't exist under the old Countrywide franchise. (B of A bought Countrywide in mid-2008.)
Requesting his name not be used, he said new B of A executives that were put in charge of the home lending unit placed so many "overlays" on the business that processing times have increased by several weeks. "You have a lot more chiefs that you need to report to now," he said. "It speaks to work flow, people and management focus. Even the loan imaging system they switched to takes longer."
He cited one statistic, that if true, speaks to how slowly loans move from the application stage to closing: "One direct endorsement underwriter I know there is now doing 33% of the volume they used to handle."
The LO said he grew so tired of the slow processing and underwriting times that he went to work for a midsized nondepository where loans can close within 30 days, even sooner if necessary. He said B of A is now taking 45 to 60 days, a figure cited by other lenders as well. (His own refi with B of A took seven months, he claimed, because he used an out-of-town call center.)
Asked why he would jump ship during an extremely precarious time for both the U.S. and economy and mortgage banking, his response was simple: "The Houston market is actually pretty good, especially compared to the rest of the country. July was a little slow but August is looking good."
And what does B of A have to say about how long it takes-the nation's second largest home lender-to close loans? The lender doesn't dispute the fact that loan closings can take a long time, especially in the wake of tighter underwriting requirements from Fannie Mae and Freddie Mac.
Although the lender would not provide details, a spokeswoman noted, "The mortgage environment has undergone dramatic changes over the past several years. Conservative underwriting standards have been enforced and regulatory changes have been enacted in order to ensure that consumers can safely afford their mortgages over the life of the loan."
She added that while B of A is "playing a leading role in this new era of responsible lending, we also understand that these changes often translate into longer processing periods. This is the reality across the industry."
That may be so, but it's also giving some nonbanks a leg up on the megabanks-that is, as long as these nondepositories have strong capital positions and committed warehouse lenders. Chris George, CEO of CMG Mortgage of San Ramon, Calif., one of the nonbank industry's undisputed survivors, said his company can take an application and fund a loan within 30 days, even sooner. "Absolutely, yes, we can do even 15 to 20 days" as long as the borrower is what he calls "submission friendly."
He said he has heard the stories about the nation's top funders taking upwards of 60 days on some loans, but declined to comment on what his competitors might be up to.
One mortgage banker said over the past year his firm lost four loan officers to B of A and Wells. "So far three of them have come back to us," he said. This executive, who requested his name not be published, said the LOs who left "thought they were getting stability by joining a big bank, but they disliked the control they saw and the manner in which they were treated."
Scott Stern, CEO of the Lenders One cooperative of mortgage companies, said he hasn't necessarily heard many stories of LOs leaving the megabanks for community mortgage firms, but he can testify to longer turn-times on correspondent loan sales where a nonbank sells an already funded loan to a firm such as B of A, Wells, Chase or CitiMortgage.
"It now takes several weeks to complete these deals," Stern said. "These deals used to take 24 to 48 hours. They (the buyers) are 'quality controlling' every loan. Files have to be perfect."
He added that nonbanks and community mortgage firms should be able to do a better job of closing loans than the big regionals. "We understand the community better than they do and should be able to respond quicker."
