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Countdown to June 30th

As the Tax Credit Expiration Date comes barreling towards us, we in the mortgage business are facing some challenges we haven’t seen since December 1986 (when the tax law changes that were becoming effective in January 1987 required an flood of closings onto the docket).  Today, I want you to understand the challenges and provide some insight how to navigate the waters so that you have every possibility of closing and receiving your tax credit.

  1. How can all these loans be processed, underwritten and closed in time? My team is staffed to close 70-75 loans each month.  This month we have nearly 200 loans on our “hit list”.  To close nearly three times the volume isn’t easy.  We can’t hire and train people that we would likely layoff in July.  We can’t expect the staff to work 24 hours a day.  So, we do what we can.  We work overtime, reassign staff from other departments to help out, we offer closing times on Saturdays, Sundays and at night, and we ask loan officers to help gather conditions (instead of originate new business.  But most importantly, we communicate to our customers how important their immediate response to our requests is to their being able to reach their goal.
  2. How can we coordinate all the parties to get them to the closing table? If a buyer’s attorney normally closes 15 deals a month, how can they physically attend 50 in the next two weeks?  A few weeks ago, we started scheduling loans for closing at Approval (rather than when they were Cleared To Close) to make sure we had the attorneys committed to showing up.
  3. What about “repeat buyers” and their tax credit? The problem here is that they need to sell their current home to buy the new one.  There is no way to know if their buyer is going to get to the closing table in time.  The buyer who is also a seller needs to increase their communication to have confidence in their buyers financing.
  4. Most lenders close loans using a Warehouse Facility to provide the funds at the closing table. These lenders have a line of credit that is tied to their net worth and typical closing volume.  Many lenders cannot simply add millions of dollars to their net worth to get increases in their lines of credit.  “Not having the funds available” is going to be a real problem for many (even though they may not admit it).  Getting your loan cleared and on the calendar sooner will help you here.
  5. What if it’s a Short Sale and the bank is slow to approve the sales price? News Flash- This is a real life situation that is happening every day.  Hoping it works out, rather than diligently being the proverbial noisy wheel, could cost you the tax credit.
  6. How about those homes that need work? Appraisal issues for value and the ability to reinspect the work in time is going to be an obstacle.  Those 203K Renovation loans are tougher to process and underwrite and could be shoved to the back burner.  It is imperative that you don’t sit back and pray for the best.  Push your LO, your processor, and their vendors.

What should you do?

Two things:

  1. Reach out to your political representatives and ask them to push for a 30 day extension for the tax credit closing date.  Taking some of the air pressure out of the balloon will help everyone.  Because the tax credit won’t be redeemed by most until next year’s returns, there is no impact for the Federal Government.  Even those who file amended returns for 2010 to get the refund sooner will be spreading out the cost to the government over more time.
  2. Talk to your mortgage company daily and ask what you can do to help expedite your file.  Help us help you.  Trust me, we want to close every loan we can.  The more help you provide, the more we can help you.  Meanwhile, say a prayer for all those hard working mortgage professionals who are dedicated to doing everything possible for you.

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