As you may or may not know (or care, for that matter) I started my very own mortgage company at the first of October. Yep, after nearly 10 years at the same mega-bank, I left the comfy confines of a big desk and leather chair to bootstrap my very own enterprise. I'm answering the phones, processing files, running documents … you name it. And guess what? I'm having a blast. Know what else? Some things simply haven't changed in the loan business. I'll tell you a story that may ring a bell with some of you.

One of my first fortunes was to have 36 loan files (yes, 36) transferred over to my new office. You see, there was a builder that was having a cat's time trying to get his units financed and all of his buyers were lured into this one particular lender. To make a gruesomely long story short, the lender wasn't performing, the builder called me and asked if I could help.

"Don't know," I told him. "Let me see the files." After a couple of days of transfer letters, couriers and loads of copies I had some time to review these loans and figure out why there were so many problems with them.

I looked at the first few loans and noticed something right off the bat; when a loan was declined at one lender, the loan officer pulled the file and submitted it to another lender. That lender also declined the loan. The result? The loan officer pulled the file and sent the loan to still another lender. In fact, according to one borrower, he had been submitted to over seven lenders with the same result. Here's what went wrong:

There really wasn't anything wrong with the loans; instead they were simply submitted under the wrong loan program. But the loan officer didn't understand the core issue, that lenders aren't really all that different but loan programs can be. One lenders' 30-year, fixed-rate conventional loan is underwritten to the same exact guidelines as another lender's 30-year, fixed-rate conventional. Simply changing lenders while trying to get approved for the same exact loan is silly.

I actually met the loan officer who was trying to get these loans through and without saying exactly how old I am (I'm between 46 and 48 years old) and without saying how much lending experience I have, (somewhere around 15 years) I can tell you this loan officer was in his early twenties. Sharp-dressed, nice kid. I introduced myself, we talked a bit and he was actually relieved that the loans were being transferred because he couldn't get any approvals.

We chatted for 10-15 minutes when he told me he had only been in the business for a couple of years (just in time to make a little money in the refinance boom) and he hadn't seen loans this difficult. I told him I'd try to help him out.

The problem wasn't with the loans, the problem was that he was submitting them under the wrong program but he didn't know any better. These buyers all wanted either zero-to-five-percent down and they were all rental properties. But the loan officer didn't know that and the lenders he kept sending them to kept turning them down.

I contacted four lenders that day and began submitting loan files with no money down for investor properties. Even for those with stated documentation. Are there lenders out there that have those loan types? Sure there are. We're just starting to close some deals in a matter of days not months.

Am I a hero or something? Of course not. I just know my way around the Loan Block as does most any experienced loan officer. But the kid still wet behind his ears didn't bother to ask the lender why they were getting declined or even ask the lender if they had other loan programs that might work. Granted, the lender could have done a better job of explaining the problems but again that's not the lender's job. The underwriter is supposed to see if a loan application conforms to their guidelines and not find loan programs for loan officers.

If this sounds a little too familiar, or you're getting the runaround from your loan officer, stop the insanity and pin them down. Ask him or her, "Tell me, exactly what is the problem with my loan?" If your loan officer can't answer the question other than, "Well, I know of a bunch more lenders we can try," then cancel the loan and find someone else.

Published: October 15, 2004

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, a veteran Mortgage Banker, successful Real Estate Consultant and author of Your Guide to VA Loans, Mortgages 101: Quick Answers to Over 250 Critical Questions About Your Home Loan, Who Says You Can't Buy a Home!, and Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You, is a former columnist and Contributing Editor with San Diego-based Mortgage Originator Magazine. Reed is President of CD Reed Mortgage Bankers, Austin, TX and is a Past President of the Austin Mortgage Bankers Association.