Think of the mortgage industry as a factory that makes stuff. I like the example of automobiles because everyone knows a little about cars.
At the auto factory, the raw materials are brought into one side of the plant and after many predefined steps a car is produced and rolled out the other side. Within those enormous factories, engines are built to be dropped onto chassis, the seats are stitched in the upholstery area to be installed down the line, and components such as windshields, computer parts, and tires – which are generally manufactured at other plants, are delivered to be assembled at the precise right time.
How is that anything like getting a mortgage?
Your mortgage application, along with all your documentation, are the raw materials that in the end will become your mortgage loan. The mortgage originators, processors, underwriters, document drawers, and funders, are the factory workers. The documentation and services from the escrow and title people and your appraisal are the regional factories that make the components that go into the final build of your mortgage loan.
A well-run factory operation is one that knows exactly how long each step in the manufacturing process is and optimizes each step by ensuring that each department has all materials and components they need to complete their step. They are also careful not to ship more materials than any department can handle, or things will start to back up.
Here’s the state of the mortgage industry right now. Everyone is trying to either refinance or buy a property while rates are low. Even though there is limited inventory of properties for sale, properties are selling. Couple that with the already large refinance volume, and the mortgage factory is being shipped more materials than they can take in. For those lucky to get their applications submitted, they are encountering delays because the component manufacturers – escrow, title, and appraisers, are overloaded with orders as well.
To give you some examples:
In “normal” times, when we request documentation from the escrow and title people, such as the Preliminary Title Report, Lien Check, and Financing Statement, the turn times used to be a few days. Now, we have seen some title companies take up to 2 weeks to provide these necessary documents the underwriter must have in order to underwrite your application.
Appraisals have always taken longer in Hawaii than on the mainland, but appraisal completion times are now longer than I have ever seen them in my 25 years of originating mortgages. Most appraisal completion dates are now 30 days or longer from the time they are assigned to an appraiser willing to take on the job. In many cases, the appraisal management companies are having difficulties finding appraisers to accept the orders. Your loan can’t move forward without an appraisal. Just like the factory making cars, if the components aren’t available, the factory has to shut down the assembly line.
Real Estate Agents, you know first-hand how busy we all are. It is imperative upon you to educate your clients (buyers and sellers) about the current situation in our industry. I have had to deal with sellers personally thinking the delay in closing had to do with the qualification of the buyer. Expect at this point that extensions are going to be requested.
And if you are a buyer or seller, or a current homeowner wishing to refinance, please be aware that everyone in our industry is really that busy right now. Speaking for myself, our company received our normal month’s level of mortgage applications in just 4 business days last week. That’s why my staff has been working overtime and on weekends just to keep our exceptional level of service where it’s at.
With delays in mind, if you have a critical must-hit date to close your loan, I’d advise you to have a frank conversation with your originator as early in the process as possible. While there might not be anything that can be done to speed things up, having everyone involved in the transaction having a realistic schedule, will avoid frustration and unnecessary concern.