Once again the ever changing market place is keeping everyone on their toes. The news today might be more about the Fed’s and their decision to cut 1/4 on both the Discount and Fed Funds Rate, but I’m more concerned about a different kind of rate - The Pull Through Rate. Maybe you should be too.
Pull Through Rates and the definition of what constitutes that rate can vary greatly from lender to lender. To simplify, maybe they should be renamed “Finish What You Started” Rates.
Here’s how Pull Through Rates are changing the mortgage business.
Let’s start with SunTrust:
Pull through is defined as the percentage of locked loans that fund without expiring. Note that this percentage is calculated by dollar volume, not by units. Every month, SunTrust reviews each broker’s average pull through performance.
Our pull through is at historic lows. Currently, 40% of loans that are submitted to us are never funded. SunTrust requires our broker customers to maintain a minimum pull through ratio of 70%.
SunTrust is implementing the following new pull through policy:Brokers with pull through under 65% for two consecutive months will be terminated!
SSSSNAP! Ok, that’s a little strong but it does make some sense to me.
“Quit spinning our wheels“. It’s not just SunTrust, it’s the entire lender industry. Every lender is looking at controlling and reducing costs. If a full 40% of loans go to the loan submission graveyard, it’s easy to see Brokers are wasting many good man hours for the lenders. The Lender pays good money to have those highly trained people working.
As a loan originator, I’m sure you know plenty of lead sources who’s leads tend to go nowhere. Is It a local real estate agent or your Uncle Tom? You know who I’m talking about. Every lead they have sent you over the last 2 years was a dud - Good Old Uncle Tom. It’s Monday morning and you have 15 phone calls to return. I’ll bet the lead from Uncle Tom is the last one on your priority list - right? That’s how Lenders feel about you right now.
Coincidentally, I just found out that National City Mortgage has stopped accepting TBD submissions, (purchase loans where the property has not yet been determined). Why is this important?
Most any loan originator can get an automated underwriting decision from a variety of sources on most any loan scenario. The problem is that the human L.O. computes the various important factors, (namely INCOME) and uploads these factors into the computer program. If they compute that income wrong, the approval the computer gave them is invalid. Garbage In - Garbage Out.
“Follow the Findings” is a phrase that means a human underwriter checks the input for accuracy and follows the documentation requirements set forth by the computer underwriter. That’s fine as long as the human loan officer didn’t screw up.
I have a couple that wants to buy their first home. I have a pretty clean Fannie Mae (D.U.) Approve / Eligible finding. My Clients already like a house and want to make an offer. Before they do, I’d simply like a human to check my math. Not just any human, I’d like an underwriter who knows how to compute salary, bonuses, commission, and other factors to verify that I did it right. But If I want to use National City, I can’t - not under their new rules. They have to be “in contract” first.
My Clients will have to make an offer based on my math skills. Their Agent will write that offer based on my computer prowess. The Listing Agent who will present their offer to the Sellers will also be relying on my 14 years experience. What if I made a mistake? What if I didn’t, but the guidelines changed and the computation is now different? Or what if the house has multiple offers including one with an approval by a human underwriter and the Listing Agent knows the difference? See my point?
So, why did National City change their submission guidelines? According to the Underwriter I just talked to, it was because of bad Pull Through Rates. Not mine, but the industry as a whole. Who really ends up really paying for this? The general public. And in this case, possibly my Clients should their offer not be accepted.
Before you comment assuring me that my math was probably good and I certainly know what I’m doing, let me ask you this…
When was the last time you asked someone to proofread something?
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14 responses so far ↓
1 Chris Lengquist // Dec 11, 2007 at 4:13 pm
Before the creative financing of the last 4 years I would actually qualify, as the realtor, my own buyers. I would go by their word on income, expenses and savings and then calculate what their debt load should be at 28/36.
Sounds like I may need to go back to something like that. It’s just that the 28/36 kept moving on me. So I went to the letters that sometimes aren’t worth the paper they are written on.
2 Tony Gallegos // Dec 11, 2007 at 7:52 pm
Your posts have been awesome latey…you are on fire!!
3 Diane Cipa // Dec 11, 2007 at 8:53 pm
Excellent post.
4 PeterT // Dec 11, 2007 at 9:11 pm
Great post, Mike. The times they are a changing!
Back when times were flush the Lenders needed us (bankers/brokers) to bring in the volume they needed. Now there is more value in being selective. B of A pulls out of wholesale entirely, other lenders will winnow down their brokers and only keep those who are most profitable for them.
By getting tough on pull through now, the wholesalers won’t have to worry about losing half their pipeline every time the rates drop. This will lead to stronger strategic relationships between wholesalers and their key accounts over time.
5 Richard Maize // Dec 11, 2007 at 10:16 pm
The lenders will always change the rules in their favor making it impossible to have a level playing field. Just when you thought you had the goal post in sight, they move it further down the field.
Richard Maize
6 Rhonda Porter CMPS // Dec 12, 2007 at 7:36 am
Great post, Mike. Both of my sisters are wholesale mortgage AEs…you should hear the talk around the dinner table when we get together if one of them brings up “fall out” (that’s what they call it). Argh.
Like you, even if I have a nice AUS, I want the lender’s human underwriter to review it upfront. Especially in this market.
7 Mike Mueller // Dec 12, 2007 at 8:25 am
Chris -
That’s always a good idea. Brian Brady has a cute little trick he teaches his agents (I’ve borrowed it for mine).
Here’s where you will go wrong, computing the income when bonuses, overtime, and commission is involved. Not because of any ineptitude on your part, it’s just that your client knows they made x dollars, they are honest, they really made it. The problem is in how the guidelines say that the income is determined. That’s what skews the numbers.
Full Time Permanent, Part Time Temporary, Part Time Temporary, or even W-2 Commissioned? What about child support income? Social Security? Pensions?
Some things might count as income and others might not. Some for this loan , but not for the next. Your clients might qualify for more because of factors they didn’t consider as income. In the end, it’s not you, the client or the loan officer that determines what counts. It’s the Underwriters and their interpretation of the Guidelines.
If I was a listing agent today and was presented with two identical offers - one with just an AU decision and the other with an AU and a human conditional loan approval, I’d certainly push my sellers towards the stronger of the two - wouldn’t you?
8 Mike Mueller // Dec 12, 2007 at 8:31 am
Tony - You are always much too kind!
Diane - You’ve been taking lessons from Tony?
PeterT - It’s all about the bottom line, eh? In a perfect world every lead I talked to would end up as a loan. Every loan I submitted would fund. The mortgage applications are showing as being up this month but then they are also being dismissed as many borrowers are applying to multiple sources. So even the public is killing the Pull Through Rate. Don’t they understand? ; )
9 Chris Lengquist // Dec 12, 2007 at 8:35 am
And those factors all caused me to give up my own “pre-approval” process. Though I was always on the conservative side, I don’t think there is anything wrong with that.
As a Seller’s Agent, I ALWAYS pick up the phone and call whomever is on the pre-approval letter. You can find out a lot by knowing what questions to ask.
10 Mike Mueller // Dec 12, 2007 at 8:47 am
Richard - it is indeed an ever changing world out there. Is it really stacked against us? Not always. Ebb and flow. Go back a couple of years and it would have been tilted the other way - “Those damn brokers get everything!”
Rhonda - I would love to hang with the family - that would be great dinner conversation. There are multiple versions of “fall out” depending on who you talk to. For the AE’s it might be as simple as looking at a credit report and quoting a rate then not getting the submission. Others, like SunTrust look at the locks. What if you submit but never lock? I remember a long time ago, I had a LO that would take an application (by hand) and then T box it to a lender right away, without ever crunching numbers! Each submission was manually underwritten and declined. George, what was your LTV? “I don’t know the underwriter will tell me.” George, what was the back end ratio? “Won’t the underwriter tell me that?” Guess how long he lasted…
I’m gonna use this argument on all my submission cover letters from now on (with your permission of course), “Hey, if the Rhonda Porter wants a human underwriter to review, so do I.”
11 Mike Mueller // Dec 12, 2007 at 8:51 am
Chris - in my letter I invite them to not only call me - but stop by the office. I’ve had just one person actually pop in. That offer was accepted!
Good for you!
BTW: I’ve always loved the Mini. I may have mentioned it before. It’s been a couple of years now but I drove an S around Laguna Seca and all I could say is WOW!
12 Mike // Dec 12, 2007 at 9:12 am
Mike,
Suntrust is my favorite lender bar none, because my submissions are cared for immediately, and the underwriter allows me to call her. My account exec is awesome, too. I’ve learned a lot from you just now; thanks for the post!
Mike in Tucson
13 Mike Mueller // Dec 12, 2007 at 9:20 am
Hi Mike!
SunTrust does have some great accessibility features don’t they?
Here’s another one (at least for me):
SunTrust Mortgage, Inc.
1800 Sutter St Ste 650
Concord, CA 94520
Patagonia Finance
1800 Sutter St Ste 870
Concord, CA 94520
If I stomp three times would my underwriter know I received the conditional loan approval? LOL
14 Rick Marnon, Howell // Dec 12, 2007 at 9:18 pm
I did not know this. I originally started in the mortgage industry and decided that I would prefer to do the real estate side of things.
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