Bear with me while I rant. The personal experience I am going to relate will absolutely tie back to understanding the challenges of getting deals bought in special finance.
As many of you know, I live in Sarasota, Fla., one of the epicenters of the 2006 housing collapse. Against that backdrop, Mrs. Goebel decided that 2014 would be the year to upgrade. The home we have owned for nine years has finally recovered enough value that we can get out with an unpleasant but tolerable haircut. I knew whatever we intended to buy would appreciate quicker than the last one did. I set a maximum purchase price, something for which I knew we could comfortably write a check. Mrs. G. found a way to break my ceiling — by a bunch.
Not a problem. Many people have a mortgage. I have had one for years, and with a credit score that is, according to TransUnion, better than 100% of the population, I’m looking for a loan with a 37% LTV and a PTI less than my existing mortgage. I rolled over and put down a $50,000 earnest money deposit on my wife’s dream home with the typical 30-day “finance approval” contingency.
Inspired by some extremely low rates (3% seven-year ARM), I contacted Chase the same day. I told them there was zero chance they would have my 2013 tax returns (it was February) and explained that I had been the victim of an identity thief who filed a fraudulent return for tax year 2012 (more on that in a moment). That first meeting went well so I decided to move forward.
Their mortgage banker requested tax returns, bank statements and my personal information. Due to the aforementioned identity theft, it took me a day to get TransUnion unlocked so they could pull credit, but that was quickly handled. Again, everything looked fine to the banker. And why not? I was going to put gobs of cash down and my statements showed where all the money was coming from.
Suddenly, my banker stopped making phone calls and started sending emails and texts. Calls to her office went unanswered. A week went by and the paperwork had yet to reach the loan processor. I owned and operated a multistate mortgage brokerage in the late ’90s. The delay was vexing, but I knew that things had likely changed in the last 15 years, so I tried to be patient.
But there was another concern. I was one week into the process and I had never been asked to fill out a credit application or account for changes in circumstances since the end of 2012 — or answer any other questions, for that matter. Regardless of how the industry may have changed, simple logic says that sound and simple underwriting practices would include gathering and understanding more than what I had provided at the outset. This was the first sign of trouble.
A week after the process started, I was asked to complete an online questionnaire and share my opinions. I shared the fact that I wasn’t happy because my calls weren’t being returned. That prompted a wave of customer satisfaction calls from the banker’s manager and other people inside Chase, and finally one from the broker, and yet no talk about any germane facts.
Two weeks to the day after documents had been emailed, Chase’s mortgage processor called. Verbal contact at last! The loan had been approved as requested, but I had to prove where deposits into my various accounts had come from (e.g. investment dividends and payments), and they wanted proof of the identity theft and fraudulent return. They also wanted copies of my wife’s and my trusts, since we were buying the home titled in the name of the trusts.
I had already provided the bulk of the items in Week One. Sending the balance would be a piece of cake. Thank goodness for email! In the span of a few minutes, I had fired off 141 digital files, the equivalent of at least 1,000 pages. Chase’s team could not understand the monthly investment statement from Merrill Lynch, even though I am sure they are nearly identical in layout and function from JPMorgan statements. But at least we were making progress.
After nearly a month of waiting, sending, verifying and more waiting, I started to wonder how much time this adventure was costing. I know I spent more than 40 hours on the phone. Each time someone actually would talk to me, they would say that day’s submission “should take care of it,” and it never did. They never could get comfortable with the bogus IRS tax return, mostly due to its resolution.
The fact is, I got lucky — too lucky for the bank’s taste. I intercepted a very large check that was issued after the bank frequented by my criminal counterpart declined to accept “my” tax refund via direct deposit. The IRS mailed a check to my rental property. In response, I contacted the IRS, returned the check, filled out their forms and wrote a letter. Not knowing where the crime had been committed, I could not file a police report.
Of course, we also filed our own return that year. It was on file, and the IRS was actually very helpful. They went out of their way to provide anything that would satisfy Chase. But that stip took me until the 11th hour of the 30th day to collect, so I was fortunate to get the financing contingency extended by 15 days.
I supplied Chase with copies of everything, but they were still unsatified, even with printed transcripts from the IRS substantiating my real return! After many hours of discussions, they finally accepted it.
Week 5 Month Two
Four weeks in and no resolution. The demands kept coming. Chase wanted more deposit verifications for the most recent month on accounts we weren’t using to fund the purchase. Finally we come to the 45th day and the expiration of the contingency with no approval to close. It seems that one trust account that they had information on from Day One suddenly didn’t satisfy the underwriter, “but it won’t be a problem.” Gulp. Either I lose my wife’s dream home or I put my deposit at risk. They convinced me to do the latter.
(By this point, three other institutions, including Merrill, contacted me to let me know they could have had the deal done in two weeks. So why didn’t they return my calls when I first decided to apply?)
We finally got the deal approved after jumping through ridiculous hoops on the day before closing. This was after I had liquidated enough investments to pay for the home in cash and keep my $50,000 deposit, which will almost certainly incur a $35,000-plus income tax event. I was mad beyond belief. Their poor handling, lack of understanding, and in the end, very poor communication in the final days had cost me 35 grand and about a week’s worth of billable time.
When the loan closed, the banker’s manager brought me a bottle of bourbon to thank me for my understanding and patience. Or maybe just to placate me.
What is to be learned from this experience for you? First, understand that you must do a proper credit interview and submit a thoroughly completed app. When Chase finally showed me their completed app, I laughed. “So that’s what I make!” I said. “I wondered, since you never asked me and I still don’t have a tax return for 2013.”
Next, build your case thoroughly for each deal, in advance. While certain companies have some very high qualifications for credit analysts, others really don’t. Make it easy for them to see. They are buying paper for people they know have had credit issues on collateral that they haven’t seen — and hope to never see — and all they have is what you provide for them.
Furthermore, understand that when a buyer is asking for stips, the person who reviews them might not understand what they are looking at. Granted, not many SF buyers will show up with a 36-page investment statement. But you can’t assume the people who are reviewing the stips you collect are brain surgeons.
Finally, in the interest of customer satisfaction, have empathy and respect for your customers. I have perfect credit. I was seeking a no-brainer loan. Yet, somehow, it nearly caused an aneurysm. Whether or not you are able to help each customer, be conscientious of their time and their concerns. I can say that, in 60 years, I had never been through anything like this, and it certainly reminds me of what our customers of much less means must feel in your stores at times.
Until next month, great selling!
Greg Goebel is the CEO of DealerStrong and the industry’s leading special finance trainer since 1989. He is an 18-year former dealer principal and a highly sought-after speaker, author and consultant. [email protected]