GFE Feedback: Effect on the IRS, Cash to Close, Lack of Borrower Signature; What it Costs to Keep an AE/LO

I remember listening to a management consultant tell an audience about how handling e-mails determines what kind of person you are. He said that there were two types. The first group handled all their tough and involved e-mails (those that required lengthy responses, research, etc.) first, and then dealt with the other e-mails after they'd finished. That group was the one you wanted running companies, proving your innocence in a murder trial, etc. The second group first looked at all their joke e-mails, dirty picture e-mails, gossip e-mails, etc., and then went on to their more serious e-mails. That constituted 99% of people and is why I will never be a mover and a shaker, since I immediately knew I was in group #2.

Yesterday I noted a few comments by Warren B. about the tax on banks. In an effort to give equal time, many feel that a bank tax is fine. They say that because the government is already giving the banks money at 0% and the banks are buying treasuries and collecting 3%, or making mortgages and making 5%, so making money for them is not rocket science. And giving the profits to their executives doesn't make sense.

I received several valuable comments yesterday about the new GFE form.

One sharp mortgage banker in Santa Cruz, CA noted, "No one has thought about the bottom line impact to the IRS. Formerly you could only deduct origination points. "Now all the origination costs are in a single box, which results in a greater deduction for the borrower!"..."A lot of people didn't know that you can include tax prorations in your bottom line. Now I put it on page 3 of the 1003.  With all these crazy changes making out bottom lines look larger than it really is we need all the help we can get. Not to mention for qualifying etc."

"The new GFE does not have a signature line and I don't believe it calculates cash to close. It only shows the costs of acquiring the loan. I think after a little experience with the new documents everyone will chill out." "The borrowers do not sign the new GFE. The issue of not having a cash to close number on the GFE is one with which we are all struggling. Many are putting Cash-to-Close worksheets together. Giving them an old GFE violates the rules."

"Where my office is, the seller has to pay for owner's title and taxes on the deed, yet we have to disclose it as a cost on the GFE. The GFE isn't the cash you need at closing; it is just a total of all costs. We have page 3 of the 1003 handy when going over the GFE so they can see their actual cash needed at closing. In the case where we are forced to show a seller cost on the GFE, we include a page 3 credit to offset it, so the cash to close is still correct from the application."

You never know when it will strike, but there comes a moment at work when you've made up your mind that you just aren't doing anything productive for the rest of the day. Sometimes individual loan agents ask the owners of their company, "Dude, I know that I didn't close any loans in the fourth quarter, but keep me on anyway - I am not costing the company anything, right?" Wrong.

Granted, some areas are more expensive, but I did a very informal poll of managers/owners on the cost of having producers. For retail agents, "The basic cost of overhead per agent is approximately $587 per agent per month.  This is for the in-house agents that share an office.  If they have an office by themselves, then the expense is $375 higher per month.  The outside agents are $375 less. This doesn't include the cost of the staff, which is an additional $843.75 per agent, whether inside or out."

Another wrote, "We put a price tag on every LO we have - gone are the days of the LO who doesn't produce but is 'low maintenance' and may work from home.  We used to keep guys around purely for our golf scramble team but not anymore. Based on all the things we offer our LO's we determine we spend $800 to $1,000 per LO per month. We absolutely require that our LO's do a minimum of 3 loans per month, and we review production semi-annually. Those who do not meet our minimum requirements are let go or given a reprieve for 6 months to get their numbers up."

"It used to cost me a minimum $2,500 just to set a new person up with software, computer, etc. I never bought a computer for a loan officer, but just the tech support guy that comes in and connects to the network, sets up the computer for company stuff, the scanner, the e-mail address etc. And that doesn't count employee paperwork and training on our systems and procedures. Then, of course there is the cost of using the phone, copier, coffee, etc.  All that adds up but the biggest cost however is the use of my support staff's time. It drives me crazy when a non-producer takes hours of my team's time - underwriting, processing, docs and funding - and other producing mortgage consultants.  The lack of current knowledge because they aren't producing causes more questions and because they have nothing but time on their hands they love to just talk about it all. That's the biggest expense and drain.  When you add up their hourly rate and the lost productivity on the loans the rest of us our production, well, that is a sore spot for me."

"Rob, we do not have anyone working out of their home, all our Retail folks have an office and are required to report, come into the office and go over their files once a week with their processor. We also have a Mandatory Sales Meeting every week all retail production personnel are required to attend. We actually run profitability numbers by Loan Officer and apply a pro rata share mix of fixed and variable costs that determine the profitability or ROA of the LO."

"We have four net branches, but they cover their own expenses and we have a margin we keep on each loan to cover costs: 0.375 on any conventional loan & 0.50 on all government loans plus flat fees of $675 on every deal."

"In our wholesale company an Account Executive must cover their draw. If they have potential and are trending in the right direction, closing approx $4m/month will keep them in place - anything less than that, for 2 months running, is a problem. But since we now work in a virtual world, with no local office infrastructure, the actual costs of supporting an AE are nebulous, at best."

Back to the markets! After Jobless Claims, and the earnings results yesterday, we had more economic news. (There is none today.) Leading Economic Indicators was up 1.1% in December, after showing positive numbers in October and November. But the Philly Fed Survey fell more than expected although it is still well within positive growth territory. We learned that next week's auction by the Treasury amounts to $44 billion in 2 year notes Tuesday, $42 billion in 5-year notes Wednesday (one hour prior to the FOMC decision), and $32 billion in 7-year notes Thursday.

Although the markets had another relatively non-volatile day, we did see some intra-day price changes for the better as the equity markets worsened. The two markets do not always move in different directions, but yesterday they certainly did. The weekly Fed purchase figures came out: net $12 billion for the last week (4 days). And if traders believe that origination is running at about $1-1.5 billion a day that means that the Fed is buying older production. And someone is making some money off of it... So with no news scheduled, we find mortgage prices about unchanged from Thursday afternoon, and the 10-year yield sitting around 3.60%.

Three women: one engaged, one a mistress and one married, are chatting over lunch and conversation turns to their relationships. They decide that night to surprise their men. They agree that all three would wear black leather lingerie, stiletto heels and a mask over their eyes.

A few days later they meet up for lunch.

The engaged woman said, "The other night when my fiancé came over he found me with a black leather bodice, tall stilettos and a mask.  He took one look and said, 'You are the woman of my dreams.  I love you.'  Then we made love all night long."

The mistress said, "Me too!  The other night I met my lover at his office and I was wearing the leather outfit, heels, mask over my eyes and a raincoat.  When I opened the raincoat he didn't say a word, but we had wild passion for hours."

The married woman said, "I sent the kids to stay at my mother's house for the night.  When my husband came home I was wearing the leather lingerie, black stockings, stilettos and a mask over my eyes.  He walked in the door, looked at me and said, 'What's for dinner, Batman?'."