I HAVE TO VENT!!!!

[Mike H.]

Holy cow. This is just one of those scenarios that I think only fellow BP members could truly appreciate the nonsense. And it was something that I'm absolutely on fire about. It was either vent here or lose my mind.  So here goes.

I have been in the process of completing a blanket loan refi on 7 properties with one of the national blanket lenders (firstkey).  This process has been one of the most difficult and time consuming loan processes of anything I've ever done. It has literally consumed a good deal of my free time over the past 2 months.

Imagine doing a 5-10 conventional loan with all the fannie mae guidelines and all the crazy underwriter requests. Now multiple that effort by 10.  Thats how much time you're going to spend doing these crazy blanket loans with these companies.  They want so much information its silly. And they want the properties repaired as well - no matter how trivial. I actually had to have the gutters cleaned at one house in order to get this loan.

So, finally, after 3 months of nonsense, I signed all the loan docs on friday. Interestingly enough, this crazy company has its own rules on closings too. You actually schedule a signing date to sign the docs. But the loan isn't considered closed (not even dry closed) just by signing the docs. The loan isn't considered closed until they receive the originals.

Ok. So now I sign on friday. Docs are overnighted to them. They receive on tuesday. I had to wait the additional days because of the weekend and the holiday. Ok. Fine. I'll get my check today.

Nope. At 10:30, I call and ask the title company if the file was closed and the deal was funded so they could cut the check.  The mail I get back?   "Call me".  Lovely. How bad can it be?  

Well apparently, the title company forgot to seal the envelope. Of the 100+ pages that were sent, the lender only received about 30 some.  So now some of my business info is floating around who knows where.  It is what it is.  

But now I have to sign the docs all over again and wait til tomorrow. Jeepers.  But only if it were that easy.....

No. Apparently, firstkey needs some crazy indemnification letter from the title company saying they will indemnify firstkey from any issues that may arise from this transaction. Lovely.  Well, my title company's legal counsel says they won't do that and so now the entire deal is in limbo.

I get thru to the title company legal counsel and see if I understand what firstkey is trying to get from this letter. Then I send an email to everybody including firstkey saying that if firstkey just wants to ensure they won't get sued by me, I will sign the letter. 

No response. The legal counsel from firstkey hasn't responded to a single email from me all blankety blank day. I'm calling my rep there and he keeps telling me they're working on it. And all I see the firstkey counsel doing is sending out emails with the photos of the fedex envelope.  And the people on both sides debating whether the fedex tab has been set or not.

I've never seen anything like it.  I can't get anyone from firstkey legal to explain to me why my suggestion won't fly. I'll sign the letter saying I won't hold them liable for any of my info getting out as part of this transaction and then we can move forward.

They won't even reply......

I am so close to wanting to walk from this deal just so i can take them to court for failing to respond and work thru the issue. 

I also pointed out to them that what if fedex had simply lost the envelope. Are they suggesting they wouldnt' close unless fed were to give them an indemnification letter??? I told them we all know that wouldn't happen. So what the blank is their issue here?

And if they actually have one, then why aren't they telling me, the customer, what that issue is so I can address it. Is it for me suing them? I'll sign something waiving that. Is there some really strong reason why it needs to come from the title company? Tell me that reason and I can push back harder on the title company since they're the one I always use.

But this is just ridiculous. And firstkey's legal group's absolute unwillingness to speak to me about the situation is the most obnoxious example of a lack of business ethics I have ever seen in my life.

Some of the original docs got lose because the title company made a mistake. How in the world can we not get this loan closed now? 3 months and easily over 100 hours of my time and close to 7 or 8k in fees and other hard costs (repairs, etc). And a title company rep accidentally forgetting to close the envelope is going to blow the entire thing up.

And I'm sure some of you are doubting whether this deal won't close now. But the legal counsels on both sides have really dug in. The title company won't budge right now. And firstkey has yet to be willing to speak to me throughout the entire process - which makes absolutely zero sense to me.

I'm not the one that sends the docs in the envelope so it wasn't my fault they got lost. And even if I had the right to sue them for the docs getting out, why in the world would they not want to talk to me to explain the situation, explain their position and come up with some reasonable solutions?

But thats not happening. And the fact that it isn't suggests to me that they may just be moving on to legal defense instead of closing this loan.

And that is the kind of nonsense and ridiculousness that we investors have to deal with as we work with all these lenders. Most of em have no clue what they're doing and they're literally as dumb as a box of rocks when it comes to using common sense to solve any problem.

So there is my vent.  An unsealed fedex envelope by the title company has literally derailed a 765k refi loan. Go put that in some investor seminar........ 

[Mary lou L.]

Not to make light of it but (Im in a funny mood today)

Included with future application packets from Firstkey should be a roll of duct tape!

[Charles Worth]

@Mike H.

And they were named SFR lender of the year. What a joke. It always surprises me that the process is so inefficient across the board.

[Mike H.]

Ok. Here's the closing update.

So they sent out an email this morning. Firstkey said they could see the package tracking info and it was scheduled to arrive to them by 3pm. They said they needed the copies of the new docs we sent so they could review them in order to have enough time to fund today - after they get and confirm the originals.

Great.  I emailed the title company. Hey. I thought you said you were going to send them out for AM delivery????

Well, then an hour later the email from firstkey goes out that they received the packet. Apparently, there was one thing they still needed to see from the title company but they could close without. Ok Great.

And there was one thing they needed me to sign so they could fund because it wasn't included in the packet. But they could take a copy of that (it was the estimated payments including escrow).

Naturally, I was unable to get to the computer to scan and send so it had to wait an hour. I sent it in. Waiting for about an hour and a half. Nothing.

So then I email them and ask them if the loan has funded.

"Nope. Not yet. She will let me know when it does."
So I reply, what exactly are we waiting on? I thought my doc was the last thing they needed.

2 minutes later, the email goes out.  Its funded..
My wife goes over to the title company to pick up the check.

And this crazy fiasco is now done and over with. 
100k...... At a cost to my net cash flow of about $350/mo.
And some long term headaches I'll have to deal with because of the separate entity I had to create.

Still, this was the craziest thing I've ever gone though in the 8 or 9 plus years of doing this. 

But we're now back to the real business. Investing in real estate. And in working with a new wholesaler, we're set to close on a really nice house at the end of next week.  #45 is hopefully coming real soon.....

Thanks for the sounding board on this though. Normally, I can suck it up and deal with the nonsense. But this was one of those I really wanted to blast firstkey on a little and see if anybody else thought this was as crazy as I did. :-)

[Bill Gulley]

Oh, this is what examiners live for! Attorneys too! 

There are some issues that aren't as bad as they appear, you do have a 3 day right of recession and blanket loans aren't secondary market deals with electronic docs, so I understand the bird in the hand thing. Even so, losing the docs, shipping in an open package, personal financial information blowing around who knows where.......oh boy! :)

[Curtis Yoder]

This entire string fits directly into a little saying my Father once told me....

"He who cares the least wins"

I have been in so many situations in my life where I have pulled this out of my memory and thought about my Dad saying this. If you don't understand, go to your nearest Tag Agency and try to get something done without PERFECT paperwork. lol

Good luck to you and congratulations on getting it done! That is what investors do, they get it done!

[Mike H.]

The funny thing is there was very little personal info out there. No ssn. 
The would have the corporation's ein. And know the addresses of my properties but thats public knowledge. 

And I don't think there actually is a 3 day recision period for commercial/investment property loans. I think that only applies to your primary residence.

But it was still all kinds of crazy. And the fact their attorneys wouldn't talk to me really got to me. They wasted so much time yesterday arguing with the title company that it made no sense. 

At the end of the day, they did exactly what I suggested they do. And the reality of it is that they're far more protected with me indemnifying them than with the title company. 

But the whole process seems silly and I'm glad its over.

And the funny thing is that literally one minute after the email went out that the loan had funded, my firstkey rep called me. He even threw out there (by habit I'm guessing) when the next deal would be. :-)

I said listen, I could never do that again. If they didn't change their processes, I just would never want to go through that again.

He mentioned a one house product they had that had a much easier process. But it was a 30 year fixed loan (term and amortization) with a rate of 6.7%.

I said no, I can't do that. If they were to do a 5 yr balloon amortized over 30 yr and get down to 5.7% then that I might be willing to entertain. But the underwriting process would have to be different and there's no way I'd be creating a separate entity for every one.

So if there are any lenders out there wondering what a perfect loan product would be, here is my dream loan product yet something that I think might still be reasonable:

1) 5 yr balloon, amortized over 25
2) LTV of 75%
3) No seasoning to use the appraisal value on a rate/term refi
4) Rate - 5.5% or better

Thats my dream loan. If someone were to ever be able to offer that loan product and tell me they would do 20 properties under those terms, I would be TICKLED PINK!  :-)

[Jay Hinrichs]

@Mike H. West coast lenders all want originals back and review before they fund.. 

its why we sign docs on a Tuesday and maybe fund on a Thursday.. they also won't fund without recording numbers. 

this is the general feedback I have heard from all the new players that have entered the investor market... And they know there is risk in these loans and they own them so they are obviously uber careful... does not help that your buying the exact same home you say is worth 100k for 50k... LOL  like happens all over the mid west.. 

I had a texas closing last week were they would not do a mail away and would only send to their sister title co. .who happened to be one I have used for years or a moblie notary which I dont care for.

So I sign and my title co. in Oregon forgets to send the package.. poor buyer wants to move in on Friday but docks dont arrive...  felt fad for them

[Mike H.]

Interesting.  Thats just so different than how I've typically done any closing before.

I don't see how they get away with that. Basically, if I'm obligated to the loan when I sign the docs, then they should be required to fund when I sign as well. 

Seems one sided to me. They can back out by simply "losing" the docs. But I don't get that option?

What is the world coming to you when you even need an "original" doc anyway. You aren't going to file the original as part of a foreclosure proceeding. Do you have to produce one for a foreclosure proceeding? Just craziness.

[Jay Hinrichs]

@Mike H.  you do need the originals to foreclose.. the DT or Mortgage of course is recorded but the note is not. so they want the original in hand before they fund.

now when I was in my hey day of HML in 12 states there was different procedures in each state but it was our money so we could determine what we did. Just like these guys its their money they make the rules on how they want to fund

[Roy N.]

Originally posted by @Mike H.:

So if there are any lenders out there wondering what a perfect loan product would be, here is my dream loan product yet something that I think might still be reasonable:

1) 5 yr balloon, amortized over 25
2) LTV of 75%
3) No seasoning to use the appraisal value on a rate/term refi
4) Rate - 5.5% or better

Thats my dream loan. If someone were to ever be able to offer that loan product and tell me they would do 20 properties under those terms, I would be TICKLED PINK!  :-)

You should come north. Mortgages usually 5-yr terms with a 25yr (occasionally 30 yr) amortization with a 75% LTV on refinance (no seasoning) and rates on residential are currently 2.5 - 2.7% ;-)

[Cal C.]

I feel your pain. Count yourself fortunate that they only took four hours to figure it out. I used to buy houses using VA vendee loans and Bank of America had the contract at that time. They asked me for my federal tax extension (not a copy, not a certified copy, not a letter from my accountant) I mean the actual extension request that goes to the IRS is what they demanded. It took me most of two months to get that one straightened out.

[Mike H.]

Yea. I get that. But I really think these guys should describe the entire process to people before they sign on. I'm sure they don't because nobody in their right mind would go through with it.

Had I known it was going to be such an unbelievable ordeal, I would have just went to my local banks and done rate/term refi's on each one individually.

Logically, you'd think it would be much easier to do a blanket loan since they would run your file once and then just have to deal with the extra effort on the appraisals and title work.

In reality, the files for these blanket lenders is thru the roof. It makes a conventional loan process look like a no doc loan from 10 years ago......

If these lenders were to give you the laundry list of documents you're going to need to get to closing and tell you everything you'll have to do BEFORE you put down your deposit, they'd never do any business.

The rep actually told me that getting thru the term sheet offer was the most difficult part in terms of the paperwork. You can guess what I think of that after taking this all the way through to close. :-)

I think I'll stick with the local or midsize lenders down by me from here on out. And next time I need the infusion, I'm going to just do them one by one. It'll save a ton of time and aggravation.

And my suggestion to other investors when you're listening to these funds tell you how easy the process is, I would say expect to spend about 3 or 4 times the amount  of time, energy and effort you did on a 5-10 conventional loan. Thats about the level of magnitude you're looking at to get one of these blanket loans done......

And believe me, 3 or 4 times is no exaggeration. Compared to a commercial loan I get with a local bank, I'm guessing that number is 100 times - and thats no exaggeration either. I literally give my local banks the address and estimated appraisal value/loan amounts and ask them to refi.

They don't even ask for an appraisal fee up front. Sometimes, I have to update my schedule of real estate (which I keep up to date anyway) and personal financial statement along with the bank statements and pay stub and thats it.

I can have their paperwork to them in a matter of 15 minutes......

So is 1500 minutes a fair assessment for my time on this one (25 hours)?
Its way more than that.  I spent a minimum of 40 to 60 hours of my time on this refi.....

[Account Closed]

A good loan processor would have all conditions cleared in a month for those loans.  The silver lining, if any, is that first key is making no profit on this transaction. Yet, they still have to make payroll.

If you need another source, give me a call  We do asset-based investor loans.

Dick Dyas  434-325-7229

Gia Capital

[Mike H.]

2.5 to 2.75%?  No wonder why the prices in canada are so high. :-)

At least thats what I've seen on those HGTV shows......
Maybe thats only the cities.  But I think I've seen 3/2's, 1600 sq ft going for 600k in areas like toronto.  

[Roy N.]

@Mike H.

Toronto and, worse, Vancouver are little bubbles unto themselves.   That said, a 1600 ft^2 3/2 in the Maritimes can run anywhere from $140K - $200K these days (rent: 1100 - 1400$/month)  ... of course, you would get a 28% discount on the dollar right now.

[Jay Hinrichs]

@Roy N. which makes HML in Canada attractive if you can make a loan with US dollar right now with a nice 10% plus interest rate ... then say 2 or 3 years from now the Loonie is closer to par you do quite well.

I stumbled into a few of these when I spent time in B/C  made the loan at an all time Loonie low then got paid off when  we were close to par... Also Rev  CA does not track that kind of income like they do capital gains.. its was a nice play

[Brian Burke]

@Mike H., welcome to the world of structured finance. Sounds par for the course. These lenders plan to securitize your loan, and most of the groups that do that have similar procedures. You'll see it with all three of the big SFR portfolio lenders and you also see it on CMBS loans. Original documents (usually 3 to 4 duplicate original signatures per document). Massive process checklists. Huge lender legal costs. It's all pretty typical and very daunting. I've been through it several times, I feel your pain.

Not to add salt to the wound, but the only thing worse than the ridiculous legal squabble over an open envelope is that you were paying the bill for the cost of the lender's counsel to give you all of that grief.  On an hourly basis, no less. 

By the way, your "dream loan terms"?  It's already out there. I closed a loan last December on around 35 houses with terms almost identical to your dream list. Trouble is, it took about 80 hours of my time to get the deal done.  Sound familiar?

I did another one a couple of month ago...over 100 notary signatures.  Made me really grateful to have a notary on my staff. The notary fees on that deal would have been huge!