CHASE Responsible Lending Statement Been Reminiscing...
Been thinking this morning. Reminiscing…
April 21, 2009 marked my 23rd anniversary working in the mortgage business. Starting out in Escondido, CA with Home Savings of America as a trainee appraiser in 1986 when tax laws were changing, I started out busy. Everyone was trying to make changes in their financial plan before new tax codes took effect. At that time the only loan product we provided was the Option ARM, which had been developed in late 70's to early 80's. We appraisers had access to the old appraisal files and refer to them when a customer was refinancing. I used to see interest rates noted on the folder that went all the way up to close to 20% for a fixed rate, which is why ARM's were developed. Since Option ARMS were the only product we sold and were kept in the Bank's portfolio, it was critical that customers knew exactly how they work. Every Loan Consultant had to memorize a script that explained the product in detail and that was before they went to formal training. If you couldn’t do the script you were sent home. These were professional Loan Consultants.
I worked my way up through Home Savings, to Chief Appraiser, then Assistant Loan Manager. Back in those days, most all of the necessary activities were done in the local branch. The appraisers had their own area; the Loan Manager and Asst. Loan Manager were in offices. The Processing staff was all there and all of us supported the Loan Consultants. Back then, appraisers and loan managers moved around to different branches every few years. I worked in branches that covered all of San Diego County. I knew neighborhoods; I knew what the markets were and knew the community. Appraisers completed the appraisals; Chief Appraisers reviewed them-often driving the properties to review in the field and signed off for the Loan Managers. Loan Managers would then sign off on the appraisal, also driving the property and comparable sales. We were not just verifying the estimated value, but also the quality of the appraisal work. The Assistant Loan Manager did the majority of the underwriting of loans. Loans up to a certain level could be approved, suspended or denied before going to the Loan Manager. Higher loan amounts would be pushed up for higher and higher levels. Back then the loan to value ratios were lower and verification of income, assets, etc. was performed on all loans.
When I started there was one computer terminal in the office, used mostly by processing. We had fax machines and would copy the fax because it would fade over time sitting in the files. Photos for the appraisals were made using black and white Polaroid cameras. Since Home Savings put all loans in the portfolio, we didn’t use the typical appraisal form. We had a two-sided card that fit into an envelope about 6” x 9”. We used a mechanical pencil to fill in all the information. My first Chief Appraiser told me I had to block print so that it would be legible. After writing that way every day, I soon forgot how to write in script, except to sign my name. I also had to really start wearing glasses with a stronger prescription.
Every lender, every business looks for ways to cut the cost of doing business. Computers change workflow and offer up the possibility of doing more.
1995 Home Savings centralized processing and underwriting functions in two locations. The sales staff continued to work out of their offices, the appraisers worked out of their homes and sales managers managed a bigger area. The underwriter working on a file may have been an hour away or 5 hours away by plane.
Washington Mutual started buying and growing in the 90’s. For us in California we saw American Savings, Great Western and others in the west become a part of “WAMU.” We also merged in 1999. These mergers were exciting and were difficult at times. One thing that was always consistent was the “savings and loan” mentality. We took in deposits from customers and lent money to homeowners. We would do everything we could to help customers, even if that meant denying their application. The words “common sense” were used a lot. The numbers may have added up positively or negatively, but in the end a loan approver had to believe the customer would be able to pay their payment for their home. I know my competitors also took the same view. There were always some differences in each lenders view and we were all better for it.
There are numerous articles, blogs, books and media discussing what happened in the past several years. I know some things now that I was completely unaware of during the boom period. I only worked with prime customers. What was happening in subprime was not an area I was exposed to, until near the end. I do remember when higher LTV loans were getting pushed out to the field. We at WAMU were slow to implement and many of our Loan Consultants complained about all the business they were losing. This was when Countrywide made a huge push to dominate the market. Not only were they aggressively promoting these new products, they were recruiting every possible Loan Consultant from WAMU, Wells Fargo, Bank of America, etc. As I was trying to keep my people, I had to address the fact we couldn’t compete against 100% financing. I knew they didn’t want to hear me say it, but I said “I would continue to forward their complaints to our bosses, but I was very nervous about these loans.” Anyone who had been in the business for any period of time knew that everything works in cycles.
The boom cycle was not one I had seen before though. The combination of lower interest rates, higher loan to value and less documentation opened up the floodgates. I believe that majority of retail salespeople working for banks; mortgage bankers and mortgage brokers performed their jobs honorably. Most had been in the business for awhile and were looking for relationships with customers, not just the deal. We also hear and see stuff that shows how many disreputable people were out there. After the market started to implode in 2007 I had many people apply to work for me. They had been working in the business a year or two or three. They had no idea how to document a file or even explain how a loan worked. One person told me about his experience working for a company in the San Francisco area. They would hire dozens to hundreds of people to come in and work the phones. Their was no training but the script. They were to call friends and families first to get business. Every month all non-performers were let go and a new group brought in. My eyes were opened.
April 2008 we were told all of the Home Loan Centers were closing. All lending would be done in the Financial Stores. During that period of time, as all the bad news was coming out, many of us hoped Chase would buy us.
Well, I took my severance and went to Chase myself. It has been a year now. More layoffs, more restrictions, more challenges. And now back with friends from WAMU! There is a new vision for mortgage lending today.
The Chase vision is reflected in the Responsible Lending Statement.
These values look awfully familiar to me and I am glad they are here!
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