Listen to what Dr. Emmett Brown, the Nutty Professor in the film Back to the Future, said to Marty McFly when asked how the Flux Capacitor works: “First, you turn the time circuits on. This one tells you where you’re going. This one tells you where you are. This one tells you where you were. So, you input your destination time on this keypad, and Voila, you can travel back or leap ahead into the future”.
Hey, it worked in the movie! But just try using the back button to 2001, when you could write up a Real Estate Seller Carry offer to purchase, put in the Offering Price; Down Payment; Interest Rate and Terms and once accepted by the Seller, simply head on over to Escrow and open an Escrow and move to closing in a matter of days. It just won’t work anymore. Tucking in a Seller Carry or putting it to bed, just isn’t a piece of cake anymore. In fact (and I hate to even think or say this) with the new regulations in place, if not done correctly it could cost you a fine or at the least a “nick” on your license. Being in the Real Estate Business and helping consumers buy the home of their dreams is not as satisfying as it used to be.
Back in the day, at the turn of the 21st Century (not so long ago), you could purchase a Note and after cursory due diligence, go to Escrow with your funds, the seller delivered and endorsed the Note and within a week from start to finish, it was heading for the Servicer (I hope NSC) to Set-Up and get the investment cash flowing into your account. Now, even the Servicer is bogged down and overwhelmed with regulations supposedly put into place to protect the consumer with the unintended consequences of making it extremely difficult for the consumer to purchase with any type of non-traditional financing. Unfortunately, it is also the era when banks have tightened their belt and some closing their womb to the loan application of the borrower for a loan.
Well, that’s Where we Were back then, but the reality is, here’s where we are as Loan Servicers and also as Investors or Private Lenders, just a dozen or so years later. Think about it, without the assistance of the Flux Capacitor, a time-traveling DeLorean or a Bolt of lightning hitting a clock tower – we have been plopped into the “here and now”. The “here and now, embraces a whole new set of Rules which have been delegated to the Federal Reserve who, in turn, created Agencies to write and enforce these new Regulations. Unfortunately, these regulations have created a paradigm shift of how we do business by affecting the decisions we make on a daily basis. Compliance Programs, Policies and Procedures require higher professional expertise, legal, insurance and risk management cost are escalated. All in all the new requirements have placed a tremendous financial burden on lenders and Servicers. More importantly, these increases have resulted in a necessary increase in fees to clients across the board in order to make ends meet.
The Financial, Economic and Entrepreneurial Landscape have changed dramatically. Perhaps more in the last decade that in the previous 50 years. The Dodd Frank Act has now put us into what is known in the trade as “The Age of Dodd Frank”. It’s not going away. In a recent speech by ….Cordray, the head of the Consumer Financial Protection Bureau, he declared the Consumer Finance Protection Bureau is a “regime (that) will govern the mortgage servicing market – including both the bank servicers and private loan servicers – in perpetuity.”