A lot of the customer-visible pain in the process is that the front-end and back-end are managed by different people with different world views, imperatives, comp structures, etc.
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Front-end: commissioned sales reps who turn leads into mortgage applications. Back-end: operations professionals like underwriters who turn mortgage applications into a product which can be purchased by investors, while not violating the laws (of which there are many).
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It’s “the back end is *}#*]ex” which makes for the best reading in the book, particularly because the author (who comes from the sales-y) side is resolute about the challenge being management and not IT systems, even when it’s manifestly IT systems.
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A point the book makes numerous times: the human labor cost to produce a car at GM is less than that required to produce a saleable mortgage. (Both around $2k)
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Previously, one sales professional generated sufficient paperwork to keep 0.66 operations professionals busy in producing the saleable artifact. Dodd-Frank and post-crisis regulation increased that to 1.5 ops professionals, baking in about $2k regulatory expense per mortgage.
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The industry clearly chafes at some of the refs, including Ability To Pay, which determines by fiat a relationship between documented income and the size of a mortgage payment one is allowed to take out. Note that “documented” part because it is important.
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Interestingly the primary cure for a defective loans (here meaning “it lacked a paper trail compliant with government standards” rather than “didn’t pay”) is that investors get to have you repurchase it, I assume as a free non-expiring put option.
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Anyhow documented income: Explicitly connected to millennials, blacks, and Hispanics having disproportionate troubles relative to true ability to pay, simply for setup of income streams. If you don’t have single established W-2, prepare for headaches.
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Author profiles a hard-working immigrant who does 3 different gif economy things plus a bit of System D and would be almost immune to underwriting despite better income than many less industrious people. Interestingly this *also* hit professional class early in careers.
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It’s an originally French term for the grey market economy, where folks are paid in cash irregularly generally out of view of the taxman. The specific example was that the guy has friends who are doormen and he’d occasionally pick up their hours, probably w/o employer knowing.
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