By: Stephanie Diana Gast- Wilson

Tonight I am writing about a great opportunity. I am working on a business plan and business model to redefine how the mortgage industry handles condo compliance underwriting. As we see smaller lenders struggling to afford condo teams and builders creating projects that cannot be approved through traditional lending when they get to the sales of their units. It is time to revolutionize the process and create something to help keep compliance sale’s strongest tool.

So, I am looking for people to collaborate with on this project in taking CondoLand to the next level. The platform would involve all employees working remote as a method of keeping overhead costs down.

The backgrounds needed for this project include the following:

  • Real Estate/ Real Estate Compliance Attorney,
  • Business and funding development specialists/ Marketing, and
  • IT specialists.

If you are interested send an email with your resume, letter of interest, and social media contact info to condolandconsultants@gmail.com. You can also reach me through DM on twitter @sdgwwgds

If you have someone to reference that you think would be interested in such an opportunity I would love to reach out to them. Also, remember sharing is caring share away on social media.


Disarming the Mortgage Sales Force: How the Changes to the CFPB are Hindering Sales Reps

By: Stephanie Diana Gast- Wilson

I was reading Rob Chrisman’s daily news letter and how the compliance aspect of the mortgage industry is putting their hands up to comment on the fact that the financial crisis of 2008 didn’t happen by accident. It happened because the mortgage industry neglected a sales reps best defensive weapon… the compliance department.

For those who don’t know me from working with me or reading my blog or social media regularly I am a Condo Underwriting Compliance Specialist within the mortgage industry. While, working in this arena I have earned my Masters of Science in Operations Management at Southern New Hampshire University and I am working on my Doctorate in Business administration at South University. Working in this industry I am lucky to have both the in the field perspective along with the academic perspective. Having these vantage points allows me to look at the battle field that is the mortgage industry in an interesting and dynamic way.

However, from my vantage point I have noticed an industry wide systemic issue. This issue can be best explained by looking at the holiday arguments I have with my brother who is a loan officer. One of these debates ended with him saying something that still strikes me every day. He told me, “You compliance people are all alike. You don’t get that you are what is standing in the way of progress”. In looking at interactions within the mortgage industry sales seems to hold this adversarial attitude about compliance people. When in reality mortgage compliance specialists are a sales reps best defensive weapon.

Even without taking a look at the global viewpoint implications of lowering compliance regulations and how that can cripple the American Economy, compliance is a reliable defensive weapon sales people are just getting the hang of wielding. See compliance departments protect sales reps, borrowers, and the company they work for as a whole. An example in my own work is sometimes when I have had to talk to the borrower when a loan is declined for condo compliance issues and I explain the fact that the property might be your dream home but; based on a list of reasons it will quickly become your financial nightmare and no one wants that for our buyer. This helps protect sales people from lawsuits but; also helps borrowers make good financial choices. Which, is the most important reason why compliance the undervalued weapon of sales needs to be enhanced. Not deregulated.

Down Payment Assistance Programs and Condos

By: Stephanie Diana Gast- Wilson
A question I have been getting asked a lot lately is regarding down payment assistance programs and how they affect condo project underwriting? For investors and future home buyers a down payment assistance program where money is not directly given towards the purchase of a home from say a local government or nonprofit towards the purchase of a home. When doing a loan there may be a down payment which is a purchase can be as high as 100% Loan to Value Ratio otherwise known as LTV

The main programs that I personally see a lot and get a lot of questions about are CALHFA and USDA loans.

First as usual always touch base with your local underwriting and real estate professional to see if these products will be helpful for your situation. Also, be sure to check with your lender. Now that the CYOB (Cover Your Own Bottom) portion has been covered let us tackle the topic of down payment assistance home loans and how they relate to condo underwriting.

Starting with USDA loans. First off a USDA loan has very little to do with meat since many of us associate this department with food inspection so easy mistake but; let’s clarify a bit. Also, many mistake USDA home loans for only helping those in rural areas. Which is a common misconception that needs to be squashed. USDA home loans is a down payment assistance loan product that allows borrowers in both suburban and rural areas to come in with no down payment and purchase a home. The nice thing about these types of home loans with regards to condos is the fact that per the published USDA underwriting guidelines the project either must be eligible for Fannie Mae full CPM (Condo Project Manager) approval, or the project must be actively approved by HUD through FHA review or VA condo approvals which are published on the HUD website. Although if the subject unit being purchased is detached or a PUD than condo review is not required. However, check with your lender as some lenders are more cautious than others about this topic and may still require a full review. But, remember if there is litigation against the HOA or the developer that may throw a wrench into things so always again investors always check all the condo docs provided by the HOA just in case the lender misses something. No one wants to pay hundreds for a lemon.

Now CALHFA is similar as it is a down payment assistance type program in California specifically where if one has the amount for the down payment then the loan program can be put into the back end of the loan towards closing costs or the other way around. The difference between a CALHFA loan and a USDA loan is that the Direct Underwrite program must be set as conventional, FHA or VA and how this is set up depends on what kind of condo underwrite is required. So, if the CALHFA product is added to the loan as a down payment assistance program but; the loan is an FHA loan then the project the subject unit is located in must be located in an FHA approved condo project. So, research on a project is key to starting this process so that the condo underwriting part of the loan is as simple as possible.

Another fun fact about CALHFA loans is that they are designed for people who are low income and not only must the borrower max below a max amount based on the area of California that the borrower is shopping in. But; the subject unit has to be a max value. Which can be challenging to in areas like silicon valley or San Francisco. However, every obstacle is an opportunity for more condo sales since condos tend to be more affordable. There are also condo units with deed restrictions that have to be sold for lower prices to people with less income. (See article on deed restrictions).
Hopefully, this article has helped you. Remember sharing is caring so feel free to share this article. Also please feel free to us on topics or questions at condolandconsultants@gmail.com or on facebook at condoland or via twitter directly to the author @sdgwwgds

Waivers Blessing or Curse for Builders?

By: Stephanie Diana Gast- Wilson


As with all posts let’s get the disclaimer out of the way in that builders should always touch base with their preferred and do your own research on the topic of PERS otherwise, known as Fannie Mae (FNMA) waivers or agency new construction waivers.  Like any lending product, there are draws and drawbacks so always be informed.  


Now that we have gotten that out of the way for those who are not familiar with what new construction waivers are they are exceptions made on a case by case bases for projects that do not fit to the letter of new construction underwriting guidelines. For example, projects that have more than the max amount of commercial space.  In these cases, depending on all risk factors a lender can send the file to Fannie Mae or Freddie Mac for a waiver.  However, there are some risks that the borrower has to account for.  


Such as the costs of getting a PERS review from Fannie Mae.  Per their most updated PERS overview published May of 2017 which can be seen in PDF format https://www.fanniemae.com/content/fact_sheet/pers-overview.pdf the price is finally posted online.  Now their charges are nonrefundable and are just for the review itself with no guarantee of approval.  This can be costly for the builder/ developer depending on the size of the project but; this can also be an added risk for the lender.  


Not all lenders are willing to do the work and obtain the required information to submit for waivers as if a waiver is approved for a whole project or a phase of the project it opens up a can of worms not all lenders want to deal with.  Specifically, when a project gets a PERS approval it is published on Fannie Mae’s website as being approved by all lenders.  Which adds risk for preferred lenders regarding other lenders doing loans in the project.  Yet, at the same time, it helps so that the preferred lender does not end up having too big of a loan concentration.  Which helps so if the economy falls again like 2008 the whole project will not be owned by one lender.  


Although builders also need to think bigger picture.  Such as projects with too much commercial space or large single investor concentration or other non-warrantable issues on new construction projects can cause the HOA after the control is taken from the developer to have issues.  The issues it can cause is making it so that the HOA has to work with lenders and pay money to get waivers for the project just so unit owners can always be able to sell or refinance their units. Which hurts investors in the long run.  


Hopefully, this article helps you with project planning and investing.  Remember Sharing is caring.  So share away.  

Condo Terms Glossary A- G

Stephanie Diana Gast- Wilson


It is understandable that since Condo underwriting is such a specialty skill that many terms and jargon are lost on those who invest or work within the industry and do not deal with condos on a daily bases.  So, this is a first part series of condo glossary terms.  This article will cover terms A- H.


    • A
      • Asbestos
        • Asbestos which you can find information on what it is https://www.asbestos.com/asbestos/ .  In layman’s’ terms , it is a material used in construction to resist fire damage.  However, it can cause cancer among other issues as well when it becomes powderized and in the air.  It is good to note where asbestos is present the appraiser must note it and give an opinion on how hazardous the exposure is based on a building standpoint.  From a condo standpoint based on current agency underwriting guidelines a stage 2 environmental hazard assessment must be done and an asbestos report must be obtained.  Also be sure to check and see if the HOA is under any sort of litigation due to this condition in the project and if there has been any abatement.  


  • See FNMA seller guide section B4-2.1-03 through -05, Environmental Hazard Assessments.  


    • Assessment
      • The word assessment is another way of describing the HOA dues charged to the unit owners for the upkeep of the property.  
    • Appraisal
      • A report that assesses the value and condition of a property.  Please note that a condo appraisal is on a 1040D form.  Also, verify that it is not subject to or on legal- non conforming land.
    • Apartment
      • The use of the word apartment can indicate in certain states the styling of the condo meaning one unit above another.  This can also be used as nomenclature for a condo unit in the title, legal docs and HOA cert.  However, this term can also refer to apartment style rental units on the project that are part of the commercial space.
  • B
    • Budget
      • An estimate of income and expenditures over a period of time.  With regard to condos the time period tends to be financial year or annually.  Reviewers should verify when the budget expires.
        • See the budget review guidelines per agencies under full review requirements.  Also, note that 2-4 unit projects have a different set of guidelines regarding budgets.
    • Building
      • This word is often used to describe the structure the unit is located in.  Building or buildings can also describe different physical or legal phases.  See guidelines on legal phasing and new construction projects.
    • Boilers and boiler insurance
      • See mechanical breakdown but a boiler is a mechanism that heats a home much like a heater/ water heater.  
  • C
    • Construction
      • Construction or New Construction can relate to if the project meets established guidelines.  This can also be a term regarding defects or repairs that are going on within the building.  
    • Conversion
      • Conversion is when the building is either gutted in a full or part from one type of building to another.  Some conversations are in legal description alone.  An example would be from apartment complex to condo.  Please note that FHLMC guidelines require for a project that was converted in any capacity to be considered established must have had the conversion completed at least five years before the date of underwrite and three years for FNMA.
    • Condo
      • A condo is a legal description of a property type like a manufactured home or single family residence.  This is not to be confused with the property style being apartment style or townhouse style.  (See article on PUDs and Townhouses).  
  • D
    • DU
      • DU is an acronym for Desktop Underwriter which is the program used to do the initial underwrite for FNMA.  This document regarding condo compliance underwriting first of all details what the loan product type is such as conventional, FHA, VA, USDA or a Bond loan.  Also this will note the occupancy type and the loan to value ratio otherwise known as LTV.
    • Deed Restriction
      • Deed restrictions are private agreements that restrict the use of the real estate in some way, and are listed in the deed. The seller may add a restriction to the title of the property. Often, developers restrict the parcels of property in a development to maintain a certain amount of uniformity.
    • Deed In Lieu
      • A deed in lieu of foreclosure is a deed instrument in which a mortgagor (i.e. the borrower) conveys all interest in a real property to the mortgagee (i.e. the lender) to satisfy a loan that is in default and avoid foreclosure proceedings.
  • E
    • Established Condo Project.  This is a condo project that meets FNMA’s guidelines for type S review.  Current guidelines define an Established project as a project with 90% or more of the project sold and conveyed, complete and not subject to additional phasing or construction, all common areas are completed and the HOA has taken control of the project from the developer.  
    • Equipment breakdown/ Mechanical Insurance has to do with a coverage clause on the HOI insurance for common area equipment.  Such as boilers,
  • F
    • Fee simple
      • Fee simple is a permanent and absolute tenure of an estate in land with freedom to dispose of it at will, especially in full fee simple absolute a freehold tenure, which is the main type of land ownership.
    • Flood cert
      • A Flood cert or flood certification in real estate is a document that states the flood zone status of real property. … If it is in a flood zone, federal flood insurance is required.
    • Foreclosure
      • the action of taking possession of a mortgaged property when the mortgagor fails to keep up their mortgage payments.  AS a condo specialist this can be a guideline issue if the HOA is requiring more than 6 months of past HOA dues and if this is in line with the state’s condo laws
  • G
    • Ground Lease
      • Ground lease also known as a LeaseHold, or Ground Rent is an agreement in which a tenant is permitted to develop a piece of property during the lease period, after which the land and all improvements are turned over to the property owner.  See guidelines for information on the review of ground leases.

Glossary Dictionary Definition

These are some of the main terms that need more clarification normally in my day to day.  Shoot an email or a tweet if you know more terms related to condo underwriting for A-H.  Remember sharing is caring so feel free to share this post.

Site Vs. Detached Condos

By: Stephanie Diana Wilson

Site Condos have always been a tricky subject particularly regarding USDA and FHA loans. However, conventional guidelines have changed recently providing lenders more clarity on the difference between a Site Condo and a Detached Condo. And before it is asked yes this post is an extension to last week’s topic post on “It Is Not a Condo It’s a Townhouse”. Much like the confusion between Planned Unit Developments or PUDs and the various styles of condo units the style of detached condos which look a lot like a detached PUD within a sub division can look a lot like a Single-Family Home or SFR.

Now before we start on this journey our normal CYOB moment. As a reminder guidelines change frequently and we are talking about guidelines posted online at the time of writing this article. If you have more in-depth questions be sure to contact your local mortgage loan officer or underwriting professional. Now that’s out of the way let us move on back to the topic at hand.

The issue becomes when the title shows that your subject unit is in fact a condo in a condo project is it detached or not. Normally an appraisal will show pictures but; I must admit sometimes it is hard to tell in the pictures. So, my advice to underwriters is never be afraid to ask the appraiser to verify if your subject unit is 100% detached. Once it has been defined as both condo and if it is attached or detached the next big question to ask is if the unit is a detached unit in a project of detached units or is this a detached unit in a project that has both attached and detached units?


Then we move on to trying to define if the unit is a site condo or a detached condo. Now Fannie Mae (FNMA) has made a list of defining factors that a site condo must meet. This info can be foud on the FNMA guidelines dated 3/28/17 at https://www.fanniemae.com/content/guide/sel032817.pdf on page 763.

Site Condo Definition A site condo is a detached condo unit in a condo project that meets all of the following:

• Project consists of all single-family detached units where the unit owners own the land and the improvements on the land.

• Project has minimal common elements, which may include project signage and limited undeveloped green space.

• Project does not own any common amenities including, but not limited to, swimming pool, fitness or recreational facility, playground, laundry facility, or clubhouse.

• Project does not own or have responsibility for maintaining its own infrastructure such as roads, street signage, electricity, water and sewage, snow removal, or garbage disposal.

• Project has minimal or no involvement with a homeowners’ association, including no or little

dues; no special assessments; and no road, amenity, or common element maintenance.

• Unit owners are required, per the condo legal documents, to carry their own individual hazard and other applicable insurance coverage, which may include flood and liability insurance. – (Fannie Mae seller guide dated 3/28/17)

Now part of the reason that the defining the difference between a detached condo and a site condo is because they are underwritten differently. Detached condos that do not meet all the above noted items to be defined as a site condo are underwritten as a condo through limited review. Detached condos per the current guidelines do not limit the ability to do detached units based on Loan To Value ratios or LTV. Which we have discussed in other articles. So, regardless of the LTV detached condos are currently underwritten as a limited review.

Now much like a PUD site condos do not require condo review process. Also, like a PUD a site condo is underwritten like an SFR. However, the current guidelines require that lenders must verify more info. Page 764 of the Fannie Mae guidelines updated 3/28/17 found online at https://www.fanniemae.com/content/guide/sel032817.pdf reads:

For site condos that meet all the criteria listed above, a project review is not required. Instead, lenders must confirm the following requirements are met:

• The project follows Fannie Mae’s requirements for priority of common expense assessments;

• The project is following Fannie Mae’s requirements for projects located on land zoned as legal, non-conforming land use; and

• The appraisal, completed using either Form 1004 or Form 1073, must confirm the local market treats units in such a project as comparable to owning a unit in a single-family detached housing development that has not been organized as a condo.

Hopefully this info has helped you. Remember sharing is caring so share the article. Also, you can find me on twitter at @sdgwwgds and on facebook just search condo land blog. If you have questions or topics you would like address send us a message or comment at facebook or twitter.

It’s A Townhouse NOT a Condo?

By: Stephanie Diana Wilson

Now this is a phase I have had to explain over and over drives me nut. It drives me nuts when sales reps and branches try to tell me a subject unit is, “it’s a townhouse not a condo”. Which is a common statement in DC and Colorado where there are townhouse style condos going up and attached PUD’s. This is a common misconception as townhouses are a style of condo. Often what the person wants to say is the unit isn’t a condo the subject unit is an attached Planned Unit Development or PUD.

The first issue is that many don’t really know what a condo is exactly. A Condo much like a Single Family Home (SFR), Modular Housing, Manufactured Housing, Planned Unit Development (PUD) is a legal description of a property. Where row, townhouse, garden, high rise, etc are styles of properties. The legal description for a condo in short is a property where each unit owner owns their unit with an undivided percentage of ownership of the whole property.
Now it is true that one style of condo is a lot like an apartment where there is a person living right above each other. However, the styles differ greatly in fact there are styles of condos called detached and site condos which are much like a single family home or SFR within a condo complex.

Low Income Retirement Condos or Complex
There are also condo projects that are townhouse style where there is an up and a downstairs level inside the unit. Also where a unit might be single story like an SFR or cottage like.


Now a PUD is a horse of a different color. PUD’s are a planned unit within a subdivision which can have mixed use land within. A great example from popular culture is in the movie Poltergeist the homes are PUDs within a sub division. Course that also can take us on the topic of track homes which is a topic for another day. The difference further in a PUD from a Condo is how they are underwritten. As a PUD legally is defined much like a house so it it underwritten much like an SFR. A Condo on the other hand is more involved because the financial implications an HOA can create as a risk factor for underwriting.

To avoid incorrect underwriting always look at the legal description which is most easily found on the title. Usually condos in a legal description state the word condo or note a percentage undivided interests. I have never seen a legal description as a townhouse. So, the moral of the story is alway read the title report. It can save on underwriting issues, wrong appraisals and other additional costs change in property type can cause late in a loan. And know there is no such thing as a property type called townhouse. But there is a condo style called townhouse.
If this article helped you remember sharing is caring. Also don’t be shy leave a comment on topics you want covered regarding condos.

Florida the Sunshine State with Different Condo Rules

By: Stephanie Diana Wilson

Based on questions I have been getting not just at work but; from other friends who work in the mortgage field a blog post on Florida Condo Underwriting guidelines since they differ greatly from condos anywhere else in the country. Or as one of my friends in the mortgage industry says, “OK it is time that we have a coming to Jesus on this topic.

Now for our usual CYOB (Cover Your Own Behind) please be sure to check with your lender or realtor professional to verify any updates to the guidelines or how the guidelines may affect your individual circumstances. Remember always consult your local Real Estate professional or Underwriter.

With that out of the way let’s discuss Condos in Florida. Florida’s real estate market has been hit really hard not only by climate change but also by the financial crisis of 2008. Only now is the state of Florida starting to come out of the abyss. And only now are the HOA’s starting to run their projects in line with the idea in mind that they need to make their projects saleable to lending agencies.

However, as Condos are a great and smart investment for borrowers they can be a risky investment for lenders. If the project is not running properly financially or keeping up with repairs at best lenders have a marketability issue in the event of foreclosure at worse they have a safety issue making the project non saleable. Because of this lending agencies have installed underwriting guideline rules on Loan To Value Ratios (LTV) that are different in Florida compared to the rest of the country.

Florida-Condos.jpg (1000×750)

Credit to below picture to Florida-Condos.jpg (1000×750)


First let’s clarify what LTV is exactly. LTV or again Loan To Value ratio in a nut shell is the amount of deposit that is brought in and the total ratio it is to the total value of the loan. So, if a borrower comes in with a 10% down payment that means the loan has a 90% LTV as 10% of the total value was brought in by the borrower. Another example is where a borrower comes in with 3% down on a down payment assistance plan (like here in California we have CALHFA) which calculates to an LTV of 97%. Basically; the higher the down payment on a loan, the lower the LTV is on the subject loan.

All this being said the max LTV’s for limited review on established projects are as follows in Florida:

Occupancy type Max LTV

Owner Occupied unit


2ND Home


Investor / rental

Not eligible for limited review

The rest of the country’s LTV guidelines requirements for established projects are as follows:

Occupancy type Max LTV

Owner Occupied unit


2ND Home


Investor / rental

Not eligible for limited review

So, in Florida a higher deposit is required in order to do a limited review. Now a limited review is done on established attached projects. We can tackle the topic of detached vs. site condos another day. We will also tackle further in another article about new construction in Florida. But, lets cover what a limited review is and why it is important that a higher deposit is required in Florida to do said review.

A limited review on an established project is a brief look at the project as certain things are not asked on the short form used for limited review. You can find Fannie Mae’s full review/ long form, and limited review/ short form standardized HOA cert at https://www.fanniemae.com/singlefamily/project-eligibility . One of the questions not asked on a short form is how many units are delinquent in HOA dues 60+ days and items like how many units are rental units and second homes? These are considered lower risk because the borrower came in with more down payment.

Full review on an established project includes how many units are in the project, investor concentration, etc. Also, the full review includes a review on the budget which includes making sure the HOA is not spending more than they are making. Also, the budget review includes an analysis of if the HOA is allocating 10% of the total dues to reserves and if not is the HOA following a reserve study that meets guideline requirements or not? It can be more involved and the HOA may or may not be following guidelines. Also, the amount of delinquencies in the project could also create an issue as agency guidelines require no more than 15% delinquency otherwise a PEW waiver may be need. Creating an added risk on a loan with a lower deposit.

Now the reason that this is a “Coming to Jesus” topic is that these LTV guidelines are based on the location of the subject unit not the location of the lender or broker’s office. Unfortunately, this can cause confusion for the loan originators. So, there should be emphasis for loan originators who do loans in Florida even when they are located outside of Florida reviewing the guidelines regarding geographical location and LTV in the guidelines. Not only will this help to prepare the borrower for what info will be pulled but also help to properly plan for how long it will take to get the loan cleared. Florida is still a Condo Land but; to underwrite there you got to remember the LTV guidelines.

If this article helped you remember sharing is caring. Also, feel free to suggest Condo questions you want to see addressed.

​Standing Rock and How Completion Will Hurt Condo Loans

By: Stephanie Diana Wilson
Normally this blog is socially and politically neutral but; the topic of protecting water and environment is near and dear to me.  The topic of environment also has the possibility to hurt not only mine and much of the US economy’s bottom line and the future health and financial well fare of the children who will become future home buyers.  Lets for a moment forget about the financial facts that more money is there to be made and more jobs can be created by the use of green tech and alternative energy resources such as solar and wind.  Ignoring these facts but paying attention to the facts that oil spills, can cause water and soil contamination.  

The reason I bring this up is because all the major lending agencies have very strict guidelines regarding environmental hazards within land that condos and single family homes.  This blogs focus is in condo guidelines and it could cause a project to become unwarrantable.  As we have noted on numerous occasions always check with your mortgage advisor and underwriter with questions on specific properties.  However, if we look online at Fannie Mae’s underwriting guidelines (keep in mind that the guidelines change frequently and again check with your underwriter) environmental hazards can be researched in section B4-2.1-03, 04, and 05.  This can be seen on the Fannie Mae guidelines online at https://www.fanniemae.com/content/guide/selling/index.html.  

In the underwriting guidelines it details everything from legally acceptable amounts of radon and other soil contamination, water contamination and seismic issues.  However, even if a lender’s condo department does not catch these issues the news advertising an environmental hazard will drop appraisal values.  This was observed during the gas leak in Porter Ranch, California.  The LA times wrote an article in April about how the gas leak had dropped home values in that area.  The article can be seen online at http://www.latimes.com/business/realestate/la-fi-porter-ranch-sales-20160406-story.html.  Even before these Porter Ranch loans of any kind came to underwriting many lenders may have been cautious about doing loans there because of the underwriting issues that come with environmental hazards.  

Another example of environmental hazards hurting the real estate market is Flint Michigan.  Michigan was hit hard as a whole state after the financial crisis of 2008.  Now that the city has been without clean drinking water since 2014 the housing prices have dropped to around $14k!  CNN documented how the people in that community have been hurting with the financial crisis that the water contamination has caused.  Please see link to CNN’s article at http://money.cnn.com/2016/03/04/real_estate/flint-housing-water-crisis/.  Many residences cannot move because, they can’t sell their home to afford to move.  Which is causing a real estate crisis throughout the country as more pipelines are being pushed through despite a stop ordered by the US government.  

At Standing Rock which are trying to protect not just the land that the pipeline is being built which is actively used native burial grounds but; the river that supplies water to the local reservation. There the Water Protectors are protesting the possibility that a pipeline might rupture.  Unlike in Lycoming County Pennsylvania where they have recently had a pipeline burst.   NPR wrote an article when it happened https://stateimpact.npr.org/pennsylvania/2016/10/21/sunoco-gas-pipeline-ruptures-in-lycoming-county/.  Also we cannot forget how New Orleans and Texas suffered during the oil spills in 2010 and how it harmed their housing prices as well.  https://www.clearcapital.com/newsroom/press-releases/clear-capital-impact-of-bp-oil-spill-reaches-beyond-gulf-coast/.   

This comes as more pipelines are being built across the country and as reports come in not stopping in North Dakota even though the government has halted their approval of the project on the land.    Even though using the Bush concept of asking for forgiveness being easier than permission has been showing not to be the case.  Going against the wishes of the native people has cost the NDPL reps more money than expected and brought to light the issues they are causing around the country.  

Although the issue of property values dropping due to environmental hazards is being published and this is being done across disciplines.  Such as the US National Library of Medicine published an article on home prices that have been effected by plants being opened or closed near properties.  https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4847734/. There is even an article on Jstor.org from the University of Wisconsin Press on how the building of pipelines has hurt property values.  https://www.jstor.org/stable/27647732?seq=1#page_scan_tab_contents. You can also find the same article at http://le.uwpress.org/content/82/4/529.short.  Some environmental hazards can be abated or monitored to fit within agency guidelines.  Such as the information detailed in one of my earlier blog posts on Meth being the new four letter word in mortgage.  Though in the case of an oil spill not only does it cause a issue with housing prices and value but for gas prices.  https://insideclimatenews.org/news/20131125/neighborhood-shattered-families-emptying-out-oil-hit-arkansas-town.  

With all the homes and condos all along the Mississippi the construction of pipelines throughout the country is becoming costly to the American People and the businesses that sponsor them.  The Department of Energy in the US has a website for people to find all the wonderful jobs in green energy including those in the labor and construction aspects of the industry.  Links to that info can be found at https://energy.gov/eere/education/clean-energy-jobs-and-career-planning.  

I get this is a highly political issue regarding treating and social economical discrimination and racial discrimination along with corporate and governmental corruption.  But, if all parties sit down and see how these actions are hurting both the American Dream of home ownership and the financial stability of the nation and its real estate industry which ends up hurting everyone’s pocket books change can be attained.  These companies investing in green energy instead of oil will increase their profits, put them in line with the rest of the world which is going or has already gone totally green.  It would also starve a potential national financial collapse by not polluting soil and ground water causing numerous homes property values to plummet.  This ability to plan ahead and adapt to an ever changing world is what made America great in the first place.  If we want to keep America great investments need to be shifted to account for geo political changes and environmental changes.   This will create jobs and raise the real estate values and the financial industry as a whole.  All parties need to look at this issue much like financial planning for a child while planning a will for ourselves.  We want to make sure we leave our kids with a sound financial footing and room for them to grow that way as well.  Our children and the economy cannot thrive if we have unrest and massive pollutants hindering financial and physical growth.   

​Is Commission The Best Payment System for Loan Originators?

By: Stephanie Diana Gast- Wilson

So, to give some back story to the topic noted in the title.  I am taking an HR Human Behavior course within my Master’s program.  The term long case study we are examining is a company that used a Scanlon bonus pay plan to encourage morale long term and if this was shooting the company in the foot and if so what behavioral plan would you put in place to get the company back on track?  Of course my plan is to use six sigma cross training to not only develop appreciation at all levels for what each employee contributes but it empowers the employee by making them feel invested in and developing additional transferable skills should they be laid off.  Also allowing the company to be able to run lean with a skeleton crew if needed and find other cost saving strategies through entire company collaboration.  

However, when doing the research I found that studies since the 90’s show that bonus and commission pay plans are meant to be temporary quick morale boosters and tools for startups to keep costs down till the company can have a salary and hourly system put in place as they gain money.    According to an article in the Harvard Business Review there is a direct statistical link between quality falling and incentive plan pay systems.  You can find the article written by Alfie Kohn at  https://hbr.org/1993/09/why-incentive-plans-cannot-work.   Even the Society of Human Resource Management has an article from 2012 on the pitfalls the incentive pay plans have within the view point of HR and the employee/ work force behavior. The article can be found online at https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/incentivetips.aspx.
This got me thinking with all the issues that the mortgage industry has had and now the push for quality control and compliance focus why is the mortgage industry still paying sales people commission and no base?  I work with sales people all day long trying to help them navigate the underwriting guidelines with regard to condos.  

What many may or may not know Realtors, Loan Originators, Loan Officers, Account Executives, Account Managers, Sellers Agents, Brokers Mortgage Loan Officers, etc., are the sales force in mortgage and they are only paid based on a percentage of the loan that is being taken out.  Investopedia has a great article that details the way that sales people in this industry are paid. 

“Loan officers get paid in a way that they call “on the front” and/or “on the back.” If a loan officer makes money on the front, that means they are charging for things that you can see. This money is either out-of-pocket or is incorporated into the loan when you sign the papers. These are things like processing fees and other miscellaneous charges that are charged for processing your loan. If a loan officer makes money on the back that means money is being received from the bank as a sort of commission for filing the loan.”  

You can read more on this article at http://www.investopedia.com/articles/pf/lending-loan-officers-perspective.asp.  Also you can get more info on a similar article by Forbes.com at http://www.forbes.com/sites/learnvest/2013/07/17/secrets-of-a-mortgage-loan-officer/#681157e839c0.

So, since studies show that quality takes a hit when sales people are paid in an incentive based pay plan why do we keep using that same system in this industry?  Right now every lender in the country is looking for sales reps and coming up empty because of a number of reasons.  Some reason I hear from those I know who have left the industry include are numerous but the root is the pay scale and how the compliance focus has made the job even harder for sales people.  When really it is only harder because, the pay plan is set up for quantity over quality while demanding higher quality.  Which is absurd when you think about this issue with a global view within the Business Administrative and Operations Management scope.  
Another thing that many who do not work in the academic aspects of mortgage may or may not know is that the risk assessment model that the mortgage industry has been using until 2010 was the same one used since 1945. In the risk model developed for mortgage post World War II it viewed mortgage loans as a win, win for the lender.  The reason it was seen this way is if the borrower defaulted then the bank got the property back and could sell it off again. Which led to the development of lending products that created a potential for subprime issues.  However, as we all saw in 2008 that isn’t always a win, win in the event the whole company has a financial collapse.  There is a great working paper written by Robert Ban Order at the Stephen M. Ross School of Business at the University of Michigan which can be found at https://deepblue.lib.umich.edu/bitstream/handle/2027.42/55317/1086-VanOrder.pdf?sequence=1&isAllowed=y .  The scholarly article not only breaks down the history but also the math.  (Which again is why I feel mortgage should be pushed as a career path at the college level and looked at as a STEM field.)  We often forget about the detailed math and science that goes into developing the guidelines and risk analysis in mortgage.

Which brings me back to my original question should we still have a commission based payment system for sales people in mortgage?  We need to face facts sales people when paid in a commission/ incentive payment plans quantity becomes the game.  Cause if they don’t make sales they don’t eat.  If sales reps don’t make sales they can’t make the basic living needs.  And this payment plan sets sales reps up to fail.  

If the mortgage industry makes an overall change to provide a base pay to sales professionals the research suggests that the industry will stop feeling like they need more sales people to keep up with quota and people leaving the industry.  It will also promote quality which will lower the industry wide repurchase issues.  Furthermore the research shows that if the industry wide increase in quality starting with giving a base pay to sales reps then sales will increase.  Mostly because, sales reps will have a product that isn’t such a hard sell.  Sales people are the back bone of the mortgage industry but they are paid in a way that statistically sets them up to fail and have constant low morale.  That’s not fair nor is it logical from a business stance. When employees feel stable and empowered they perform miracles. 

This is theoretical though.  But, I welcome people to send messages on twitter and facebook.  Condo Land’s facebook page can be found under the name Condo Land Blog.  Send tweets to @sdgwwgds.  Also leaving comments on this page is helpful too.  Remember sharing is caring and if you found the info in this article informative and helpful.