Mortgage Myth Busters: But the underwriter *does* have the right ...

But the underwriter *does* have the right ...

Yesterday I was at an event with a group of my favorite REALTOR organizations and, as always, the chat eventually turned to how crappy some other lender is. I was listening, politely, and understanding some things the agent may not have understood about how loans can get askew during the process until they said, "You know, these underwriters think they can just ask for anything from us!"

Right on. They can.

Underwriting guidelines are there for a purpose - to serve as a guideline for making wise lending decisions. Underwriters do have the "right" to ask for additional supporting documentation in many instances especially if other guidelines are only marginally met.

If you knew an underwriter personally you would know they have a responsibility to the originating lender and ownership of that loan for the remainder of its life. If they make too many lending decisions which result in loan defaults, especially early payment defaults (EPD) not only can they lose their job but they can lose their Designated Underwriter (DE) approval to underwrite FHA loans.

Undewriting is not a joke.

Underwriting is one of the most crucial components of loan issuance or denials. Certainly you, your buyer, your seller, the loan officer, and others have the right to question or dispute an underwriter but ultimately not only can they require additional supporting documentation but they should and must.

Can an underwriter be wrong? Yes! The best way to overcome the opportunity for an underwriter to be wrong is by working with an experience, licensed, Mortgage Loan Originator who works for a recognized and respected mortgage lenders.

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I started writing on Active Rain in 2006 when I was representing the mortgage industry. I am no longer in that industry and many of the older posts contain outdated information. Please do not contact me for LENDING or MORTGAGE questions but rather contact a licensed mortgage professional from your area. I have always been in marketing and branding and that is still what I do. Thanks for reading!

Comment balloon 63 commentsKen Cook • July 15 2011 10:11AM

Comments

If good underwriting rules had been followed over the past 5 years, we would not be in the mess we're in.

An unqualified buyer should never be able to get by a responsible underwriter. 

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) over 9 years ago

I have worked with underwriters and learning how they think and why is paramount to navigating within their world...It is a position that demands optimum because the stakes demand no less....good post Ken

Posted by Richie Alan Naggar, agent & author (people first...then business Ran Right Realty ) over 9 years ago

This is a good post Ken.  It clarifies and explains.  Especially after the defaults, a lot has changed and they are more vigilant.  Rightfully so. 

Posted by Kathleen Vetrano, Helping YOU Achieve YOUR Dreams (RE/MAX Gateway) over 9 years ago

While I agree with Lenn, it wasn't the underwriter that made the final decision but was "forced" to approve by upper management to get it done even though the underwriter said "no".  Upper management had a lot to do with it.  There used to be private blogs with code names, just like the President and his family, for upper management at these banks.  I was privvy to them as a friend who was in the business, wanted me actually see what was going on behind the scenes.  The names were changed so nobody could figure out who was complaining about "making it work."  Today, upper management doesn't have the right to force the file anymore; well, not that I know of.

Posted by Barb Van Stensel over 9 years ago

Agreed. We need experienced underwriters. But also we need to be able to make individual decisions not just put everyone in the same box.

Posted by Shannon Coe, 916-597-3818, Lincoln, Rocklin, Loomis, Roseville (Keller Williams) over 9 years ago

Underwriters who are doing their jobs and processing files for smooth closings are usually not resented.  It is when the same docs are requested repeatedly, new document requests are made days or hours before the closing date and delays result from reviews and requests that could have been made much more proactively, earlier in the process.

Posted by Daniel H. Fisher, MCRP - Charlotte Real Estate, NC or SC (www.FisherHermanRealty.com (704) 617-3544) over 9 years ago

The topic of underwriting requests has come up at C.A.R. in the past year or so.  They do actually ask for things they can't legally ask for and they often miss things.  What would be useful is a consistent set of underwriting rules so that what they need is the same every time.

Posted by Bryan Robertson over 9 years ago

Ken, I like that underwriters take their job seriously and know their responsibility for coming up with a good loan. I just wish some of them were just not such crappy communicators, or have NO sense of urgency. They remind me of doctors.

Posted by Gary Woltal, Assoc. Broker Realtor SFR Dallas Ft. Worth (Keller Williams Realty) over 9 years ago

Consumers, agents, and some LOs don't understand that underwritng is only marginally about credit risk these days.  Underwriters no longer make approval decisions for the most part.  Banks make mortgages not because they believe that a particular borrower is a good credit risk, but because a particular mortgage has a value on the secondary mortgage market.  PERIOD.  This is why every LO can share stories about a millionaire not being able to qualify for a small loan or other crazy situations where some really stupid technically causes a loan to be denied.

@ Lenn, investors in the secondary loan market determined that stated/stated, ninja, 580 FICO scores, etc were all acceptable.  As a result, banks made the loans as there was a market for them.  Underwriters sole job is to verify that the mortgage application meets the guidelines of said investor (no matter how stupid those guidelines may be) and to detect/prevent potential mortgage fraud.

These days underwriting loans is more about CYA due to buy back risk.  If a loan goes into default, the PMI companies, Fannie/Freddie, large banks are all looking to push the blame down hill.  Say a borrower goes into default because they lost their job.  Sh*t happens.  Fannie/Freddie will then start saying the loan application wasn't completed in blue ink, so no the bank has to buy the loan back.  The blue ink has nothing to do with why the loan went into default, but if it isn't documented, it could make the bank liable for a loan that goes bad in the future.

Mortgage approvals are like painting by numbers and going outside of the lines is not something that is encouraged.

Posted by Russ Msrtin, Residential Mortgage Advisor (Perl Mortgage) over 9 years ago

Ken....I like your last line the best:  "The best way to overcome the opportunity for an underwriter to be wrong is by working with an experience, licensed, Mortgage Loan Originator who works for a recognized and respected mortgage lenders."    That pretty much sums it up.  That way we know what we are dealing with & what kind of requirements we are looking at.

Posted by Christine Smith, Exclusive Buyer Agent & Attorney, Canton, MA (Buyers Brokers Only LLC - www.BuyersBrokersOnly.com) over 9 years ago

Ken - I have to say this blog is right on the money and as a lender I deeply appreciated it.  The industry forgets why we ended up in the "meltdown" we are in - and what lead us there.  Do I think underwriting has gone too far to the right?  yes, I do - but I also understand the "why".  In time (not sure of how long that "time" is) I feel it will settle more in the moderate - but for now - we have to deal with it - and as I say "....it is what it is...."

Posted by Louise Thaxton NMLS 69996, Military Mtg Specialist - 866-960-9115 VA FHA USDA (Fairway Independent Mortgage Corp Louisiana NMLS#2289 Equal Housing Lender) over 9 years ago

@Bryan - what things do they ask for that they are not legally allowed to ask for? (just curious)

 

I agree this business is tough, and any loan can seem to be difficult, even the 800 credit score quarter million dollar in the bank borrower. the down side is you can take the best loan officer out there, and if the backbone of the office isn't there, or the turn times are not perfect they become the incompetent guy who cant get anything right.

 

the only real way for an originator to be "on his/her game" is to have dedicated underwriters, ones that will relay any additional/new overlays the bank is going to require as they come out. There will never be a standard when it comes to underwriting, as each banks portfolio, and default are going to be different, and overlays are put in place to seal the holes so to speak. If a bank starts to see certain issues that are dominate on defaulted or slow pay files, that company will start to require additional information to make sure that is removed from all new files entering the office for underwriting. I spend about 2 hours a day just reviewing guidelines and rules, and constantly check to see if there is anything new I need to be aware of at the time of initial application so that I can request whatever it might be. I also have the ability to send up my questions regarding issues that I see could pose a problem, and can get them taken care of before we get the borrowers back to the Real Estate Agent.

Communication is the key to success, without that the LO is just a number to the underwriter.

 

Posted by Matthew Hullinger (State Farm) over 9 years ago

That person has a lot of power and with that comes responsibility! Who can blame them!

Posted by Matthew Johnson (Keller Williams Premier Realty) over 9 years ago

My mindset is that every person is at risk for default (thanks to strategic default) so lenders and underwriters can ask for anything and everything.  I have ZERO animosity towards y'all!  I am surprised that lending is still around today.  I always tell people that complain if they don't like it - pay cash.

Posted by Renée Donohue~Home Photography, Western Michigan Real Estate Photographer (Savvy Home Pix) over 9 years ago

Ken, you probably agree that the experienced loan officer who takes the time to review credit, income and asset documentation while helping the client evaluate options is in an excellent position to evaluate the foreclosure risk.  Unfortunately, the underwriter is also looking at "re-purchase risk." 

At some time in the future, mortgage rates will be higher.  At that time, those fund managers who hold Mortgage Backed Securities with a yield of 4.5% will be looking for options to improve this yield.  Is it possible that they will sit down and search mortgage files for a "t" that is not crossed or an "i" that is not dotted and demand a repurchase if this allows them to move $$$ from 4.5% to 6.0%?

I believe that this risk of re-purchase eliminates the option for the underwriter to use common sense forcing  the "walk on water" borrower to supply explanations for every deposit, every inquiry, and every cloudy day.

 I certainly would like to hear your comments.  Have a great day!

Posted by Angelo Cusinato, CRMS, CMC, Mortgage Specialist NMLS # 207204 (First Centennial Mortgage) over 9 years ago

Underwriters are human beings but some can have God Complex the same thing holds true for some appraisers. I have witnessed loans close with one lender that did not close with another. Same type loan, same customer, same income and credit, same property. The only difference being it was re-appraised and/or giving to a different underwriter.

That's why an experienced, licensed loan originator is always your best option. One who has an inside knowledge of each lender and knows all the idiosyncrasies is best suited to place your loan file with the proper lender for your particular situation.

 

Posted by Jim Poole, Zero Down, USDA Purchase Loans, FHA 203(K) Rehab & VA Streamline Loans over 9 years ago

Ken - As a fellow MLO, I agree with Russ #9 and Angelo #15.  There really is no standard underwriting nowadays with most lenders adding overlay after overlay after overlay after.....

Today, it's all about selling the loan off to the secondary market and not having it come back to bite them in the @$$.  I have seen and heard (straight from the horse's mouth) of underwriters who are so afraid of losing their jobs that they, "just say no because they know they won't get fired for saying no".  SERIOUSLY!!!

For the most part, common sense underwriting has gone out the door and probably won't be heard from again for a very long time.  Some of my portfolio lending sources are starting to trickle some common sense underwriting back into their process but that service doesn't come at today's low rates or cheap pricing.  JMHO

Posted by Donne Knudsen, CalState Realty Services (Los Angeles & Ventura Counties in CA) over 9 years ago

Great post Ken!  I have found that when working with experienced lenders with good reputations, there are minimal problems if any.  The frustration comes when buyers go out and find their own lenders.  It is annoying to have documents asked for repeatedly or things fall through the cracks until the last minute.  It is a big responsibility on lenders today.  In this market it is so important to work with people you know and trust.

Posted by Sherri Berry, Murfreesboro TN Homes & Real Estate (Reliant Realty, Murfreesboro) over 9 years ago

The underwriter is going to have a thankless job, as nobody ever says how quickly or smoothly the underwriter did his job, it's just when they are asking for more documentation that they start to get the wrath of everybody else.

Posted by Morgan Evans, LICENSED REAL ESTATE SALESPERSON (Douglas Elliman Real Estate) over 9 years ago

surrounded by negative people equals negative thoughts equals negative input

go back to selling tupperware

not that there's anything wrong with that mister nattering nabob of negativity who doesn't like underwriters...

thanks for the post

Posted by Vince McEveety (Gilleran Griffin Realty) over 9 years ago

There are good and bad underwriters, just as there are good and bad agents and loan officers.  The frustration comes not from the fact that something's been asked for, but if it's been asked for and provided previously, or if the requests continually come after the information is provided, or if it had already been provided to the loan officer.

Posted by Karen Crowson, Your Agent for Change (Coldwell Banker Residential Brokerage) over 9 years ago

I've always thought about the underwriters as the Wizard from Oz.  We never see them, they remain behind the curtain, but they call all the shots.  "There's no place like home, there's no place like home . . . " and you're right . . . a good loan officer can deal effectively when they may be "wrong"

Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) over 9 years ago

They can and they should! They are the ones making the decision and it should be based on as much information as needed to make a good decision.

Posted by Billie Hiser, A Different Way to do Mohave County Real Estate (Hiser & Co) over 9 years ago

This is such a frustrating thing for all of us....but I'm glad that as an industry they are looking more deeply.

Posted by Karen Fiddler, Broker/Owner, Orange County & Lake Arrowhead, CA (949)510-2395 (Karen Parsons-Fiddler, Broker 949-510-2395) over 9 years ago

Wow- lots of opinions on this topic. As a licensed originator I consider myself an expert in my field. I am however a sales person, not an underwriter.

Loan officers work on commission. I want every loan application to close, if I didn't believe it would close I wouldn't spend time working on the loan. Sometimes things arise that are out of any ones control and unfortunately it is the underwriters job to relay the news that there is something that does not into the "guidelines" and the loan is denied. I had two loans denied this week due to low appraised values, we needed the value on the rental income to prove 30% equity so we could use the rental income on the purchase and the appraised value came in low. Totally out of my control, I was crushed and I was the one who had to call the buyer and the listing and selling agents to tell them the loans were denied. Not fun and NO income for me.

In my opinion you need to work with a smart loan officer who works for an organization in which the underwriter is available to the loan officer. The loan officer and the underwriter need to be able to communicate and work on a solution together should an issue arise. The underwriter wants the loan to close too - believe it or not.

Posted by Sabrina Linman, Mortgage Pro (SecurityNational Mortgage) over 9 years ago

I am not an underwriter but that is a great picture of my desk.

Mel

Posted by Mel Ahrens, MBA, Kelly Right Real Estate, Customized Choices for your Real Estate Needs (Kelly Right Real Estate) over 9 years ago

Question Ken,

What License?  Federal, State or Local  does the underwriter have to practice ? Are there required CE's to renew their license, do they have a Code of Ethics, Standards of Practice,  are there systems in place for consumer complaint and discipline ?

Listing Agent and Buyers Agent = REALTORS are licensed

As you pointed out Mortgage Originators are Licensed

Appraisers are licensed

Home Inspectors are licensed (at least in Indiana they are mandated to be)

Contractors /Home Builders are Licensed

Hmmmm the decision maker -> underwriter ? what guidelines are in place for consistantcy and regulation?

 

Just sayin:)

Posted by Jeff&Grace Safrin, SpousesSellingHousesTM (F.C.Tucker 1st Team Real Estate) over 9 years ago

Great post...it's not the underwriters job to fix the buyers financial picture so they can qualify...

Posted by Cory Barbee, Broker (760) 563-4022 over 9 years ago

After 18 years in the mortgage business, 10 of which spent heading up operations, I have worked with many underwriters.  Not all were equal in ability, experience and talent.  They all did have one job and that was to be the gatekeepers to the funds required to complete the transaction, be it a purchase or a refinance. 

Underwriters are required to follow the guidelines as published by the market makers to protect the interests of their mortgage company, their lending partners and ultimately the investors who buy the mortgages after funding.  They also have a responsibility to not put a homeowner in jeopardy by approving a loan that they can not repay. 

Most good mortgage companies instruct them to work with the LO's to educate and work on solutions to issues and problems.  Sometimes there are deal killers that can not be overcome, but many times the underwriter is able to provide guidance to the LO to assist the borrower in providing documentation to be able to complete the transaction.

It is not the underwriters job to "Fix" the borrowers financial picture, however they can make suggestions to the LO as to what the borrower needs to do to qualify.

As has been stated many times before in previous comments, communication with and access to the underwriter when combined with a professional, experienced loan officer is the key to getting the deal done, on time with minimal hassle.

Underwriters, I've seen your job, I admire it........but I sure don't want it.  :<)

 

Posted by David A. Weaver, 24 years helping folks finance their dreams. (Peoples Bank & Trust Co.) over 9 years ago

We can all point fingers but at the end of the day it boils down to three things.

Credit, can they show a history of paying their obligations

Capacity, can they show the means to service the debt they are applying to take on

Collateral, does the property they are buying have sufficient equity where they are NOT likely to walk away?

If your borrower(s) have these you will close your loan. If they don't you can blame an underwriter for doing their job but haven't we pointed the finger enough when they didn't do their job and we are facing historic foreclosures from it!

With respect to not doing their job let me clarify most of them STILL did their jobs however, capital markets determined underwriting requirements and the methodology behind it was not necessary and that increased valuation alone offset any risk and need for due diligence...

Hmmmmm values didn't rise and the rest we all know

Posted by David Shamansky, Creative, Aggressive & 560 FICO - OK, Colorado Mtg (US Mortgages - David Shamansky) over 9 years ago

Ken:

I agree that a competent and knowledgeable loan officer may help avoid problems that underwriters uncover.  But sometime it can be impossible even with a competent MLO.

Posted by Evelyn Kennedy, Alameda, Real Estate, Alameda, CA (Alain Pinel Realtors) over 9 years ago

Ken - I agree with one of the comments above that there is a lot of CYA, and I understand that underwriters have to be careful.  That said, there's still some odd requests some days.

Posted by Christine Donovan, Broker/Attorney 714-319-9751 DRE01267479 - Costa M (Donovan Blatt Realty) over 9 years ago

Ken, although I agree with you for the most part, I've had some pretty stupid requests on the cleanest loans you can imagine. One such request was to have the buyer's agent substantiate that they are not making over 8% on the transaction.......what??? Yes, I had to have the Realtor write a letter and sign it.  

In some cases the pendulum has swung to the point of absurdity because everyone up the chain is afraid of their own shadows.

Posted by Ray Waisler, NMLS #6621 - Specializing in Jumbo FHA & VA (Finance of America) over 9 years ago

Ken, I so agree about the underwriters role and working with an experienced licensed loan originator!  A good mortgage loan officer and processor will provide all the documents necessary for the underwriter.  It makes the underwriter's job easier.  It also improves the quality of the loan.

I know from my friends who are underwriters that some of the requests that seem "out there" or unnecessary are being requested because of audits on their files.  I know working with FHA loans that inorder to get the loan insured they are picky so the underwriter needs to be picky.

Great post!

Posted by Beth Paterson, CRMP, NMLS #342859 (Reverse Mortgages SIDAC, LLC, NMLS #1790592) over 9 years ago

Ken I would take it one step further an work with originators who has the LO5 designation.  Loan officers who has the LO5 designation has a license, has 5 years or more experience and follows a code of ethics.

Posted by Shay Campbell, Raleigh, NC (Universal American Mortgage Company) over 9 years ago

Hi Ken, I'm just wondering what, if anything, happened to the underwiters of the loans which have defaulted over the last few years. I don't envy the underwriters of today, in fact, we're all paying the price for the irresponsible actions of "yesterday"... live and learn; I hope !

Posted by Kathleen Donovan, GRI, CBR, SRES, South County RI Residential Speci (RE/MAX South County) over 9 years ago

The underwriter's requests should be made on time. If the buyer has a deadline to close, the underwriter should make the requests early on. Just because the underwriter waited to the last minute doesn't mean the seller should lose money waiting.

Posted by Dave Halpern, Louisville Short Sale Expert (Keller Williams Realty Louisville East (502) 664-7827) over 9 years ago

Interesting post.

I work with a lending company that have great underwriters. Therefore, the mortgage reps know what paper work in needed from the client up front.

Posted by Keith Lawrence, ABR, SFR (Christie's International) over 9 years ago

As you said, working with a reputable loan officer is key...it certainly helps when the loan officer has an in house undewriter

Posted by Patricia Beck, Colorado Springs Realty (RE/MAX Properties, Inc., ABR, GRI, SRES) over 9 years ago

Carla, love your analogy about the Wizard of Oz, did you know they also use a Ouiji Board?

Yes, the underwriter can ask for extra proof to document the facts, but if the mortgage falls through or the terms of the mortgage change from those on the initial approval, it's either the borrower's fault for not being able to back up the answers they gave to the MLO, or the MLO's fault for not realizing that the borrower did not qualify based on the information they gave.

Underwriters don't kill deals, they just put the body tag on the dead body when it lands on their desk.

Posted by Alan Bercovitz (Guaranteed Mortgage Quote, LLC) over 9 years ago

And I so agree with Daniels post #6. It is frustrating when you have to extend the closing date out 6 times because surveys and appraisals have to be done twice, the same documents have to be delivered over and over and hours before the closing more documents have to be delivered and here is a good one: they demand which insurance company your buyers have to use for your home insurance to get the loan approved. And all that by one of the big "reputable" banks. Does nobody else see that there is something wrong with this picture? And yes I admit, I do not like lenders!

Posted by Christine DeLay (Bransom Real Estate, Azle, Tarrant County, TX) over 9 years ago

Most everyone forgets that at the end of the day, if the loan defaults, its the LENDER who take the loss.  No one else.  The lender never comes back to the real estate agent asking for a return of their commission.  I do know that some bank are coming back to the LO's though.  Agents also don't see the re-purchase requests that come back to the lender from the investors if something was missed in a closed loan. 

With every loan that gets approved, the underwriter does risk both their job, and as you stated, their DE authority.  As#31 stated, the 3 C's are still a must for every approved loan.

Several comments above complaining about documentsbeing asking for repeatedly.  Of course , the LO could have lost it the first time.  After all, has anyone really noticed how thick a file is?  It wouldn't be too difficult to misplace a piece of paper in all of that.  More than likely it is because the documentation provided by the borrower then called into question something else that had to then be explained.  This is very common with bank statement where there are large deposits made that must then be sourced.

Posted by Rodney Mason, VP of Mortgage Lending - AL, FL, GA, SC, & TN (Guaranteed Rate NMLS# 2611) over 9 years ago

When other people's money is at stake (investor's), an underwriter should definitely cross all t's and dot all i's. I think buyers and agents get frustrated when requests for additional documents come after a couple of weeks into the process rather than upfront.

When working with a lender who offers very low rates or who operates mostly online, be prepared for lengthy delays in underwriting because they are short staffed and the demand for their loan exceeds the capacity for timely reviews.

Posted by Sylvia Jonathan, Broker Associate, SFR (Coldwell Banker Platinum Properties) over 9 years ago

I also noticed a lot of comments about the underwriter should ask for documents up front or "on time".  It's the MLO and sometimes their processor who gather up the documents to make a package to send to the underwriter.  The underwriter does not see the package until well on in the process.  So they can't ask for everything up front because they don't see the file up front.

Posted by Alan Bercovitz (Guaranteed Mortgage Quote, LLC) over 9 years ago

My gripe is with timeline management.  Just had a closing delayed yesterday - USDA loan with positive GUS approval Monday morning - yet still waiting for USDA approval.

Is it too hard to expect deadlines to be met?

Posted by Jeanne Dufort, Madison and Lake Oconee GA (Coldwell Banker Lake Country) over 9 years ago

You are so right.  Bottom line is that they are giving the borrower money and they can create whatever terms they want or and if we don't agree to what they want, we can dispute it, but in the end, they do not have to give up the cash unless they want to.

Posted by Jirius Isaac, Real Estate & loans in Kenmore, WA (Isaac Real Estate &TriStar Mortgage) over 9 years ago

Comment #9 is right on the money, not only for the current UW guides but for what happened to create the current foreclosure mess. It was NOT poor UW decisions that created the current mess, it was a poor decision to bring these "exotic" loan products to the market in the first place. Who in their right mind thinks that 100% financing to 580 score borrowers or NINJA loans will perform with any degree of positivity? It's like putting someone in a lease-purchase contract to buy the seller out in 6 months without lever ooking at credit, income and all the details to make sure that it can realistically happen. Just because someone may think it's a decent idea doesn't mean that it really is.

Comment #46 is the issue at the heart of many closing "delays" - are you communicating with the lender before setting the closing "deadline"? Rest assured that every originator wants to get every loan closed as quickly as possible. It is absurd to expect unrealistic deadlines to be met. Just because I can pull a rabbit out of my hat on most occasions, it does not give you the right to squeeze me on the closing date just because you or the buyer or the seller want a quicker closing. Because I am the originator on a new purchase contract and can get a loan closed quickly, the list agent moved the closing date up by 15 days "because I know you can do it". There are borrowers who are not sensitive and respectful of the timeline, and I call in the agent for help when I'm not getting timely reaction from the borrower. I go above and beyond to get a loan closed: obtaining waterproofing quotes, meeting contractors and inspectors at the home, even helping to replace a toilet. As for USDA loans, every single USDA loan requires concurrent approval by the local RD office and the RD office works on the loans as they're received. It's our job to help manage the timeline at the RD office, and requesting an exception if it is needed to help keep a file on the required timeline (one lender usually wants title cleared by the UW before sending the file to RD, and if time is running tight, I ask for an exception to get the file in line at RD sooner). Is it possible to give us the time we really need to get a loan closed and to be mindful of issues if they arise?

Does your originator think like an UW and really work through the loan's possible underwriting issues? We're not underwriters, but we should have the ability to foresee most issues. Work with a competent broker who thinks like an UW. Options and critical thinkers are what today's market needs. 580 scores - check, non-arms length non-owner purchases - check, <36 months out of foreclosure - check, credit score needs improvement - check, someone to tell you "how" (not "no") - check, cutting corners - nope.

Posted by Melanie Thompson, Registered Mortgage Advisor (Mortgage Equity Team) over 9 years ago

Responsible underwriting is one thing, window dressing yet  another. But in the end, he (or she) who has the gold... makes the rules. And a competent mortgage professional knows how to work within them.

Posted by Kate Kate over 9 years ago

Ken- LOL at Melanie's comment about pulling rabbits out of a hat.  It's so true too that many escrow deadlines are unrealistic to begin with.  For example, on my USDA loan files I often request 45day escrows to allow for sufficient time for both approvals.  If the Realtors/agents refuse to allow me sufficient time to close they loan, they have set me up for failure.

Furthermore, it is true that in order to reduce the amount of underwriting requests, an MLO has to "think like an underwriter" from the get-go.  This is an ability that simply isn't possible for some MLO's (especially many bank clerks) who lack the experience and/or "seasoning" to be able to anticipate underwriting requests. 

For example, as Rodney #43 states, all large deposits have to be explained and any experienced and "seasoned" MLO knows this upfront and we get our LOE's and supporting documentation with all the rest of the submission documentation.  Same goes for any other issue like employment questions and/or credit concerns that don't meet the program guidelines or the lender overlays.

By the time the underwriter gets the files, the only PTD conditions they should be making are ones pertaining to the appraisal or ordering the docs and PTF conditions should pertain to funding the loan.  The problems arise when the MLO hasn't collected all of the submission documentation or the appraisal detects issues with the property or the underwriter gets a hair up their @$$.

I recently had a loan file where the borrower had two p/t jobs and was working 60hrs a week (an EMT).  The borrower had been maintaining this schedule and jobs for nearly three years.  The underwriter tried to deny the loan because she didn't feel the borrower would be ale to maintain that work schedule for very much longer.  SERIOUSLY??? 

Needless to say, I escalated the matter to senior mgt.   This wasn't about my borrower not meeting the program guidelines or lender overlays but rather an underwriter who simply didn't like the file.  As fate would have it, the appraisal discovered issues that the seller refused to address.  I still contend that getting any loan these days to the closing table is all about whether or not the lender is going to be able to sell the loan to the secondary market without it coming back to them.  If the lender can't sell it, they won't fund it - PERIOD!!!

Posted by Donne Knudsen, CalState Realty Services (Los Angeles & Ventura Counties in CA) over 9 years ago

When you work with a reputable lender in most instances there just aren't that many surprises. Usually the surprises happen with inept loan officers who are slow to respond in my world. When the loan officer doesn't call back you know you have issues..

Posted by Bill Reddington, Destin Florida Real Estate (Re/max By The Sea) over 9 years ago

Ken:  Most of it now is just plain overkill CYA. We've all had those ridiculous requests from underwriters & will continue to do so in the future. Personally, I think it's gotten worse - I don't think they actually read all that paper they request - they just want MORE, MORE, MORE!  Killing trees is the name of the game I think.

Posted by Lyn Sims, Schaumburg Real Estate (RE/MAX Suburban) over 9 years ago

Right on, they do ... but they often don't even read the apps or supporting docs carefully, you have to call, circle, underline, etc, etc.

Posted by Ed Tseng over 9 years ago

It is very easy to criticize something that one may actually not know that much about, underwriters are there to protect the viability of the loan applicant, can we really blame them for being a little strict considering what is happening across the country with the housing market. This is why a realtor needs to be working with a top notch loan officer!

Posted by Michael Deery (Citywide Financial Corp) over 9 years ago

Good, experienced, thorough underwriters who are also efficient make the process much smoother. Unfortunately, some lenders (one in particular who I will not name;a BIG one, though) chose to lay off a great number of underwriters a couple of years ago. This put a tremendous strain on the process and many of my colleagues began to discourage their clients from using them. I personally lost a sale because they kept asking for this and that from my client. After the closing date had been bumped 6 times (!), the seller finally decided not to sell.

Posted by Scotti Jowers, Realtor - West Monroe, Louisiana Homes for Sale (CENTURY 21 Shackelford French, Search West Monroe Homes ) over 9 years ago

Ken- Great blog and topic. Yes underwriters can be frustrating, but they must be diligent in their duties. We don't want the past couple for years repeating itself do we?!

P.S. - Reblogged!

Posted by Todd & Devona Garrigus, Broker / REALTORS® (Garrigus Real Estate) over 9 years ago

Common sense as gone out the window.  I have a client that works for a major national Cooperation that has many major brand name subsidiaries.  He got a promotion and a raise, but now gets paid by one of those subsidiaries. 

You can go on line and find that one owns the other.  I cannot name it here, but it is a company we all know. 

They want a letter from his boss explaining the business relationship between the two companies.  They are also freaking out because he got a big raise.

Posted by Gene Riemenschneider, Turning Houses into Homes (Home Point Real Estate) over 9 years ago
I wonder what Underwriters say about Realtors®? We all have to do what we are responsible for ethically and within guidelines. If we think something is not right, we need to ask questions and find out. Talking about a company or another person behind their back does not solve anything or make our work any easier. 
Posted by Robert Courtney, Century 21 All Islands, RA, CDPE, MCRE, CIAS over 9 years ago

Well  said, underwriters do have a fine line to follow, the only times I have had a problem has been with the underwriting process with the lender. If the lenders have a good process set up then there are no underwriting demands at the last minute.

Posted by Jeff Crane, Jeff Crane (HomeSmart) over 9 years ago

Pretty simple:

About the same time they brought in the HVCC apprisal rules a couple years back- they also threw out any common sence when it comes to interpreting the guidlines.

Underwriters are afraid to do any thing out side the little box, that has been created by over-correcting everything thru regulation.

To answer Jeff's question in post #58: "I wonder what Underwriters say about Realtors®"? 

Underwriters don't like Realtors. They think you are all a bunch of con artists trying to pull a fast one so that you can collect your way to high commissions.

It alright they think the same thing about Loan Officers and Appraisers or anyone else involved in the transaction.

Good post!

 

Posted by Ben Yost - 303-587-4297, FHA, VA, Conventional - Mortgage Loans in De (First Time Home Buyer, Mortgage Rates, Pre-Approval) over 9 years ago

Wow! I guess I should have logged in over the weekend to respond to all of these posts. I had no idea the topic would be so hot. Thank you all for your comments. I really cannot improve on anything you guys have said - 95% of you really do get it. The other 5% are just pissed because they've lost commission and trust me I understand that!

Posted by Ken Cook, Content Marketer/Creator (Content, coding, marketing, host.) over 9 years ago

It is a difficult day in the housing world across the board. Underwriters are being especially cautious because they have to. They DO have the right to ask for more if they are not comfortable with the loan. Their jobs are on the line.

When I begin a loan with any borrower I tell them what my expectations are as to timeline and I gather the supporting data to the best of my ability. I remind them that I've got a lot of experience, but the underwriter has the trained eye. He/she may ask for additional data. I tell the borrower exactly this up front. I ask them in advance to be patient because we are in a whole new world of mortgage lending. Loans are not easy these days. My hope is that Realtors are conveying the same message.

Posted by Dora Griffin, NMLS 6380 (D A Griffin Financial.LLC) over 9 years ago

I just had a case where the underwriter's would not make a final decision and passed it on to the investors to see if they would fund the loan. They are doing what they need to do to satisfy their "bosses".

Posted by Gerard Gilbers, Your Marketing Master (Higher Authority Markeing) over 9 years ago

It is not easy to get an approval these days, compared to the wild west days of yesterday. I like what #9 commented above, he hit it right on. http://activerain.com/blogsview/2402423/but-the-underwriter-does-have-the-right-#9720705

Good underwriters will communicate clearly about what they need & why, and yes their job is to protect the lender from fraud & buybacks, defaults, etc.  Good mortgage reps understand underwriting guidelines, and anticipate the items that will be needed.  I think much of the frustration with 'underwriting' comes from mortge reps who don;t understand what will be asked of a client, and then perpetuate the stereotypical blaming of the resulting turn down on underwriting.

For the record, some underwriters ARE better than others, same as in any job/field. 

Posted by Jeff Coon, Branch Manager (Annie Mac Home Mortgage) over 9 years ago

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