UNDERWRITING REALLY ISN’T THAT MYSTERIOUS BUT IT’S NOT STANDARD BY ANY MEANS EITHER - Part 2

By
Real Estate Mortgage Broker with Los Angeles & Ventura Counties in CA

In Part 1, I discussed the trials and tribulations of trying to buy and/or sell a condo in a complex where the homeowners association (HOA) is in severe financial and legal distress and how underwriting a mortgage loan package doesn't have to be this top secret process shrouded in mystery that no one but underwriters and MLO's are privy to. 

While there may be a lot of lenders and even MLO's who may want you (Realtors & borrowers) to think that you aren't allowed to know what really goes on "in underwriter", I'm not one of those people. 

I think it's our (MLO's) responsibility to inform our borrowers about what is going on with their loan application at all times.  Furthermore, we're doing our clients, their agents as well as everyone else in the transaction a disservice by not educating them about the underwriting process as well as lender guidelines. 

In my continuing effort to pull back the curtain on the underwriting process, in Part 2, I want to illustrate how verifying a buyer's employment can also cause hiccups along the way to the closing table. 

The days of just stating where you work and how much you make with no verification are long gone.  Working with borrowers who have long standing, stable employment with a small, local employer where we're usually dealing with a manager and/or supervisor or a human resources staff member is relatively simple and neat.  

Issues with verifying a borrower's employment typically come up when dealing with a) third party verifications, b) multiple employers or c) employment gaps. 

THIRD PARTY VERIFICATIONS:  These are services that many large, national, foreign and/or government employers use to conduct employment verifications for their employees.  The challenge of working with these organizations is that they usually don't provide enough info to complete a standard verification of employment (VOE) form and thus does not enable the lender to make a full assessment of the borrower. 

What we (MLO's & lenders) look for in a VOE are employment dates, position, rate of pay as well as a breakdown of earnings (regular pay, overtime, bonus, etc...).  We also want to know the likelihood of continuing employment. 

Third party verifications often lack a thorough assessment of the employee's employment history.  Moreover, with so many lenders now requiring a verbal VOE prior to docs or funding, not being able to get a verbal verification poses more risks to the lender and their investor because third party verifiers never do verbal VOE's - EVER! 

MULTIPLE EMPLOYERS:  In today's current employment market, multiple employers are becoming very much a reality with so many individuals taking on second jobs as well as new jobs.  Furthermore, multiple employers are very common with independent contractors/consultants who may work for several employers at a time for various projects or for a specified period of time. 

These employees may earn a different rate of pay for each employer creating even more challenges in determining an average income.  Additionally, since they may have only been hired for a specified project and/or period of time, their continued employment with a particular employer may not be as secure as someone who is a regular employee. 

EMPLOYMENT GAPS:  Once again, today's current employment market has been very challenging on many individuals and having employment gaps is very common.  Additionally, while unemployment benefits are a blessing to get us through a rough patch, they're doing borrowers no favors during a loan transaction.  However, the ability to explain employment gaps so as not to jeopardize the loan transaction can get complicated. 

While it's still possible to purchase a home if a borrower has one, all or any combination of these scenarios, there will be some hoops the borrower will have to jump through before getting to the closing table and this will most certainly require some additional documentation.  This is where working with an experienced and diligent MLO will be absolutely vital because much of this can be addressed and resolved without delays to closing escrow. 

However, having said that, some of these things will invariably hang up the process and when that does happen, some patience, understanding and cooperation from all parties would be greatly appreciated.  What we (MLO's) don't need are a bunch of whiny, belligerent, agents hammering us about screwing up the entire transaction.  SERIOUSLY? 

Stay tuned for part 3 where I discuss some of the facts and fiction of getting an FHA loan.

UNDERWRITING REALLY ISN'T THAT MYSTERIOUS BUT IT'S NOT STANDARD BY ANY MEANS EITHER - Part 1

UNDERWRITING REALLY ISN'T THAT MYSTERIOUS BUT IT'S NOT STANDARD BY ANY MEANS EITHER - Part 3

UNDERWRITING REALLY ISN'T THAT MYSTERIOUS BUT IT'S NOT STANDARD BY ANY MEANS EITHER - Part 4

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~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

 Donne Knudsen

Realtor® - CalState Realty Services

DRE#: 01364050 / NMLS#: 249822 

 

805.2069123

 

E-mail   My Blog  

Serving low-medium income individuals and families as well as first time buyers with both their real estate as well as their mortgage needs including down payment assistance

Los Angeles County  --  Ventura County

© 2010 - All Rights Reserved

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Re-Bloggged 2 times:

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  1. Janice Roosevelt 05/22/2010 02:50 PM
  2. Donald Bradbury 05/22/2010 08:27 PM
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Topic:
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underwriting conditions
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Rainmaker
598,554
Donne Knudsen
CalState Realty Services
Los Angeles & Ventura Counties in CA

Eric - I know it's a lot of info but it's important to know this stuff.  The more that Realtors know about the loan process, the better that they'll be able to help their clients through escrow without losing their mind when hiccups come up.

Julia - While it may seem like "No one ever knows what it means when a file goes to that magical land of underwriting", that's not true - MLO's know and they shouldn't be keeping all that info to themselves.  As for "no one seems to know what will come out on the other side these days..." there may be some truth to that and unfortunately, there's not a whole lot we can do about that right now. Hopefully, we will someday soon.

Thx for stopping by folks; I really appreciate it. :)

May 23, 2010 06:09 PM
Rainmaker
637,322
Gene Mundt
Mortgage Lender - Chicago/Chicagoland Mortgages
www.genemundt.com

Donne:  I can commiserate with Lori's situation above.  Just went through something very similar myself a week ago.  You are right when you say ... 30 days .. PERIOD!  Not one minute shy either.  In my particular loan, the customer was completely right in taking the new position.  What gummed it up was the manner in which she was going to be paid and just what the company decided to classify her position as ... as it was a newly created position.  Made for a very interesting and stressful closing ... as attorneys in subsequent transactions effected by the outcome of my loan (and closing time) were scheduled  (get this, Donne) ... not only the same day ... but exactly one hour after each other.  Like a game of dominoes if my loan didn't close!  3 other closings ... bing, bing, bing .. all come to a screeching halt.  No pressure there!   Who in their right mind?????????  In this day and age?????? 

We got through it ... but not without a lot ... LOT ... of blood, sweat, and tears ...    Aaaaggghhhh .. the stories we can tell, huh?

Gene

May 24, 2010 12:10 PM
Rainmaker
598,554
Donne Knudsen
CalState Realty Services
Los Angeles & Ventura Counties in CA

Gene - Ah, my friend, the stories we could tell would probably scare the holy beejezus out of most people.  Yours more so than mine, my friend.  Your 30+yrs in the biz puts my measly 8yrs to shame. 

It's been a wild and wacky 8yrs though and definitely the greatest learning experience of my life. Even more so than the two previous careers and marriages.  I LOVE MY JOB!  I LOVE MY JOB!  I LOVE MY JOB!

Have a good week Gene and thx for stopping by: I really appreciate it and ALWAYS love your comments and feedback.  :)

May 24, 2010 12:36 PM
Rainmaker
128,109
Mike Henderson
HUD Home Hub - 303-949-5848
Your complete source for buying HUD homes

I so miss the days of if over a 720 doing stated income.  It's a different world now.

June 12, 2010 10:37 PM
Rainmaker
598,554
Donne Knudsen
CalState Realty Services
Los Angeles & Ventura Counties in CA

Mike - There is so much I miss, I can't even begin.  Right now, I just long for some patience and understanding for doing my job.

June 13, 2010 01:32 AM
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Rainmaker
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Donne Knudsen

CalState Realty Services
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