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

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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 I am no longer in that industry and many of the older posts contain outdated information.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!

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Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Louise Thaxton 07/15/2011 10:52 AM
  2. Cory Barbee 07/15/2011 04:11 PM
  3. Todd & Devona - Garrigus Real Estate 07/16/2011 03:07 PM
  4. David & Lisa Webber 07/17/2011 11:27 PM
Topic:
Mortgage / Finance
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Ask KEN
Buyer Information - What Buyers Need to Know in Today's Market
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underwriting

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Show All Comments
Rainer
27,553
Alan Bercovitz
Guaranteed Mortgage Quote, LLC - Exeter, RI

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.

July 16, 2011 11:10 AM #45
Rainmaker
261,758
Jeanne Dufort
Coldwell Banker Lake Country - Madison, GA
Madison and Lake Oconee GA

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?

July 16, 2011 11:11 AM #46
Rainmaker
190,703
Jirius Isaac
Isaac Real Estate &TriStar Mortgage - Kenmore, WA
Real Estate & loans in Kenmore, WA

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.

July 16, 2011 11:38 AM #47
Rainer
34,768
Melanie Thompson
Mortgage Equity Team - Lynchburg, VA
Registered Mortgage Advisor

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.

July 16, 2011 11:53 AM #48
Rainmaker
163,409
Kate Ford
Get-Your-Best-Mortgage-Rate.com - San Diego, CA
Ask Kate a mortgage question...

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.

July 16, 2011 12:08 PM #49
Rainmaker
598,880
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

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!!!

July 16, 2011 12:22 PM #50
Rainer
385,685
Bill Reddington
Re/max Southern Realty - Destin, FL
Destin Florida Real Estate

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..

July 16, 2011 01:30 PM #51
Rainmaker
811,783
Lyn Sims
RE/MAX Suburban - Schaumburg IL Real Estate - Northwest Suburbs of Chicago - Schaumburg, IL
Schaumburg Homes

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.

July 16, 2011 01:38 PM #52
Rainer
63,430
Ed Tseng
El Sobrante, CA

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.

July 16, 2011 02:28 PM #53
Rainer
103,550
Michael Deery
Citywide Financial Corp - Pacific Beach, CA

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!

July 16, 2011 02:33 PM #54
Rainer
62,629
Scotti Jowers
CENTURY 21 Shackelford French, Search West Monroe Homes - West Monroe, LA
Realtor - West Monroe, Louisiana Homes for Sale

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.

July 16, 2011 02:37 PM #55
Rainmaker
515,325
Todd & Devona - Garrigus Real Estate
Coldwell Banker Kivett-Teeters - Beaumont, CA
Southern California REALTORS®

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!

July 16, 2011 03:05 PM #56
Rainmaker
1,255,834
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

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.

July 16, 2011 03:30 PM #57
Rainer
68,804
Robert Courtney
Lihue, HI
Century 21 All Islands, RA, CDPE, MCRE, CIAS
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. 
July 16, 2011 06:10 PM #58
Rainer
23,076
Jeff Crane
HomeSmart - Scottsdale, AZ
Jeff Crane

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.

July 16, 2011 07:10 PM #59
Rainer
145,873
Ben Yost - 303-587-4297
First Time Home Buyer, Mortgage Rates, Pre-Approval - Denver, CO
FHA, VA, Homepath and Jumbo - Mortgage Loans in De

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!

 

July 16, 2011 10:17 PM #60
Rainmaker
271,173
Ken Cook
Digital Content Creator - Marietta, GA
Writer For Hire

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!

July 18, 2011 08:49 AM #61
Rainmaker
126,911
Dora Griffin
D A Griffin Financial.LLC - Fort Thomas, KY
NMLS 6380

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.

July 18, 2011 03:35 PM #62
Rainer
215,148
Gerard Gilbers
Stingray Performance Marketing - Waldorf, MD
Your Marketing Master

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".

July 18, 2011 10:21 PM #63
Rainer
123,391
Jeff Coon
Annie Mac Home Mortgage - Toms River, NJ
Direct Mortgage Lender

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. 

July 19, 2011 10:48 AM #64
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Rainmaker
271,173

Ken Cook

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