The other day, I came across a post by Ralph Gorgoglione asking whether the underwriting process was a standard process or did it vary from lender to lender. While I commented that very little about the underwriting process these days seems standard anymore, the underwriting process most certainly isn't a mystery either or least it doesn't have to be (yes, it can vary from lender to lender).
There are a number of things that can wreak havoc on a loan transaction (as Ralph points out) and while many of them are underwriting related issues, there most certainly is no reason why agents shouldn't be allowed to be privy to why these matters have come up and what is being done to resolve them.
Personally, so many of the scenarios that do come up in the underwriting process are not deal breakers but so often it seems that the agents in the transaction as well as our own borrowers sometimes get so worked up over the requests for additional documentation and simply don't seem to understand why these matters need to be addressed. I guess we (MLO's) are to blame for that one - we need to be better educators with our borrowers and their agents.
Some of the things that I see agents around here complain about are actually very valid matters that need to be verified and documented yet instead of understanding the need for the documentation, agents and/or buyers will just gripe and complain about having to provide the required documentation. This can also be attributed to so many years of borrowers having to provide so little documentation (and we all know how that ended) that now any requests seems like too much.
Those days are long gone folks and quite frankly, I'm glad. All loans now are full doc loans and not only does everything regarding the borrower's ability to qualify and pay for a mortgage need to be verified and documented but properties also need to be qualified as well.
Granted, much of this can be done in such a way and in a particular time frame so that it doesn't have to necessarily delay the escrow process. This is where an experienced, hard-working and diligent MLO is absolutely vital.
One of the scenarios that Ralph asked about were the problems with Homeowner's Associations (HOA). This is most certainly a challenge and it doesn't seem to be getting all that much better either.
Not only has our current declining economy been really tough on homeowners but it also has been extremely hard on the millions of condo complexes and the HOA's that manage these units.
The challenges that we are seeing so much of now with condo requirements have always been there as guidelines for borrowers purchasing a property in a condo complex. The problem is that these guidelines were never an issue before until now. The three most troublesome matters with purchasing a condo right now are a) the owner occupancy ratio, b) the financial status of the HOA and c) any pending HOA litigation.
In a strong and rising market, these matters weren't an issue: owner occupancy was great, the financial status of the HOA was strong and the HOA's generally handled their legal issue quickly and completely. In today's declining market, this has not been the case and many HOA's are in severe financial and legal distress. This makes purchases in these complexes much more risky for lenders and their investors.
As we all know, all mortgages are packaged up and sold off to the secondary market after the close of escrow and if a lender can't sell it, they won't fund it. These days, secondary market investors are looking for safer investments and that generally does not include properties in high risk condo complexes.
While it's still possible to purchase a condo unit, there are numerous hoops a borrower and an HOA have to jump through before getting to the closing table and this will most certainly require some additional documentation.
Once again, this process is most certainly not some top secret that only MLO's are privy to but it will require patience, understanding and perhaps even some assistance from agents working with buyers/sellers who are looking to purchase/sell a condo.
If agents are not willing to do what's necessary to serve their clients who want to buy/sell a condo then they need to refer the client to someone else who is willing to do what it takes to help the buyer/seller purchase/sell a condo.
Stay tuned for part 2 where I discuss some of the challenges of verifying a buyers employment.
UNDERWRITING REALLY ISN'T THAT MYSTERIOUS BUT IT'S NOT STANDARD BY ANY MEANS EITHER - Part 2
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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