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.