As a mortgage lender since 1991, I have had to learn the technical skills essential to do my job. You see back then there was no automated underwriting. The borrower had to have a down payment, income and show an acceptable credit history that indicated their likeliness to repay. All of this had to be documented.
Trust me, I screwed up many deals in my early years because I didn't know what I was doing or didn't look at the documentation I had. I learned from my mistakes and didn't make the same mistake twice. More importantly, I didn't blame anyone but myself.
I have heard and seen more horror stories about home purchases blowing up at the last minute because of changed guidelines or additional underwriting requirements. Here are a couple of thoughts:
Changed Guidelines
The guidelines almost never change without notice. In most cases, lenders have anywhere from 30 to 90 days before a change and often times have changes that are effective with applications after a certain date. The problem is many lenders are lazy, don't ready the guidelines and don't keep up with the changes until it blows up a deal. In these cases, the problems were avoidable had the lender stayed on top of their game.
Rather than tell the truth and say they dropped the ball, the lender will often times blame it on the underwriter or changed guidelines. Because we have seen so many changes in guidelines, it is an easy out and allows the lender to save face. Unfortunately, that does little to solve the homeowners & agents frustration.
I will in an upcoming post show you where you can find information on guideline changes for both conventional and government loans.
The Underwriter Keeps Asking for Documentation
It is not uncommon for an underwriter to have conditions on a loan file. The lenders job is to gather those conditions so as to obtain the final loan approval. Here is an example, the underwriter ask for a bank statement to verify the borrowers funds to close. The lender gets the bank statement from the client, the current balance is enough cash to close, so we are good to go. But wait, the lender failed to look at the entire statement and missed the fact that the applicant had a large deposit that are unexplained that made up most of the clients down payment. Now the underwriter must condition the loan again to find out where the money came from.
Lenders often times don't look at paystubs, bank statements or other key documents. Thence the last minute conditions or never ending stream of conditions.
Who Made The Underwriter God
As a lender, I need to know the guidelines and rules as good if not better than an underwriter. I need to be able to show them why they are wrong and why my deal can be done. I have taken dozens of underwriters to school (and have made more than one think less than favorably of me) for the benefit of my clients and agents. If I claim to be an expert, then I better be. If an underwriter is going to go toe to toe with me, they better know their stuff or I am going to take them to task.
Long story short, I spend a lot of time keeping up with the rules, I will also ask the hard questions up front and know what I have to work with right away. My pre-approvals are rock solid and I don't waste my clients or agents time. When I say a deal is going to go it does. When I tell them it won't, they know they can bank on my answer.
Sorry to rant, but I am sick of lenders who don't own their business. You give all of us professionals a bad name and reputation. If you don't know what you are doing, learn! If you are unwilling or can't, with all due respect, get out of our industry!
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