As lending guidelines have tightened up(along with my arteries), I have had to make some hard decisions.
I have learned,during these challenging times that working not only harder, but smarter has been the key to my survival.
When I am dealing with underwriting conditions that I feel are unreasonable, I win most of my battles. (By the way, I hate using the term "battles" but that seems to be a word that my clients and realtors can identify with). On the other hand, over time and experience, I have learned to also pick my battles.
As effective as I have been over the years going to bat for my clients and getting their loans done, there are some underwriting battles that I will never win.
When these situations occur, we have to resist the urge to argue or complain about certain conditions.
Here are some examples of black and white guidelines that, bottom line, we have to adhere to.
(1) We need every page of a bank statement or investment statement.
No ifs, ands, buts. We have to have every page. I can hear the rebuttal already: "But, Paul, the last page is blank, why do you need that?"
OUR RESPONSE: We don't know that the page is blank. That last page could show a loan or credit line on there that is not showing up on the credit report. In addition, there may be a whole summary of overdraft charges month to date and year to date. Extra loans, advances, or overdrafts undetected on a credit report could kill your loan.
(2) Unusually large deposits on a bank statement that are clearly non-payroll have to be explained and documented.
If one is making $3000 a month, and we see a deposit for $2000 on a bank statement, and another one for $1500 in a given month, not only will we need an explanation for that deposit, but we will need an image printout. (Good news: if the bank account is a Wells Fargo account, I can pull up the images very quickly and easily).
THE RATIONALE: We have to know, when deposits are that large, where that money came from. It could have been a loan, payday advance, a family member, etc. If it was from a loan, of course, we will have to include that new loan in the debt ratio. If the money is from family, then that will be considered a "gift" if one is counting on that money for the down payment for a home.
(3) Two years corporate taxes for borrowers who are owners of corporations or partnership returns for borrowers who are in a partnership.
Sometimes borrowers own a corporation and may pay themselves a salary. They will provide us W-2s and the income looks great. However, our underwriters have ways of knowing if one is an owner of a corporation. If that is the case, we need corporate returns.
WHY? We have to analyze the financial situation of a company that one owns. Even if one earns a great salary from his or her company, if the company is in the red, it tells us two things:
One, the future of the company may be in jeopardy which means the days of an owner drawing a paycheck may be numbered and two, do we want to make a loan to someone who owns a corporation that is losing money every year?
I have had customer's refuse to provide corporate taxes for me. They asked me for an exception due to their prior great history with Wells Fargo, their 800 credit score, etc. When I told them we had to have them to get the loan and subsequently asked them why they wouldn't provide them for me, they admitted they had not filed their taxes since 2007.
SORRY, BORROWERS, IF YOU DON'T FILE YOUR TAXES, THAT IS A SUREFIRE WAY TO GET YOUR LOAN DECLINED.
These are just several of the situations in which I will never get an exception.
Now, let me address two statements that I know you are saying in your mind right now:
(1) "Oh, I will just go somewhere else, Paul. Wells Fargo is making this so hard. I know my credit union or regular bank won't ask for all of this".
ANSWER: Go for it. Go ahead and waste another two weeks of your time and money, and end up with the same result. Since all of us lenders fall under Fannie Mae, Freddie Mac, or Ginnie Mae(FHA/VA) guidelines, there is no room for "gray areas". If we all have to fall under Fannie, Freddie, or Ginnie, why would one think that another lender would waive asking for your corporate taxes if we had asked for them?
It won't happen. Trust me.
(2) "Paul, I did this loan with you a few years ago, and didn't have to provide you all of this stuff".
ANSWER: Let's see. If you closed your loan before June 2007, you are probably right. However, that was then. This is now. To use an analogy, the NFL also did not have a "helmet to helmet" penalty until recently. However, due to the many recent injuries to NFL players due to a defensive player ramming his helmet into another player, the NFL has now disallowed helmet- to- helmet hits.
NFL rules, as with many other rules in sports or other industries, change over time.
Our "helmet to helmet" collisions in our industry, prior to 2007 were: stated income loans in which Wal-Mart clerks bought $500,000 homes, fixed income borrowers getting negative amortization loans, an appraiser appraising a 2 bedroom home in downtown Vancouver for $350,000 because he used homes in Prune Hill as comparables, bank statements being used for income instead of tax returns for self-employed borrowers, 100% loan to value loans, to name a few.
To sum up, I am telling it like it is. I know it is frustrating for all of us, but we have to get pre-2007 behind us and realize that times have changed.
I will always go to bat for my clients, but I also know what battles I cannot win.
We need to learn to live by the old adage:
If you can't beat 'em, join 'em.
Thank you for your business, as always.
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