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Ask The Underwriter: Finger Pointing

By
Education & Training with Ask The Underwriter Mentor/ Mtg. Underwriter

 Today's underwriting subject is Finger Pointing.  I know most of you are asking "What mortgage product is that? I've never seen or heard of that condition? Do you mean when the Underwriter is finger pointing?"

I had a few good underwriting questions I wanted to share with you guys this week. I wish I could write to you about them today, but the truth is I can't.  I have to get something off my chest. I've been interviewing Account Executives for the past few weeks now and I've been hearing some very disturbing ideas on why the industry is in the position that it's in now.  Maybe the things I've been hearing are part my fault; I should have probably started the interview off with something like:

"Hello My Name is D. Bass; I'm a Laid off Underwriter".  Maybe I should have asked them to stick to the purpose of the interview "SALES", but I being the nosy person I am ....I had to listen!

Okay AR buddies...here it is.  The reason the mortgage industry is in the toilet now is the:

 

 THE UNDERWRITERS FAULT!

  

Now I have to admit the first time I heard it I thought it was just someone who didn't understand the function of an underwriter.  After the 3rd time I thought to myself: "Is this the new thing it's the underwriters fault.  WOW!  Let me first say this:  The underwriter reviews the file based on the SET guidelines by the INVESTOR or BANK.

 

Here is an example:   Sample Stated Income Guidelines in Italics:

1. Character    (credit) - Credit report or alternative credit (utilities, insurance, car payment, rental history) sample guidelines: minimum credit score 620, at least #X number of trade lines with 12 month history.  12 month history for mortgage or rental history.

2. Capacity     (income) - Verified Income or Stated ~ sample guidelines:  2 year history in the same line of work, DTI max #XX%. Verbal verification of employment required at closing.

3. Capital        (assets) - Checking, Savings, 401k, etc... sample guidelines: #XX amount of months reserves (verified or stated)

4. Collateral    (property) - Subject property:

Now if the investor that I underwrite for wants to lend someone money without verifying their income, should I get upset and quit my job?  If an investor wants to allow a mortgage file to close without an appraisal should I get upset and quit my job?  

Now all underwriters have different personalities, backgrounds, interest, experiences, etc.  What one underwriter may perceive as "REASONABLE INCOME" another may research it a little different and find that is "REASONABLE INCOME".  One underwriter may come from a small town, but is underwriting loans all over the country.  Now tell me this, what would someone from a small town know about property in a large city.  I live in Canton, Ga, but I come from a city that had Million dollars properties across the street from housing projects, $500, 000 dollar homes across the railroad tracks from $75,000 dollar homes. 

 My opinion of the mortgage meltdown:  GREED

Greed is what brought down the mortgage industry.

 

 

Not:

1.      "Sneaky Sam" the loan officer: We all know that there are some people that will never change and NEVER get caught.

2.      "Aggressive Aaron" the Account Executive: We can't blame Account Executives for pushing programs that their companies were funding!  That was the market back then. 

3.      "Pushy Peggy" the Loan Processor (Account Manager or Loan Coordinator): FYI unless you have SOLID evidence you cannot say the "F" word (Fraud).

4.      "Appraisers (I ran out of fancy names!)"  There are 3 types of appraisers: The Good, The Bad & the New Ones!  Nothing has changed.  Appraisers have been screaming about the AVM system since it started.  You can't blame them for that.

5.     "Ask The Underwriter" oops...I meant "Understanding Underwriters" (LOL)

 Now last thoughts:

All I'm saying is before we point the finger.  Think about how much money was made from 2000-2007 = I think the total amount added up to something like: $GREED!

 

Tomorrow I will go back to Ask The Underwriter and address underwriting questions & concerns.....

D. Bass

Mortgage Underwriter & Trainer

Account Executives Needed: careers@alphamortgagetraining.net

Questions: asktheunderwriter@alphamortgagetraining.net

www.alphamortgagetraining.net

 

George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

D. Bass,

Can Loan Officers be at blame if they encouraged a Borrower to lie about their income, yep.

Can Underwriters be at blame if they do not verify everything that they are suppose to verify and look the other way, yep.

Can Appraisers ve at blame if the fudge the appraisal, yep

Can Borrowers be at blame if the lie about their income, yep. 

And so on and so on.  Lots of blame to go around, and the bottom line is as you stated Greed is the blame, because it is because of Greed that these people behaved improperly.

But for anyone to say that it is any of these people that is ALWAYS the blame for the mess that we are in is foolish. Because what they fail to understand is that if a Borrower meets the Loan Program Guidelines, and the house truly appraisers for the selling price, the Loan  Officer can not refuse to take the loan application, and the Underwriter can not deny the loan.  If they do they are opening themselves and the company they work for to a discrimination lawsuit.

Feb 14, 2008 01:04 PM
Dionne Bass
Ask The Underwriter - Atlanta, GA
Blog: Ask The Underwriter

Okay George!

If I had called you first my blog would have been one paragraph!  You hit the nail on the head: We cannot REFUSE an application that meets the guidelines.  THANK YOU!  Blame me for an individual loan that I underwrote, but don't put the entire mortgage meltdown on my head!

Great comment!  I needed to hear that...

 

Feb 14, 2008 10:49 PM
R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham
Bank of England (NMLS#418481) - Raleigh, NC
Bob Mitchell (NMLS#1046286)

While its true that there is a lot of blame to go around, the facts of the matter are that the programs that got the industry into trouble were CREATED by the big Wall Street Investment Houses.  They were the ones who came up with the underwriting guild lines that you were directed to underwrite to and that the originators where given to go out and sell.

To me, 60% of the blame goes to these companies.....didn't they realize that they were setting themselves up for a fall when they wrote program guild lines that allowed for stated income, 100% ltvs and bad credit?  Leaves me wondering....what the hell were they thinking?

35% percent of the blame would go to the ratings agencies who rated the CDO's as AAA+ (or whatever their equivalent rating was).  RATINGS are their business...if the big wall street investment houses didn't know that the bad credit, high ltv, stated income loans were a bad thing, wasn't it the rating agencies job to tell them?

That leaves 5% to spread around to everyone else....why only 5%?  Because if these programs had never been invented the LO's and the borrower's wouldn't have ever been able to partisipate in them.  Fraud is one thing....actually, it's a totally different issue...What people don't realize is that you didn't have to be fraudulent  to do these loans...all you had to do was give them what they were asking for!

 

Bob Mitchell

ValueList Real Estate Services, Inc. 

Feb 28, 2008 02:45 AM