Has one of your clients been asked by his or her lender to write a letter of explanation or LOX? This underwriter requirment is very common in the world of home financing today, and I find that it has a tendency to stump some borrowers and stall the loan process.
Reasons for a Letter of Explanation
There are so many reasons why an underwriter may request a letter of explanation. Here are the most common ones I run across:
- Overdraft on a bank statement
- Employment gap
- Bank deposits other than payroll
- Reasons for a bankruptcy
- Reasons for lates on revolving or installment debt
Helping Clients Conquer the LOX
I always instruct my clients to be honest and to keep the letter short and sweet. At my blog, Loan Officer Lately, I've also written a model letter to help clients get started. It's actually the most popular post I've ever written, so that goes to show you how often people are looking for help when the underwriter requests a letter of explanation. With a little coaching and guidance, your borrowers/clients will navigate this stage of the loan process with ease and be handed the keys to their new home right on schedule!
For more detailed information on the letter of explanation, be sure to read my full blog post.