Yesterday I was at an event with a group of my favorite REALTOR organizations and, as always, the chat eventually turned to how crappy some other lender is. I was listening, politely, and understanding some things the agent may not have understood about how loans can get askew during the process until they said, "You know, these underwriters think they can just ask for anything from us!"
Right on. They can.
Underwriting guidelines are there for a purpose - to serve as a guideline for making wise lending decisions. Underwriters do have the "right" to ask for additional supporting documentation in many instances especially if other guidelines are only marginally met.
If you knew an underwriter personally you would know they have a responsibility to the originating lender and ownership of that loan for the remainder of its life. If they make too many lending decisions which result in loan defaults, especially early payment defaults (EPD) not only can they lose their job but they can lose their Designated Underwriter (DE) approval to underwrite FHA loans.
Undewriting is not a joke.
Underwriting is one of the most crucial components of loan issuance or denials. Certainly you, your buyer, your seller, the loan officer, and others have the right to question or dispute an underwriter but ultimately not only can they require additional supporting documentation but they should and must.
Can an underwriter be wrong? Yes! The best way to overcome the opportunity for an underwriter to be wrong is by working with an experience, licensed, Mortgage Loan Originator who works for a recognized and respected mortgage lenders.
Social Media Edge Radio - seriously true professionals who won't misguide you with some crap they made up to sell more books and seminars. Every Tuesday at Noon eastern.
REtechRadio - part of the REtech family. Great tech information and updates from people who have the answers, people who speak and product and service users.
Ken Cook - Community Outreach Leader Southeast Region (I make friends, handle social media, SEO/SEM/SMO that's my job :) - We do FHA, USDA, VA and Conventional Home Loans (678) 439-8683 NMLS ID 208452
My employer: AmericaHomeKey, Inc., 2300 Windy Ridge Parkway, 8th Floor North Tower - 840N, Atlanta, GA 30339. NMLS ID 102930. Georgia residential mortgage licensee 23191. Equal housing lender.
But the underwriter *does* have the right ...
This is a very timely reminder about the role that the underwriter plays in a transaction. Just this week we had a transaction nixed by the underwriter. We do understand her concern; this is a waterfront property that is being purchased as an investment. In the future, the tiny 450 square foot home is going to be torn down and there will be a large home built in it's place. But for now, the buyers are in a home they have lived in for several years, a large home with a waterview just a few streets away. Their dream is to be waterfront and with the prices so low right now and the interest rates at record lows, the buyers decided now is the time. The initial loan was supposed to be a conventional investment loan with 25% down. Everthing was going as planned. The offer was negotiated and we went back and forth several times until it was finally approved.
The appraisal came in about $50k low than the offer price, which wasn't too surprising. The problem was finding appropriate comparable properties for the appraiser to use to justify the value of the offer. It seems that the underwriter did not like the appraisal and she has decided that the offer as is will not be funded. The underwriter is the ultimate decision maker as far as whether the loan will be approved. There were 3 different reasons this particular loan was rejected and the one that is the most important (we think!) is the land to home (improvement) value which is 92%. According to the appraiser, that exceeds the maximum for Fannie Mae or Freddie Mac purchases so it is not considered a conforming loan that can be easily sold on the secondary market.
We were going to petition BB&T to keep this loan as a portfolio loan but fortunately we have a back up. Our client is going to do a VA refinance on her current home and then take an additional $90k out of her 401k - she can take that out as a loan to buy real estate and pay the loan back TO HERSELF with interest! What a great way to invest in real estate!
We've had to request a one week delay as this will take longer than a week to get approved. When you do a refinance, you have a 3 day right of recision which will take us past settlement. Hopefully this will work so buyer and seller will be happy!
See below for a mortgage loan officers take on the importance of the underwriter in a real estate transaction!
Via 678-439-8683:
2 comments • David & Lisa Webber, www.webberteam.com • July 17 2011 11:27PMComments
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A thoughtful and provoking Blog, David and Lisa.
Borrowers are encountering more and more demands from Underwriters. All Realtors can tell stories of working with Buyers who have 800+ Credit Scores, significant financial assets, and a good subject property... but they are questioned again and again by the mysterious "Underwriter" that is in some far-away city.
David & Lisa,
thank you for your excellent introduction to a post. I am glad it all worked out for you. As agents, we do not know underwriters, and often tend to think that thheir only goal is tomake our lives miserable, and it is not