Originating the Perfect Loan

Written By: Bonnie Wilt-Hild, Op-Ed Writer

If there is one thing most production staff will unanimously agree on, it would be that loan originators never collect sufficient documentation when originating a loan. Forget the compliance errors, never signing and dating the initial 1003 or even having the borrower do it, it just seems that loan officers are so busy selling the deal that they sometimes neglect to collect or even request the information that processors need to get the deal into underwriting.

Now I will agree that it’s important to make your borrowers feel at ease and even develop an overall fondness for the originator, but it’s also important to collect enough documentation to make sure they qualify. In short guys and girls, paystubs are helpful.

As you are all well aware, I myself underwrite full time for a bank on the east coast so I am well versed in all of the adjectives not to mention the choice words used by the processing staff to describe their loan originators when less than adequate documentation is provided with a case when it is turned into processing.

I am actually guilty of teaching them some new ones particularly when the case makes its way to my department with nothing more than what it was turned in with. It’s for this reason and of course my personal goal to curb my use of particularly vulgar words that I am able to incorporate into every form of language as not only adjectives but also nouns, verbs and occasionally dangling participles, that I have decided to share exactly what the loan origination staff needs to collect from borrowers to make sure their deals not only move efficiently through underwriting but also what it takes to get them into underwriting with very little effort.

Needless to say, when a borrower first meets with the loan originator for the purpose of making loan application, they are excited so this is the best time to collect as much information from them as you may possibly need in order to get the loan closed.

As with anything else interest in the transaction will begin to wane at some point, think about buyer’s remorse and purchase transactions, so the last thing the loan officer wants to do is go back to the borrower three days prior to settlement and request 72 pages of documentation, it’s just going to upset the borrower particularly if it’s already boxed up ready for the move or the borrower is concerned that perhaps they made a mistake in signing the contract to purchase the home.

Trust me everyone, the transaction will go much smoother if everything necessary and un-necessary is collected at application. You may have more than you need but that’s better than not enough.

When you consider the current climate of underwriting best practices, most underwriters are now fully documenting every file regardless of documentation waivers so don’t depend on these when trying to determine what you need to get from your borrower.

Requesting everything for a manual underwrite is the best method so your checklist should include the following:

1) Paystubs documenting one full month of earnings

2) Bank statements for the most recent two months evidencing sufficient funds to close

3) Copies of 401k statements if the borrower has one

4) Any required credit and inquiry explanations

5) Divorce decrees, separation agreements or any documentation concerning child support or alimony

6) If the borrower owns additional real estate, collect evidence that the taxes and insurance are escrowed in the monthly mortgage payments

7) Contract of sale if the transaction is a purchase

8) Disclose accurately and appropriately, compliance is a big thing these days and a faulty GFE could result in a transaction being rejected or a significant reduction in the loan officer's fee

9) Collect tax returns for the most recent two tax years, waiting for transcripts and finding out that the borrower claimed unreimbursed employee expenses can kill your deal so you need to find this information out up front and finally

10) Completely fill out the loan application, if you don’t you could end up with some unwanted surprises that could result in loan rejection like undisclosed child support.

Once you have collected all of the information, take the time to prequalify the borrower, there is nothing like having a case rejected two days prior to closing to completely destroy relationships with your business partners such as the realtor and forget borrower referrals, you won’t get any of those either. If you determine you need additional information, request it during the application while the borrower is still excited, they will get it to you right away and it just improves your processors turn time which makes everyone happy.

If you provide your processor with the correct information, your case should move quickly into underwriting and ultimately to the closing table avoiding things like expired locks, re-disclosure and of course angry borrowers and business partners which means less time soothing ruffled feathers and more time generating new business. Best of luck and document, document, document!

About The Author

Bonnie Wilt-Hild - As an op-ed writer, Bonnie holds mortgage underwriting position as the Senior FHA DE Underwriter for a major lending institution. With over 25+ years of senior-level FHA/VA Government underwriting experience, Bonnie is considered the "Queen of FHA Loans".

Opinion-Editorial (Op-Ed) Disclaimer For NAMU® Library Articles: The views and opinions expressed in the NAMU® Library articles are those of the authors and do not necessarily reflect any official NAMU® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMU®. Nothing contained in this articles should be considered legal advice.