Written By: Bonnie Wilt-Hild
These days, underwriters constantly stress the importance of collecting the appropriate documentation in order to complete acceptable due diligence on the cases intended for underwriting. Often times, these requests appear to be the result of ultra conservative underwriting practices and the documentation required nothing less than excessive particularly if the request for additional items is being made a few days prior to closing.
As you can imagine, this provokes nothing but foot stomping style tantrums from the loan officers and unfortunately in some instances, the borrowers and agents as well. With that in mind, I thought I would share a few ways that processors could complete their own due diligence, early in the loan process which might minimize the larger issues down the road.
First it is extremely important for processors to get a handle on their underwriter’s personalities. Once you know an underwriters documentation standard, the likelihood of receiving an approval free of pre closing conditions is good and honestly, I think you work better as team with people you understand. Next, a complete review of the file is necessary when it is received into processing to determine what documentation, above and beyond the customary paystubs, W-2 wage statements, tax transcripts and bank statements you are missing.
Don’t assume that the loan officer’s income calculations are correct and don’t take the approach that the underwriter will condition for the documents they want, be proactive. The bottom line is, when the borrower signs that contract, their excited to give you whatever you need in order to get the loan closed. If you keep going back to them however, 2 days prior to closing when everything is packed, they are going to lose patience and want to know why the stuff wasn’t asked for up front.
When reviewing the file, review every piece of documentation provided by the borrower and ask yourself the important questions; 1) Does the borrower have an acceptable credit history or should I ask for an explanation 2) Does the borrower have sufficient income and 3) Have I documented sufficient funds to close the transaction. Needless to say there are several other things that should be considered such as inquiries, year to date earnings, unreasonable deductions on paystubs, NSF charges, large deposit, I know you get it. So ask for the stuff up front. Collect from the borrower everything you think the underwriter will ask for so anything that might be required after underwriting has been completed in minimal.
I know you are asking yourself now, “Why should I do the underwriters job?” the answer quite frankly is, your not, your doing what a processor should be doing, which is processing the loan. Due diligence review is also part of that function as the processor is the first person on that line of defense.
In the end, you will submit a more complete loan package, receive fewer conditions and quite honestly waste less time on the loans that you know you can’t get approved so you have more time to really work loans that will, at some point, make it to the closing table. It also makes funding and insuring a whole easier too. In closing I would like to say that if you set the file up appropriately, it will almost process itself. Just be sure to read the documentation provided so that you can address any potential issues up front. As always, enjoy your week.
About The Author
Bonnie Wilt-Hild - As an NAMP® staff writer, Bonnie currently serves as a senior instructor for FHA Online University (www.FHA-Classes.org) as well maintains a full-time 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". If you're interested in becoming a writer for NAMP®, please email us at: firstname.lastname@example.org.