Tag: underwriting

Underwriters Are Not Evil (Not All of Them)

On a recent loan, we needed one simple document from the borrower’s bank, nothing more.  We weren’t seeking lost pages of an Ernest Hemingway novel (I’ve read some of his stuff, and anything lost can stay that way, if you ask me).  The borrower went to one branch and was told that what we were requesting was impossible.  We’ve obtained this type of document hundreds of times before on other loans, so I was extremely confident we weren’t asking for anything exotic.  Nevertheless, the teller insisted to the borrower that they couldn’t provide what we were seeking and gave him something else – something that WOULD NOT fly with the underwriter (which I was fairly certain it wouldn’t in the first place).

After reviewing the document he sent over from the bank, I regrouped with the borrower and asked him to return to the bank and ask in a different way.  He called me back about twenty minutes later and told me that I would never believe what just happened.  I told him I’m pretty sure I’ll believe him because I see weird stuff every day:  He went to a different branch this time and the teller gave him EXACTLY what we had requested the first time.  I burst into laughter and then quickly collected myself and apologized to the borrower saying, “I’m sorry about that.  I shouldn’t laugh, but it’s all I can do when I come across these situations, and they happen fairly regularly.”  To that, the borrower said, “I don’t see how you can deal with this kind of thing on a daily basis without drinking on the job.”  This is coming from a guy who teaches high school so his own level of “grin and bear it” has to be through the roof.

I shared that little piece of . . . absurdity so I could share this with you – there’s a very solid reason underwriters are so extremely persnickety and insistent that things be done in a certain way and documents look just so.  You could say it’s because they hold the gold, so they make the rules.  Or, you could say that they’re getting ready to lend, perhaps, the largest chunk of money an individual will ever borrow in her/his lifetime, so they want to make sure everything is in order.  Either of those two answers is partially correct, but the REAL answer is far more simple: they’re covering their butts.  Everything they do from the moment they touch a loan application is to make sure they can’t be blamed for anything.  (What must their home lives be like?)

In the case of my teacher buying a house, the form he needed had to show the money being transferred out, but it also had to show the transactions before it to show that the account had enough money to make the transfer in the first place.  To a normal human being, the fact the statement showed that after the transfer was completed there was a balance of $XXX should be sufficient to prove there was enough money in the account for the transfer to go through.  To an underwriter, though, they have to show that the account holder didn’t walk in that day, hand the money to the teller, and then transfer that money out.  Sourcing and seasoning rules don’t allow that, and the underwriter has to make sure of that. The underwriter didn’t make that rule (or any of the rules they’re tasked to follow), but their continued employment depends on their sticking to it – they’re forced to be the devil about the details.

Whether you’re a seasoned real estate agent or a first-time homebuyer, the next time you think the underwriter is being unreasonable or especially stubborn, bear in mind that 99% of the time they’re just doing their jobs – they’re just covering their backsides.  If they’re like me, the older they get and the less exercise they undergo, covering that area becomes a bigger job by the day. To borrow a notion from the Rolling Stones, have some sympathy – even if you still think of them as the devil.

Herding Cats: Notes From an LO

 

Someone much wiser than I once told me that there are always three sides to a story: Party A’s side, Party B’s side, and the truth. In the mortgage/real estate world, that’s especially poignant.

On a recent transaction, the real estate agent representing the sellers was eager to get the appraisal ordered –we had a short escrow, and she wanted to make sure there were no delays.  I don’t blame her at all, as it’s her job to keep the sellers’ interests at the top of her priority list.  When I conferred with the buyers’ agent, I learned that the inspection had JUST been completed, and he and his clients had just sent over their response for what they wanted to see repaired.

I reminded the buyers’ agent that, while I didn’t wish to delay the transaction either, we needed to be mindful of certain aspects of the appraisal process.  In this instance, if the appraiser went out and did her/his job before the repairs were completed, there’s a strong possibility the buyers would have to pay an additional $150-250.  Why?  If the appraiser included mention (and photos) of these unrepaired items in her/his report, the underwriter would require the appraiser to go back out to the property to confirm that the repairs had been completed.  The underwriter is not going to accept a note and a pinky promise from anyone else that this has been done –only the appraiser can confirm this.  And if this were to be required, the appraiser would charge a return-trip fee, and the buyers would be the one paying that fee.

We explained all of this to the buyers so they could decide with their agent how they wanted to proceed –all agreed to have the other agent stress to her sellers that these repairs needed to be made quickly (and correctly, of course) so the appraisal could be ordered in a timely fashion.  As an aside, one of the repair items was exposed wires in an exterior sprinkler box (the timer most likely), and one of the buyers laughed and said it could probably be “fixed” by closing the box before the appraiser showed up.  No argument there, but I wouldn’t want the buyers to have to pay $150-250 because someone forgot to close that box.  The buyers agreed with me.  And herein lies the dilemma:

Party A’s side (sellers): we’re busy professionals, and we’ll get to the repairs when we can, but we don’t want the transaction being held up.  We’ve given you concessions, so work with us.

Party B’s side (buyers): we met your asking price on the house, so all we’re asking is that you get these items repaired quickly. We’re going to need that extra $150-250 for “house stuff”.

The truth: the underwriter isn’t going to fund this transaction until all the repairs are made and nothing appears on the appraisal that would adversely affect the “lendability” (I’m pretty sure there’s a better word for that) of the home.

In all of this, my job is to spread my arms wide and keep everyone (including the underwriter) moving in the right direction –it’s often like herding cats.  Regardless of how we get there, as long as everything closes on time, I’ll take my scratches –I can always make up a really cool story about how I got them.