Those Days Are Gone

Written By: Bonnie Wilt-Hild
Senior DE Underwriter & NAMP Instructor

I had a very interesting conversation with a loan officer this week. The conservation like most, started out nice enough when he was informed that the case he had submitted for underwriting was being rejected for several reasons and of course as the week progressed, well let’ just say the conversation wasn’t very nice by the end of the week.

The case as submitted was marginal at best, a purchase transaction demonstrating excessive ratio’s, no reserves, no prior experience with housing expense, 100% payment shock and this not considering other debts that were deferred. As with all cases it began in underwriting with a particular underwriter and as the deficiencies were noted and overall risk determined to be unacceptable, the initial underwriter referred it the ladder and the case was eventually rejected by three different underwriters.

The loan officer, as I said was not pleased and as one discussion led to another, he finally blurted out a slew of stupid comments like I don’t care if the loan performs as long as the borrower make 6 payments and I get my fee……, there are a lot of companies that would approve this no questions asked…. How disappointing! This is the very attitude that has not only cost us as tax payers millions if not billions of dollars but is also the reason that we as underwriters no longer have the flexibility to make common sense underwriting decisions that might have benefited a borrower such as the one described above, in the past.

So, I have decided that now was a great time to reiterate the that not only are the days of common sense underwriting a thing of the past but so are the days when mortgage lenders approve anything in the name of a fee. I am sure there will always be less then scrupulous lenders out there that will unconscionably place a borrower into a mortgage they can not afford regardless of the subsequent loss to both the borrower or investor but I would like to think that after the most recent two years that lenders as well as loan officers have started to understand that those days are long gone.

Borrowers need to be well qualified as they should have been in the past and lenders need to demonstrate the basis on which loans were approved. This has not only become important where government insurance programs are concerned but where investors are concerned as well. The big players out there in the secondary market are auditing files as well and issuing pre-purchase suspense conditions like they have never done in the past.

All of this equates to one thing and that is that we as underwriters, regardless of how often we need to wear our boxing gloves, need to make sound underwriting decisions to insure that the institutions that employ us are still around in the future. It is unfortunate that there are people employed in this industry who, after all that has transpired in the most recent 2 years, still could care less about the quality of business they produce or the future of the institutions that employ them. Solid underwriting practices (and of course the boxing gloves) are the only way to demonstrate that those days are gone. As always, happy underwriting.

About the Writer. As an NAMP staff writer, Bonnie serves as a senior instructor for FHA Online University as well maintains a full-time job as Senior DE Underwriter for a major banking institution. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)