Exceptions

Written By: John Hoxsey
Certified Master Loan Processor (CMLP)

"I never make exceptions. An exception disproves the rule." - Sir Arthur Conan Doyle

Most of my articles have been geared toward steadfast rules which allow you to process more efficiently. Today I am going to talk about the dreaded “exception”. Should we make exceptions? And, if we do, what are the consequences?

The simple answer is that common sense and exceptions go hand in hand. There is a large part of me that never wants to make an exception. In fact, when the word “exception” comes up, somewhere, in the back of my head I hear a voice proclaiming “We will not negotiate with terrorists!!” However, it is ultimately the borrower we are serving, and as such, we should make exceptions when they are warranted.

I had a recent situation where, after the lender had sent docs to the title company, we discovered that the borrower’s property taxes were paid in full. We thought they were due, and therefore, were collecting them at settlement. The borrower was adamant about not wanting any extra cash at closing, but without paying the taxes, they were now getting back approximately $1800.00. I contacted the lender and let them know we wanted to lower the loan amount by $1,800.00. Also, the borrower had a scheduling conflict and could no longer close the loan that day, and needed to reschedule for closing the next day.

The following was the lenders e-mail response: “Your loan is no longer clear to close! Resubmit the loan to the underwriter with the changes!” No big deal right? Wrong!!! I was then informed that the underwriter had 24 hours to again review the loan and that it could not be re-scheduled for the following day because the closer had the day off. It would be 3 more days before we could reschedule.

This is where rules for workflow and common sense (or a lack of it) collide. The lenders rule that loan changes have to go back through underwriting and the inherent delay is understandable. The rule is in place for major overhauls that can negatively affect LTV, DTI, credit, and findings. In our case the loan profile was only getting stronger. We were lowering the LTV and DTI.

I can also understand the rule regarding the same closer working on the file when the loan is rescheduled. Obviously it is more efficient to have someone who is familiar with the file redo the docs. I am also sensitive to anyone that has a bonus structure that may be affected.

The only problem was that, in this particular case, we were sacrificing what was best for the borrower. Ultimately we are supposed to have the borrower’s best interest in mind. All too often I see lenders and processors take the attitude that “procedures” override what is really important.

I could not in good conscience make the loan officer go to the borrower and explain why a simple change was going to delay the loan several days. I explained to one of the managers at the lender that most other companies would be able to make this change on the fly, correct the docs, change the date, and still have the docs out in plenty of time for closing the next day. The lender complied.

This is an extreme case but I think it illustrates beautifully why exceptions are sometimes necessary. We should always try to work within the rules and guidelines that have been established but we also cannot lose sight of why those rules are there in the first place.

On the flip side there is a type of exception that can cause problems and comes with many consequences. We should always maintain our standards when it comes to complete files being submitted to processing. “Exception” can sometimes be a camouflaged version of the word “lazy”. We all recognize this and need to keep our eye out for the culprits. “You give an inch, they take a mile”.

I must admit that sometimes I wake up in a cold sweat haunted by Seinfeld’s Soup Nazi echoing the words “Your loan is no longer clear to close!! No soup for you!! Back of the line!!!”

Remember - Your reputation is your business.

Happy Processing!!!

About the Writer. As one of NAMP's volunteer writers, John Hoxsey is currently a NAMP member in good standing and is a NAMP Certified Master Loan Processor (CMLP). If you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.