Written By: Bonnie Wilt-Hild, Op-Ed Writer
Now that we are in full swing where the FHA originations are concerned, there are several practices which exist where FHA lending is concerned that are not associated with conventional or even sub-prime lending. Completing some of these tasks requires cooperation among lenders and brokers, more particularly case number assignments.
As we are all aware, only one FHA case number is issued per borrower and property. The origination lender or broker usually requests this case number upon origination of the loan application and if something happens, say the borrowers decides to move their loan to another lender, the originating lender must assign both case number and appraisal to the new lender. This usually takes place by the originating lender transferring the case in FHA connection to the lender of the borrowers choice. However if the origination lender refuses, the new lender cannot proceed or even access the case in FHA connection.
Ultimately this means the borrower cannot close on the loan until this is completed. I will say that I have encountered lenders or brokers in the past that would refuse to assign the case number, trying to hold on to the case. Not very professional and certainly not in the borrowers best interest, it’s also sort of manipulative but ok. In these cases, the borrower would simply fax a letter to HUD requesting that the case number be assigned and it would be completed at the HUD level. A waste of time, manipulative but ultimately the case would close.
Today I saw something different and for the first time and I have to say it disgusted me. It was not a case of a desperate loan officer holding onto a case number because he really needed the commission, it went a little further than that and included support staff, more particularly an FHA DE Underwriter, which is why it was so disgusting.
In short, I had a case in which the borrower had chosen to move their case to the institution that I am employed by. I requested that the case number be assigned for about 2 weeks before faxing a letter to HUD to have the transfer completed. When I went into FHA Connection to pull the case number assignment, it printed with a flag stating that the loan had been rejected. REJECTED! What a way to spite a borrower for moving their case. Let me state that these particular borrowers were requesting a cash out refinance, had DTI/HTI of 23/35, 14 + years on their jobs respectively and 801 median credit scores. No kidding. The underwriter rejected the loan for inadequate income.
As underwriters, either conventional or DE underwriters, we all know that none of you would have rejected this case. This kind of behavior is a little more common among that of maybe origination staff but not FHA Direct Endorsement underwriters. The thought of a DE, with any amount of dignity or professionalism sitting at their desk and intentionally rejecting a loan of this quality just to manipulate or spite a borrower makes me want to scratch and then shower. As for the rest of us that take the responsibility seriously and consider it a privilege to underwrite loans on behalf of the US Department of Housing, I would like to say that there is no place in this industry for individuals like that underwriter.
On a more positive note, I called the Philadelphia HOC and upon reaching a HUD underwriter explained the case to her. She was awesome and when she reviewed the rejection in FHA Connection, she agreed with me that the underwriter was completely out of line for rejecting the case. Additionally, the underwriters name is also listed in the rejection screens so it did my heart good to know that the underwriter from HUD also got his name. She asked me if I knew this guy, which I didn’t but we both agreed he needed to read the 4155 again. I hope she gets his next loan to audit.
I realize we all need business but as underwriters we not only have a fiduciary responsibility to our borrowers but a responsibility to make fair decisions where all of our borrowers are concerned.
This type of spiteful behavior has no place in an industry already plagued with a horrible reputation for unscrupulous lenders and brokers. Please people don’t add FHA Direct Endorsement Underwriters to a long list of mortgage sleeze.
About The Author
Bonnie Wilt-Hild - As an op-ed writer, Bonnie has held many mortgage underwriting positions, including 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".