Written By: Bonnie Wilt-Hild
As we all gallantly return to the FHA market, I thought this week would be a good week to discuss something that a lot of underwriters are currently experiencing and that is plying through test cases. It’s not something we think about as a normal course of business but given that so many companies have recently become approved to originate FHA business, I thought mentioning the other piece of the FHA approval process would be relevant. Not only that, but as I, myself, have accepted a new position with a mortgage lender who has also recently upgraded their FHA approval from Loan Correspondent to Unsupervised Lender and I too have found myself in “test case hell”.
I would like to start by saying it’s not a completely horrible thing to have to submit cases to HUD prior to closing, it has its benefits from a learning perspective, however, the daunting scrutiny that an underwriter is subject to with each file is a little unnerving. As a DE of 18 years with several test case situations under my belt, I have to tell you it doesn’t get any better with time, so I really feel for new DE’s who are muddling through this process. Which brings me to the true subject of this blog, please have patience with your underwriters.
Test cases require not only underwriting but review at the highest level. As a normal course of business, FHA will scrutinize every aspect of the case so it is up to the underwriter to not only anticipate what another underwriter may pick up deem unacceptable, but to underwrite the case and adhere stringently to every policy, procedure and documentation completion guideline that FHA has as well as making sure the case is simply approvable.
Forget that any audit process is stressful, most DE’s find themselves underwriting and re-underwriting the cases just to make sure that every I is dotted and T is crossed. Then there is management, particularly the production side, who wants everything closed yesterday so they don’t quite get why the underwriters at HUD won’t immediately, if not sooner, pick up their case and underwrite it. It takes on average 4 days for this process to be completed and a Firm Commitment to be issued so the wait in itself is enough to make an otherwise amicable production manager a little short tempered.
Once the origination staff gets the idea of how it all works, they usually start harassing the underwriters, sort of like “Is that case at HUD yet?”. Not cool, there are two ways to do things, the right way and the wrong way and just shipping cases that are not complete to HUD while in test case phase is a big no no and will ultimately result in a Notice of Rejection or NOR due to missing documentation. The DE knows this and will usually try to explain this to the origination staff and production managers who, with settlements scheduled prematurely, just don’t get it. This causes more frustration.
By this point, the production managers begin to resemble Attila the Hun on steroids and are just all over the underwriters to get it done. This is where the plea for patience comes in. Support staff needs to understand that an underwriter can send the case to HUD or they can send the case to HUD the right way. If you want the firm commitment and ultimately the completion of the test case phase, give them the time they need to do it right so business as usual can begin.
The sooner all 15 test cases have been completed THE RIGHT WAY, the sooner HUD will ultimately release the lender and everyone can begin conducting business more efficiently and without the delays and scrutiny we all must bear during the test case phase. So have patience and let your DE’s do what they do best and you will find yourself out of test cases before you know it.
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.