Underwriting Training : Stick to Your Guns When You Think You are Right!

Written By: Jane Harford

I wanted to share a story that actually happened to me recently at a new job, I recently started. I am working for a large mortgage lender that is considered to be a solid company. They have been in business for a long time, have a conservative philosophy in their mortgage underwriting guidelines and have a successful mortgage origination business that does business nationwide. They also have a well established program of in house education that all new employees are required to complete before the company will sign off on an underwriter’s lending authority.

Need Underwriting Training? CLICK HERE:http://www.UnderwriterTraining.com

This company does all types of mortgages-conventional loans sold to Fannie Mae primarily, FHA/VA, RD loans, construction perm and bond programs in all states in which they are licensed to lend. The company provides a very solid way of reviewing their loans which enables their underwriters to make well thought out decisions that meet the agency guidelines and the company’s credit overlays. The parent company is a well established banking corporation. The company has a well established credit review department which does incredible research to establish credit policy based on the loans sold defaults and industry trends. Overall, the defaults experienced by this company are well documented, researched and reviewed many times over after a default or repurchase takes place.

I give you this background on the company in order to have you understand that this type of large lender is very rare any more. I should also add that this lender also still services most, if not all of the loans closed by them. They have a large servicing portfolio. I haven’t worked for the likes of this kind of company in nearly 7 years. I feel that it is a good and stable employer. They are well known and not going anywhere. The parent company is doing well; it weathered the recession well and will be around for many more years.

With all of that background, I would now like to share the story……In my training on this job; I have been working closely with the other underwriters in our office. We all have much background and run questions and scenarios by each other all of the time…..this is so wonderful for me. The last few jobs I have had were with small companies that sold 100% of their loans on a correspondent basis. I was the underwriter responsible for getting the company’s HUD test cases approved by HUD in order to get the company’s full eagle in two situations. The last company I worked for did a lot of FHA wholesale business.

We underwrote the loans three times (by 3 different Underwriter’s) in order to be sure that none of us missed anything. We did well, but the loans were extremely challenging and difficult to approve and close. Anyway, back to the current employer….there were a few of us talking about the new FHA MIP calculations effective with case assignments 4/5/2010. I found the mortgagee letter on line, printed it out and we were going through the fine points of the calculations of both upfront and monthly. The loan that we were reviewing was a purchase loan. We reviewed the calculations for the UFMIP and the monthly calculations.

It appeared that the monthly calculation was not being done correctly based on the computer’s calculations. We went through it several times and I found other memos, training sites information on the calculation of the monthly MIP amount. It sat in the back of my mind that the calculation of the monthly was .5% or .55% times the base loan amount and divided by 12 to arrive at the monthly figure. That is what we have done forever……so, the underwriter conditioned to have the closing documents reflect this correct calculation. …….well, you would have thought that we asked for the loan officer’s first born child or to have the entire software system overhauled…..no, just correct the initial monthly MIP figure to match the underwriter’s calculation. I knew that the calculation was important since, HUD has kicked back files on my old jobs if that and other simple calculations were not done and shown correctly.

We asked our team lead to check into this situation further….and she escalated the question all the way up the food chain at the company’s resource center, underwriting support function and the company’s credit policy officers. The entire time we were told that the software was correct (Even though the calculations were different from our manual calculations) and that we were to use the software calculations. We were told that HUD would not kick back the file for this difference in calculation.

Three days later, we got an incredible change in the company’s pat answer. We were correct in that our calculation was the correct calculation that was supposed to appear on the HUD LT, 1003, HUD addendum and other closing forms….we were told that we are supposed to hand change that figure on these documents, even though the computer software would not be changed…..

I was totally blown away! I had given up on the company’s response to this even though I knew that our underwriting department was really right. This will be distributed to all underwriting centers this week as the “gospel” truth about the software and what corrections to make.

Talk about feeling good about what I know and sticking to my guns. This is an incredible thing that I was able to help achieve this week. Sometimes the individuals may know more than the company they work for.

Happy underwriting and please be sure that you check the monthly MIP calculations on your final FHA documents……you may also be correct!

Need Underwriting Training? CLICK HERE:http://www.UnderwriterTraining.com

We will return to the final blogs on mortgage fraud next week.

About The Author

Jane Harford - As an NAMP® staff writer, Jane brings 30+ years of mortgage business experience in FHA, VA, LAPP and is also an FHA DE Underwriter. If you would like to become a writer for NAMP® , please email us at: contact@mortgageprocessor.org.

Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.