Underwriters Prefer Cover Letters

Written By: Stacey Sprain, Op-Ed Writer

This week I asked a few underwriters what their top gripes are lately with the files they receive for underwriting. Based on the underwriter responses, I was able to establish a few items worth mentioning.

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One thing was very clear based on the responses. If you want your underwriter to adore you and your loan files, I highly recommend you make get yourself in the habit of composing and presenting cover letters or loan overviews with your submissions on a consistent basis. Providing the underwriter with a quick overview of the file might take a few extra minutes of your time when submitting, but doing so will render you worthy results when the underwriter is able to move through your files quicker and more efficiently in the long run.

Think about it- Put yourself as the processor in the underwriter’s shoes for a moment each time you are preparing to submit a loan file. How long do you think it will take the underwriter to establish what she/he is about to underwrite when she/he receives your file in hand? How long will it take her/him to sort through the file to determine the end lender, the loan type, the property type, loan purpose, loan product and other pertinent details? The answer is that it takes far too long when there isn’t a cover letter or file overview to help speed that process along. You can do you part as a processor to simply outline the exact same standard characteristics each time you submit a file for underwriting.

Here’s an example of cover letter or overview details that can make all the difference in the world to an underwriter:

Borrower: Joe Blow Loan Type: Conventional Purchase with MI LTV/CLTV: 95/95
Property Type: Condo Credit: Credit Scores 628/645/632
AUS: DU Approve/Eligible DTI: 24/36

Borrower: Joe is a non-permanent resident alien. He has been in the U.S. for nearly 6 years working for same employer. I have provided a copy of his passport with visa stamps confirming he entered the U.S. under H1 visa category. Joe is a first-time homebuyer and is excited to become a new homeowner.

Credit: Borrower has minimal credit but all has been paid timely with the exception of a student loan that reflects some past late payments and an outstanding medical collection. AUS approved the credit and did not require an explanation letter so I have not provided one.

Employment: Stable employed, same employer past 6 years. Used annual salary divided by 12 mos + 24 month average of bonus earnings to qualify. Full VOE along with a current paystub and IRS tax transcripts for last year are included.

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Assets: Source of down payment is checking, savings and a withdrawal from 401-k account. Documentation of the vested account balance and loan terms is included in the submission. Borrower is waiting for check to come in the mail. As soon as it arrives, he will provide a copy of the check and deposit receipt from his bank and I will forward to underwriting. Note that with all verified assets, Joe will have about three months of reserves remaining after closing.

Debts/Liabilities: The only debts he will have in addition to the subject PITI are his car loan and student loan payments. He pays his credit card balances off monthly. I have included documentation showing such in the file.

Property: Joe is purchasing a new condominium unit in a 50 unit project downtown. I have provided the condo questionnaire completed by the management company along with the certificate of insurance for the HOA. Because interior is not covered by the master policy, I made Joe aware that he will need to obtain and present evidence of HO-6 insurance coverage. He is in the process of checking around with agents and will forward the policy information within the week. I will submit the HO-6 evidence as soon as I receive it from him. I have compared the condo questionnaire and appraisal information with Fannie Mae’s guidelines and the condominium appears to meet warrant ability requirements.

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By pointing out details in a manner such as in the example above, the major points of the loan file have been neatly summarized for the underwriter in under a minute or the time it takes her/him to read it. She/he immediately knows she will be underwriting a conventional purchase of a condominium property, that the borrower is not a U.S. citizen, that the borrower is stable employed, has debt-to-income ratios within guideline, is a first-time homebuyer, she/he knows where the source of funds for down payment is coming from, that mortgage insurance is required, that AUS approved the loan, that the borrower uses minimal credit, and has three months reserves. Howe long do you think it would take the underwriter to establish all of that without a cover letter outlining it all for her/him?

About The Author

Stacey Sprain - As an op-ed writer, Ms. Stacey Sprain is currently a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution. 

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.