Approval

Credit? Forget It

Contingency In The Closet

Just what is a "loan approval"? part 2

Just what is a "loan approval"? part 1

The Illusion of Precision

Let Me Talk To That Underwriter!

Let Me Talk To That Underwriter!

The moment of truth for most mortgage applicants is less personal than an IRS audit. When you are defending yourself against the IRS, at least there is a human being to meet, look in the eye, and argue with.

Not at the moment of mortgage approval or denial.

In mortgage purgatory, you get to meet a banker who prepares you and your application. This banker (often known by the antiquated term "originator," which is about as descriptive as "starter"), no matter how skilled, doesn't make the decision.

You also get to talk to a "processor" while she polishes your file for presentation ("processor," which implies "clerk" of some kind, is a term which grossly understates the skill of these loan managers).

The banker and loan manager can give you a good idea where you stand along the way, and provide hints about how to play the game. "In your case, we should probably go with everything, belt and suspenders", or "Your file is so strong, and we've got some time -- let's wait to see if the underwriter asks."

There. That word, "underwriter." The disembodied shot-caller.

About three weeks after you apply, your file is ready to submit. Your financial life has been reduced to a two-inch pile of xerox copies and forms (if you happen to be self-employed, that will be four inches, please.)

Off to a wholesaler goes this bug-killer, by express mail, often no further away than Denver. No matter whom you approach for a loan, the underwriter is somewhere else: the last time we checked, there was not a single underwriter based full-time in Boulder County.

Your file then moves up slowly through a stack, waiting its turn. There is no ongoing argument about approval, the file just sits for two or three days.

"Can't you get them to look at my file first?" Sure: if I ask them one more time, they'll plunk you back at the bottom of the stack. The whole heap is one rolling emergency; nobody has priority over anybody else.

The magic moment arrives. A good underwriter can review upwards of twenty files in a day: your instant in surgery seldom lasts more than half an hour.

Depending on how well-organized the wholesaler may be (one of those little variables in price which few borrowers care about at the beginning), your approval appears by fax within minutes or the next day.

The almighty underwriter has underwritten: you may be approved (always with conditions, some of which can kill an approved loan), denied (occasionally reversed), or suspended. Some suspensions are genuine requests for more information, many are curtains: "I'll lift the suspension if you can prove that all 27 prior late mortgage payments were a lender error."

Some conditions are easy: "I need a better copy of the W-2", some are hard: "The deal looks fine, but I've got to have two years of 1040s, two years of K-1s, and the underlying partnership returns", all for a sin no worse than a minor investment. Meanwhile, two Realtors are howling at the banker about whether or not the loan is approved.

It's when the conditions are tough that many borrowers (particularly the executive types, used to talking their way out of tight corners) utter the immortal line, "Lemme get him on the phone!"

"Doesn't he understand investments?" "He wants me to explain why a Sears payment was late in 1988 that wasn't late?" "I've given him all I'm going to give him, except a piece of my mind."

Who is this underwriter?

First of all it's a "she," not a "he." Male underwriters are extremely rare. No discrimination here, salary or otherwise: these usually female executives are often the highest-salaried people in a mortgage company.

Underwriters are usually female because the processors are, and most underwriters are graduated processors. The career path leading to processor status is the one that is sex-related: most processors are graduated secretaries and receptionists. (Why more men don't embark on this career path is a mystery to me.)

How do you get to graduate? Apprenticeship: There are courses to take, but you can't learn to underwrite in school. After five or ten years of processing, armed with demonstrated judgment under fire, and excellent work habits (a photographic memory helps), a company may trust you to move up to underwriter status.

Trust? That's it?

Yup. You become a Fannie Mae (Freddie Mac, FHA, VA) underwriter when a company decides that you know the difference between a file Fannie will keep from one Fannie will make your company buy back.

Remember those twenty files every day? After 100 files a week, five thousand a year, for ten years, there aren't a lot of surprises. Borrowers find unique ways to arrange their financial lives, but the details are the same.

The underwriter won't talk to you for three reasons: it won't do any good, she is too busy, and see reason number one -- no matter how good the borrower's appeal to common sense might be.



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