The Mentality of The Underwriter

In today's tumultuous world of finance and mortgages, the mentality of the underwriter is being dissected, analyzed, criticized and chastised. In defense of the underwriting arena, we have to first of all understand that underwriters, want to approve a loan. With the present surge of foreclosures in the marketplace, we cannot point the finger at the underwriters. No, the underwriters followed the product guidelines as presented to them.

Yes there are some underwriters, that have donned the cloak of supremacy and have "hidden" from the view of the consumer. But, maybe you didn"t know this, but underwriters for the most part do not listen to the "urging" of a mortgage broker or loan office as to why a loan should be approved. Quite frankly, that approval process rests squarely on the requirements of the underwriter to make the decision as to whether or not the loan applicant will make the payments.

This approval is after an extensive analysis of the applicant/s job history, credit records and public records. If, there is an outstanding judgment, the underwriter requires that the judgment is satisfied. Now, here is a gray area. Some underwriters mandate that the judgment be paid off and some mandate that the judgment merely be satisfied. These are two distinctly separate issues.

An example is when a judgment is on the public records for a certain time, sometimes the judgment holder will accept a lesser amount as satisfaction. So, now the mentality of the underwriter comes into play. Here is where I differ with this "pontification of power" by an underwriter to make this determination. Why not give the borrower the opportunity to get the judgment satisfied. After all, if the holder is satisfied and it is so entered into public records, is the underwriter potentially placing their thinking into the arena of a possible contempt of court action from some sharp attorney. What power exists on the books that says " a judgment MUST be paid". "

I have had this situation many times in my career. It was ONLY after having the underwriter fully understand that they can only approve or decline a loan application based on the information provided them from agencies such as the credit bureaus, public records and employee verifications. I have cautioned many about the potential for litigation regarding this scenario. I had a friend that refinanced his condo a couple of years ago. His credit scores were above 800. This is an excellent score that very few people have. Well, my friends application was conditioned by the underwriter because on public records a child support issue that was (20) years old in Wisconsin was reporting on his credit report. Now, this did not affect his credit score, after all he was over 800. But the underwriter insisted that this item be paid off.

Now, the state of Wisconsin, Division of Child support faxed to our office in Florida a statement that this account was fully paid over (20) years ago. The State of Wisconsin is not required to notify the credit bureaus whenever an account is paid off. Plain and simple. But the faxed copy from Wisconsin, forwarded to the underwriter did not convince the underwriter at all. She insisted that it be removed from the credit bureau files. We did not have enough time as the closing was either going to happen within (24) hours after her "clear to close" and the closing documents were in the hands of the title company. A rapid re-score was out of the question because the company that provided credit reports had a policy of requiring a letter from the State on the State of Wisconsin stationary. We have yet to find any state that does this. Their policies are to furnish records and not a letter because the actual letter could be construed as an opinion later on. They will not even go into that room.

Now, our client is livid. He has been delayed for this loan with a score and credit report that is impeccable. What to do? Well, we contacted the underwriter and spoke to the senior underwriter. We explained that the fax was generated through the court system and was he in a position to accept service on behalf of his company to answer to potential contempt or court charges. The loan was approved in (5) minutes.

Our advice to mortgage officers is to make yourself aware of ALL of the laws and how the rules of evidence work. This might just get an approval. I have another article coming out on "how does an underwriter handle illegal debt"?

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