Written By: Bonnie Wilt-Hild, Op-Ed Writer
I was recently hosting a seminar and during a question and answer session, I had an individual ask me what was the greatest deficiency I was seeing in files submitted for underwriting. At the time my answer was incorrect loan amounts due to the changing of rules where the UFMIP was concerned. But after several days of underwriting files, I have changed my mind. The correct answer should have been that the files are simply not processed.
Baring a few exceptions, it seems that the new rule for processing is as soon as the case is turned in, the file must be sent to the investor for underwriting. Based on what I have seen this week, this is occurring without even a cursory review by processing. I am all for submitting a case subject to an appraisal but I have seen several cases that simply were not approvable.
Forget the fact that there were no submission documents and I mean no final typed 1003, no 92900LT or 92900a, it was clearly obvious that the case was not even reviewed. When a file is submitted with 8,000 in monthly income and at time of underwriting it is determined that the borrowers income is actually 4,000, it is clearly obvious that no one, loan officer, or any other employee looked at the paystubs.
So with that said, I want to talk about processing a mortgage application. I realize that there are several people out there that know how to do this but I want to hit a few finer points. Before we start I would like to mention reputation. If a processor takes pride in their work, they will see that before a file is submitted to underwriting they have reviewed it and collected most everything an underwriter will need in order to make a credit decision.
If your Suspense comes back with 21 conditions, you know the underwriter more than likely does not think you have any idea what you are doing. So aside from earning a reputation in the business as being the best, you need to consider processing the file practice for future responsibilities, responsibilities like underwriting perhaps. Think about it, if you can’t calculate income now, how will you progress to the point of actually underwriting the file.
No body is saying the case needs to be perfect but an initial review should be completed and the processor should spend enough time with case to determine what is missing and request the information from the borrower. Additionally, they should review the credit report to make sure that an explanation of credit is not needed and if so requested. Look for public records to determine if you need evidence of satisfaction of judgments or bankruptcy papers. Add the borrower’s monthly payments to determine if your DTI is in line. Don’t assume that your LOS will do it for you.
Look at the borrower’s paystubs. Determine if the YTD earnings are line and calculate the borrower’s monthly income. Check out the deductions to determine if there are wage garnishments like child support. If there is, have the borrower provide the necessary documentation. Review the bank statements for large deposits and evidence of sufficient funds to close if you are working on a purchase. Make sure the Contract of Sale is executed. For your FHA files, make sure you have your case number assignment and LDP and GSA prints, you are going to need them before closing so collect them.
Doing just these things will enable you to determine if you have a loan. Why waste time and money on a case that will ultimately not close. Additionally, you will become familiar with the case so when presented with questions, you can actually answer them. It all comes down to ownership. Good luck and happy processing.
About The Author
Bonnie Wilt-Hild - As an op-ed writer, Bonnie holds 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".
