Written By: Bonnie Wilt-Hild, Op-Ed Writer
Every lender operation is different. Some are operations friendly and others sales friendly and fortunately some are in between. As an industry educator as well as underwriter, I have many opportunities to talk to be originators and underwriters and as you can well imagine, many of those conversations end up being discussions about unreasonable underwriters asking for unnecessary file documentation and if I am speaking with underwriters, they always go in the direction of how management does not support them as underwriters and that they withstand a tremendous amount of pressure from the origination staff to approve loans that they believe should be denied or waive documentation that they think should be provided. In an attempt to close the gap between these groups I am going to share some insight as to why I think the mutual business interest approach to running the house is the best and with any luck, both sides will begin to appreciate the opposing opinion.
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Let’s start with the originators and what they bring to the table which is production. Needless to say without the originator, there would be no business in the pipeline and without business in the pipeline there is no need for processors, underwriters, closers or post closers so with that said, let us be thankful for the job they do and help them achieve success. It is no secret that originators are generally paid on a commission basis so not only is the job they do imperative to day to day business operations but also to them on a personal basis and to that extent, we need to help them become successful by getting their business closed as it will generate further business in the future. Happy business partners and clients result in referrals and referrals mean greater production. Now do I think this alone constitutes allowing loan officers run amuck, yell at processors and underwriters and make unreasonable demands that result in unsound lending decisions, no I don’t and unfortunately the normal pay structure for most originators tends to promote this behavior not only in originators but sometimes also for management. Management wants to see numbers increase and if they have a few originators who are producing they tend to let them run through the office like spoiled children and often encourage the underwriting staff to indulge them which is a horrible idea. Not only does this diminish underwriting morale but you are also asking the very individual who was hired to keep your organization safe and profitable, to cave to the demands of the individual whose primary objective is to get paid and sometimes without regard to how what or why which brings me to the underwriters.
Underwriters get paid to make sure that the loans that do get approved are not only salable and insurable but also sound credit risks. As they are charged with this task, underwriters, thankfully, have a tendency to make sure that the sound credit risk has some historical merit as well as future investment and they do this by questioning documentation provided as well as requesting other documenting which might give them some insight as to how the loan, if approved, will perform long term which is something loan officers generally don’t concern themselves with but management should. Remember, it is the long term performance of these cases that determine if the lender will end up with funding issues because it’s never good to have several loans on your warehouse line, insuring issues because you can’t get those sold and lastly, buyback issues because in the end, no lender needs a seriously delinquent loan sitting on their books that will result in significant losses when sold at foreclosure. These types of events, particularly if the occur frequently have a tendency to put smaller lenders out of business. As far a larger lenders and banks are concerned, if the buybacks don’t get you, then perhaps think about things like your compare ratio where FHA insured mortgages are concerned. If your loans continue to go into default and they are FHA insured it will drive your compare ratio up to unacceptable levels. This may result in termination of your ability to originate FHA insured mortgages, federal sanctions which could cost you hundreds of thousands of dollars and finally termination of correspondent agreements with your investors which will leave you very few outlets to sell your closed business. When you consider this, I think it’s actually prudent to let your underwriters do their jobs and perhaps encourage originators to work with them in the spirit of future operations. Now don’t get me wrong, I am not saying there is no such thing as an underwriter with a god complex or that an underwriter has never asked for unreasonable items, I am simply saying before you disregard his or her request, maybe ask why they need it.
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In closing I would like to reiterate that I think underwriters and originators can make a very good team. I have several who sit outside my office door and they are invaluable at lunch time and in making sure I remain employed and I am grateful for both. So moving forward underwriters, when a loan originator gets on your last nerve, maybe think about payday, it always helps me get through the file and loan officers, when your underwriter asks you for something you deem unnecessary, before you run to management to throw your tantrum, maybe ask the underwriter why he or she needs it. Maybe start with something like, “Just so I understand for next time…….”, you never know, it might make sense with some explanation. Have a great week everyone.
About The Author
Bonnie Wilt-Hild - As an op-ed writer, Bonnie has held many mortgage underwriting positions, including 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".
