Is There A Fear Factor In Mortgage Underwriting?
July 12, 2008
It is no secret that mortgage money is getting tighter. FICO score requirements have risen steadily over the past 24 months. Income
documentation and source of funds have also been scrutinized now more than ever.
Even though these changes have made it a little more difficult to obtain financing at least when you know the rules you can make home ownership possible. Now there seems to be another hurdle on the horizon. One that can stop the mortgage process in its tracks. It has no set of rules. Fear!When an underwriter is afraid to make a decision on a loan file there may not be a black and white reason. Your loan could be suffering from a previous file that went bad. It may have been a reprimand from someone in quality control. Even the fear of losing their job! What ever the reason, it just put doubt in everyone’s mind as to whether or not to approve your deal. No one wants to override someone else’s indecision.
This week we closed two deals with 20% down, very high FICOs and full documentation. Both were required to provide additional comparables from the appraiser. One required a total of 5 comps the other 6.
Then they asked for additional pay-stubs because the ones in the file are now 30 days old. Rate locks were expiring, tempers were flaring, competency was questioned and supervisors were called in. Finally we closed. But with all this there was a back log built in underwriting and more pressure applied to the underwriter for completing the next deal and the cycle begins again.
I have been in the business a long time and have found the availability of funds to be more important than the cost. The mortgage business is based on risk tolerance vs reward. Instead of trying to keep the rates low and removing all risk, why not take the pressure off the system and raise rates a point or two. Let the odds work for the lender as a safety net.
The majority of loans are still being paid like clock work. Investors can be enticed to begin investing again when there is a bigger margin. Cash flow is what gets the economy moving, trying not to close a deal is what stops progress.
Here is what others have said.
“The greatest mistake you can make in life is to continually be afraid you will make one.”–Elbert Hubbard
“Decision is a sharp knife that cuts clean and straight. Indecision is a dull one that hacks and tears and leaves ragged edges behind.”-Jan McKeithendeath
“If you make every game a life-and-death proposition, you’re going to have problems. For one thing you’ll be dead a lot.”- Dean Smith
About the Author:
Wayne Malcomb is the Broker/Owner of Niagara Frontier Funding & Realty, serving both Niagara and Erie counties of Western New York.
Wayne is called upon as the local expert for newspapers and radio shows including his own weekly radio show on WLVL 1340.Wayne follows the theme of Sy Syms, "an educated consumer is our best customer."
When asked what sets his company apart, Wayne said, "We use a combination of technology and one stop shopping to reduce both time and expense per transaction, which saves the average customer $3,200."Do you know anyone who could use an extra $3,200?"
If you need real estate sales or financing information in Western New York call Wayne Malcomb at
800-216-6829 or visit him on the web www.niagarafunding.com.
You can also email wayne at wayne@niagarafunding.com.
Great post Wayne! Couldn’t agree more. As an appraiser I have been getting RIDICULOUS addendum requests for additional comparable sales that I have never seen in my career. 5 or 6 comps seems to be typical these days. On one recent report I completed, they asked for 9 (nine) comps! The underwriter didn’t like that I used Colonial comparables on a Cape Cod subject property. The comps were less then 3 months old, less than one mile away and within 100 SF of the GLA of the subject! Plus, this particular market shows no preference for one style over the other.
It can only be one thing: FEAR!