Do you want your loan approved? Part IISerafim Ivaskunderwriter, commercial lending, Mortgage Asset Research Institute, Web-based tools
Think you have a clean deal? You better check before the
underwriter does
Previously, the importance of careful and accurate communication
with the lender when you submit your loans was discussed. A very
beneficial step when borrowing from the commercial lending practice
is providing a cover letter that will briefly introduce the
underwriter to the borrower and the specifics of the deal. If the
deal is a straightforward case, say so. If the deal has some
unusual aspects to it, a weakness or a particular strength, then
it's even more important to alert the underwriter up front. This
will save you and the lender time, and could be the difference
between getting and not getting an approval. At a minimum, it will
earn you the respect and appreciation of the underwriter, who may
now be more apt to try to see things your way and perhaps go out of
the way to try to help you with a tough case. Do not expect the
underwriters to find the strengths of your deal on their own, and
certainly do not obscure the weaknesses! They may miss the
strengths, but they will find the weaknesses—that is what
they are trained to do.
This article will identify another frustrating situation that
has wrecked many good deals. However, the problem is very easy to
guard against. A few easy steps can save your deal, or at least
protect your reputation. In our new emerging mortgage order, where
easy loans are becoming extinct and lenders tremble before the
ever-demanding dictums of the secondary market, the ability of a
broker to maintain his relationship with a lender is more tenuous
than ever. The slightest suspicion of foul play will threaten the
broker with suspension or termination. To further complicate
matters, a suspension or termination by one lender leads to a
permanent record in the Mortgage Asset Research
Institute (MARI) which, whether justified or not, will impact
the broker's ability to sign up with another lender in the future.
So, let's be careful!
The basics
You get a lead. You call the prospective borrower, who tells you
what he wants. You ask a lot of questions and, based on the
responses, determine which program should fit the borrower's needs.
Business is not wonderful these days and you need this deal to
close. Do you assume or do you verify that all the facts provided
are accurate? At what point do you verify? How do you do it? Where
do you check the accuracy of the collected information? Do you
expect the lender to do so? You know they will!
You already know this, but ...
In evaluating an incoming loan file, lenders will look for the
following things more intensely: The borrower's ability to make the
payments, evidenced by the income and professional/job stability,
and the willingness to make timely payments, evidenced by
established credit. Especially in the few remaining stated income
type loans, they will also look at the reasonableness of the
claimed income! Since underwriters may be somewhat unfamiliar with
the profession or occupation of the borrower, they will resort to
Web-based tools to aid them in determining what a realistic range
of earnings for a given profession is. Luckily for the borrower and
the loan originator, everyone has access to Web sites like www.salary.com or www.salaryexpress.com, not
just the underwriters. Before you submit the loan, take a look at
what the underwriter is going to see anyway. If you uncover a
discrepancy, you can address it. Web-based references may not
always be accurate, but now you have a chance at providing a
rebuttal before the underwriter begins to have doubts about your
deal. In addition, you must be very careful in describing the job
responsibilities. Simply saying that one is a foreman does nothing
for you or your borrower. Is this a foreman/supervisor with 20 to
50 employees under control, or are we looking at a foreman who has
two part-time laborers helping with the yard work? An incomplete
job description may place your borrower on the wrong end of the
income bell curve and may cost you the deal.
To make matters worse ...
Unfortunately, there will always be someone who will overstate his
income, his job function or the very nature of the employment, not
to mention misrepresenting occupancy intentions. Underwriters have
lost jobs for not catching such fraud. In today's environment, even
the slightest suspicion that the job may not be what it purports to
be could cost you the deal. Did you call your borrower at work? Did
you check to see under whom the work or home phone number is
listed? If an underwriter calls for verification and is told that
the number is a non-working number or is assigned to a private
citizen and not the expected company, you have a problem. Yes, you.
The borrower will not get the loan and you, at best, will look like
the wrong end of a horse. Does a lender want to risk doing business
with an originator/broker who does not verify collected
information? In a recent example, a chatty receptionist volunteered
that she was asked by the borrower to say that he was still
employed at the company. In actuality, the borrower resigned a
little while before. Obviously, this was a major embarrassment for
the broker!
Where to go and what to do ...
Here is a partial list of sites lenders may use to check employment
and telephone listings: www.searchbug.com, www.anywho.com, www.411.com and www.whitepages.com.
Beat them to it: Do your own reverse search and place the results
in the submission file. Not only will this provide you with the
confidence in your loan, but you will earn the respect of the
lender! Another valuable subscription Web site gaining popularity
is www.rapidreporting.com.
This one reports on identity issues, occupancy issues and income
filed with the Internal Revenue
Service. Does the credit report show numerous known aliases or
multiple Social Security numbers? Check this out yourself before
sending in the file. Another Web site providing such services as
quick income verification (such as IncomePro), appraisal
information (such as HistoryPro and HistoryPro Review), identity
verification (such as IdentityPro), and even a rating system
evaluating Mortgage Brokers and originators on the quality of their
loan production (such as ThirdParty Scorecard) is www.corelogic.com. Drawing from
a proprietary database of more than 180,000 agents and millions of
loan transactions, the ThirdParty Scorecard assesses an agent's
loan quality, assigning a risk score to each agent that can be
compared against internal, local market and industry performance
standards.
Another area of growing concern is the undisclosed mortgage or
other major financial obligations undertaken just before or
simultaneously with the subject loan! New mortgages, as recent as
three to seven business days, will be caught when the lender runs a
Mortgage Electronic Registration System (MERS) report. If the
broker cannot run his own MERS search, one can try to run the
Multi-Closing Alert Program, also offered by CoreLogic Inc., which
may even catch simultaneous deals being attempted by the borrower.
At the very least, you should get the client to sign a statement
confirming that no undisclosed major obligations were entered into
or are being attempted simultaneously. This may help protect you
from the wrath of the lender and a report to MARI, should the
lender discover some borrower foul play after your deal closes.
Conclusion
Today, almost anything about a borrower's identity, address,
employment and criminal record can be searched and found on the
Internet. Therefore, the question should not be how to obscure or
hide unfavorable information, but rather how to beat the lender to
the potentially inaccurate information hiding on the Internet. Find
it, address it and correct it before the wrong information has a
chance to tank your deal! However, if the loan turns out to be
other than what you expected, you'll want to "kill" it before it
gets to the lender! Use these Web-based tools before you submit the
loan and save the results of the searches. You may need them!
Educate the borrower in the need to be accurate and the importance
of verifying the publicly available information. With the
incidences of identity theft on the rise, this could well be
another value-added service a good broker can provide.
Serafim Ivask is a wholesale account executive at SunTrust Mortgage Inc.
and has been actively involved in the residential and commercial
mortgage industry, both retail and wholesale, for more than 20
years. He may be reached at (516) 650-3078 or e-mail
[email protected].
