Mortgage Talking Points

I was honored to be a part of the Wisconsin Mortgage Brokers Convention and did a session called “Thrive & Survive with FHA”.

During the session, the audience discussed how difficult it is to get anything approved through a DE Underwriter nowadays. And how AUS approvals mean next-to-nothing, and that loan files are being conditioned ad-infinitium.

Almost as if DE Underwriters are afraid to approve anything!

You know, this really is a story from the past.  Other than the recently bygone “approve anyone who is breathing” years, LOs have always believed that DE Underwriters “look” for reasons to get rid of and/or condition their loans to death.

(Before I move on I apologize to any DE Underwriter who is offended by my choice of graphic. I figure that I’ve been a DE Underwriter myself since time began and I KNOW how underwriters are perceived. If it does bother you, let it go and take a joke. Please.)

DE UNDERWRITERS: Let me give you a little insight from the DE’s perspective:

• Unless a DE truly thinks the loan is (a) fraudulent; or (b) not in FHA or Lender compliance; or (c) a foreclosure waiting to happen — then 99% of them want to approve your loans. Cross my heart!
• Underwriters don’t make up conditions just because they can’t find anything wrong.
• FHA audits closed loan files and picks them to pieces.
• FHA audits all foreclosed loans.  If they decide something wasn’t underwritten per their guidelines, the lender pays for the foreclosure losses instead of FHA.
• DE Underwriters are rated by FHA.
• AUS/TOTAL approves credit and ratios, and that’s about it.  EVERYTHING else must be fully underwritten for FHA compliance.
• It’s really hard to keep up with everything and to understand FHA Mortgagee Letters - even for Underwriters.  (You see, most of them are entirely unaware that MortgageCurrentcy.com can be their lifesaver.)

THE OTHER SIDE: On the other hand, there are a bunch of new DE Underwriters out there who honestly don’t know what they are doing.  And it’s true that the Lenders didn’t used to come up with so many additional rules over and above FHA’s.  There’s some truth that the underwriter is a little scared.  Wouldn’t you be?

WHAT DO YOU DO? FHA is an entirely different animal. If you don’t know the guidelines, you darned well better invest whatever it takes to learn. Off the top of my head, my FHA Lending Guide is your best resource for an all around and understandable everything-you-need-to-know about FHA, regardless of your level of expertise. (I honestly wouldn’t say that if I didn’t believe it.)

If you haven’t touched FHA much for the last three or four years - you don’t know it anymore.

You had also better know what the lender limitations are.  Beforehand.

AN INSIDE TRICK: My Girlfriend and Cohort, Karen Deis and I were discussing how we’ve done this throughout the FHA ages, and how it still works:

Say you know the rules and you’re pretty sure the underwriter doesn’t know and/or won’t go for something in your loan file that you know is legit. Get a hard copy of the appropriate page from the Mortgagee Letter, Handbook, TOTAL Scorecard, whatever the reference, along with a cover letter that explains how/why what you are doing is allowed by FHA “per the attached”.  Include both as part of the loan submission.

This technique is not guaranteed, but it usually works because the Underwriter is covered if he/she gets audited in the future. So if you handle it right and keep the DE Underwriter’s ego in mind, it really can make your deals work!

IN THE END: Once again it’s back to basics with basic tenets.  Learn your stuff.  Keep yourself CURRENT.  Cover your underwriter’s butt!