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Low mortgage rates trigger more loan applications – and longer delays

Missing pages, missing documents and failure to respond to questions are among the biggest holdups for getting a loan approved.

By Jeff Lazerson

6/20/19

What I think: As the unsung heroes for both borrowers and mortgage loan originators, mortgage underwriters never get enough credit for thoroughly plowing through application packages to (hopefully) issue your loan approval.

Underwriters are also the first line of defense to protect financial institutions from fraudsters, eventual investor loan buybacks and borrowers who don’t meet lenders minimum credit standards.

A crushing loan application volume increase of late (due to mortgage rates precipitously dropping) means longer lines on everything from loan disclosures, appraisal completions and mortgage underwriting.

I took an informal poll from my lender pals to find out from their underwriters exactly what mortgage borrowers and their loan officers can do to prevent unnecessary delays in getting your purchase or refinance loan funded.

Here are the most common delay complaints about borrowers:

1. Incomplete documentation, be it pages of your tax returns or your asset statements, for example. Your underwriter does not know that page 4 of 4 in your bank statement is blank. All pages must be accounted for. Otherwise, there is a worry the borrower is hiding something.
2. Sending closing funds to escrow from an unsourced account not listed on the application. This triggers a request for an explanation and two most recent months of bank/asset statements.
3. Going on vacation in the middle of the mortgage application process. You are not easily available to respond to clarifying questions or chase down supplemental documentation.
4. Repeatedly demanding that the underwriter accept previously provided documentation that does not fulfill the loan approval condition.
5. Messing with your credit after your initial credit report was run without first consulting with your loan officer (i.e., buying a car or furniture or paying off credit cards). Most lenders monitor your credit during the loan process.

Here are the five most common delay complaints underwriters have about mortgage loan originators:

1. Submitting incomplete loan application files. The more complete the file, the cleaner the loan approval.
2. For complicated loan files, failing to write detailed cover letters that offer all the pertinent facts. Don’t force the underwriter to guess at what is going on. Make it easy for underwriters to follow the file.
3. Submitting loan files without first checking the lenders’ underwriting guidelines. A good underwriter makes nearly $100,000 per year.  It wastes valuable time when a loan file is declined or needs to be re-underwritten on a different loan program.
4. Failing to set realistic loan process timelines for one’s client. And, failing to quickly and clearly communicate once triggering events occur (i.e., the underwriter looked at your file and needs X). Keeping a client in the dark is never a good thing.
5. Failing to ask your borrower to explain all irregular, large bank deposits that don’t have an obvious source. Failing to paper trail (canceled check for example) the source of the large deposit.

Mortgage broker Jeff Lazerson can be reached at 949-334-2424 or jlazerson@mortgagegrader.com.