Underwriting Process is Annoying

20 Replies

This is my first home purchase and I am going through the final approval with the underwriter. I've quickly learned that the underwriting process is illogical, annoying, and can also destroy the entire deal while losing all your upfront costs. Just because the underwriter is having a bad day. 

I have read some horror stories with underwriters. Mine are not too bad. Only that they keep asking for things twice, such as my rent payments every month. I have three letters of explanations all saying the same thing with slightly different wording. It like being a master tennant is such an odd thing they need it explained to them three times. 

I honestly think I'm just dealing with someone who feels they need to do something because that is there job. If they just said all looks good and passed it on, they would quickly be unemployed. 

Been reading about underwriters soon becoming computerized which would essentially look at your credit, your income, ask about any suspicious activity (only asking once!) and then close the deal. Can't wait til this happens. Not that I want humans to lose their jobs but these people really need to think about what they are doing before they cause unneeded stress to the buyer. The bottom line is this is a 30 year mortgage, and trying to judge me in even a single year or two is only going to be so accurate. Trying to squeeze the last week in and quadruple check everything is just absurd. Its like making every airline passenger take off there shoes because 1 out of trillions of flyers set off a shoe bomb 15 years ago. 

I'm venting here... does anyone know of a bank that uses a robot for underwriting? For whatever reason it seems humans are generally too illogical to handle such a task. I welcome the bots asap. 

This is legit venting. 

There will still be human underwriters for some time to come. Consumers are actually pushing back against a lot of the automation -- for example we now have the ability to bypass asking you for any bank statements at all. But >95% of consumers push back, since the only way to do that is to have you enter your online banking logins into a secure bank statement capture portal. I'd push back against sharing my passwords too, so I've actually pulled back from that and after a brief beta test stopped pushing forward on that aspect of the automation - I'm happy to be at the leading edge of tech, but not if it's raising more Red Flags than Vladimir Lenin during the Russian Revolution with my borrowers. So I'm still asking for copies of bank statements. 

This is, however, one of the things that humans - particularly first time homebuyers - are completely unaware can be shopped. When I put a loan scenario into the industry insider search engine and sort by rate/fees, 1st and 10th place wholesale (but not retail) have the exact same rate. 1st place might be $200 less in one-time fees per $100k borrowed than 10th place, which we internally call 20 "basis points" (bps). 1st v 7th place might be only 8 or 14 bps off. At that point it's not about price, it's about speed, service, and efficient underwriting without a bunch of unnecessary conditions. Back when I was a direct lender, I was held captive to one pool of underwriters, and didn't really realize how much variance there was here.

Now that I do have that ability, and the ability to go "hey ABC Home Loans underwriter, I can send this loan to XYZ Home Loans with 100% guarantee that they will not ask for this BS condition. Take it off or I'll do exactly that," and wouldn't you know it quite frequently their "need" becomes "nah I'll cancel the requirement." Not always, sometimes the condition is legit, it really comes down the particulars of the scenario. I'm here in the Bay Area, I'm sure there's an independent mortgage broker in your area that you can find.

Here's what a vanilla refinance can look like when the power is with the loan originator, not the underwriter:

Here's what an investment purchase for an investor who ignored basically all of my advice (ever play the "hey where did this $10k cash deposit come from?" game?), causing me to have to internally fight with underwriting a bunch (without the borrower even being aware of what was going on) can look like -- we actually had clear to close & docs in title too early, causing a bit of drama:

Direct lenders with captive LOs that can't shop for speed and light underwriting conditions (in addition to rate/fees) are characterized by overly conservative underwriters, giving them a disadvantage. That is a HUGE difference I've been seeing since I made the switch. I can't believe I beat my head against the wall for so long, I should have switched years ago. For you, the consumer/borrower/investor, find an independent mortgage broker in your area and make it clear that you aren't purely a rate/fee whore, you will happily pay $100 or $200 per $100k borrowed in one-time nonrecurring closing costs (they might call it an "underwriting fee" or "points," wtf ever) for the exact same rate, if it means you aren't banging your head up against a brick wall with underwriting.

Robert,

Your complaint certainly does not fall on deaf ears. There is unequivocally a wide spectrum in regards to quality of underwriters.

Certainly with a more automated process you would get rid of redundancy, which would mitigate some of the frustration. Unfortunately, from what I've heard with regards to companies that try to automate much of the process, is that they fail to capture the nuance of a particular situation, which often requires human understanding.

The best solution to me would be a company that seamlessly integrates automation and excellent customer service (a component often missing in tech-heavy companies). That way, you don't have to deal with issues like redundancy, and yet you are still getting the benefit of someone who can understand the details of your unique situation.

Thanks for sharing your experience,

Michael

I have had the same problem but I had some that were super smooth too. Caliber Home loans for a rental refi was suprisingly good and smooth. 

I think that robot underwriting will be difficult. I was able before to argue my point with underwriter and get my application approved despite that they wanted to deny it.  

Originally posted by @Chris Mason:

This is legit venting. 

There will still be human underwriters for some time to come. Consumers are actually pushing back against a lot of the automation -- for example we now have the ability to bypass asking you for any bank statements at all. But >95% of consumers push back, since the only way to do that is to have you enter your online banking logins into a secure bank statement capture portal. I'd push back against sharing my passwords too, so I've actually pulled back from that and after a brief beta test stopped pushing forward on that aspect of the automation - I'm happy to be at the leading edge of tech, but not if it's raising more Red Flags than Vladimir Lenin during the Russian Revolution with my borrowers. So I'm still asking for copies of bank statements. 

This is, however, one of the things that humans - particularly first time homebuyers - are completely unaware can be shopped. When I put a loan scenario into the industry insider search engine and sort by rate/fees, 1st and 10th place wholesale (but not retail) have the exact same rate. 1st place might be $200 less in one-time fees per $100k borrowed than 10th place, which we internally call 20 "basis points" (bps). 1st v 7th place might be only 8 or 14 bps off. At that point it's not about price, it's about speed, service, and efficient underwriting without a bunch of unnecessary conditions. Back when I was a direct lender, I was held captive to one pool of underwriters, and didn't really realize how much variance there was here.

Now that I do have that ability, and the ability to go "hey ABC Home Loans underwriter, I can send this loan to XYZ Home Loans with 100% guarantee that they will not ask for this BS condition. Take it off or I'll do exactly that," and wouldn't you know it quite frequently their "need" becomes "nah I'll cancel the requirement." Not always, sometimes the condition is legit, it really comes down the particulars of the scenario. I'm here in the Bay Area, I'm sure there's an independent mortgage broker in your area that you can find.

Here's what a vanilla refinance can look like when the power is with the loan originator, not the underwriter:

Here's what an investment purchase for an investor who ignored basically all of my advice (ever play the "hey where did this $10k cash deposit come from?" game?), causing me to have to internally fight with underwriting a bunch (without the borrower even being aware of what was going on) can look like -- we actually had clear to close & docs in title too early, causing a bit of drama:

Direct lenders with captive LOs that can't shop for speed and light underwriting conditions (in addition to rate/fees) are characterized by overly conservative underwriters, giving them a disadvantage. That is a HUGE difference I've been seeing since I made the switch. I can't believe I beat my head against the wall for so long, I should have switched years ago. For you, the consumer/borrower/investor, find an independent mortgage broker in your area and make it clear that you aren't purely a rate/fee whore, you will happily pay $100 or $200 per $100k borrowed in one-time nonrecurring closing costs (they might call it an "underwriting fee" or "points," wtf ever) for the exact same rate, if it means you aren't banging your head up against a brick wall with underwriting.

 Re-reading this post, might be helpful to give other context too. Guy calls me saying that he doesn't care how much brain damage he suffers, he wants the best deal. If there's a dollar to be saved, he wants that dang dollar. 

Started the mortgage process 6/27/19. Just closed the refinance today. Last loan to close out that was originated prior to my son being born.

But he got his dollar (it was actually a couple grand in closing costs holding constant the rate). And is a happy customer. 

No surprise, not the same lender I referenced above. Right tool for the right job.

I agree with @Chris Mason on this.  I'm a newer LO broker Almost 2 years now. I was blown away at the difference in lenders when I first started.  If you really want to bang your head on a wall go non qm.  Its insane how much work it is.  I just had a file took 5 months to close and ray charles could have completed the underwriting on this thing it was so clean.  

You take it to a lender that has systems and processes in place and you do a good job on initial underwriting you only get 1-3 conditions.  We use a couple lenders that can close them in 15 days with appraisal in that window and others that take 3 months.  It's all about picking the right tool to do the job.  I have a file right now that is CTC in 11 days, fastest turn around for me.  The clients had their poop together and one simple fast email everything was sent and cleared.

For me the biggest hurdle is getting documents, everyone uses smart phones and thinks a screen shot or camera phone picture works. Guess what it doesn't.  So I normally give my clients a come to jesus speech before we start, half listen the other half we play this dance around the tree game thinking conditions are going to magically disappear.

I don't know about others on here but loan processor can also make or break these things.  You have a lazy one, that also slows down the deal flow.

My favorite lender is not the cheapest, but they are the fastest and easiest to work with.  At the end of the day its about speed and peace of mind.  Fast closings equal happy clients

After some research it seems anyone can be an underwriter. So it comes down to proper training I think. There should be critical reasoning tests given before allowing them to work... I imagine a lot of these underwriters would fail.

Originally posted by @Tim Johnson :

For me the biggest hurdle is getting documents, everyone uses smart phones and thinks a screen shot or camera phone picture works. Guess what it doesn't.  So I normally give my clients a come to jesus speech before we start, half listen the other half we play this dance around the tree game thinking conditions are going to magically disappear.

You (not others reading this) have my permission to poach this and use it at your whim, it might save you some time: 

https://www.eastbaysmortgagebroker.com/mortgage-processing-terms

I was an underwriter for 14 years, and I can safely say that robots won't be able to replace underwriters.  They can automate certain aspects of it, but there's so much that they couldn't do.  

I've been the buyer (borrower) on tons of mortgages lately since I've become a full time investor, and I still experience problems.  Every underwriter is totally different, and every company is totally different.  

The best advice I can give is to get whatever they ask you as quickly and easily as you can.  If you're unsure why they asked for a particular document then get clarification.  It's all about documentation.  Document, document, document.

I work in underwriting, it's the same as any job: there are people at it who are good, and there are many more that are bad. 

And borrowers are no better, most are awful. So while you complain having to give things twice, we spend most of our time asking for things 5 times that a borrower never produces. 

Also realize the UW for small single family government backed loans is EASY and is basically just admin. All the good underwriters work on more complex loans, so if you want better UW, do better deals ;) You're getting the vendors equivilent to the task you need. 

also your comment that anyone can do it if they have the training is correct about every single job any human has ever had. If we tested people out of jobs over critical thinking the entire planet workforce would drop by 90% overnight.

@Alexander Felice  

Thanks for the advice! - "do better deals"... slowly will get there. 

"...also your comment that anyone can do it if they have the training..."

Just to clear, was not saying this. Saying the opposite, that only certain people are capable of doing it and that it should possibly require a bachelors degree in underwriting or at least an associates. Currently, it seems there is no stringent job requirement (anyone can do it). 

If the underwriting was fully computerized and automated and had robots doing it.....youd be denied for this loan instead of having the opportunity to write those letters of explanations for a human to look over.

"If the underwriting was fully computerized and automated and had robots doing it.....youd be denied for this loan instead of having the opportunity to write those letters of explanations for a human to look over."

I do not think a robot would have had these conditions. It would have been able to see on my loan app that my monthly rent is $1500. The $4500 check to *** Real Estate every month(going back 5 months) would have to be total rent to my landlord, along with the two deposits of $1500 having to be my roomates. Since together it equals to a $1500 a month rent payment. The probability of it being anything else is zero. Since nothing else could calculate to a $1500 rent payment. All the other conditions were uploads (e.g. insurance quote, proof of home course, etc.). 

However, I do agree that a human is needed for certain instances. We do need someone available. 

Originally posted by @Robert Jensen :

"If the underwriting was fully computerized and automated and had robots doing it.....youd be denied for this loan instead of having the opportunity to write those letters of explanations for a human to look over."

I do not think a robot would have had these conditions. It would have been able to calculate that my monthly rent is $1500. The $4500 check to *** Real Estate every month is most likely my rent along with the two deposits of $1500 most likely being my roomatmates. Since together it equals to a $1500 a month rent payment. The probability of it being anything is else is zero. Since nothing else could calculate to a $1500 rent payment. All the other conditions were uploads. 

However, I do agree that a human is needed for certain instances. We do need someone available. 

 A computer would interpret that as you having a monthly liability to the tune of $4500/mo. A computer would (probably correctly) assume that each of you are fully and jointly liable for $4500 - 1 lease, 3 signatures. A human will give you the opportunity to argue for $1500/mo, perhaps after reviewing to confirm that you indeed have your own lease that only obligates you to $1500/mo, or otherwise grant an exception if appropriate. Or a human underwriter might look into if the $3k/mo qualifies as "boarder income" & what additional paperwork from you would be needed to substantiate that.

I had a borrower who was self employed, video production. They had a live-work studio, work address = home address. Their rent was $2,000/mo. They also wrote off that rent on their business taxes. A computer would calculate his net income as being $2k/mo less AND hit him with the $2k/mo in rent, and indeed if you just fill in the various worksheets, that's what you get. A human underwriter intervened, and only "hit" him with that once, allowing the deal to go through.

Not all underwriting departments are created equal. In both of the above examples, some places would say yes, some places would say no. If you put a computer in charge, it's 100% just going to default to "most conservative" IE "what are we 100% sure will NOT create a loan buy-back in the secondary market?" A lot of these internet lenders are basically already here, collecting the money NOT paid out to underwriters as extra profit (& I know that b/c they price out right in line with us, but no better -- in our case we can price there b/c we don't have 8 layers of sales managers getting paid out on every loan). So we don't have to talk about the impact of increased automation, you can "live" test that by going to a jenky internet lender with your unique scenario and giving it a whirl (hope you don't have a deadline to close or earnest money on the line...).

A loan buy-back is when Fannie Mae, or whoever, refuses to take delivery of the loan. So now the lender does not recoup the $500k they lent to you (+$15k profit), they just have to sit there and collect P&I payments at a pathetic 3.75% ROI (or whatever your rate is), rather than being able to flip that same $500k 5 times a year for a double digit CoC ROI.

If the computer saw it as a potential "monthly liability" it could have then asked me the appropriate question instantly after it received all the docs. 'Are you on a lease agreement?' Yes 'Is it month to month?' Yes --moves on to next question. 

So far all the underwriter has asked is; what are the two $1500 deposits for and what is the $4500 a month payment for. We have not even reached what should be the important questions; Is it month to month, (if No) Are you 'jointly and sever-ably liable'? 'How long is your lease?'. I'm guessing these questions will start to come in a week before the closing date (weeks after the initial question was asked). Raising the level of 'annoying' in the process. 

I don't think humans are going to stand a chance. Unfortunately, because there will be implications. As long as they make humans available when needed though, it should be a much smoother process. 






Originally posted by @Robert Jensen :

So far all the underwriter has asked is; what are the two $1500 deposits for and what is the $4500 a month payment for. We have not even reached what should be the important questions; Is it month to month, (if No) Are you 'jointly and sever-ably liable'? 'How long is your lease?'. I'm guessing these questions will start to come in a week before the closing date (weeks after the initial question was asked). Raising the level of 'annoying' in the process. 


LO's job is to anticipate that. Also on the LO to have anticipated the question to begin with. First time homebuyers get pissed at me b/c I ask so many questions before submitting to underwriting, or even preapproving, but you are seeing why I do that right now. 

Unknown and unknowable how much business I lose b/c consumers think the "other lender" is "easier to work" with b/c they preapproved without "asking all those annoying questions," but the questions are 100% going to be asked no matter what, best to get ahead of potential issues than to be blindsided by them the week of closing.

Robert (great name btw, gave it to my son), I think your gripe is with the lender you selected, not the fact that robot overlords aren't running the planet. A robot revolution isn't necessary to address your concerns and the issues you are facing.

At the end of the day, you selected the lender. You got lucky and evidently dodged the following bullet, but did you know some huge percentage of lenders (30% or so) will not finance investment properties at all for people who do not live in a primary residence that they own? This is what they are watching out for, why they would implement such a blanket policy. In your case, a human underwriter probably did their own thinking, looked at where you live, where your commute to work is, and where the property is, looked at the size of your family (on loan application and # dependents listed on tax returns) and the size of the home, or some combination of those factors, and said it was good to go. 

A robot 100% would have denied your loan weeks ago. 

@Chris Mason You must be the exception that proves the rule most LOs I have worked with only asked two or three questions then try to sell you on why you have to do your mortgage with them. They then send it on to underwriting and let me battle with the underwriters. Most are the kind like used car salesman, not saying that about you by the way.

I do have a good guy I use now but feel lucky to have found him.

Originally posted by @Dana Whicker :

@Chris Mason You must be the exception that proves the rule most LOs I have worked with only asked two or three questions then try to sell you on why you have to do your mortgage with them. They then send it on to underwriting and let me battle with the underwriters. Most are the kind like used car salesman, not saying that about you by the way.

I do have a good guy I use now but feel lucky to have found him.

 Thanks for the kind words. I will state that I do say sales-ey bullstuff. I've seen my income drop 50% when I turn that off for a few months, and then it pop right back up again when I turn it on for a few months. I've also seen past clients that I've done 5 mortgages for express unhappiness at the close of escrow when I had it turned off for transaction #6, and then they get happy again when I turn it on for #7. So, FWIW, evidently y'all consumers demand and expect the sales-ey BS, gotta do what the consumers want....

My main gripe is being told I'm approved when I'm not. 

First its preapproval which is basically the same as cc pre approval. It means absolutely nothing. Then Im told Im APPROVED by Underwriting! - with conditions. Conditions are simply a couple of LOE that I send in 5m. Then Im told in a later email it will go to a processor then back to underwriting for FINAL approval. 


Why tell me its approved at all. I nearly gave my 30 days notice when I was told I was approved the second time. The reality is I still may be denied. They know I'm a first time home buyer...