I recently saw the above status posted by a friend on Facebook. I immediately sympathized with her and wondered to myself where she was at in the process. Which of the (alleged) three hundred steps of the process was she getting hung up on? Did the loan officer leave on extended hiatus while the ink was still drying on the application? Was aCriminal Mindstrained mortgage processor asking her to explain a $250 deposit from seven months ago? Was an overzealous appraiser asking for a quarter sized water stain to be inspected by Bob Vila?
Getting a mortgage sucks.While the industry is constantly introducing new technology to help smooth out the wrinkles, most borrowers liken the mortgage process to the financial version of a colonoscopy (i.e. not good.) It is important however to highlight one of the major reasons why this is the case…
Mortgage Loans Are Underwritten by Robots
Little known fact; The Jetsons’ housekeeper, Rosie, went on to a career as a successful mortgage underwriter after the show was canceled in ’87. Kidding aside, “Automated Underwriting Engines” do most of the heavy lifting in mortgage underwriting operations. With names like “Desktop Underwriter” and “Loan Prospector” these are the ones calling the shots. Loan officers input the borrower data into Loan Origination Software, and these engines either approve or decline the application.
These underwriting engines then provide a list of required documentation needed to close the transaction, things like “Four consecutive paystubs” and “Bank statements covering two months dated within 30 days” or maybe “explanation of deposits on bank statements in excess of $X.” If whoever is lending you the money to buy your house is anyone other than your parents (in which case what the hell are you reading this for?) I can pretty much guarantee they’re using one of these software programs to underwrite your loan. While a human underwriter is still around to make sure the data being entered is sound, the computer is almost always making the credit decision.
Now don’t get me wrong, these Automated Underwriting (AU) Systems have gone a long way to bring efficiency to mortgage lending. Investors can buy loans on the secondary mortgage market with confidence knowing that these mortgages were “AU approved” and meet some sort of minimum credit threshold. There’s no doubt that AU has helped in making mortgages moreavailableandaffordablefor the average homebuyer.
The issue is that homebuyers often feel that lenders are asking for ridiculous and seemingly redundant pieces of documentation. A great example has to do with paystubs. AU often requires that the borrower provide a paystub dated within thirty days of closing. If the borrower gives the loan officer a paystub at application, there’s a good chance that it’s already a week or two old already. So a few weeks later, they ask for another paystub to keep it within thirty days. Then a few weeks later, they ask again, hoping that this will keep them within the thirty day window of closing. Borrowers then scream “WHY DO THEY KEEP ASKING FOR THE SAME THING?! I ALREADY PROVIDED THAT!!”
I’ve often heard “BUT I’VE NEVER PAID A BILL LATE AND I HAVE AN 800 CREDIT SCORE!!” Don’t matter. Robot asked for it. Argue with the robot at your own peril. “CAN I CALL THE UNDERWRITER?!” Um, no. No you can’t.
If you plan on getting a mortgage anytime soon, there’s one piece of advice I’ll give you in preparation of your sixty day battle with these underwriting Cyborgs; FIND A GOOD LOAN OFFICER. Ask a friend. Throw it out there on Facebook. Or better yet, ask your real estate agent for a recommendation, they are the ones who know what’s going on in the local market. While the online mortgage may seem appealing, find someone you can actually meet, and talk to. An experienced loan officer will help you navigate the potential pitfalls much better than a website will (usually for the same price.)
Patrick O’Brien is a mortgage banker turned software entrepreneur at LenderLogix. With QuickQual by LenderLogix, your borrowers and Realtors can issue their own pre-qualification and pre-approval letters. Intrigued? Learn more now.