Underwriting Process is Annoying

[Robert Jensen]

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. 

[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.