How Mortgage Underwriting Can Screw Up Your Life

Most people – that is, most home buyers and home sellers – have never heard of mortgage underwriting.  The only person most people know is the person they talk to about getting the mortgage.  That would be the loan officer.

Whether they work for a bank, a credit union or some other financial institution, these loan officers are all about trying to get you a mortgage.  More often than not, they get a commission or bonus, just like your Realtor, when the loan is funded and closed and the new home buyer (borrower to the mortgage industry) has signed all the paperwork at the settlement table.

So, the loan officer is usually on your side.  Don’t get me wrong.  They won’t and can’t get you a mortgage you can’t afford (not anymore).  It’s not in their interest and it’s a lot harder to do nowadays.  But they are in the “I wanna lend money for mortgages” mindset.

The “Underbelly” Of The Mortgage Industry

Underwriters, on the other hand, get paid an hourly wage.  For the most part, these folks who have total and complete control over whether or not you get a mortgage:

  • don’t care about you or your mortgage or your dreams for the future
  • don’t work on weekends, holidays, sick days, vacation days or after closing at the end of the day (let’s say that’s 5:00pm)
  • don’t really want to approve your loan.

That’s right.  The underwriter’s job is to find a way to turn your loan down so the bank or other financial institution they work for is not at risk of you defaulting on your loan at some future date.  You have to be solid titanium (gold and platinum: get to the rear of the line) in order to get past the first hurdle.

The FHA Borrower / Home Buyer

As much as you hear about FHA backed loans being more flexible and forgiving to buyers who may not have a lot of money for a down payment or may not have the absolute best credit in the world, the underwriters are still looking for a way to tell you to take a walk.

Most recently, I encountered the problem of a home buyer who had evidently been shopping for homes with several lenders working the transaction.  As a result, this borrower had multiple FHA case numbers.  Normally, you would think: what difference does it make?  But, then, you know the Government.  Ain’t nothin’ easy.

Angry ManIt seems that because of these multiple FHA case numbers, this particular buyer could not get a mortgage until all but one was eliminated.  Why?  Because it looked like he was buying multiple properties which, of course, he couldn’t possibly do.  Now this may seem to make sense…and, in a way, it does.  What steams my shorts is the fact that this wasn’t uncovered until one day before settlement was supposed to occur.

So, picture this:  Seller has all but moved out of his house.  Buyer has all but moved out of his house and loaded up the truck or lined up the friends or moving service to spring into action. Then, all of a sudden…..STOP!  A mortgage underwriter has found a problem with the loan.

Could This Have Been Uncovered Sooner?

The short answer is: probably not. This isn’t the only loan the mortgage underwriters are working on.  Yet, you would think that some of the obvious stuff are things they would catch early in the process so that there would be plenty of time to work through the problems.

Remember, though, the underwriters don’t care.  They get to go home to their nice, warm beds and martinis and come back to work another case tomorrow.  It’s like a factory.

The only problem is that unlike a real factory, the system is hugely flawed and staffed by mostly incompetent drudges.  At least with a factory, there is a system and each widget that is manufactured at the factory goes through the same process so if a machine breaks down at the beginning of the line, it gets caught and fixed.  In the mortgage industry, it’s lucky if you can get a loan at all.

And people wonder why the economy isn’t recovering faster.

Is There A Solution?

Unfortunately, there is no solution to this particular problem.  It’s an integral part of a system that is so flawed as to be almost broken.

So the moral to the story is that you need to:

  • have all your ducks in a row
  • continue to ask for updates
  • be prepared to lose the home of your dreams because some anonymous mortgage underwriter had a bad hair day
About Ken Montville

Ken Montville is a Realtor® and Associate Broker with RE/MAX United Real Estate in the beautiful Maryland Suburbs of Washington, DC. He has been selling nice homes since 1999. Way back in the 20th Century.

When Ken Is not doing the real estate thing he can be found all over social media in places too numerous to mention and he listens to jazz, reads a little (mostly non-fiction), hangs out with the Rotary Club of College Park, MD and can be found blogging at MDSuburbanHomes.com