The Role of the Underwriter is Not Always Easy

The Role of the Underwriter

The broker, banker, loan officer (the “originator”) and processor, in most cases, do not have the authority to approve your loan. Their roles are to put together a compelling package for the lender’s underwriting department to review and approve. Specifically, the role of the loan officer is to sell you on the rate and terms of the loan. The processor’s role is to sell the file on paper to the underwriter, who then determines the level of risk the lending company is willing to take.

Mistake # 49: Believing you have an approval without a “Clear to Close”

However, there are times when both the originator and the processor have to be able to verbally sell your file. They must be able to articulate well enough to convince the underwriter to look at a situation from different perspectives, if need be. That is, they must be able to overcome any objections the underwriter might have, based on the guidelines he or she has to follow.
Even though you may have followed all of our advice from the “Things Not to Do While Applying for a Mortgage Checklist,” you might still receive a list of conditions from the underwriter to fulfill in order to get a final loan approval. In terms of approving or denying your loan, the underwriter will make one of the following decisions:

Approve the loan
Approve the loan with conditions
Application returned for additional documentation and resubmission
Deny the loan

If the underwriter decides to approve your loan, he or she will package the paperwork in preparation for selling the loan on the secondary market. However, if the underwriter approves the loan with conditions, don’t freak out; this is common. Just get busy and get it done. Depending on how busy the underwriting department is and how quickly you can give them the information they need, it could take up to four additional days to complete your loan.
To help you be better prepared, here are a few more examples of conditions:

Buyer must prove that child support payments are up to date
Buyer must show proof and source of funds for the down payment
Survey of the land needs to be done
Property must be insured by a title policy
Buyer must show a copy of the discharge papers from a bankruptcy
Buyer must subscribe to private mortgage insurance
Buyer must supply hazard insurance
Buyer must payoff certain debt
Approval value must meet or exceed sales price

If the underwriting department needs additional information, they will contact the processor with the list of conditions that need to be met before the borrower receives a “Clear to Close.” This process can go in circles for a long time if the borrower and the processor are unable to present the information the way the underwriter wants to see it. Often, this part of the process causes everyone a lot of stress. The additional information the underwriter requests might be perceived as trivial or inconsequential in the whole scheme of the loan. But keep in mind the underwriter’s guidelines require this information; his hands are as tied as yours. It can be very frustrating if you cannot readily get your hands on the information and you are supposed to close within days. The best attitude to have during these trying days is an understanding one and make sure through all of your preparing to move you still can readily access your important papers.