Getting a Home Loan in 2012

It has been said before that the more things change, the more they stay the same. I think this is also true for the lending world. You see in 1990 when I first started in the mortgage originating world, there were no computers, no emails, and fax machines were “High Tech”. Loans were all underwritten by a real person that looked at all of the hard copy paperwork that I had to provide to them to substantiate my claim that a borrower was worthy of borrowing “X” amount. In loan Officer 101 we were taught that you must prove a borrowers “Three C’s” if you want to get a loan approval. They are Collateral (is the home worth what we say it is and is it in good condition), Credit (does the borrower have a history of paying debts back in a timely manner), and Capacity (does the borrower have the where withal to afford the payments). These are the 3 things that the underwriter will be using to approve or deny my loans, so the better I documented my file, the better my chances were that I would get a loan approved.

Then came the advent of the internet and the automated credit/underwriting models of the 2000’s. In the big rush to show the world how technologically advanced “XYZ” bank was, they started depending more and more on the automated scores and automated underwriting results, and less on the real people looking at real documented files. It eventually got to the point that there really was no file to look at because mortgages were being sold off to Wall Street faster than they could be produced. And now we all know where that led us.

So here we are in 2012 and mortgage industry pendulum has swung back far, far, far to the other side again where banks are afraid of writing a loan always worrying if they will be forced to buy that loan back in a few months from Fannie Mae or Freddie Mac. So what are they doing to hedge their bets? They are going back to real people, looking at real documentable files while at the same time also keeping all of the automated redundancies in place too. This means that every loan now has in essence two underwriters looking at the file. The automated one like “Desktop Underwriter” as well as the real live person with a very sharp set of eyeballs that are looking for any possible discrepancies in a file. Now to be fair here, I need to explain that the reason this person is looking so close at these files now are twofold. First any discrepancy that is not caught by the underwriter before the loan is sold off to Fannie or Freddie, can be used against the lender should the loan go bad for even a totally unrelated reason forcing the lender to buy back that loan. Second, the underwriter can be held personally liable for writing a bad loan and forced out of the industry. So once again these underwriters are now back to looking at the entire loan file to see if the loan officer has sufficiently proven the borrowers “Three C’s”, and at the same time using today’s technology like online employment verification, credit scoring, automated valuation modeling, etc. to further back the file up. This is also why borrowers are once again (just like back in 1990)being asked to supply complete copies of supporting documentation like bank statements, pay stubs, retirement accounts, tax returns etc. And if your bank statement says at the top that there are five pages, they want to see ALL FIVE (even if one of the pages is blank). That is because every underwriter out there thinks the one item you were trying to hide from them is always going to be on that missing page. So if you want to make your home loan process a little less stressful, just know going into it that it is probably not going to be as easy as it was five or ten years ago, and there are less people still doing loans out there that remember the last time we had to truly document our files. But once you find an experienced lender, taking advantage of these historically low rates will soon be a smooth and worthwhile experience.

As always, if you would like to go over your specific scenario, please do not hesitate to call or email me directly.

With your success in mind,

Rob McNelis
Summit Mortgage
NMLS#830519
Desk (619)928-9762
Cell (619)279-6162
robm@summit-mortgage.com
www.RobMcNelis.com