what does an underwritter do in regaurds for mortgages?
in the whole loan process what does the underwritter do, and can the loan officer or the person who is financing the “deal” be the underwritter?
Tags: Mortgages, regaurds, underwritterin the whole loan process what does the underwritter do, and can the loan officer or the person who is financing the “deal” be the underwritter?
Tags: Mortgages, regaurds, underwritter
The underwriter is a person who decides whether a loan meets certain guidelines for approval and possible sale on secondary markets to investors. The underwriter verifies Income of borrowers through W2s or tax returns and sees that the Principal, Interest, property tax and Insurance payments, as well as other debt payments (credit cards, car payments) are at a certain percentage of the Gross Income. Also, it verifies that that there is adequate money for downpayment, that the credit of the borrower is good, tha the property appraisal is correct and is not inflated, that the tilte of the property is clean, and clear of litigation or other problems…and that all the fees are disclosed to borrowers to meet regulatory requirements…etc… the underwriter looks at the whole picture and assures compliance with investor and governmnetal guidelines. There are many different type of investors, such as those who want A credit, or the best credit,… and investors who accepts less than perfect credit,A-… or investors who accept problem credits, B paper….
Loan officers can become underwriters if they are knowledgable of investor guidelines, however, the loan officers and underwriters functions are set separate for conflict of interest reasons. Loan Officers usually have a salary plus a commission. Underwriters are under salary basis only. Loan Officers would like to approve all the loan applications to assure they make a lot of money… That is why, loan officers are not underwriters, and the line is set separate. Loan officers however, help underwriters collect the “conditions” underwriters set so that the loan is funded asap. Loan Officers help scrutinize loans, so that the “underwriting department” functions efficiently, by not allowing all loan applications reach the underwriting desk, if the loan package is not complete or poorly processed.
I hope this helps. This is just a snapshot of the loan approval process. More detailed procedures will be boring to read…
The underwriter verifies that the loan file meets guidelines.
The loan officer finds the customer and arranges the file.
This is the simple answer.
About your other question, no, the Loan Officer cannot be the final decision on your loan application since your Loan Officer has an interest in your file closing. That is also why you are separated from the underwriter.
If there is a loan officer who told you they are underwriting the loan, then you need to re-think who you are dealing with.
As above… the underwriter makes sure the loan is within lender/federal guidelines. They are the ones who either approve or deny your loans base on those guidelines.
A loan officer can become an underwriter but he or she can NOT underwrite their own deal. BIG NO, NO!
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Underwriters are the ones who make sure that the income, assets, appraisal, and structure of the loan match the guidelines for the loan program. Ultimately, they are the ones who either approve or deny a loan.
Generally speaking, it’s a conflict of interest to underwrite a loan you are also originating. You have too much financial incentive to approve the loan.
The only time I’ve ever heard of or seen an originator with any amount of underwriting authority was from a subsidiary of ABN AMRO, a Dutch bank that just sold their mortgage division to Citibank.
I would have to assume that some things got a secondary review before allowing the loan to close, but they used to market for loan officers by touting their ability to make you the underwriter too. Sounded plain crazy to me.
If you’re a loan officer, you’re supposed to have someone else originate your loan. If you’re an underwriter, another underwriter in your company would have to approve your loan, you couldn’t do it yourself. At least that’s the policy at 99% of places, if not 100%.
The underwriter is the person in the office who approves, or rejects loans submitted by loan officers or processors of the mortgage company. The underwriter reviews the loan application and documentation to be sure it meets the specific loan program guidelines. Some loan officers can be underwriters or authorized to approve loans, but typically these are separate functions in a mortgage office. There would be a major conflict of interest if the loan officer who is earning a commission, also approves the loan and determines if the loan meets the program guidelines. Most loan officers are NOT underwriters.