Thinking inside the box.

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I am in the mortgage business.  I help clients borrow large amounts of money from various lenders collateralized by real property (houses, townhouses, condos).  I help to build a loan file (a “case” if you will) to help prove why my client should be trusted to borrow and to pay back over time thousands of dollars.  A good file (usually an inch or two thick in paperwork, financial documents and disclosures — any thicker usually means long explanations or documentation of unique problematic situations) closes without much commotion and ends up filed neatly in a box (behind lock and key) or in a file drawer somewhere safe.  Ah . . . a file in the box means a closed-loan, a happy client and a comission paid for a job well done.

That’s it really.  Sure there are things like credit scores, tax returns, appraisal reports and other things that help to build the borrower’s case (or the collateral’s); and there are 4506-T forms, fraud-scans, VOE’s, VOD’s and VORs to insure that the information submitted is accurate and honest.  And there are even some complications around housing ratios, debt ratios, what to do with deferred debts, loans from 401Ks, gifts from family members, and private mortgage insurance, to name a few . . . but basically, I help people borrow money to buy houses.  

Certainly the mortgage debacle of 2007 has changed the way that lenders and underwriters look and scrutinize potential candidates to borrow money.  In the past, underwriters had room to make exceptions to paperwork, reduce documentation and even be swayed by a persistent loan officer . . . well, even though the borrower ___ (insert file weakness here), the loan really does make sense because of ___ (insert file strength here).  For years, in the business, this was called a “common sense underwriting approach.”  If the loan makes sense, let’s do the loan.  It was the mantra for wholesale lenders trying to gain the business of mortgage broker clients, “We want your loans.   We take a common-sense approach to underwriting files.  We’ll get your deals done.”

This is no longer the case.  The goal is not to make sure that the file makes sense (that is now a given . . . a pre-requisite).  The goal of the underwriter is to make sure that the loan is put together and documented in such a way as to meet ALL of the investor’s guidelines so that it might be sold in the secondary market.  Call it crossing every “t” and dotting every “i” if you want, but, now loans must fit neatly in the guidelines so that it can be sold in secondary market.  

If it is not inside the guidelines, then it is not inside the box . . . and if it’s not inside the box, then it must be outside the box.  And the only place outside the box for a loan file, is right here

Jeffrey Pinkerton is a Mortgage Consultant and President of Hillside Lending, LLC and writer for “the Mortgage Blog.”  Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about available programs and interest rates, please visit www.hillsidelending.com

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