Sunday, September 21, 2008

query: what happens once a loan goes through the underwriters

Loan application files that have moved through the underwriting department come out with status marked, denied, approved with conditions, or suspended.

If your loan application has been denied, the lender must send you a notice called an ADVERSE ACTION.  You can appeal the decision by providing evidence that disputes the basis of the denial.  You won't get a chance to talk with the underwriter so if you are making an appeal, you must write clearly and concisely in a way that makes your case for approval logically and with reason.  Emotional appeals will not work.  The underwriter is interested in your ABILITY to repay, your WILLINGNESS to repay, and numerous other items such as the acceptability of the COLLATERAL, the house and land, and EQUITY AND RESERVES - are you investing savings in the transaction and do you have money to fall back on in hard times.

If your loan application is approved - it will always have conditions.  They may be simple conditions like getting a hazard insurance policy or there may be a long list of conditions that seem onerous.  There can be 20 items listed that you must provide prior to closing in order to meet current underwriting rules.  Don't panic and don't get mad.  Just deal with the reality that lenders are being very careful in this lending environment.  It's not about you.  It's about learning a new, more conservative way to lend.

If your loan application is suspended, that's not bad news.  It means they'd like to approve it but they don't have enough information.  Cooperate, stay calm, and give them as much as they ask for and more.  Help them approve your application.

Remember, the lending staff really wants to make the loan but they are under strict guidelines and can't bend, so stay calm and work together as a team.

Finally, no one, NO ONE, should assume they will be approved or that they will be approved within a controlled timeframe.  That means that YOU must remain flexible with moving plans.  In fact, until all of the ducks are in a row, all conditions cleared, I wouldn't make definite plans.  Stay flexible.

I spoke the other day with a woman whose job depended on her having access to highspeed internet service.  She had set up cancellation on the service to her home and also set up new service installation at the new house BEFORE final approval.  She was very angry that the date she had in mind wasn't likely to happen and she wanted everyone to change reality so that it would.  I calmly explained that we had her title file ready and as soon as the lender was ready, we would close.  She had applied for a state bond program and the lender has no control over the timely response of the state underwriters.  I suggested that she undo the cancellation of the internet service to her present home so that she would have a fall back position since it was unlikely that the deadline would be met.  She refused.  That's her decision, however, an adult must learn to go with the flow and not stand and stomp their feet and say they are unhappy.  For heavens sake, if my job depended on internet availability, I'd leave all options open, wouldn't you?

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