Underwriting: Learning From Our Mistakes

Written by Ralph Rosynek, as originally published in The Reverse Review.

When a situation arises in the underwriting process as a result of inaccurate information or error, recovering from the mistake can be a very painful process for all parties. First the underwriter must assess the damage caused and thoroughly examine if any required checkpoints were overlooked. And then he must own up to it. Oftentimes, we stress and scramble to undo the damage, when those involved may be better served by simply owning up to it and moving on.

Consider a situation in which a female applicant signed the original document for her and her husband. The field-executed application did not indicate that the wife was signing as POA for the husband on the signature lines. The first counseling session was done by phone and identified the wife as POA for the husband on the counseling certificate. The case number was pulled based upon the counseling certificate, which included the POA information. All services for the loan were ordered and charges incurred on behalf of the borrowers. Subsequently, the borrowers were contacted for a copy of the POA document, only to find the husband was competent but unable to speak. The borrowers were immediately sent back for a face-to-face counseling session. The loan processor noted the extra work involved. “Then we executed another application with the husband signing for himself,” he said. “If I just used the new application and counseling cert, it would seem like we pulled a case number, credit report and appraisal prior to counseling.”

Unfortunately, recovering from the problem by undertaking the action described above does not resolve the fact that what occurred was completely noncompliant. Correcting the situation by completing additional documentation, including letters of explanation, will help clear up the issue, but the fact remains that services were ordered before the borrowers were counseled, and additional fees will apply. Because a case number stays with with the property for the duration of the loan, the noncompliant issue cannot be fixed by simply ordering a new case number.

Ultimately, the situation leaves one to ponder what could have been done differently. Did we interview the borrowers completely and ask the right questions? Could we have been more thorough? When cases like this arise (and they will, no matter how diligent you are), take time to ask these questions and review how things could be done differently. This will help you improve your process and ensure that you learn from the mistake.

Back to School and Back to Work
Speaking of asking the right questions, I have always commented that the month of August is both a very happy and very sad month for many—from a child’s disappointment over the appearance of “back to school” commercials to a parent’s anticipation of those ringing school bells. So my question is: Are you ready to get back to work? Summer is over, and for many that means it’s time to hunker down.

While your full attention may have been fragmented in the past few months, our friends at the CFPB, state regulators, HUD and the consumer groups have been working on creating more interesting opportunities for our industry.

If you need to play catch up, here are 10 things I suggest you look at a little more closely:
* Have there been any substantive changes

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in your state regulation with regard to increased borrower awareness and disclosure?

* How does the recent CFPB HECM Report impact your ability to originate?

* Are there any required regulatory policy, procedure or guideline implementations or changes coming up in the next 60 days?

* In your ongoing sales and marketing training, is there a focus on improving interview skills and techniques?

* If you use checklists or a matrix to assist you in the origination or processing of the loan, does it need to be updated?

* Have you reviewed and implemented all of your investors’ change requirements over the summer?

* Are you aware of current investor criteria for addressing tax and insurance delinquency issues?

* Have you or your company developed a review and improvement checklist for origination and processing errors that have occurred in the past 90 days?

* Have you made your reservations and completed your registration for the NRMLA annual conference in San Antonio?

* Have you identified any new sources, strategies and efficiencies to kick your pipeline back into gear for the fall?

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