Stupid and Illegal Requirements from Mortgage Underwriters

frustrationWhat is the worst request you’ve ever seen from a mortgage underwriter? What paperwork was asked for that was totally over-the-top ridiculous? More and more, home buyers and homeowners refinancing are being asked to provide documentation that makes no sense whatsoever. Some of the information they’re asking for has already been provided in two different forms already, so digging up yet a third verification seems downright stupid.

And then there are the underwriting requirements that are actually illegal.

That’s right. Some underwriters today are asking borrowers to give them paperwork they have no business asking for! It’s high time this come out in the open and that underwriting supervisors and mortgage managers put a stop to this madness. Can we have some common sense in the underwriting department, please?!

For example, yesterday I was talking with a self-employed chiropractor. When his purchase loan was in progress, the underwriter from the wholesale bank that his broker was going through asked him to submit all of the checks he had deposited into his business account in the last year. He had already provided three years’ income tax returns (which they verified with the IRS) and his bank statements. And now the underwriter wanted to see all the personal checks that each and every one of his patients had paid him as well? He told her, “No way, that is doctor-patient privileged information, and it would be illegal for me to give that out.”

Another home buyer (at a bank) was trying to get pre-approved. His application showed a gap in employment during a time when he was hospitalized. However, during that time he maintained his perfect credit; and now he was fully recovered and back to work. The underwriter asked him to provide a letter from his doctor stating he would not get ill again. Can you imagine any doctor guaranteeing someone would not get ill in the future? Talk about underwriting stupidity!

I am making a public call for common sense to come back into the underwriting department.

In the meantime, what is the worst underwriting requirement you’ve ever seen? Please either post a comment (you’ll see the comment tab at the top of this post) or send me an email by clicking on the Ask a Question page (see big blue tab at top).

19 responses

  1. I agree, some of the stuff makes absolutely no sense!

    Luckily, not all underwriters are like that. My team rocks and we close loans fast!

    J Alfredo Robles

    Mortgage Banker NMLS: 346071

    Proficio Mortgage Ventures, LLC.

    a wholly owned subsidiary of Proficio Bank

    2550 Westway Drive, Suite 101

    Brunswick, OH 44112

    619.600.6595 direct

    SKYPE: J.Alfredo.Robles

    TEXT: 619.600.6595

    JRobles@ProficioMortgage.com

    This email and any files transmitted with it are confidential and may be legally privileged and are intended solely for the use of the individual or entity to whom it is addressed. If you are not the intended recipient, please note that any disclosure, distribution, or copying of this email is strictly prohibited and may be unlawful. If received in error, please delete this email and any attachments and confirm this to me at JRobles@ProficioMortgage.com

    Thank you.

    _____

  2. Why would they need that kind of information, especially the doctors checks for the past year? Trying to get a mortgage was almost impossible for me, but I finally found a company that didn’t ask me for the past 3 years of my income taxes.

  3. We were supposed to close today, and the underwriters had gotten into my three adult children’s checking accounts, thinking I was hiding something from them. they were scrutinizing purchases and payments they made in their accounts three months ago, which of course, have absolutely nothing to do with my husbands and my credit. We are still waiting to close because of their error. I’m not even sure what they did was legal.

    1. Jenifer, I would like to know more about why the underwriters were looking at your children’s accounts. Were they gifting money to you for the down payment? Maybe we can take this conversation offline so you can give me more details privately. You can email me through my “Ask a Question” page in the blue bar at the top.

  4. i’m borrowing 150k for a first time home, i have provided more then enough paper trails to prove i make over 80k a year and the under writer asks me about a $24.00 purchase online. i’m so close to telling these guys to piss off ill get my loan some where else.

    1. Jimmy, I agree with you 100 percent! Your loan officer should be telling the underwriter to get a grip on reality and remove that insipid condition.
      Which lender is it? Let’s post the name to let others know to stay away from them.

  5. I am buying a 143,000 house with a 780 credit score 4,800/m income (after this lender hit my credit with numerous inquiries, it was 800!). I am self employed and have been for 6 years in the same field with a steady income. I fulfilled all of their required documents, and received my commitment letter- with 12 stipulations attached. One was to completely pay off my car loan (owe 2400 on it-my only other debt) and to have 10,000 more in savings than we need for closing. They of course want it done IMMEDIATELY. They already required me to pay 1,000 on my car loan. Then they went back all 6 years on my tax returns and I had to provide a letter stating the slight variation of income (around 1500-2000 each year). The also are asking for my FULL september bank statements WELL before the month is even over. 9/1-9/30 required by 9/20.

    WHAT!? I am so over this!

    1. I agree with your response: Whaaaaat?!!

      I haven’t seen your loan file and I don’t know who the lender is (wish you had stated it), but based on what you have said, I would go to another lender.

      A couple things to note: When a car loan has no more than 10 months left, you don’t have to count the monthly payment in the debt ratio. And, two years’ tax returns are the requirement for Fannie Mae.

  6. Love this post. Feel a bit better today, as I dig up every cancelled check paid to my landlords over the history of our rental, and our lease agreement (how is that relevant in any way, shape or form?). My credit is 800, has been at 800 forever, and I’ve been employed by the government for 10 years without pause or problems. And I’ve had to request and send in four different interim statements from my checking and 3 savings accounts, because every 4 or 5 days they demand to see documentation of any new transactions. WTF??? How are they not wasting money themselves on paying salaries to people to collect these crap, when obviously whatever transactions I’ve had in the 2 weeks before closing have about a 0% chance of being wildly different from my long-term credit history?

    1. Sounds to me like you’ve got a lender with a bad underwriter and a loan officer who is not doing his or her job by standing up for you. Let me guess…is it one of the Big Banks?

  7. If I’ve furbished proof that I’ve paid my last two years of owed back income taxes, (copies of checks, Stamped Reipts from IRS and bank statements showing the funds have cleared my account) the underwriter is now requesting the impossible: A letter from the IRS stating I owe no more penalty or interest. After consulting the Accounting firm I used, they’ve never heard of this request and stated the IRS will not provide such a letter. Why can’t they just submit the 4506T form again to verify the last 2 years are good to go?

    1. This is another case of a stupid underwriter asking for something that cannot be obtained.

      Write a letter that explains what you have told me and add this sentence: “I cannot provide a document that does not exist.” Sign it. Then add: P.S. I will be posting a review on Yelp. Send it to the branch manager and the regional manager and the company CEO or President. I can pretty much guarantee you that requirement will be waived.

      Please come back and let us know what happened! I want to hear the end of your story. I’d also like to know who the lender is. If you don’t want to post it publicly, send me a private email at askcarolynwarren at gmail.

      1. Just to follow up on my previous complaint; I did what you said to do, with one small adjustment: I told the Manager what the UW was asking was unprecedented and not needed and if I need to I’ll go above his position very loudly that their UW request was not acceptable.
        Remarkably I received my Clear To Close yesterday. I’m closing Monday. Hopefully it goes without a hitch.

        Thank you for your incite!!

        Chris

      2. Well done, Chris! You have shown that you don’t have to be a victim of bad and stupid underwriting.

  8. My closing date is or at least is suppose to be a week from now. And today the underwriter ask for a dr letter that will state that my wife’s disability and income source will last more than 3 years. My wife have been disabled since 2008 but no dr can guarantee she will not get better for the next 3 years. The CFPB issued a bulletin regarding this in 2014 but it seem some underwriters are under train or deliberately ignores the law. I send the underwriter a copy of the CFPB bulletin lets see what I heard back. That was the only condition from the 6 asked I got an issue with.

    1. William, I believe the underwriter is trying to follow the rule that says in order to count certain types of income, it needs to continue for three years. If you have a paper that says her disability is permanent, that would work. That said, I agree with you: no doctor can guarantee anything about a person’s health. For an underwriter to ask for that is plain stupid. Hopefully, the underwriter will put that bulletin in the loan file and call it good. If needed, ask for the name of the Branch Manager and then call and speak to him or her. Managers can override underwriting requirements.

      Do you need to count that income to qualify for the loan? If not, tell the loan officer to remove that income from the loan application and rerun Automated Underwriting: then it won’t be required.

      I’d like to hear how this turns out for you.
      ~ Carolyn Warren

      1. Hi Carolyn,

        Sorry for the late reply I was waiting to actually close to let you know the outcome. The next day after sending the CFPB bulletin to the underwriter I was told that I was right and that I didn’t needed to provide a letter from my wife’s doctor. We closed on the 7th as scheduled so everything turned out fine.

        I will recommend to anyone in the same situation to provide the lender a copy of the CFPB bulletin that can be found at http://files.consumerfinance.gov/f/201411_cfpb_bulletin_disability-income.pdf

  9. I have been trying to refi my 5 yr ARM into a 15 yr fixed since February. Despite the world’s worst appraisal (our brand new $40k barn was valued at $1k for example) we still are under 60% LTV, have 780-800 credit, 10% debt to income ratio, and enough in savings to pay the mortgage in full. I thought we might run into problems as my husband owns his company, but that was easy. The UW is hung up on the fact that my 2 kids were dependents on 2015 tax return but not 2016. I explained that they are both adults, but had to be dependents in 2015 for ACA health insurance. We ended up not qualifying and purchasing private insurance, so did not claim them the next year because one got married and they other would get a bigger refund if we didn’t claim her. That explanation was not enough and I had to have the court send my 15 year old divorce documents even though I am remarried, own my home in my name only, and my kids are in their 20s.

    I used to be a real estate lender in the 90s when we had to verify and document pretty much everything, but this is beyond ridiculous. The regional manager called me to say that he thought the UW was being too demanding and that they have since changed their policies but that went into effect after me. He also mentioned being afraid of me suing them for discrimination.

    He actually waived the requirement, but the UW went around him and tried to get the title company to obtained the divorce decree from the court. I know the title officer so he emailed me to let me know. I was supposed to close a month ago, but it’s still in UW hands. Sooooo frustrating.

    1. There is absolutely no reason or excuse for putting you through that kind of underwriting nightmare! I hope you will file a formal complaint. In my opinion, they should waive your closing costs for this unnecessary abuse.

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