If you’re having difficulty getting your loan approved, you might think talking with the 
underwriter is a good idea. That way, you can explain your self-employment income, your tax deductions, your true rental income, your defaulted student loan, or the bad credit account.
If the loan officer gets paid only when a loan closes, why won’t she/he put you through to the underwriter? It seems logical that letting you explain things to the underwriter would be in the best interest of the loan officer as well, right?
But no. Underwriters — the final decision-makers on whether a loan is approved or denied — do not and will not speak with borrowers. Here are three reasons why.
1) The underwriter must follow the rules in the lender’s underwriting guide. These rules include exactly how to calculate income and how to handle credit. For example…
… Only 75% of rental income can be included. (25% is set aside for repairs and possible future vacancies.)
… For self-employed income, there is a complex worksheet that must be filled out. Part of that dictates that the Adjusted Gross Income is the main figure used. So if you have a clever accountant and write off tens of thousands of dollars worth of income, that lowers the income you get to count accordingly.
Therefore, you cannot call the underwriter to inform her that she has calculated your income incorrectly. Her calculations are correct and yours are wrong, according to the lender’s rules.
2) Verbal Explanations Do Not Count
If you have an explanation that needs to be included in the decision-making, put it in writing. Create a short and to-the-point Letter of Explanation that can be added to your application and loan file. Then and only then will the underwriter consider your explanation. This is because the underwriter is required to have documentation in your file to support any exception to a rule.
3) Your Loan Officer is Your Advocate
Your loan officer has a vested interest in getting your loan closed, but she/he also knows the underwriting guidelines. If a question or argument needs to be made to the underwriter, your loan officer does that for you. Thus, the loan officer serves as a gate-keeper and screen for the underwriter. Underwriters are under pressure to get loans approved and on to the Doc Draw Dept. They can’t spend half their day chatting or arguing with borrowers. It’s not in their job description. But, it is in your loan officer’s job description.
Underwriters will speak with loan officers, so if there is a valid question or argument to be made, you do that through your loan officer. That is part of what your loan officer is paid to do: be the bridge between you and everyone else in the complex process.
Remember this overriding principle: “He who holds the money makes the rules.”
If you disagree with the rules about how income is calculated or how credit is considered, that makes no difference. In Mortgage Land, the customer is not right; the underwriter is right. The underwriter must look out for the lender’s risk in lending money.
The one with the money decides on who gets it. What’s more, they don’t “owe you” to give you a loan.
Understanding this perspective will help you get approved. Ask your loan officer to explain the rules to you so you understand why the underwriter made that determination. Then, if warranted, put your explanations in a letter. Use bullet points, not long wordy sentences. A good letter can work magic. People are sometimes surprised at the loans I’ve been able to get approved by adding a succinct, logical Letter of Explanation to the loan application.
One last thing. In Mortgage Land, getting mad and yelling at people or sending upset emails does not help your cause. Underwriters do not give in because someone throws a fit. So keep your cool and your dignity, and do what needs to be done to make the underwriter happy with your application and documentation.
This is a great article!
Thank you.
Carolyn,
I just finished your book, “Mortgage Rip-Offs and Money Savers.” Does the trickery, deception, and bait-and-switch tactics still go on in the lending world, or has it gotten better since you wrote the book?
Thank you for asking, Tom.
I just got off the phone with a borrower who was quoted $1,600 for the lender fee and $385 for the appraisal. When the GFE and Itemized Worksheet came in three weeks later, it showed a lender fee of $2,050 and $450 for the appraisal. The borrower is dropping this lender for dishonesty, bait-and-switch, and poor service (three weeks instead of the three days required by federal law).
Two weeks ago, I spoke with another borrower who also had a lender try to rip her off. The difference in lender fees from the original GFE to the second GFE was $252. I advised her to object, and when she did so, the loan officer dropped the $252.
One was in Vermont, the other in Texas. I could give more examples, but these are my most recent two.
So even though new, stricter laws have been put in place, the dishonest loan officers still lurk.
Great information – helps keep things in perspective! Thanks!
Thank you for following my blog.
Is this manner considered as illegal?
That is a good question. Yes, it is absolutely legal for underwriters not to communicate with a borrower; it is the loan officer’s job to communicate with the borrower. A good loan officer is your advocate between underwriting and all the other many team players that work on a loan in progress.
Rules only apply to those they to chose to apply it too! Much discrimination with this system. Talk about that!
Unfortunately, that has been true with some lenders. I will post a blog with specific information on discrimination shortly. Please check back next week or subscribe.
Really good advice
Enjoyed the read
Hope my lender had read your post fingers crossed
Thank you for your kind compliment. Feel free to forward the URL address to your lender. : )
What if the underwriter asked for documents the day before closing (after having no additional requests for a week), and delayed the closing AFTER the scheduled closing time? Are they liable when the loan is delayed due to faults on their parts? Do they have any legal obligations to at least inform the borrower that the closing will be delayed? Now they won’t even tell my loan officer what to expect/when the closing will be. If I cannot speak to the underwriters, can I speak to their manager or superior?
Emily, I am sorry to hear this happened to you! There are some bad lenders with bad underwriters out there. Your loan officer should have been on top of this long before closing date. Was this a bank, a mortgage lender, or a mortgage broker? I see no reason to keep the name a secret.
No, they are not liable due to their delay. You can and should call and speak with the manager, president, CEO or whoever you can reach by going up the chain of command.
Good luck and let us know what happens.
Hi Carolyn. My wife works for a financial institution that forces the underwriter to contact the borrowers directly. She and the other underwriters believe that this is a conflict of interest and an unethical practice. Is there a federal or banking guideline that discourages the underwriter speaking directly with the borrower?
How unusual! No, there is not any law or guideline that dictates who should keep in contact with the borrowers. Why don’t they trust their loan officers? Are they not licensed and fully trained? Personally, I would not work for a financial institution that did that, because I don’t trust underwriters to present conditions in a way that will please my clients. Plus, I generally get some of the underwriter conditions waived upfront first. Also, the loan officer needs to be the one expert for the clients to build their practice, get referrals, etc. By taking the power out of the loan officers’ hands and putting it on the underwriter, the institution is undermining their sales staff. I am the expert and the advocate for my clients; I would never hand that over to an underwriter.
This is so frustrating. When I picture the underwriting department, I see this underground bunker with a big 3 ton steel door that would survive any nuclear bomb. I see people sitting in glass, sound proof cubicles that are unreachable to any human contact. That’s the impression I get from my loan officer and when it comes to him talking to the underwriting department. Almost as if he’s terrified of this department and already knows the answers to our question and gives you the “I’m 95% sure the underwriter will say no”. Or, “I feel certain the underwriter will not consider that”. He already knows the answer to all the questions so it begs me to ask why do we even need an underwriter if he already knows everything? I truly feel we could be losing the home of our dreams because the loan officer doesn’t communicate with the underwriting department. He can’t even explain correctly why the underwriter might say no, etc. I understand why there are standards and rules but I also see how these people rule your life to determine what you can have and not have. I own my own home, this isn’t my first rodeo. I can say the homebuying process is an American nightmare not a dream. Thanks mortgage lenders and underwriters, you’re right up there with lawyers and car salesmen!
T.A., that sounds very frustrating! I wonder if your loan officer isn’t having a conversation with the underwriter because the underwriter is overseas and not in the U.S.?! Per my most recent blog post about that. If you want to ask me your question, I will get the answer for you. You can either post it here or email me at AskCarolynWarren at gmail.