6 Reasons I Hate Underwriting

by Elizabeth on July 29, 2013 · 4 comments

When my husband and I bought our first home seven years ago, getting a mortgage was a joke. We literally walked into our local bank branch, told the loan officer we were interested in buying a house, and in under 15 minutes we’d been pre-approved for a mortgage somewhere in the neighborhood of $450,000 – even though we were only making $45,000 combined a year. During the underwriting process, I was only asked to provide a signed offer letter from my new job – which I’d yet to start – while my husband was taken at his word that he worked. When we closed on our first house in the late summer of 2006, I was still waiting to start that new job, while my husband continued to work at his existing job… in a different state. Yes, getting a mortgage was a joke indeed.

And then there’s today.

The world of mortgage applications and underwriting has changed dramatically since the housing crisis and ensuing financial meltdown. In fact, “changed dramatically” isn’t a dramatic enough to describe what’s happened to the housing market over the past five or six years. And as easy as it was buying a house in 2006, it’s been next to impossible this time around – so impossible, in fact, that I’ve started to outright hate the entire process.

The result? My tongue-in-cheek list of the reasons why I hate underwriting.

  1. It’s redundant. hate repeating myself, whether it’s giving instructions to my kids as we head out the door in the morning or telling one of my colleagues for the umpteenth time that I’m still waiting on a piece of information only they can provide; and underwriting, I’ve learned, is one of the most redundant processes I’ve ever gone through.
  2. The underwriters never seem to get back to me… until 5:01pm Friday. This is one of my biggest complaints. I spend all week long asking the underwriters what documents they need from me, only to get a response after the close of the business day Friday, making it beyond difficult to, say, stop by my local bank branch and get the supporting documents.
  3. They don’t trust me. Yeah, I get it – this is how we got into the whole housing bust in the first place; underwriters and loan officers were greedy and all too willing to take equally greedy homeowners at their word: “Sure, we can afford it… trust us.” We all know how that worked out. But here’s the thing: I wasn’t one of those greedy homeowners. I laughed at my 2006 pre-approval letter and bought a home less than 1/3 of what the bank said we could afford; I never made a late payment; I refinanced to a lower interest rate when common thought said I should. Although I know it’s the right thing, it’s tough to feel like you’re not trusted when you haven’t done anything wrong.
  4. Everything’s automated. So much for talking to an actual person. Our entire loan application and underwriting process has been done via a website, where I have to upload and download the necessary documents. Not having an actual person to talk to makes it tough to get timely answers to questions.
  5. There’s not one middle-man, there are three. After shopping around for a home loan, we decided to go with a bank in our new hometown. The loan officer there started the process, then handed us off to a loan processor in Florida, who is working with underwriters in Virginia. This – combined with the fact that basically everything is done digitally – makes it hard to find a single person who can really help guide us through this process.
  6. It’s sloooooooooooooooow. When we closed on our first house in 2006, we made it through the entire home-buying process – from viewing homes to putting in an offer to applying for our mortgage to underwriting to closing – in 23 days. This time, it took us more than five weeks, and that really pushed our underwriters and title company to the limits of what’s possible these days; I’ve been told 45-60 days is a much more achievable goal.

I know a lot of my complaints here are necessary evils to prevent another mortgage meltdown, but they irk me nonetheless, largely because my behavior wasn’t what led to the meltdown in the first place. After all, the greed of some homeowners, banks, and real estate agents is why my husband and I lost more than $7,000 on the sale of that first house, thanks to declining property values. And while the government went out of its way to help some homeowners – many of whom contributed to their own demise – we didn’t get a single piece of that pie; maybe now I want a “get out of jail free” card.

Have you purchased a home both before and after the housing crisis? If so, what changes to the underwriting process did you notice?

{ 4 comments… read them below or add one }

1 Newlyweds on a Budget July 29, 2013 at 4:20 pm

As excited as I am about buying our first home, I am not looking forward to this process!

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2 Pamela | Hands on Home Buyer July 29, 2013 at 4:50 pm

Underwriting standards are not remarkably different before and after the mortgage crisis when you talk to lenders who have had good standards all along.

Most people go to the bank that has their deposits or whoever has the best rates. But I encourage people to ask around and find out which mortgage lenders are fair and reasonable. After all, life is too short to be stressed out over buying a house.

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3 Crystal @ Prairie Ecothrifter July 31, 2013 at 11:07 pm

I’m with you!!! I HATED underwriting during our last home buying process. Slowed down everything! SOOOOO SLOW. Bleck.

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4 Sarah M September 5, 2013 at 6:24 pm

I work in the mortgage industry, so this is where this is coming from. I also work in a role where I deal specifically with mortgage fraud and troubled/botched foreclosures (I actually got my start auditing fraud-laden Countrywide files in 2008). So that is also where this is coming from.

Restoring (not changing, the post stating these standards were in place all along and were simply no adherred to during the Wild ‘n Crazy Times is absolutely correct) underwriting standards is pretty much the only substantive change that’s been made to the industry. Unfortunately, it’s also the change that impacts consumers rather than banks or loan officers (and I definitely think the big problems were absolutely on the lender side moreso than the consumer). That sucks, but it sucks because we haven’t done nearly enough to change the culture in ways that will prevent something like the housing crash from happening again, not because we shouldn’t be giving loans this kind of scrutiny.

I know everyone would like the process to be easier, and I sympathize with honest people going through it, because it is a PITA. But this is probably the biggest financial debt you are going to take on in your life. It should be a big deal. And most importantly, I’ve seen too many stated income loans that were completely false and unbelievable, but had been given not even a second look. I’ve seen too many pay stubs and bank statements that crooked brokers created themselves so they could make a commission, sticking the borrower with a house they could not afford, and that would just drive them into financial ruin.

It was awful, and there’s so much money involved and so much temptation to do it the wrong way, that greed will out if people stop paying attention again. Is this inconvenient for honest borrowers with good credit? Yes. But to me it feels like a small price to pay for something that actually fixes a problem that led to the recession, when so many problems aren’t being addressed.

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