Shoot and Score with FHA Lending
Brokers must remain familiar with new rules and pass that knowledge to others in need
By Darrin Stobaugh, owner, DES Financial Services
Are you getting the approvals
on Federal Housing Administration (FHA) loans that you deserve?
Are your loan officers turning away good
FHA loans because they don’t know how
to fight for them? Are the underwriters reviewing your loans new to FHA lending?
If you answered yes to any of these
questions, you’re not alone. Brokers working with FHA loans might sometimes feel
like star basketball players in a championship game being controlled by a rookie
referee. Because of this, brokers must advocate for themselves and remind the ref
and other players of the rules. Brokers who
act properly can save loans from failing.
Darrin Stobaugh is
owner of DES Financial
Services in San Jose, Calif., and a 22-year veteran
of the mortgage industry.
He has held positions
as a regional operations
manager and corporate-
underwriting manager at some of the top
wholesale institutions in the industry. E-mail him
at dstobaugh@desfinancialservices.com.
Here’s what to know and how to deal
with some of the obstacles that may develop.
Recent changes
There have been many changes to FHA
lending recently, and not everyone is familiar with the new order. Often, companies give their originators down-and-dirty
training or none at all. As such, loan officers may not realize they can underwrite
without credit scores or use concise letters
of recommendation to help gain approval.
Rather than lose customers because of a
lack of knowledge, brokers should invest in
educating themselves and their employees.
This includes learning how to document a
file to overcome negative information.
Even seasoned brokers need new education and should understand that FHA
guidelines differ widely from those of
Fannie Mae and Freddie Mac. The ability to use alternative credit reporting, for
example, marks a significant difference.
Also, FHA guidelines are open to the public and are the same for everyone. Unlike
with Fannie and Freddie, there are no enhancements to the guidelines for certain
lenders. Brokers can research a particular
borrower’s specific needs online.
When dealing with new underwriters,
education and experience often are a broker’s biggest obstacles. One way to prove
borrowers’ worth is to write a detailed
cover letter, referencing the exact rules
that pertain to the loan at hand.
Too much documentation, however,
can cause a new underwriter to be blinded
by paperwork. It can be best to send files
with the appropriate level of documentation, making sure to demonstrate succinctly where possible issues might exist
and why they shouldn’t derail the loan.
Alternative credit
If you are using alternative credit to offset
borrowers’ damaged traditional credit, let
the underwriter know that clearly. If an issue remains, talk to the underwriter and
have the guidelines handy. If there is still
a problem, ask the underwriter to consult
the local FHA Homeownership Center to
see if a remedy exists.
Because of quality-control issues, many
companies won’t let a senior underwriter
or manager sign off on someone else’s loan
file. They can, however, review guidelines
and work toward a resolution with the broker and underwriter.
Be sure to speak with a supervisor if
the underwriter seems unwilling to work
out the issue. Such reluctance often occurs
because of a new underwriter’s lack of confidence in decisionmaking.
Seasoned underwriters also can present roadblocks for brokers. In such cases,
one of two things usually is happening:
1. They are rusty on the new FHA guide-
lines.
2. They are overwhelmed with loans and
miss crucial information in files.
Although these situations can be frustrating for brokers, it’s important to remain respectful and kind. The best way
to deal with either occurrence is to become an advocate and to do the necessary legwork ahead of time or at the time
of decision.
■ ■ ■
Although not every FHA loan will be approved, many are declined improperly.
Brokers can help reverse this trend and
can help clients avoid denials delivered
because of someone else’s lack of training.
The best way to do this is to remain educated about all FHA developments and to
share that knowledge.
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