Nathan Rufty is a mortgage coach and trainer with Mortgage Marketing Pros, a company that works with loan
officers to develop marketing plans that increase leads and
closed loans. Mortgage Marketing Pros was created by a
producing loan officer and a master marketer to teach
mortgage professionals how to create their own businesses
without relying so much on one or two streams that can
dry up without warning. For more information, visit
mortgagemarketingpros.com. Reach Rufty at (909) 731-1218.
Stop Struggling With Underwriters
Instead of griping about turndowns, educate yourself about the process
By Nathan Rufty
There is an old adage in the mortgage industry that underwriters look for ways to turn down loans. That is far from the truth. Everyone in a mortgage company — including underwriters — knows that without closed loans,
the company would cease to exist. Instead of getting
upset over rejected loans, mortgage originators need
to look at things from the underwriter’s point of view
when reviewing their loan files.
It takes a team effort to originate, process, underwrite and close a loan. No one part survives without
the others. Knowing and understanding underwriting guidelines will make your origination process that
much smoother and easier.
Originators should understand why underwriters
exist and the vital role they play in the stability of the
mortgage industry. There is a reason why we have
underwriters: It is to approve or decline a loan, as well
as to ensure the company has fundable and performing loans in regards to collateral, capacity and credit
that can be sold to secondary market investors.
Know your overlays
As a loan originator, your role in the process is to review
company guidelines and overlays on loan programs
so you can present your borrowers with the best alternatives. More than that, however, you should look at
how your underwriter will view those guidelines and
overlays — and what documentation is required to
If you still have questions after reviewing your company’s guidelines, pick up the phone and call your
underwriter or send an e-mail asking for further clarification. It is better to know and educate yourself on the
underwriting guidelines when starting the origination
process than to push forward on the process and end
up with a turndown.
Too often, originators just forward pay stubs from
borrowers, for example, never even opening up the
e-mails to review the documents and verify that they
actually are pay stubs, or to see if there is anything
different from previous pay stubs. A change in hours
worked, a new garnishment, a decrease or increase
in pay, an address change or new deductions are red
flags originators need to watch for. These are areas the
underwriter will review and, if your underwriter finds
any discrepancies, additional conditions will likely be
Unfortunately, a lot of knowledge in this industry
is learned “on the job” and “as you go.” The best way
to teach yourself is to learn from your mistakes. When
you receive a loan decision — whether good or bad
— see what you can learn from it so you won’t make
the same mistakes again.
You may think you know what collateral, capacity
and credit are, for example, but have you gone the
extra mile to see these terms from the standpoint of
an underwriter looking at a loan file? Let’s take a look.
■ ■ Collateral is the amount of equity the loan will
have from the downpayment or available equity
based in the property. Your underwriter will determine if the funds for the downpayment are
sourced and seasoned by reviewing asset items and
then approve or request supporting documentation to source the funds.
■ ■ Capacity focuses on the borrower’s ability to
repay the loan by reviewing income documentation
such as pay stubs, W2s, 1099s, federal tax returns,
profit-and-loss statements, balance sheets and
business returns. Your underwriter may well request
other supporting paperwork to prove receipt of
income and that the income is likely to continue.
■ ■ Credit comes from reviewing the borrowers’
credit report. Underwriters focus on the public
records area, open collections and judgements.
They also may need to review letters of explanation
for name variations, overlapping addresses, Social
Security number differences, reasons for late payments and recent credit inquires.
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