Comments on: Mortgage Fraud Part 3: Recent Developments

By: Daniel Mulvehill

Daniel Mulvehill — Sat, 27 Feb 2010 17:30:09 +0000

Data in Data out automated underwriting can set the stage for a loan approval but personal review is proven to be the best way. FICO scores are not good, look at the report grade the credit history I have a client with 22 open paid as agreed credit lines and the FICO score is 645 no lates manages his money for if you pay as agreed you must be earining your way and deserve the credit offered to you, yet another client has 4 traelines 1X30 and theree score is 710 ? not much parity the scoring ssystem is rigged and you can ask 10 people how it works and you’ll get 9 7/8 diffrent ansawers for sure.Back to the foundation of underwriting is were we need to go ?

By: Alison Clark

Alison Clark — Tue, 23 Feb 2010 23:18:37 +0000

This article was my favorite one so far, as I have said before I am a processor that finds the need to keep my CE’s current even though not required. I think between my eyes and the underwriters we are making sure that everything is done ethically and completely. I make a practice to scrutinize all documentation and always have. I am so happy that I do not have to argue with anyone anymore about what documentation we need to close a file as we are back to needing everything and in having all the documentation we can very reasonably assure we are not being lied to. I also agree that the last comment is brilliant

By: Chris Yanke

Chris Yanke — Wed, 30 Dec 2009 22:39:26 +0000

The closing statement of this article was interesting. I wonder if he knew how true those words would become? There can’t be one perfect answer but one thing is clear, any of us who chose to stay will feel the pain of the scrutiny that we get whenever someone asks us what we do and we tell them and this is what the person asking us brings up. It hurts everytime, I’ve had family members chastize me, friends insult me, and I’ve even gone through my own personal chaos because of this. The face remains that I might have to carry the scars of this without having ever done any of these things but it’s because I believe that the way I do business will change this perception in the years to come. There’s no silver bullet but bringing back human common sense will help put a different meaning in home buying and financing. Besides, didn’t this happen in the late 80′s with the S&L crisis?

By: Yvette

Yvette — Fri, 18 Dec 2009 08:07:09 +0000

What is amazing to me is that all of my files that have gone through DU, or Lp have also all been hand underwritten by an underwriter. I have also just recently underwritten for a large bank, what I found interesting was the Loan Officer, who would create their own story when asked a question about a file vs just calling the borrower for an explanation. They just do not want to take the time, they just want the file closed. Not all of them are being fraudulant they just want their paycheck and the file has to close by the end of the month. Most do not understand that the file does go through an audit system and everything has to be documented and in the file.

I do agree that we should go back to make sense underwriting and that the credit score alone does not mean that the borrower is qualified to repay the loan. If a borrower has a high fico score, they require less documentation. You can have a high fico score if you are able to juggle and make your payments on time. It does not necessarily mean you can qualify for a mortgage.

I do not think we are ever going to have a perfect answer for eliminating mortgage fraud, but I think that maybe we are going in the right direction. One arena that has not been greatly affected by the mortgage melt down has been FHA. There requirements/guidelines have remained consistant throughout the years and therefore has not had a lot of defaulted loans. The percentage of loans that have defaulted have all been paid by mortgage insurance premiums that have been self funded by the borrower or seller paid closing costs

By: Raylene Ramos

Raylene Ramos — Thu, 23 Apr 2009 23:05:29 +0000

Back to basics is where we need to go. Yes, it’s kind of scary to think of the possibly of not being able to qualify for a loan myself. However, I would much rather know I was completely able to pay for my mortgage for as long as I want to live in my home, than to be wondering if I really do make enough money or that the mortgage terms will allow me to stay afloat.

By: Mary McGraw

Mary McGraw — Wed, 22 Apr 2009 00:25:40 +0000

Also that the industry will keep up with the right rules and not take advantage of people.

By: Mary McGraw

Mary McGraw — Tue, 21 Apr 2009 23:38:09 +0000

I agree i believe that going back to some of the old ways are good because alot of people back then believe in honesty and didn’t take advantage of people also i believe in alot of the new rules hopefully years down the road we wont have the same problems we are having today.

By: Chris Madden

Chris Madden — Sat, 28 Feb 2009 18:30:38 +0000

The article was a nice plug for old school underwriting. But the fact remains, their human like everyone else. To imply that the industry would magically rid itself from fraud is ficticious. Your still going to have the greed element. Dont be suprised to see a underwriter, LO, and appraiser in kahutz. Where there’s greed, theres will be fraud.

By: Sharon Eva

Sharon Eva — Wed, 11 Feb 2009 19:06:55 +0000

I agree that the old underwriting system might be more effective in terms of fraud prevention but i’m afraid that this might slow down the loan process and extend closing dates. A lender might need more underwriters to timely close loans. Bottom line here is that there are more loopholes for fraud for mortgage broker companies and not enough repercussions for fraudulent consumers. I think if we tighten the process for mortgage broker firms and increase punishment for the Average Joe, we might see less fraud. I think that lenders should get all of their documentation needed to close a loan directly from the source instead of from the borrower or verify the documentation from the source as a “checks and balances” process.

By: Teresa Tait

Teresa Tait — Tue, 10 Feb 2009 07:26:05 +0000

When I first got into this industry 6 yrs ago, the majority of my loans were underwritten automatically.While this definately sped up the entire process, it didnt help me to truly see each file thru an underwriters eyes.I then started selling CMG Home Ownership Accelerators( which were always underwritten manually)and that is when I learned to respect and understand the why’s and what’s that the underwriters were looking for.It wasn’t always easy, but it sure helped me learn how to prepare my files and not waste everyone’s time having to resubmit conditions over and over again.
I would still like to see auto approvals followed with a manual underwrite. The process may take longer but maybe it would insure less fallout.

By: Julie

Julie — Sun, 08 Feb 2009 00:47:43 +0000

There are arguments for both human and auto underwriting, but auto does make it much more objective. Auto gives you standards you have to meet, human bring too many subjective/outside influences into it. For example, when I started in the business 25 years ago,in training I sat with an underwriter explaining the file. He was all set to approve, but then notice a 5yr old car (they were listed then), and said “Oh, that’ll have to be replaced.” And denied.

Also remember being denied our first mtg app in 1964, I’m older that most of you, because they wouldn’t use my income. “You might get pregnant and leave the workforce.” Husband was CPA with Price Waterhouse. We’ve come a long way, baby.

Auto gets rid of a lot of subjective influences. It’s the credit scoring component I have a problem with. It does not accurately reflect ones ability or responsiblity to pay.

By: Robert Paterson

Robert Paterson — Sat, 07 Feb 2009 17:07:08 +0000

Automated underwriting made it just easy to bury the true risk of the loan There was no accountability from any party in the loan transaction. Greedy lenders are also to blame because they didn’t seem to care about the quality of their business as long as they could book a fee.

By: Robert Paterson

Robert Paterson — Sat, 07 Feb 2009 02:57:50 +0000

Sloppy loan management has brought a huge crisis in the mortgage industry. Why? The answer is really quite simply FEES. Under writing risk was an after thought to fees that could be booked. This starts with the loan originator and end with wall street selling these investments to buyers as CDO’s. Better underwriting fewer loans less risk less fees.

By: Scott

Scott — Tue, 27 Jan 2009 02:03:32 +0000

With the lower volume of loans being underwritten having a human element involved in the process should be welcomed. I believe the tightening of underwriting guidelines will continue. Last, the key component is consumers understanding the consequences of making good credit decisions.

By: Carla

Carla — Wed, 14 Jan 2009 00:57:42 +0000

I like going back to hands on underwriting, but I also like the use of automated underwriting. There is no clear answer, but a little of both seems to make good sense to me. Whether it’s poor underwriting practices or fraud for profit, we need a better moral compass. And where does that come from?? Clearly the corporate CEO’s who left the shareholders high and dry are in need of a new compass.

By: Cheryl J Barr, 510-LO-38949

Cheryl J Barr, 510-LO-38949 — Wed, 31 Dec 2008 19:43:27 +0000

A careful well documented loan package has always wormed it way in to an underwriters heart. I do believe we will see make sense underwriting come back and flurish in the industry. Threw document verification and a person actually looking at the information we will be able to weed out alot of “misrepresented facts” and also to a better service for the borrower. Locks will need to be longer and patience will need to handed out all the way around. I also think there will be as many or maybe more fraud loans in 2007 as there was in 2006.

By: John Sarausad

John Sarausad — Wed, 31 Dec 2008 09:21:31 +0000

I feel that an underwriter must try their best to find a reason to deny your loan because if they weren’t so picky, they would not be needed because our DU/LP findings tell us everything we need to close our loan. I have been fortunate to pre-underwrite my files and include cover letters that lead a pathway to the underwriter which allows my files to close faster and to be able to build relationships with underwriters that know I am legit and do loans the right way.

By: Joe Hrebik

Joe Hrebik — Wed, 31 Dec 2008 08:41:03 +0000

I agree that more human underwriting to better scrutinized transactions would be beneficial, but that can also be augmented by improved automated underwriting systems. There is a happy medium, we don’t need to go back in time to the 1980s, but we do need to correct faults in current underwriting processes.

The CEO comment is right on, driven by the need to ever increase earnings, cost cutting ended up getting rid of valuable people (underwriters) in the name of automation. These were bad business decisions that reflected a lack of understanding, at the corporate level, of the underwriting profession.

By: Brian Paine

Brian Paine — Tue, 30 Dec 2008 20:12:05 +0000

I completely believe we’re seeing the change in underwriting; however, once again, those that suffer are the consumers…instead of locking for 30 days you have to lock for 45 or even 60 days depending on the loan. I know…it takes time to heal all wounds and we simply have to make the best of things for a time. Take a hit to our own compensation, make it up in referrals by providing clear communication of the changed times or even in some of the education we’ve learned here and pass that along to our email lists…

By: Brian Paine

Brian Paine — Tue, 30 Dec 2008 20:02:52 +0000

It’s much too easy to say we need to time warp back 20 years when there are so many left spoiled or to fend for themselves and are suffering needlessly. Yes, many shouldn’t have been in their homes in the first place; however, it is what it is…and those people need help, now!!

Now, you’ve shut the doors on an enormous amount of home owners. You can’t create a world then yank out the carpet beneath the people you’ve unintentionally put in harm’s way…there needs to be compromise as we’re fixing and healing the “system”…if “we’re” still in the customer service industry.

By: shelley safronek

shelley safronek — Tue, 30 Dec 2008 16:27:20 +0000

I was also trained as a new loan officer back in 1990. We attended a two week, 8 hours a day training course. Learning how to thoroughly complete the 1003, review the bank statements, paystubs, W2′s and yes…..properly calculate complicated tax returns. This training allowed me to set myself apart from your typical loan officer that hasn’t a clue how to accurately determine income, repayment ability etc. I have been submitting files to Astoria Federal (awesome super jumbo pricing) and it was very fun! It was back to the days of full paper copies, no automated underwriting and include a copy package. It’s amazing when you learn how to really process a file, the file comes together like a puzzle. When one puzzle piece is out of order….the file should be denied! I’m very happy to see the traditional procedures comes back in to this industry. We can get back to loan officers that really know this business and care about the future of this industry for both the consumer and the company.

By: Dennis Tyler

Dennis Tyler — Tue, 30 Dec 2008 02:41:43 +0000

While mortgage fraud is a definate problem, it appears that we are doing largely what the media does to sell newspapers. Yes, we see examples of fraud and deceit regularly. Yes, we each have a responsibility to make this industry better. And yes, we each should also be looking for the good, and getting the word out there that for the most part, we are an honest industry (at least I hope that to be the case). Let’s not tolerate consumers, realtors or other lenders that would have us compromise our standards. Let’s not be afraid to report purpetrators that ruin our reputations and our livelihood. Rather than go back to strictly manual underwriters, how about going back to the days that a handshake was better than a written contract. I love automated underwriting. It does not need to replace integrity though. Let’s make sure we also realize that the glass is at least half-full, and re-create trust!

By: Jim Haechler

Jim Haechler — Tue, 30 Dec 2008 01:40:49 +0000

Underwriting guidelines changed because of the volumme of loans. Because of the volumme they needed automated underwritting. The ease of getting a loan. The use of sub prime and stated loans. I agree there needs to be some changes. But it seems we go from one extreme to another.

By: Jim LaLone

Jim LaLone — Tue, 30 Dec 2008 00:36:05 +0000

Let’s remember that many of the so called fraudulent loans were enhanced and done because fannie and freddie invented these products to make home ownership as easy as possible. Bundling, re-inventing credit ratings in their new ‘lifeform’ and selling them on Wall Street as A+ ? It wasn’t just us dumb originators, it started at the top of the food chain. Now, after the heads of fannie and freddie got their multi-million$ bonuses, they want to blame us for selling their bad ideas. How about they give the money back? Oh, I forgot, it’s all gone, we need to print some more…..and put these same people in charge of the printer.

By: William Schornack

William Schornack — Mon, 29 Dec 2008 23:50:11 +0000

I find it amazing…66% owner occupied were not?
I think we need to take action against those who defraud us, the borrower! All of the legislation that is being introduced is for us professionals who originate loans to protect the consumer, where is our protection? Court costs? Attorney’s fees? Ruined reputations, and loss of License is what we can expect. When is the borrower going to be held accountable? I’ve had to defend broker’s who offered a loan to the borrower that clearly benefited the borrower. When the borrower figured out he could sue his broker and lender to get out of making payments every one got the screws except the one who signed the loan documents.