I recently read an article in Loan Officer Magazine, written by Karen Deis, that made me laugh out loud. Karen is the Founder of Loan Officer Training, Publisher of Loan Officer Magazine and Mortgage Currentcy.com, and she is a mortgage and real estate industry veteran and expert.
I recently had the opportunity to meet her and I can attest she’s a lovely lady as well. With her permission, I’ve republished her article below:
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What is the most stupid condition
you’ve gotten from an underwriter on a mortgage file?
By: Karen Deis, LoanOfficerTraining.com
Well, I asked that question on Facebook and here are 24 of them that will make you laugh your guts out (or cry because it’s so sad what the borrowers have to go through go get a loan approved these days).
I was shocked by the number of posts I received:
- Underwriter wanted “high school transcripts.” (even though out of school for several years)
- Underwriter would not allow escrow for scraping and painting condition on appraisal. It’s Michigan in January and underwriter was in Arizona.
- Underwriter wanted proof that borrower was no longer under house arrest.
- The 1003 showed they had a 1-year old child. Underwriter wanted a Letter of Explanation explaining why the child was not listed as a dependent on the previous year’s tax return. Then when the letter was written saying that the child was born after the tax return was filed, the underwriter wanted a copy of the birth certificate.
- Underwriter wanted the death certificate of a borrower’s husband and a Letter of Explanation as to why her social security benefits were reduced.
- Underwriter wanted a letter from a bank teller confirming that she was the one who helped the “gift donor” purchase cashiers’ checks for the gift funds.
- I had a teacher who taught at a Catholic High School and the underwriter wanted a letter to prove that the school was part of the local Catholic school system.
- Letter of Explanation from a single dad who had custody of his child, that he did not have to pay child support. (Never saw a condition that a single mom had to write such a letter.)
- The VA Appraiser wanted a “red colored” room repainted a neutral color.
- Borrower wrote a check for $167 to Kroger’s for groceries. The underwriter wanted us to verify that they did not have a loan with Kroger’s.
- Underwriter made a comment they wanted an updated appraisal, even though it was not expired. Said that it must be old because in the picture the trees in the background were still green. They were evergreen trees.
- A source of funds letter for a $12 deposit.
- Letter of Explanation from a borrower as to why she changed her name after she got married.
- Proof that a borrower does not own a home they sold 10 years ago. It’s hard to prove something you don’t own.
- Borrower’s mailing address is a PO Box. Underwriter wanted a letter from USPS that they actually own a 10” post office box and that it’s their primary address.
- Letter of Explanation as to why a borrower who works for Microsoft (or any major company) works in a different location than the address listed on the paycheck stub.
- The underwriter asked for an updated bank statement (which is normal). The borrower wrote a letter explaining the dollar amount he had in the bank.
- I called HUD to ask them a RESPA question and the guy at HUD asked me to explain what RESPA was.
- Letter of Explanation from a doctor that the borrower has been healed and his illness will not come back.
- Letter of Explanation on a $6 deposit from a borrower who made $10K per month.
- VA loan. Borrower was a hooker and declared her income on income tax returns. Had to get affidavits from her “regulars” that they were her clients.
- A photo of a “Radon Test.”
- Borrower’s occupation was a “homemaker.” Underwriter wanted a Verification of Employment form completed by the employer.
- Borrower deposited $235 in checking account from garage sale money. Underwriter wanted copy of an ad proving she had a garage sale.
If you have a stupid underwriting condition you’d like to share, please post www.facebook.com/karendeis or email karen@karendeis.com
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Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.
We are supposed to close in seven days and now the underwriter don’t like how we pay our car note it comes right out of our bank account I have never in my life
We are supposed to close this week and the underwriter has asked for a receipt from a licensed contractor for a replaced door knob.
Underwriter wanted “high school transcripts.” (even though out of school for several years)
– If there is a Gap in employment of more than 6 months, borrower may no longer be eligible for financing unless he can prove he went to school or had additional training during that time. Asking for transcript to evidence education during that gap is an attempt to make the loan work.
Underwriter would not allow escrow for scraping and painting condition on appraisal. It’s Michigan in January and underwriter was in Arizona.
– No excuse
Underwriter wanted proof that borrower was no longer under house arrest..
– Borrowers needs income to qualify. It is hard to stay employed if you are under house arrest.
The 1003 showed they had a 1-year old child. Underwriter wanted a Letter of Explanation explaining why the child was not listed as a dependent on the previous year’s tax return. Then when the letter was written saying that the child was born after the tax return was filed, the underwriter wanted a copy of the birth certificate.
– Tax returns in file show dependents date of birth, if the underwriter is asking for the birth certificate it is probable that the date of birth on the tax returns was prior to the filing of taxes and underwriter is trying to evidence the mistake.
Underwriter wanted the death certificate of a borrower’s husband and a Letter of Explanation as to why her social security benefits were reduced.
– no explanation.
Underwriter wanted a letter from a bank teller confirming that she was the one who helped the “gift donor” purchase cashiers’ checks for the gift funds.
– In FHA files gifts from donors must be sourced and evidence must be provided they came from the donor. A cashier’s check is not a donor’s check. There is no way of evidencing its true origin (since it was purchased with cash at a bank). The only realistic way to evidence the donor provided it would be to ask for someone in the bank to verify the origin. A bit excessive but it is justifiable.
I had a teacher who taught at a Catholic High School and the underwriter wanted a letter to prove that the school was part of the local Catholic school system.
– No context, so not sure why. It could be to clarify the number of payments during the school year. Some schools pay their teachers 9 months/year (during the school year) and some 12. If a letter evidencing payment or a VOE came from the Catholic School system, you would want evidence that the school belonged to that system and same payments applied.
Letter of Explanation from a single dad who had custody of his child, that he did not have to pay child support. (Never saw a condition that a single mom had to write such a letter.)
– Underwriter is slacking, should request a divorce decree or child support order.
Borrower wrote a check for $167 to Kroger’s for groceries. The underwriter wanted us to verify that they did not have a loan with Kroger’s.
– If the bank statements show consistent and similar payments to someone and that account is not shown in credit report, the underwriter should ask for undisclosed loans/obligations not reporting. For all the underwriter knows these payments could be to Kroger Financing and are undisclosed loans.
Underwriter made a comment they wanted an updated appraisal, even though it was not expired. Said that it must be old because in the picture the trees in the background were still green. They were evergreen trees.
– no excuse
A source of funds letter for a $12 deposit.
– If there are multiple deposits on the same day and their total exceeds the threshold (1% on FHA 50% of the income on Conventional), than those deposist need to be sourced, regardless of their individual amount.
Letter of Explanation from a borrower as to why she changed her name after she got married.
– Are you sure this as not just and AKA affidavit, which is a standard requirement in these situations?
Proof that a borrower does not own a home they sold 10 years ago. It’s hard to prove something you don’t own.
– Very simple. A HUD-1 from the sale of the property or a Quit claim deed (which is public record) would satisfy that condition. Not hard at all.
Borrower’s mailing address is a PO Box. Underwriter wanted a letter from USPS that they actually own a 10” post office box and that it’s their primary address.
– The lender needs a physical address. Some companies do not deliver to P.O boxes. It is not typical for someone to not have an actual physical address besides their P.O Box. It is expected in some rural areas but is not the norm. Asking for a USPS letter is a bit excessive but not unreasonable.
Letter of Explanation as to why a borrower who works for Microsoft (or any major company) works in a different location than the address listed on the paycheck stub.
– If you buy a property in California, you are expected to live in California. It is tough to make that case if your employer states Virginia. Now, certain big companies will have employees elsewhere and not just close to headquarters. Simply because you recognize Microsoft or WalMart is such company it does not mean that someone in India who is doing a loan due diligence to purchase for the secondary market knows or understands that. No lender wants to address conditions after closing.
Letter of Explanation from a doctor that the borrower has been healed and his illness will not come back.
– This can not be true. it is illegal to deny a loan for medical condition, ask health related questions, ask for medical history or anything of that nature.
Letter of Explanation on a $6 deposit from a borrower who made $10K per month.
– This was explained earlier.
A photo of a “Radon Test.”
– No explanation
Borrower’s occupation was a “homemaker.” Underwriter wanted a Verification of Employment form completed by the employer.
– Are you sure this was not on the primary borrower? VOEs are standard conditions and auto populate. Sounds like this condition would be meant for the primary borrower.
Borrower deposited $235 in checking account from garage sale money. Underwriter wanted copy of an ad proving she had a garage sale.
– Similarly to the previous points. It all depends on how much was deposited that day/week. If it exceeds the threshold it has to be sourced. It may sound ridiculous but how else would you source the income from a garage sale.
Most of these seem a bit excessive but without context you can not determine their validity. In certain circumstances they are not unreasonable.
Whoever this idiot is who is trying to justify inexcusably stupid and excessive information requests is part of a diseased culture of automated formulization. So many people who can afford to buy and pay for homes are denied because they don’t fit inside the parameters of a formula. Ability to pay is never a factor in trying to obtain a home loan.
how do you answer it,
Underwriter wanted a letter of explanation as to why the address on the paycheck stubs is different from the address where you live
Underwriter asked because they could have more then one home, not listed on 1003. Be honest answer why they are different. It has to make sense, this is a valid question.
Underwriters subscribe to instruments that pull public record date on each borrower. These instruments reflect Deeds and properties that might be owned by the borrower. The underwriter must ask about these property addresses and verify whether the borrower has any interest or responsibility on these properties, as payments on these properties would have to be included in the borrower’s Debt-To-Income Ratio.
Underwriting wanted explanation of new debt a month prior. Screenshot it was disputed and won with credit bureaus. Now 2 days cto closing asked about credit inquiry which is the mortgage credit inquiry that he didn’t recognize as part of the file.
UW wants letter from employer stating it is ok to work remotely and travel out of country during the pandemic. I actually had this conversation with employer (large global high tech company) and they could not give a conclusive answer so I am now changing employers. My income prior year is over 500k and other than investment properties I have no debt. Looks like I am not worthy of buying/financing a home as primary residence in the US because I do not live in 1 place 365 days a year during the pandemic. Thanks you stupid brainless UWs. Thinking maybe it’s time to go the full expat route.
Underwriters don’t get that a corporate address is different from an actual work location. It should be common sense. Underwriting and common sense are always at odds with each other. Underwriting will never focus on ability to pay, ever. In fact, most underwriters will end up trying to make you look like some poor, impoverished soul even though you have a fat bank account and no late bills or mortgage or rental payments.
Hi David,
While underwriting guidelines don’t always appear to follow “common sense,” believe me, there are reasons for them. Some large employers (such as Ford or IBM) require employment be verified via their corporate office (which could be thousands of miles away), even though the borrower might work from a local office location. Some lenders will ask for one address over the other, whereas other lenders may ask for both!
Warren Goldberg
Because I work from home. I was asked prove I work from my home plus I moved to a different state and my salary did not change
They called and verified my employment but wanted to know what my increase would be in the new state ( locality rate). Fed Gov employee
Underwriter wants a copy of my listing agreement with the real estate agent who briefly listed my home for sale.
We are in the process of writing an LEO for a mortgage application. Went through a shortsale in 2013. Cause was loss of job but also a medical/health issue for my husband. Is it legal for the lender to ask for details of this medical condition?
Any input is appreciated. Just want to know what we should put in there. Want to leave this info out if possible.
You raise a very good question!
Underwriters are allowed to ask about the reasons why you experienced a short sale. The underwriter is required to determine whether your credit and payment history at that time was indicative to your credit profile, whether the issues experienced were unique and NOT indicative to your credit personality, and whether you might again fall behind on your payments.
However, while national underwriting guidelines allow for these questions, Federal Law does NOT allow lenders to discriminate based upon a number of factors, including health issues or disabilities!
This has been a double-edged sword for lenders for many years. About five years ago, Wells Fargo was sued in a class-action lawsuit brought on by borrowers who were pregnant. Lenders are required to determine whether a borrower’s income will continue. A borrower who takes maternity leave or whom decides to resign from her job to stay home with her new baby would NOT have continuing income! This raises an obvious problem for lenders! Yet the law also says lenders may NOT discriminate based upon pregnancy! Thus, lenders are damned if they do and damned if they don’t.
In your specific situation, since the underwriter is asking for an explanation, it is your prerogative whether you wish to be completely open about your husband’s medical history. You may choose to disclose all, or simply a portion of what happened. Either way, the lender CANNOT share your personal and confidential information.
Warren Goldberg
President
This has to Do with Birth Certificates of a child…Why would the under writer NEED that document IF they already have the SSI Dissability papers
We applied for a mortgage and provided our social security numbers, which were then used to conduct an extensive background check and hard credit pulls. After that, they required us to sign and submit forms for the Social Security Administration proving that these were in fact our social security numbers. What?
Hi David,
I can appreciate the frustration. Some lenders with to take the extra precaution of verifying the social security number you provided is actually associated with you! This originated from the use of “straw buyers,” or buyers faking their identity in order to purchase a house they had no plans of using. While it is still prudent for lenders to require these forms when there is a concern of fraud, to require from EVERY borrower is probably overkill.
Warren Goldberg
My underwriter put me through the ringer. Final demand was another letter from Toyota showing a car I traded in, financed by Toyota, replaced with a new Toyota, financed again by Toyota, was actually paid off. They got a copy of the sale contract. They got a letter Toyota sent that said they had final payment and subject to them being applied it was paid off. The letter said the title was sent to the dealer who paid off vehicle. This was not good enough. Nope, they wanted another letter saying it was paid off. Credit report shows it paid off and closed. I demanded they pull the report again. Common sense did not prevail.
Letter of Explanation from a single dad who had custody of his child, that he did not have to pay child support. (Never saw a condition that a single mom had to write such a letter.)
– Underwriter is slacking, should request a divorce decree or child support order.
And what if the couple was never married and has no formal child support order?
I admit it’s difficult (even impossible!) to prove a negative. However, if there is a child and there’s no formal divorce decree or child support order, then a letter of explanation from the borrower (stating there is no alimony or child support being paid or received) is a simple and benign way for the underwriter to cover him/herself.
In regards to the single dad, that’s BS. If there is no divorce decree or child support order and nothing on the credit report, it doesn’t exist. If all parents regardless of gender were subject to this, I would say it’s reasonable. Otherwise, it’s discrimination.
Underwriter is requesting birth certificates for my children due to child support recieved for “age verification” and proof that the payments were going to last 3 years. I’m not comfortable with that. I submitted a copy of the court order which clearly states the birthdays and that the payments will continue uwillntil they are 18. Also, as previously mentioned in this thread, their birthdays are on my tax returns.I’m staying firm. I’d rather not buy a house in exchange for their birth certificates. Am I being unreasonable? *note I pre qualified for an FHA loan and am looking into a USDA rural loan as well.
FHA, Fannie Mae, and Freddie Mac national underwriting guidelines require an underwriter to verify that child support payments continue for at least three years past the closing date of your mortgage.
While your tax returns do not reflect the age of your children, there are other ways to verify their age besides their birth certificates. Your Separation Agreement and Divorce Decree should reflect your children’s name, date of birth, and social security numbers, in addition to the amounts of child support you’re receiving. These should be acceptable instead of birth certificates.
-Warren Goldberg
Im a school teacher. Underwriter wants to see a contract for a new school year 3 months before the ongoing school year ends.
Do you have tenure? Is there a reason the underwriter may believe your contract may not be approved or renewed for the new school year? Please share some details. I might be able to help!
Warren Goldberg NMLS#158412
Certified Mortgage Planning Specialist ®
President and Founder
Underwriter wants Next Year tax Returns.
Hmmm…those would be difficult to provide, wouldn’t they.
Underwriter wanted detail on a $34 recurring monthly charge. This is for a $700K loan.
Here’s a beauty: Underwriter wants a letter to explain how a Bachelor of Science in Nursing relates to a job as a Charge Nurse. There’s a reason to despise the bureaucratic mind set.
;-P
Underwriter wanted Kelly Blue Book value and copy of pink slip for a vehicle that was sold 1 year prior to underwriting. 🤦🏼♀️
In addition to the pink slip request from my earlier comment, I had already provided a bill of sale for vehicle, copy of check that was deposited into my bank account, and a copy of the bank statements showing this deposit and also a statement from the month prior to this deposit.
I was asked to send a dated photo of my boyfriend and a and for him to write a letter of explanation of our relationship detailing our closes and the duration of our relationship after we already submitted the gift letter and everything needed for the gift like the deposit in my account and the 30 day bank statement from his account showing funds came from him.
I was asked to remove disputes from my report and on an account that was a 0 balance. This dropped my score and forced me to switch from conventional loan to FHA on a property that was buy as is. I found out the week that I was supposed to close. Loan officer stated this has never happened. After they switched me to FHA I saw the home was added to my insurance and they gave me a closing disclosure to sign but stated they were still waiting on an updated appraisal based on FHA guidelines. It’s been a full 24 hours and no one has contacted me with any updates. I’m concerned. I don’t think their requirements are stupid but the process isn’t going in order. I feel like they are all over the place.
Underwriter is requiring proof that my 7 year daughter will receive her father’s death benefits from Social Security for the next 3 years. Social security says they do not provide such proof. I have her benefits package explaining that she will receive benefits until she is 18 but the underwriter will not accept it. Without this income being considered we can not approve for the loan.
Thank you for sharing the informative article.