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Why every loan officer should know how to underwrite

Every Loan Officer works with Underwriters. They are the people who determine whether a client is safe enough to lend money to, while the loan officer is often the one to tell the client the underwriter's decision.

From a client's perspective, the relationship between a Loan Officer and an Underwriter might seem confusing. They may never meet the Underwriter, and only ever speak with their officer. In their eyes, this can blur the boundary between the officer's responsibilities and the Underwriters, and some might wonder why the Loan Officer doesn't do both. Wouldn't it be a less complicated process?

Loan Officers know there is a big difference between their job and the Underwriters, and they likely do see the reason for both positions. However, the mortgage lending process could, in fact, be more streamlined if the Loan Officer knew more about what the underwriter does.

Reduce back and forth

All the paperwork the Loan Officer puts together eventually makes its way into the hands of the Underwriter, who then determines whether the client is qualified for a loan.

If there is something amiss in the file, the Underwriter returns it to the Loan Officer, who then reviews the issue with the client. Once the problem is resolved, the file is returned to the Underwriter for another examination.

Loan Officers can save time by reviewing files before sending them to the Underwriter.

As the people who assemble this file, Loan Officers have access to the file and can go through it. If the officer knows what the Underwriter will look for, or what some common causes for the file to be returned to the client are, the officer will be able to address them even before they reach the Underwriter’s desk. This will streamline the process could reduce the time it takes to determine whether the lender can help the client out or not.

Improve document organization

Sometimes underwriting can be automatically done. But some cases, such as in rare circumstances for some loan products that are more lenient than others, require the underwriting process to be done manually.

To prepare for this, the Loan Officer and the loan processor work together to compile all the information the underwriter will need to make his or her decision.

The information needed in, for example, an FHA loan, is extensive. Aside from income, savings, credit score and employment information, the underwriter will also need to see explanations for credit discrepancies and a more extensive credit history. All of this information will give the underwriter more insight into the client to determine if a low credit score is a sign of irresponsibility, or just hard times. Loan Officers should review and underwrite files before sending them off to the underwriter. This can help speed up the process, save the underwriter time and address problems with the client sooner.

Loan Officers interact with Underwriters on a regular basis. Their interactions with the client sometimes depend on whether or not the underwriter decides to grant a loan. Because of this, it's a good idea to know what the Underwriter actually does. This will improve their relationship and help to streamline their mortgage lending process.

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