From the “Huh?” files comes this request from a client’s loan underwriter:
Please provide the following:
1) Fully completed and executed Lead Based Paint Notice to Purchase Agreement.
Of note, the home being purchased was built in the year 2000. Lead based paint ceased to be manufactured in this county c. 1978. The Residential Lead-Based Paint Hazard Reduction Act of 1992 requires the disclosure of known information on lead-based paint and lead-based paint hazards before the sale or lease of most housing built before 1978.
But you want a completed disclosure for a home built some 22 years later. The Federal Government doesn’t require this, why do you?
2) VA Addendum to the purchase contract signed by buyer and seller stating the borrower is applying for a VA loan.
Uhm, what “VA Addendum”? No such addendum exists in the Arizona Association of Realtors form library. If I might, I’d like to draw your attention to line 70 of the purchase contract where the little box next to “VA” is clearly checked under “type of financing”. That this is a VA loan is also noted on line 10 of the purchase contract. So we need an “addendum” for what purpose?
3) You’ve asked the loan officer to supply five additional comparables over and above what the appraiser is using. Of course we still don’t have an appraisal, so we should… guess what comps the appraiser used? This begs the question of course, as to why you need five additional comparables and what you plan to do with them. Are you going to formulate your own opinion of value? Use them to second guess the appraiser? Wallpaper your cubicle? The loan officer, not being either an agent nor an appraiser, is consulting with a second appraiser now to meet this ridiculous request. It’s hard enough these days to get one appraiser to determine a value, now we get to involve two. Oh the joy.
And what if there aren’t five additional comparables – reasonable, good comparables that is.
Here’s the deal… I can get you this stuff (assuming you can provide this phantom VA Addendum you insist on having). I’ll inconvenience myself, the buyer, the seller, the seller’s agent and the loan officer. Processing needless paperwork will add to all of our work loads (your own included), and of course add time to the transaction. We’ll do all this because of some asinine policy at your lending institution.
Here’s a thought… apply some common sense. Don’t ask for another form of information that you already have and for Pete’s sake, don’t ask for stuff you can’t possibly need.
Oh, but it’s policy.
Well it’s a stupid policy.
Think. Change the policy. Stop going about your day-to-day activities without engaging your brain. Raise your hand in some meeting and say, “This policy is ridiculous, why don’t we change it?”
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The sad part about the obvious solution in cases like this is that poorly run companies with stupid policies usually don't know how to handle employees who have ideas that are better than their superiors' ideas, and as a result, often shut their mouths for fear of losing their job.
It's insane, but I've lost my job for applying common sense and raising my hand at just the right time. There are idiots in every sector of the housing industry and unfortunately for you and me, we have to deal with them. GRRRR.
I'm on the same page with you Jay. Get rid of duplication, get rid of paper, get rid of the chaff and apply “uncommon” sense in a world where common sense has vanished.
Woo Hoo! Did I just break 15,000 on your comment meter?
Yep it seems underwriters these days are ABC people – they go by the book ABC – no thought goes into what they ask for – it's simply ABC ABC. Makes me wonder sometimes if we are dealing with real live people or just some computer. Kinda funny considering these same underwriters were asking NO questions a few years ago.
We cant change it because ridiculous policies employ lawyers. The law is specifically orchestrated to be complicated so that we have a seemingly valid excuse to create the law industry and all of the horror that it brings. That industry then further clouds everything with lobbying power to make sure that they have their jobs and also so that we cant just have the courts, we have to have layers and layers and layers of courts all on top of each other staffing yet more lawyers. Its just sad.
-Tyler
You made me laugh and almost cry at the same time. Lenders have gotten so incredibly tight on their approvals it's laughable, as if that was the problem. They went from asking for nothing but a SS# to asking for DNA samples from next of kin.
The real problem was not the approvals but the investor who were willing to create crazy loan programs that nobody should have been able to get no matter what they provided.
Common sense – it doesn't exist in Lender land.
This is a prime example that is easier to maintain the status quo versus initiating change. The problem with the status quo is that it is a breeding ground for mediocrity. The discovery of this irrevelant loan document should be spur us to review our own policies…I am sure we all have an equally irrevelant document floating around just waiting to make us look foolish.
Jay I feel your pain, it seems every lender with every deal comes up with something new such as “we need proof that the person (asset manager) actually has permission as asset manager to sell the house… really? Do you just makes these up as we go? My first 22 foreclosure sales of the year didnt need that, now we do?
Jay,
I thought that part of the purpose of the HVCC was to take the Loan Officer out of the the Appraisal discussion. Wasn't the concern that the Loan Officers were skewing appraisals?
Spare a thought for the underwriters as well. They are just not getting anything in their mind so let them take a good breather for a while.
I also love it when they tell you the contract they received from you is “illegible,” on the day of scheduled closing – esp when you scanned it and e-mailed it. Frickin' stall techniques, all of it.
Exactly, i agree with you completely. Taking loan seems to be a big mess if we keep on collecting these documents and records. Certain time i think they want us to submit everything with our hands, so as to keep us under pressure that too for the proofs they already have.
My favorite is the review appraisal of the review appraisal:
Loan Underwriter: “What, this home appraised for that? Order a review.”
Review Appraiser” “I find that the original appraisal is accurate.”
Loan Underwriter: “This home can't be worth that. I read the newspaper. Home values are down everywhere. Order another review”.
It's all about CYA these days.
I want to meet these underwriters in person. They're the only people in the real estate tranasaction that don't deal with anyone on a personal level.
I love the Lead Based Paint disclosure on new homes. What the heck??? If a home was built new in 2002 the odds of it having lead based paint in it are… NONE!
Common sense? That's funny. I love the “I just work here excuse”. It continues to frustate everyone in the business. These people go to work like robots, never ask why and make our life insane. I just rant on my video camera to unload the stress. Keep up the good work.
This reminds me of why we have to take our shoes off at airport security. Something crazy happens then we all have to pay for it!
I had to pull out our Association's version of the “VA Financing Contingency Addendum” in May (last revised 3/09). Done!
One large brokerage in Virginia requires their agents to have lead-based paint disclosure forms with all offers. Saw it with an offer today!
Extra comps? Now that's crossing the line.
And now I read that FHA wants “wet signatures”… not DocuSign digital signatures. What?
Jay – Can I get a copy of this post in bronze to hang on my wall? Thanks.
Lending stipulations and underwriters are similar to government employees these days. If its on their checklist you need to provide it. Most underwriters get their criteria from the secondary market. Why you ask? So they can sell the loan as quick as they close on it. If we want any positive and logical change it will neeed to come from the secondary buyers of loans – who by the way are the same people you created CDO's.
Good post.worth to read
This is something we all struggle with – why doesn't anybody think about these policies that make no sense?
Kind of reminds me of the letter my son's school sends me every month stating he owes the cafeteria $3 – they've already spent $8 in postage.
And people wonder why banks are in so much trouble?
This has to be the post of the year! Is there any logic to obtaining a loan anymore? Local lending may be the only solution. At least local banks would have an opportunity to physically research the property they are lending for. Is this such an obvious concept that no one has considered it?
I had an underwriter throw out the appraisal (came in at value + 1,000) and “reformulate” the value to $2,000 less than the negotiated price – $2,000… seriously. Was a mess.
Nice blog!!
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I love when they tell you the contract is illegible but the document would have been beautifully legible if they would have accepted the electronic signature initially submitted.
I totally agree! I'm still waiting to get an approval. The next thing our uw will ask for is probably a blood sample followed by a stool sample. Get real!
Great article, this is very true. Especially in the real estate market we are all going through!
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