Attorney Richard D. Vetstein on the topic of lending:
When I was a kid, my dad would often answer my questions with “because I said so,” and it would drive me crazy! Now it’s prudent advice to borrowers in a great piece by Mark Greene at Forbes.com, called The Perfect Loan File (click for link ). It’s a must read for consumers and real estate professionals alike. I’ve sent this article to all of my mortgage bankers and they, in turn, are sending it to all their clients.
The point Mr. Greene makes so well is that lenders are going absolutely nutty over borrower financial documentation to create a “put-back” immune loan file. (A put-back is when Fannie Mae or Freddie Mac make lenders buy back bad loans). Mr. Greene tells borrowers to give their lender everything they ask for even if they want to stick needles in their eyeballs, and don’t talk back. I will just highlight some gems from the article:
When I was a kid, my father occasionally issued directives that I naturally thought were superfluous, and when asked why I needed to do whatever it was he wanted me to do, his answer was often: “Because I said so.” This never seemed to address my query but always left me without a retort, and I would usually comply. This is exactly what consumers should do during the mortgage approval process. When your lender requests what seems to be over-documentation and you wonder why you need it, accept the simple edict – “because I said so.” You will find the mortgage approval process much less frustrating.
Every nook and cranny of your financial life has to be corroborated, double- and triple-checked, and reviewed again before closing. This way, if the originating lender has created a loan file that is exactly consistent with published underwriting guidelines and has documented while adhering to those guidelines, the chances are that your loan will not be subject to repurchase.
It all comes down to your proof. If the lender asks for a specific document, give them exactly what they are asking for, not what “should be OK,” – because it won’t be. This is where the approval process tends to go off the rails, when the lender asks for specific documentation and the borrower supplies something else. Here, too, is where both sides get frustrated. So if the lender asks for a bank statement and there are 5 pages for that bank statement, send them all 5 pages, and not just the summary. If you send them the summary page and they ask again, don’t complain that the lender keeps asking for the same thing when you never sent it in the first place. This may sound elementary, but the vast majority of mortgage approval process woes stem from scenarios just like this.
So when your loan officer or underwriter responds to another one of your questions with “because I said so,” do him or her a favor and do it. Your loan approval will go a lot smoother if you do.
Are lenders going overboard with loan documentation or is it justified after the mortgage meltdown?
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