What it says in the title!
In: 13
I have over 500 pages of policy on underwriting that I review annually against internal and external controls and regulations. So it’s tough to explain like you are five, but here goes…
The underwriting process varies based on the risk factors with a loan type.
Secured vs unsecured
If secured, how easily can we convert the seized asset (if the borrower defaults) to cash in the amount needed to settle the loan balance and our costs for closing the loan out?
If unsecured, what other assets does the person have that we could pursue or the value of their earnings to attach in order to be made whole if they were to default?
Commercial, residential, business, specialty, margin … all have very different criteria for packaged loans and when you move to custom lending it becomes so complex that I’ve been asked to review packages that have taken days to adequately assess and validate.
At my firm we underwrite loans we are funding and have more latitude with and we underwrite loans being guaranteed by other entities (FHA, VA, etc) have limited latitude.
When I was an underwriter waaaay back in the day we could do certain loans with extremely limited documentation-borrowing under 50% loan to value OR less than 16% take home pay for debt, I could approve and close a home loan as fast as the drive by appraisal and title company could get it done! I’ve been forced to do 103.5% LTV in programs where I *knew* one unexpected bill would bring them to a missed payment.
Underwriting is as tight or as flexible as the program/lender/type allows.
Does this help or lead you to a million questions?
I can tell you a most memorable loan was a trust fund kid who had smart grandparents and *only* gave him a few million a year out of his trust for the duration of his life, paid in monthly installments. He wanted a private jet and I financed his fractional share ownership with two *other* TFB who had not terribly dissimilar set ups. I’d just left VA lending and was scrambling to get veterans in their first owned homes and then went to custom and had these entitled boys as my first few loans. Oy!
Latest Answers