There is an underwriting guideline that could be viewed as a thorn in the side of mortgage consumers, as well as mortgage employees. It is a guideline that states we have to document where all non-payroll deposits come from. Imagine having to explain and document every little deposit whether it was a repayment from a friend on a personal loan, a family member giving you a small amount of money to help pay for movers, an insurance refund check from a canceled auto policy, etc.
Some good news
Maybe some of you have experienced this. It is paperwork torture to have to explain and paper trail all non-payroll deposits. The good news is that you no longer have to document small deposits.
What is the rule?
However, any deposit that is greater than 50% of a borrower’s monthly income must be explained and documented.
My own story
I got a loan for myself once, and my own underwriter said I had to document a recent $248 deposit, and I had no idea what it was from. After doing some research, I realized it was a refund from a canceled auto policy. I had to write a letter about this, and produce a copy of the letter and check that my insurer sent me to document. This was an unreal amount of paperwork and hassle to me. All for something that was truly inconsequential to the creditworthiness of the loan.
Conclusion
I understand in general why there is a need to document large deposits. It is to ensure that a mortgage borrower has not borrowed money from an unacceptable source for their down payment. But the small deposits were really not necessary. I for one am thankful that some common sense seems to be coming back to the industry’s guidelines.
Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.
Brian
I seem to recall having to provide reams of documentation last time we refinanced. I just hope the renewed push to make more loans available to unqualified borrowers doesn’t lead us down the same road as 2008.
I know, I hear you. I think this particular guideline loosening was a common sense one though. Not one that will lead us to more problems in a few years. We’ll see!