It’s not our fault! It is time I pull the curtain aside from the real villain in the mortgage industry, Fannie Mae and Freddie Mac! I know people like to bash individual lenders or even the mortgage underwriter assigned to their file. But they are only following the guidelines of Fannie Mae and Freddie Mac.
It’s the U.S. government?
And the US Government has taken over FNMA and FHLMC and are running them from bankruptcy receivership. So the Feds are running the show! And it seems like there are hundreds of rules to follow these days. And the lenders and the underwriters are forced to get increasingly strict in enforcing them.
A mortgage borrower has to:
- address and document any deductions taken out of a paycheck
- explain and document large deposits on bank statements (and sometimes anything over $500 is considered large)
- provide all pages of your bank statements even if a page is blank or a summary page or has an advertisement
- provide all pages of your tax returns
- don’t borrow money or open a new credit card or buy anything costly when you are getting a loan
- explain any gap in employment
I could go on and on and on. The importance of a paper trail for darn near your whole financial life cannot be understated. If you have gotten a loan in the last few years you know what I am talking about.
Who to blame?
And it seems mortgage borrowers always want to blame the bank, the underwriter, or the mortgage professional helping them get the loan. But the truth is, call your Senator or Congressperson! This mess is the creation of FNMA, FHLMC, VA and FHA, who now back about 95% of all loans. The industry is only catering to them now. We are not writing the rules, the Feds are!
It is not the mortgage professional, the bank, or the underwriter who cares about all the minutia. It’s the simple fact that if the bank and underwriter don’t dot every ‘i’ and cross every ‘t’, they know that FNMA may say the loan is ineligible for sale to them. And that is a costly mistake for a bank. The underwriter’s are told, “it’s your name on the approval, MAKE SURE THIS LOAN CAN BE SOLD TO FNMA!” So bank’s have to tell underwriter’s to overkill. Underwriter’s have to ask mortgage professionals to extract more and more paperwork from their clients.
So the next time you hear of a delay in getting your loan, or wonder why in the world the underwriter is asking for 14 different things that you feel you have already provided in some fashion, CALL YOUR GOVERNMENT REPRESENTATIVE. Ask them to help get FNMA reformed and off your back! Go here to find out how to call your representative.