Thursday, July 16, 2009

The Dreaded "Underwriter"

I had the last twenty-four hours where I thought I deal I have been working on for months was dead in the water. We had managed to get over every hurdle with this property. It is a large parcel with a small house, most of the value is in the land.

Most banks won't lend on a property with more than 40% of the value in the acreage, (which is a Freddie and Fannie guideline, look how that worked out for them) but we shopped around a bit, and found a lender who assured us it wouldn't be a problem.

So we slogged through the process, ducking issues as usual, inspections with wet basements, surveyors who are slow as molasses, the appraisal, which I was concerned about, simply because you never know, came back 10% higher than the accepted offer. I thought we were golden.

Then I get the dreaded call. The underwriter kicked it back. Too big a risk with that much land. Now keep in mind, my client is plunking down over 30% cash. With the amount that is being financed, I could sell this property over a weekend for that amount. I don't see the bank risk, that this shadowy "underwriter" has seen.

And that gets me to this whole underwriter thing. Who are these people? Even the name is ominous. Some nameless, faceless guy sitting in a florescent lit room, with a giant approved/denied stamp, thumping mortgage applications with an evil cackle. I understand the whole need to keep fraud out of the system, but this cloak and dagger stuff is a little over the top.

At any rate, so far the story has a happy ending. Using my inside voice, I explained reasonably to the loan officer that she assured me this would not be a problem, and that is why my client chose to go with her company. (Believe it or not there were a few others willing to loan on what is essentially vacant land.) After a day of back and forth, the "underwriter" approved it, and for now the deal is back on.

Now if you are an underwriter reading this, please don't take it personally and send me a nastygram, I'm just ranting a bit, and you must admit, like I said before the secrecy thing is a little over the top.

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