Notes and Opinions from one of Arizona's Most Trusted Loan Teams

Mortgage underwriting is so tight it squeaks.

Even Federal Reserve Chair Ben Bernanke has recently complained that over-strict underwriting is cramping the housing recovery. We couldn't agree more.

The root of the problem exists behind the mortgage scenes. As losses on foreclosures continue to mount, FannieMae, FreddieMac, FHA, and most of the banks continue to send out "buy back" demands to mortgage companies for technical issues on loans that performed well for 3 or 4 years but have since been foreclosed and experienced a loss. All of a sudden, the originating company (if still in business) gets a letter demanding $150,000 that FannieMae lost when they foreclosed. It is usually based on something so technical that the first response is "Are they kidding?" They are not kidding, they want the money and they want it now.

In this environment, any small oversight can cost the originating company millions. Underwriters lose their jobs when that happens, so they are very, very careful.

Gone are the free-wheeling days when increasing values covered everyone's smaller mistakes. "CYA" is the new rule and it's going to continue for a while.

What can we all do to make it better?

1. Set the standard for professional behavior for everyone in the transaction. If they can't do the job, fire them. Make sure you are always looking for a solution, not someone to blame. Everyone involved wants a successful closing. Work toward that goal.

2. Manage the seller's and buyer's expectations. Alert them that they need to be flexible, things are very different than they were a few years ago. Set reasonable close of escrow dates and manage them.

Our 60 years of combined experience is backed up by a company more than 27 years old. We've learned to adjust to the new real estate market and we want to help you succeed.

Sincerely,