The 3 Cs of all loans
Each loan transaction has its own unique situations, however all loan transaction involves three basic areas of qualification and
verification in order to be approved and sold to the secondary market.
- CREDIT - Has the borrower maintained an acceptable repayment history of previous financial accounts.
- CAPABILITY - Does the borrower have the qualified income required to repay the loan. This is determined by having an
acceptable income to debt percentage ratio.
- COLLATERAL - The security instrument - real estate property. Does the property support the amount and term of the
loan as well as meet all legal requirements as determined by the loan program and ultimate lender.
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Submitting the Loan
Submitting the loan package to the lender is all about presentation, thoroughness and accuracy. The neater, more complete
your file, the easier the underwriter’s job becomes, improving your chances for a clean approval. If all the information is in the
file and easily accessible, there will be become conditions or “stips” on the approval).
Once you have received all of the necessary items to complete the loan file (appraisal, title, insurance, etc), you are ready to
prepare the loan for submission to the lender. Check with your AE for specific information on how to submit. Many lenders will
accept submissions via fax or email but some still prefer receiving the submission via overnight delivery (FedEx, DHL, etc). Your
lender may require that you include a copy package with your submission file, as well. Some lenders may also require that you
electronically upload your loan into their system. You’ll need to make sure you follow the appropriate submission procedures. If
you don’t, your loan may not get entered into the lender’s pipeline and underwriting will be delayed.
Most lenders will have a form that they want completed for submission and some will require a specific stacking order as well.
The AE (or the lender’s website) can provide you with the necessary forms. The submission forms will usually require
information such as the borrower’s name and property address, the loan officer’s name and company, the processor’s name,
phone and fax numbers, program information and rate and lock information. Make sure you complete the forms as fully and as
accurately as possible as the underwriter will use the information on this form to structure and underwrite your loan. You’ll also
want to include any prequal, pre-approval and/or rate quote that you’ve gotten from the AE or automated underwriting system.
You should always include a cover letter to the underwriter when submitting a new loan. It’s a good way to introduce the loan
and make sure the underwriter has the correct contact information should he/she have any questions and also for where
he/she should fax or email the underwriting decision. This is also the place to include any specific details about the file.
Perhaps your borrower just graduated from college and has moved from his part-time job into a new full-time career or maybe
your borrower cosigned for a car for his daughter but she’s been making the payments for the last 18 months. The cover letter
is the ideal place to explain these things and where you can indicate what supporting documentation you’ve included in the file
(the college transcript or the daughter’s cancelled checks, for example). It goes back to providing the underwriter with a
complete picture of the loan and not leaving any holes or questions as to what you’re trying to do and why. The cover
letter is also the place to request any exception you may need and point out the compensating factors to support approving the
exception.
After you’ve submitted your file, wait. The underwriter will not be your friend if you pester. If the AE has told you that
underwriting times are three days, do not call the underwriter on day two asking for status. If you don’t know the underwriting
turn-time, allow at least 48 hours before following up on your file. Remember that while it may not always seem like it, the
underwriters have the same goal you do: to close the loan if at all possible. They will review the file very closely in an effort to
protect the lender but they do still want to be able to approve the loan. Make it as easy for them as possible and your loans will
get through faster and with fewer headaches.
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