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Giving high marks for underwriters.

Giving High Marks for Underwriters

The ARU designation is a coveted award for mortgage banking underwriters. In this article, several ARU recipients share their insights on what it takes to be among the best in their field.

NO ONE BELIEVES THAT being an underwriter is an easy job--least of all, the underwriters themselves.

"You have every loan originator wanting his or her loan given top priority," says Patricia Roberts, mortgage officer/senior underwriter, Chase Lincoln First Bank, N.A., Rochester, New York. Roberts is one of 29 Accredited Residential Underwriters (ARU) designated by the Mortgage Bankers Association of America (MBA). Meanwhile, she adds, "management is screaming that the loans are not being underwritten fast enough, while the quality-control department is complaining that every "i" isn't dotted. [And with] all of this...the phone doesn't stop ringing off the hook."

And yet, Roberts says, "I love my job, really." And she is not alone. Maureen Cahalan, Community West Mortgage, Pasadena, California, another ARU who has also been a homemaker, a processor, a loan officer and a branch manager, says the same thing: "I love my job. It is always interesting, always challenging, and has great rewards." But, adds Cynthia Jo Soard, an underwriter with National Mortgage Company, Memphis, "Underwriting is not for the faint of heart. The rewards are in knowing you've put people in homes."

Beyond the stress factor, what is this job of mortgage loan underwriter all about? Why would underwriters care so much about their jobs--so much that they would put themselves through an admittedly arduous accreditation process of education and examination just to have the letters "ARU" after their names?

Recently the MBA asked these and other questions of the ARU designees. Their observations provide an interesting look into the hearts and minds of mortgage employees sometimes nicknamed "God" or "Public Enemy Number One" by their co-workers.

Awarding underwriters

The ARU is a relatively new kid on the designation block. A member-driven initiative, the ARU program was developed in 1988 through the MBA committee process and is awarded to those who have demonstrated excellence in residential underwriting. The first ARU designation was awarded to Linda Mallett, vice president, Mutual Building & Loan Association, F.A., Las Cruces, New Mexico, in the fall of 1989. Formerly a loan officer, Mallett had nearly 10-years experience in mortgage lending and received her company's full support.

Another underwriter who received the designation in 1989, Elizabeth Stagner, first vice president, Castle Mortgage Corporation, Birmingham, also pursued the designation with her company's blessing. "My employer thought that I had the experience to qualify for the ARU designation and suggested that I pursue it," says Stagner, an Alabama underwriter. With 20 years in the mortgage business, Stagner wanted the ARU because having it "places underwriting at a professional level. A [designated] individual in the industry is recognized as one with career goals, standards of achievement and a dedication to the mortgage banking industry."

Commitment to the profession seems to be the main reason underwriters seek the ARU. For Mauro Harto, president, Baker Mortgage Loans, Inc., Ft. Walton Beach, Florida, the ARU designation fit the bill at several levels. First, it wasn't something that could be ordered through the mail. It had to be earned. Second, he believed that because the designation was sponsored by the MBA, the ARU would be better recognized than other designations. Plus, Harto wanted the networking advantage. "Having the ARU will allow me to keep on top of the mortgage industry by allowing me to interact with others who are serious about mortgage lending and face the same issues."

Christine Bowman Roberts, assistant vice president, Summit Bank, Ft. Wayne, Indiana, remembers when she first heard about the ARU she was "intrigued by the designation. Also, I believe MBA to be very reputable in the mortgage field and I think their blessing on a underwriting endeavor has some value." Adds William Landry, an underwriter with First California Mortgage Company, San Diego, "I want to better my career. Employers will be able to be more selective in choosing top-notch employees, knowing [that] people who have this designation are true professionals in their field."

The requirements to receive the ARU designation were designed to help the mortgage industry define just what a true underwriting professional should know. Not surprisingly, considering the complexity of mortgage lending today, the standards are a tough combination of experience and technical skills.

To get started in the accreditation program, candidates must first be currently employed with an MBA member firm, and must have a year's tenure there. Then they have to submit a recommendation from a senior officer in their firms and present resumes that document at a minimum one year of experience as an underwriter and three years total experience in any combination of underwriting and processing.

Once accepted, candidates must complete several rigorous MBA educational programs and then take a comprehensive exam proctored by a Certified Mortgage Banker (CMB). Underwriters with 10 years of experience or who have Direct Endorsement or VA-approved Automatic status can opt out of some or all of the education requirements.

While most ARU designees made attaining the designation part of their overall career planning, for many, actually becoming an underwriter was a much more accidental event. Says Sande Flinders, vice president/production division, California, "In the early 1970s, my boss asked me if I'd like to be the company underwriter because we needed one to deal with Fannie Mae. I said, |Sure, what's an underwriter?'"

Some ARU designees came to underwriting the old-fashioned way: by earning their wings elsewhere in production positions and then moving into an underwriter slot. For Bruce Robb, vice president, United Mortgage Corporation, Bloomington, Minnesota, the progression to underwriter was straightforward. "I had been a technically sound originator and branch manager for a number of years. I had the knack for knowing the rules and how to use them." Judith Lane Landis, an underwriter with Prudential Home Mortgage, Frederick, Maryland, began working in mortgage banking as a processor and believed that the skills demanded of an underwriter matched her own. "Underwriting involves creativity, judgment, good communication skills, analytical and technical ability and a good memory--to name just the basics. Believing I either possessed or desired these skills, I worked to become an underwriter."

Having captured the hard-won position of mortgage loan underwriter, ARUs usually find that making and acting on decisions on whether or not to make a loan isn't easy. The hardest part of being an underwriter, says William Landry, is "making tough decisions, especially when you have to deny people homeownership."

Underwriters generally acknowledge that the pressure exerted by loan officers and others to approve loans is one of the principal stresses of the job. Judith Lane Landis finds that the hardest part of being an underwriter is to be "unaffected by the pressures of time, volume, and that loan officer breathing down your neck." For underwriters working on-site in production offices, she adds, the pressure to approve loans may be especially heavy.

But the stress on the job comes from outside the company as well as inside. "Keeping pace with the accelerated rate of change in the industry will be the biggest challenge" of the 1990s, predicts Richard Daleo, a senior underwriter at Commonwealth Mortgage Corporation of America, Houston. Nancy Grover, an underwriter at Security Federal Savings & Loan, Albuquerque, agrees. "I believe we'll see even more changes than usual in the 1990s," she says.

Like everyone in the mortgage industry, underwriters have been affected by the turbulence of the past decade and the drive for companies to become leaner and meaner. Some underwriters see the advent of automated underwriting as a threat to the profession. So says Christine Jones, assistant vice president/residential operations, The Huntington Mortgage Company, Columbus, Ohio. Underwriting was an elite profession and a position to attain." Now she says, "It is becoming more and more of a |clerical' job." Computerized shortcuts, she thinks, could eliminate underwriting positions.

Changing times

The changes aren't limited to the regulatory ones we've seen in the industry in the past few years, such as qualification ratios, maximum loan size, low-doc or no-doc programs. Some of the changes are political and social as well.

One such change is falling property values. Once upon a time, it was a truism that the value of real estate had no where to go but up, but the industry's underwriters learned the lessons of the 1980s well, even if others haven't. "I can already tell that the lessons we learned about appraisals, down-payment requirements and so on are going to be easily forgotten. Somehow we let competition keep us from doing some of the things we know to do," comments Alana Stephens, assistant vice president, American Mortgage and Investment Company, Oklahoma City.

Janet Jandl, senior underwriter and assistant secretary, Security Financial & Mortgage, St. Louis, acknowledges the problem of declining property values, but adds, "I'm also concerned about the deteriorating credit values by consumers." Dovetailing with the values issue is the prevalence of fraud in mortgage lending. Flinders says, "It is unfortunate there is so much dishonesty." But she believes underwriters have to be on the lookout for the latest schemes and should do additional investigation whenever "file scenarios are not making sense."

Despite the drive toward automation and increasingly rigid guidelines, underwriters like to keep in mind the human element behind the loan submission. Terrence Beltz, regional loan development officer and senior loan underwriter, Virginia Housing Development Authority, Richmond, Virginia, says that he regrest turning down a loan to a family with children even when he knows his reasoning is valid. "In removing the opportunity" for homeownership, he says, "I feel I have let them down."

Balance is a word that comes up often when underwriters talk about their profession. Richard Daleo likens the job of underwriter to a tightrope walker balancing over a safety net of regulations. "The better underwriters," he says, "are able to walk the tightrope without having any safety nets" while the weaker underwriters need large safety nets--lots of adherence to the letter of regulations. "The guidelines are written purposely to leave plenty of room for flexibility," Daleo adds. "The better underwriters are those that know, understand and are comfortable with the limits" imposed by investors and regulators.

There is no doubt that some loans are harder to underwrite that others. "Poorly processed" submissions are the worst, says Yvonne Hostetter, an underwriter and assistant vice president of Mortgages, Inc., Las Vegas. "You may think a particular case is weak," adds Mauro Harto, "however, most of the time, the weakness can be attributed to poor processing."

Other ARU designees cite the paperwork and regional inconsistencies involved with HUD/FHA and VA loans, but the main source of underwriting headaches seems to center on self-employed applicants. These are the borrowers who have sources of income that can't be verified through the usual verification of employment (VOE) or W-2 forms. And the more different sources of income--investments, partnerships, trusts--the worse the underwriter's task. Alana Stephens remarks: "If you don't know how to analyze tax returns, you are lost." But Maureen Cahalan notes, "Many extremely wealthy people have little reportable income" and "cooperation is not always forthcoming" when these well-heeled applicants are asked for documentation.

All underwriters see borderline cases--those that are close, but not quite readily approvable. What makes them push the case over to the approval column? "Motivation," says Jennifer Henson, vice president, Chemical Mortgage Company, Columbus, Ohio. "If I believe the homebuyers are committed to the home, I will go with it." Janet Jandl tries to put herself in the competition's shoes. She says, "I try to think, |Would another reasonable lender take the deal and be able to put it together?'"

For Terrence Beltz, decision making takes on a whole new twist when his state housing agency is lending to nonprofits seeking permanent financing for borrowers who are mentally disabled and or recovering from drug abuse. "If I am balancing on the fence," says Beltz, "I take the liberal side. I look for signals demonstrating the applicants are willing and able to help themselves."

Interestingly, most of the ARU designees don't see bad credit history alone as an impediment to getting a mortgage. For Chris Roberts, there must be "an indication that changes have occurred, that the reason for past bad credit no longer exists. The borrower promising it won't happen again is not sufficient." Judith Lane Landis looks for evidence that the situation causing the bad credit has been permanently resolved. Even then, "I'll believe a medical hardship sooner than I'll buy a divorce situation." Adds Patricia Roberts, "What irks me is [when] the borrowers make excuses for delinquencies due to |out-of-town on vacation' or |my paycheck and the bills don't coincide.' This tells me that money management is not their strong point." Only time, says Alana Stephens, will cure bad credit, adding, "Recent bad credit is the kiss of death" on loan files she reviews.

What if the borrower is good, but the house supporting the loan isn't quite as sterling? The first thing to do, say the ARU designees, is size up the property to see how bad the problem is. And for underwriters who underwrite nationally, it isn't all that easy to evaluate properties in distant states. "What I |feel' may happen should not outweigh what can be proven, supported, and documented about the values," remarks Christine Jones. However, "should there be verifiable evidence of declining values, I'd hesitate at maximum financing."

"Reliance on the appraisal is key," agrees Jennifer Henson. In looking for ways to approve such a loan, Henson says, "I would look at the loan program that the homebuyer has applied for. Maybe they should be switched to a [loan program with] shorter duration. And then, I would look at the neighborhood influences that are positive to see if they will continue."

Most underwriters agree that a larger down payment, or more borrower equity in the property would be a prerequisite to approve a loan on a property with potentially declining value. Another option used by Patricia Roberts is to go ahead and approve the loan, but for a lesser amount than had been applied for. That way she is "leaving the ultimate decision up to the borrower" whether or not to take the loan.

A common thread running among the ARU designees is their desire to improve the image of their profession and of mortgage lending. Many long for the understanding of their peers and want to erase the notion that an underwriter is "Public Enemy Number One" in the eyes of production personnel. Comments Janet Jandl, "We need to work to show that we are willing to work with and not against production." Nancy Grover finds it's worthwhile to make the extra effort with originators and processors to "see the loan from their viewpoint rather than just what's on paper. Sometimes they get an impression from meeting a borrower that is valuable in understanding the loan."

Mauro Harto says that rejecting loans is the hardest part of his job. "Contrary to popular belief, most underwriters despise rejecting loans. "It is much easier to approve a loan than reject a borrower," he says.

But, adds Sande Flinders, management needs to support the underwriter's decision once a loan has to be rejected. "Quality is what is needed even when it means that some loans must be passed by. Underwriters are paid for their ability to decide whether their company should take certain risks. They need the support of their senior management so they can carry out the task they've been assigned."

Traveling the career path

For the next generation of underwriters, the ARU designees have plenty of advice on the best way to get ahead. "I would strongly recommend deciding on a career path. Underwriters should have production experience and should spend some time as an originator," advises Maureen Cahalan. Richard Daleo agrees. "Being able to read, write, analyze and communicate effectively is very important, but the best training comes from having several years of actual production experience," he says. "Underwriters with production experience are much better able to handle the pressures of the job than those without."

Patricia Roberts recommends that potential underwriters learn mortgage banking "backwards." "Start with positions in the servicing side, graduate to processing and then underwriting. It helps to have a rounded background." Other ARU designees suggest working as closers or shippers or in the company's secondary marketing department.

Eliminate the guesswork with education

But experience won't be all that's needed, say the ARU designees. Education is the key to successful underwriting and shouldn't be limited to college or university course work, although having a college degree is considered an asset by most ARU designees. As for a specific educational emphasis, Bruce Robb recommends: "Make it as broad-based as possible." For breadth of knowledge, Cynthia Jo Soard recommends math, geography, law and interpersonal development.

Industry educational courses from the MBA and others institutions get strong approval from the ARU designees. Many attended MBA's Seminar on Appraisal Techniques and Specialized Techniques in Residential Underwriting for technical training or to prepare them for the ARU exam. Take "as many seminars as time and budgest allow" says Judith Lane Landis. Christine Jones thinks that "every MBA, FHA, VA, Fannie Mae or Freddie Mac course and seminar presented" could be useful because education and knowledge eliminate guesswork." Sande Flinders believes that, "The MBA has excellent correspondence courses for all phases of mortgage banking." Alana Stephens, active in the Association of Professional Mortgage Women (APMW), recommends APMW seminars for professional development.

Armed with education and production experience, fledgling underwriters are sent off with additional advice. "Work hard," says Chris Roberts, adding that "Working with, and talking with more experienced underwriters has been an asset to me. There are so many unusual twists to the various files, no one underwriter can experience them all, so discussing cases with others can be quite informative." A positive attitude is critical, says Linda Mallett. "Keeping an open mind and reviewing the entire loan picture is very important. I like to think [that] every loan is approvable until something in the loan-file documentation makes me change my mind."

Underwriting mortgage loans is a tough job in a world that is far from perfect, but the ARU designees are trying to keep their skills honed for the 1990s, when they say the challenges will be even greater. Having the designation, most say, will be a personal and professional asset when dealing with whatever comes next. "The ARU designation has made me very proud," remarks William Landry. Others believe that receiving the ARU is a personal statement of commitment to mortgage banking.

Maureen Cahalan agrees that having the ARU sets the designees off from the rest. "There is excessive dependence on pieces of paper throughout the industry. I think that the ability to obtain the ARU will place more focus on the true ability to underwrite a loan. Underwriting is a profession, not a job, and a professional designation (especially one with stringent requirements) is a goal [toward which] all career underwriters should strive."

Those interested in finding out more about becoming an Accredited Residential Underwriter, should call (202) 861-6578 for a brochure and application.

Susan Bray is a director in the education department of the Mortgage Bankers Association of America in Washington, D.C.
COPYRIGHT 1991 Mortgage Bankers Association of America
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:designation as an accredited residential underwriter
Author:Bray, Susan
Publication:Mortgage Banking
Date:Sep 1, 1991
Previous Article:Employee magnetism.
Next Article:Servicing Mortgage Portfolios: Strategies and Applications for Buying, Selling and Managing Mortgage Loan Portfolios.

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