Broker: ‘Every deal is a documentation nightmare’

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It seems to be the complaint of the season, as brokers continue to struggle with last minute requests from lenders.
 
“On this particular deal, the lender was so busy they didn’t make the call [requesting follow-up documentation] to rectify the situation until the last minute,” Layth Matthews, a broker with Rate Miser, told MortgageBrokerNews.ca. “I had to scramble to verify pension income in addition to the employment income; the employment income wasn’t as high as originally thought.”
 
According to Matthews, he received an "urgent" email on the morning of closing, saying the "verbal income verification came in light" and the lender required more documentation.
 
“I don’t really want to criticize the lender because you don’t know what led to it,” Matthews said. “The employer could have been sluggish in providing income details.”
 
Still, Matthews is echoing a growing number of brokers who charge that every deal is a documentation nightmare these days. “Condition requirements have become painstaking and nitpicky; underwriters have very little flexibility,” he said.
 
An alarming number of brokers complained about the same issues late in the mortgage origination process this summer. They point specifically to last minute audits throughout the summer, many the result of lender understaffing issues.
 
One former lender recently confirmed that challenge and its contributions to delays.
 
“There is often another level of review after the underwriter signs off on a deal before it gets funded; the underwriters sometimes miss something and it’s a function of underwriters being overwhelmed,” Tim Hill of Dominion Lending Centres Primex Mortgages told MortgageBrokerNews.ca in September. “Volumes for lenders are also as high as they’ve ever been, and a lot of documents are being looked at very late in the process.”
  • Jagjit Arora on 2015-10-28 10:20:43 AM

    I completely agree. This is very frustrating for the broker and also wrong msg goes to the customer. These kind of problems at lenders end gives bad name to the broker community.

  • Marvis Olson on 2015-10-28 10:20:50 AM

    I'm sorry------but getting the doc's up ( letter , payslip & NOA front before you submit will solve most this. Compare the NOA for reasonability--does the payslip stream to the letter.
    Pension verification is standard--if the lender misses asking for something don't just feel lucky --if you know it's required--it will come back to haunt you.
    I've learned the hard way so not trying to be obnoxious :)

  • jkeane@dominionlending.ca on 2015-10-28 10:21:42 AM

    I sent request upon request on one of my last deals for updates on docs and never heard a sound until.10.days before closing . At that time they lost part of the docs sent in and then added more docs to the list . I emailed everyone including bdm for updates and nothing. This is unprofessional and looks bad on us . The extra docs where print out of investments client transfered into his chequing

  • Jim T, Advent Mortgage on 2015-10-28 10:35:19 AM

    I will do 1,000 deals this year and I never come across these issues. I think it comes down to knowing what the lender will require and get in front of it asap. We know what our lenders require and we always get docs upfront before we submit the deal. This way there are no surprises. Further, I believe it is the broker responsibility to be on top of the lender to make sure the file is complete. If you file is not complete, do not wait until closing to figure out why. I don’t understand brokers who wait until the last minute to deal with issues!! It is all about process. Believe me it works. I have funded over 7,000 deals and have yet to have any of these issues.

  • nick on 2015-10-28 10:47:00 AM

    jim i beg to differ on your opinion. I have been in the mortgage brokerage business for 25 years and although i have not funded 7000 deals i would consider myself active in the mortgage business. The only reason that these problems arise is the document specialists that lenders have reviewing the documentation that is sent in. These people have turned into robots because of quality control . They lose their ability to analyze what is sent in and often they have no mortgage experience. I think that lenders have to realize that the document specialists are more important than the actual underwriters and these positions should not be looked at as entry level admin. positions. This will aleviate alot of the problems that brokers are experiencing.

  • Jeremy on 2015-10-28 11:03:14 AM

    There is no story here. 100% agree with Marvis and Jim. We can't blame the lender for our lack of due diligence. Lenders have their own issue, agreed, but it all begins and ends with us, the broker.

  • Rosemary Madden on 2015-10-28 11:03:24 AM

    I agree with Nick 100%, the document "specialists" should be knowledgable and know how to read documents such as T1 Generals, I have had issue's with documents specialist not reading and understanding an employment letter or a T1 General, and Nick is right, this should not be an entry level position, lenders need to hire experienced individuals which would certainly go a long way to solving these issue's.

  • bob on 2015-10-28 11:15:49 AM

    The problem I believe is that some lenders send a file to a final audit department sometimes the day of closing, and should that department find something missing in the file that the underwriter missed then that information in then passed onto the broker on the day of closing. We should not get a "file complete" until the final audit has been done, and not have it done days (or day of) before closing.

  • Tim on 2015-10-28 11:16:11 AM

    As brokers we should have a pretty good idea of the documentation standards - review all documents before submitting (yes, there are brokers who don't), and if anything is not a slam-dunk (i.e., unclear job letter) specifically ask for it to be reviewed/approved upfront.

    Jim T: sounds like you've been really lucky, as the second level of review often happens AFTER you've been sent the "File Complete" notification (yes, really!).

  • Brad Currie on 2015-10-28 11:30:36 AM

    Today's mortgage approval process seems to be driven more by audit requirements, than fundamental principles of mortgage underwriting. The primary reasons mortgages go into foreclosure are loss of income due to job loss or health reasons and martial break up. Further, a mortgage approval is based on the borrower's circumstances at a certain point in time. Once the mortgage is on the books and as long as the mortgage payment are made the lender is happy, even though the borrower's circumstances may have change whereby the borrower may not qualify for their own mortgage anymore.

  • Dave on 2015-10-28 11:37:58 AM

    what Brad said....common sense is out the window for years now

  • Rachel@RethinkRenting.com on 2015-10-28 11:39:19 AM

    I agree with Marvis and Jim T. I'm an active real estate investor in Ontario. Over 6 years, I've seen some serious hiccups that left buyers in the lurch. Underwriters or lenders aren't always the culprit. Mortgage agents and buyers play a role too. At times mortgage agents may give their clients a false sense of security prematurely. The buyers in turn choose to waive conditions without a commitment letter in hand. I've worked with nearly 100 credit-challenged families to help them rent to own a home they found on MLS. About 20% are "rescue" situations when financing falls through in the 11th hour, with a closing date just a few weeks away.

  • TimH on 2015-10-28 11:50:03 AM

    As Brokers we should have a pretty good idea of what documentation is good, and what is questionable - anything questionable should be reviewed/approved by the Lender upfront.

    Jim T, I think you've been really lucky - most lenders don't review documentation upfront, and the second level review can happen even AFTER the "file complete" notification has been sent (yes, really)!

  • Michele Hall on 2015-10-28 12:05:13 PM

    have to say I request as much information as I can up front , the challenge is lenders are understaffed and not reading notes on files . I know I have submitted complete files and it takes weeks with some lenders to get confirmation and they are still losing documents and requesting again... Lack of accountability is a challenge . I do bulk of business with Mcap it is path of least resistance closing a file . Not to Bash but B2B and National bank are poor at funding . Very little follow up !

  • Ad Lakhanpal,Mortgage Broker on 2015-10-28 12:08:09 PM

    Nick has a good point about mortgage officers having limited training or discretion but I would extend it to the underwriters and higher ups as well.

    I had a refi deal for a secy working in a doctor's office for 14 years. Beacon was 700+ Job letter and pay stub was provided upfront. Since it was small operation, the paystub was not issued by a third party.To support the income, 3 months of bank statements showing deposits were provided. Then two years of T4s were asked for and provided. Then 2 years of NOAs were requested and provided. They called the doctor for verification. He was tied up in hospital rounds but she answered the phone, which confirmed that she worked there. The next day,the doctor left for 3 weeks vacation.
    In spite of all of the documentation, the deal was held back until he doctor returned to confirm that she indeed worked there and confirmed the income. I escalated the review as high up the channel as I could but no body was willing make a common sense decision. Can you imagine explaining to the client why her income was not being accepted!!

  • steve on 2015-10-28 12:11:42 PM

    I can think of 1 lender that asks for job letter and paystub on the condition sheet, then removes that when received, BUT then a week or so later will casually add "verify employment income" to later condition sheets. This has burned me once. I just know that this lender is not fast with employment calls and is not swift with condition sheets.
    I wont use them if I have a tight deadline

  • Ron Butler on 2015-10-28 3:05:09 PM

    For a while in 2006 - 2007 we lived in a very different world than today, I vividly remember an underwriter saying "this 544 Beacon score is not so bad, never been bankrupt and no collections, we will get a CMHC approval on this one but only 95% sorry we cannot get 100% financing"

    Or just send 2 years NOAs for self employment.

    Or just 2 ADP or Ceridian pay-stubs, that was it for salaried income verification.

    What a change in 8 years. I actually believe it will get worse in the coming years, there will be relentless pressure from the insurers / investors at monolines and from bank credit risk departments to be tougher and tougher.

    I am not defending slow or disjointed underwriting practises, that stress clients and create horrible closing situations. Those incidents are utterly wrong and need to be addressed but realistically if underwriting bars are relentlessly raised and more cross checking functions are introduced to mitigate risk, something has to give somewhere, more hiring and training stresses the whole system and increases lender costs.

    In the end we will have an even more crazily complex and restrictive lending environment until finally lending slows dramatically and the pendulum will finally starts to swing back.

  • Chris Bisson, MBA, AMP on 2015-10-28 3:19:54 PM

    We are equally to blame for these issues: Brokers should know the lenders' guidelines inside and out - and use different lenders if the service they are receiving is inadequate. Lenders should be staffing according to demand, and communicating in a timely and professional fashion.

  • Melissa on 2015-10-28 3:23:57 PM

    What bothers me is when branches don't have the same long arduous list of conditions that brokers get.

  • Jim T, Advent Mortgage on 2015-10-28 4:03:08 PM

    Hi Tim, It has nothing to do with luck. Statistically, the luck would have had to run out with these many deals. It think it has more to do with the lenders that I deal with. Scotia does have an audit process however I have yet to get a question on a File complete file. We deal with all issues upfront and have all supporting documents. Our underwriter is also fantastic and never misses a thing so it never bounces back. National Bank as well. Yes, they are hard to deal with at times but once you understand their process it is smooth sailing. Again, a file has never come back. Pick your lender carefully and build a better process and this is a non-issue.

  • Andy MacDonald on 2015-10-28 4:26:06 PM

    Jim sounds like he knows what he's doing. If a lender is incompetent fire them. If you are the problem take David Price's advice and be a better broker!

  • Neil on 2015-10-30 9:57:09 PM

    Sorry brokers but the underwriters are "textbook" lenders and are not paid to think.I underwrote for 12 yrs and was also a broker so I have been on both sides of the coin.Banks hire for degree's not experience so you have to deal with a computer instead of a real lender-maybe put them on commission and see what happens!

  • P.w.R on 2015-10-31 4:23:50 PM

    Do you job and do it well - or quit the mortgage banking . If you can't qualify the client - move on . If you cannot uphold industry STANdARDS according to RECA and AMBA then retire - BEFORE you do a bit too much creative and not enough qualification. No Brainer - just because brokers and agents can do math does not mean they understand what money is.

  • Sean Binkley, DLC on 2015-11-03 12:17:11 PM

    I've realized that in order to not only serve the client properly, and keep my sanity, that I can only control what I can control. In other words, we as broker can keep chasing the next "best rate" lender, get a commitment and it be a "federal case" to get it funded with limitless documentation, or we can ask for docs up front (lots of docs & more than we think we'll need). I use a standard doc's checklist to give to each client. And pick a lender that is easy to deal with. Like @RonButler says - it won't get easier. Lending goes in cycles - one day the bank leaves the keys for the vault and tells you to take what you need, the other day it's closed up like Fort Knox. We as Brokers need to look at our business practices and work flow to deal with the issue and what our part in the delays are.

    Stay classy everyone!

  • John Greenlee on 2015-11-04 1:42:52 PM

    I agree with Jim.

    If every deal is a documentation nightmare then please take a look at your own process and fix the issue on your end. If a particular lender continues to be a problem, then maybe deals should be going elsewhere?

    Just my thought.

  • Kevin on 2015-11-04 4:28:23 PM

    And some brokers continue to complain about how unfair life is... last time I checked it's no one ever said it was fair.

    Know your customer, know your products and lenders - do your job well and you should not have an issue.

    It is not the underwriters, or lenders, job to make your life easier. it is their job to mitigate the risk associated with the transaction. They can do that because it is their money, not yours. The lender is taking the risk, not you.

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