The Fallacy of “In House” Underwriting
Posted by: Greg Fischer Post date: March 10th, 2011From time to time, I’m asked “do you have in house underwriting?” It makes me smile. Because I know that I’m talking to someone who was served the big lender Kool Aid at some point, and now believes that having mortgage underwriting done “in house” is somehow vastly superior to all other forms of lending.
I’ve worked for a mortgage lender who had an in house underwriter. Her name was Donna. Her office was right downstairs from me. Having her as a knock on the door resource when I was new and learning was invaluable. I learned a great deal from her in several minute chunks of underwriting wisdom. But In today’s lending world, now that I know everything that I do, the added value of having an underwriter “in house” is small at best. Here’s why:
1. “In house” is a pretty relative term.
Donna was actually in the house. But you can claim in house underwriting if you work at a remote branch and NEVER see your underwriter. You can claim in house if you work for a lender where all loans are processed and approved at a national center and you’ve never even met the person approving your loans. To communicate with these people who don’t share an office, you call them. Or email them. Or use some other form of communication other than sneaker-mail. So is your “in house underwriter” in Texas any more available to you than the person you’re brokering a loan to at an investor?
2. “In house” is faster, stronger, better at getting loans closed.
Hooey. Any underwriter, at any lender, anywhere will see loan applications they like, and loan applications they don’t like. Period. If presented with an identical file, one underwriter might approve it where another might deny it. It makes no difference if the originator works for the same lender or not.
3. Having “in house” services is an advantage. Except when it isn’t.
I have seen cases where having some control over your service team can help speed the process. And cases where being tied to one system kills the file. No discussion. I recently had a Realtor tell me “I sure hope you have in house underwriting so that we can get this closed on time.” (She worked for an agency who has an inside lender, who has in house underwriting, and that’s the only advantage they can claim).
My reply: “Thankfully I don’t. I work with lenders who have to compete for my business by providing better service than the other guy, instead of having one team and one option.”
Today, I work for a lender who does have “in house” services. If I need to get a closing package done right away, I can knock on a door and ask. If I need a condition sent to the underwriter right now, I can get that done. And I’m glad to have that option. A great time is a great asset. But 100% of my business won’t be “in house” business. Because sometimes the best solution is someone else’s. In the mortgage lending market today, options are far and away more valuable than having an underwriter share your employer.
