A mortgage underwriter can generally be described as a type of financial expert who is employed by a mortgage lending company. Specifically, a mortgage lending company will hire a mortgage underwriter for the purposes of determining how much financial risk a borrower carries. They may also caclucalte the percentage of probability that the borrower will default on a mortgage loan.

The mortgage underwriter accomplishes this task by examining a borrower’s finances and reviewing the contents of their mortgage loan application. A mortgage underwriter is also the person who decides whether to reject or approve a borrower’s mortgage loan application. This concept may be overwhelming for a borrower since a mortgage writer rarely ever interacts with a borrower in person.

Instead, the mortgage writer uses the facts from their assessment to approve or reject a borrower’s request for a mortgage loan. Some factors that a mortgage underwriter may look at when making their determining include the following:

  • The borrower’s credit reputation: A borrower’s credit reputation consists of a number of details, such as their credit score or their overall credit history. Some other items that may indicate that a borrower will pose a high risk include:
    • If the borrower has prior delinquent mortgages,
    • If the borrower has applied for a new line of credit within the last year;
    • If the borrower has declared or filed for bankruptcy; and
    • If the borrower has liens or judgments against their property, or previously owned a house that was auctioned off at a foreclosure sale.
  • The borrower’s collateral: A borrower’s collateral may concern things like how much they contributed to the down payment on a home and how much money the borrower still owes in equity. The mortgage writer will also consider the type of property the borrower is applying the loan towards and what the buyer is using that piece of property for (e.g., primary residence, vacation home, to earn extra income, etc.).
  • The borrower’s capacity: A borrower’s capacity refers to their ability to make payments. For instance, a mortgage underwriter may review their income and how much money a borrower has in their savings account. Some other details that a mortgage underwriter will likely consider include:
    • Whether a borrower is self-employed or is a salaried employee;
    • The amount of debt that a borrower has versus their salary and monthly expenses;
    • Whether the borrower has any other debt concerns or financial liabilities;
    • The type of loan the borrower is applying for (e.g., short term, long term, fixed rate, adjustable rate, etc.);
    • Whether the borrower has any additional assets; and
    • The number of borrowers applying for the mortgage loan.

The above list is only a basic outline of the various types of factors that mortgage underwriters examine when doing their work. Depending on a borrower’s financial situation, a mortgage underwriter may consider other details, such as how long the borrower could continue making payments for if they lost their job.

Some mortgage underwriters may also ask a borrower to have the property appraised. This can help to ensure that the borrower does not accept a higher loan amount than what the property is actually worth.

Additionally, a mortgage writer may also request that a borrower provide them with a copy of a recent tax return, bank statements, student loan documents, pay stubs, and any paperwork associated with the property they intend to purchase (e.g., a signed offer) with the mortgage loan.

Given the large amount of paperwork that a mortgage underwriter may need to sort through, the process of underwriting a mortgage can take anywhere from a couple of days to several weeks. This is assuming that the borrower has all of the proper paperwork and that any documents that need to be signed contain the signatures of the appropriate parties.

As is evident from the above discussion, mortgage underwriters are involved in many different aspects of the mortgage loan process. Their decision is important to a borrower because it is what allows their mortgage loan application to be accepted and approved.

Thus, if you believe that a mortgage underwriter has made a mistake or if you are involved in a dispute with a mortgage underwriter, you should contact a local mortgage lawyer immediately for further legal advice.

What Is Mortgage Underwriter Liability?

The term, “mortgage underwriter liability”, refers to the legal risks that an underwriter assumes if they cause a borrower to suffer financial loss due to their decisions. Liabilities that mortgage underwriters can face will often include legal issues, such as fraud, unfair business practices, misrepresentation, false advertising, and other similar claims. Depending on who authorized the harmful action, an individual underwriter, the lending company, or both can be held liable.

A common concern with mortgage underwriters is when a mortgage underwriter illegally approves a mortgage loan for a borrower who is not qualified and thus really should not be receiving one. The approval can occur either with or without a borrower’s knowledge. In situations that are the same or similar to the scenario that was just described, however, the borrower is typically aware of the mortgage underwriter’s potentially unlawful actions.

Legal Consequences for Mortgage Underwriter Violations

There are several legal consequences that a mortgage underwriter can face for committing a violation. Some examples of the types of legal consequences that a mortgage underwriter can receive for a violation may include:

  • Having to pay civil fines or penalties;
  • Having to pay monetary damages, such as actual damages or punitive damages, if they are successfully sued by a borrower;
  • Having to pay a borrower’s court costs or a reasonable sum of lawyers’ fees;
  • Receiving a court order to reconsider a borrower’s mortgage loan application;
  • Having their professional license suspended or revoked;
  • Having to pay criminal fines or restitution;
  • Being placed on probation; and
  • In rare cases, having to serve a jail or prison sentence.

It should be noted that criminal penalties usually only come up in cases that involve mortgage fraud. If a mortgage writer is convicted of committing mortgage fraud, they may be sentenced to serve anywhere from a few months to up to thirty years in prison. As with most criminal cases, the sentence will depend on the severity of the crime, the type of crime committed, the circumstances surrounding the case, and the guidelines prescribed by state and/or federal law.

Borrowers can avoid becoming the victim of a mortgage fraud scheme by performing due diligence on a particular mortgage underwriter or a lending company before they agree to do business with them.

In addition, a borrower should also report any actions that seem suspicious and/or any lending policies that contain questionable requirements to the appropriate authorities. If a borrower is not sure who the proper authority is, they can contact a local mortgage lawyer for further guidance.

Seeking Legal Help for Mortgage Underwriter Issues

The mortgage underwriting process is one of the most important aspects of buying a home. That is because this process is what determines if a lending company will issue you a mortgage loan or not. A mortgage underwriter plays a major role in deciding whether to reject or approve your mortgage application. So, if the mortgage underwriter decides to reject your application for a mortgage, then you may not be able to afford to purchase a new home.

Therefore, you may want to consider hiring a local mortgage lawyer if you are experiencing any issues or are involved in a dispute with a mortgage underwriter. An experienced lawyer can provide advice on your mortgage underwriter issue and can find out whether there is anything you can do to get your application approved.