Episode 034 - Mortgage Underwriting Tips, Tricks and Myths with Missy Arbuckle PART 2 Being a legendary agent requires a knowledge base of the inner workings of the many parts of a real estate transaction. In this episode, we "pull back the curtain" and reveal a mysterious person that you never get to see, hear from or speak to…the underwriter! We want to help you to understand the back end of a lending decision so you can better prepare your clients for issues and concerns. Knowing and understanding the underwriting process helps you stand out as an expert. Last week we covered the process of underwriting the borrower. Today in PART 2, we'll discuss underwriting an appraisal report with Underwriter Missy Arbuckle with GVC Mortgage. She has some great stories too, so enjoy! SHOW NOTES 01:15 – The B Appraiser god or B the Appraiser god. 02:14 – This is part 2, Part Deux, Hot Shots; We are speaking French for our Canadian listeners. 03:06 – Song of the episode: Def Leppard, "Bringin' on the Heartbreak." First hit that broke them into the US. One of the very first videos on MTV. The appraiser and the underwriter are going to bring on the heartbreak to agents. 04:33 – Introduce Missy Arbuckle again. Will keep B in check. 04:58 – In the loan process, the appraisal is a big component to the loan. So many things on the backend with the underwriter. So many more things to consider beyond just the value. 05:30 – Missy: looking at condition of the property. Comparables and how similar they are to the subject. Underwriter goes through every page of the report. Look to see what was available to the appraiser in the neighborhood. Sales, listings. Would like to stay within a mile and up to 10 miles in a rural property. Predominate value in the neighborhood. Zoning – commercial influence and agricultural. 06:43 – Cate: underwriter reads the appraisal report. 07:13 – Lender overlays: multiple sets for rules based upon loan type. What does that look like? 07:55 – Missy, B "…is absolutely right." 08:45 – Conventional loan types do not have anywhere near the overlays or scrutiny that government back loans (FHA, VA, USDA) have. Look at anything that may need to be brought up to the loan standard, e.g. settlement, peeling paint, cracked windows. 09:48 – VA is a little more restrictive as they are always looking out for the veteran. If there is anything the appraiser notes that is a safety, sound or security issue with the home, VA will want it fixed. Looking at those things on top of the other criteria for the loan type. 10:35 – The appraiser is the "eyes and ears" for the underwriter. As such, underwriter might have questions and will send an email asking questions for additional clarification. 12:18 – Will the property meet the criteria for the loan? It is huge for the lender. If the lender must foreclose and take the home back, the lender is concerned. 12:34 – Appraiser has to "sell" the report to the underwriter so the lender can sell the loan in the secondary market. Appraiser has to write a "credible" report. 13:40 – Cate: overlays for different loan types. Are there different overlays for different lenders? 14:08 – Missy: more on the loan type. Conventional, FHA, VA all have most of the same rules. The borrower quirks may cause an issue, but typically the home does not change between lenders. 14:55 – Can an underwriter "override" an appraisal? Why doesn't the underwriter override the appraisal more often? What kind of things are you looking at to override the appraisal? 16:03 – Overriding an appraisal: hasn't happened in a while but have changed the value or asked for more or less requirements. As time has passed, the underwriter will stick with the guidelines of the agencies. 17:30 – Report comes in that agents are not happy with value or repair condition. Underwriter pretty much stays with what the appraiser says and will not override the appraiser. 18:05 – Comparable issue: underwriter does a little recon on the backside. They look at properties that were in the area. Look at adjustments. They will look at the BLC and ask the appraiser to look at other comps, not to override, but to get clarification. 18:50 – Fannie and Freddie also do their own "appraisal" via a computer algorithm and the appraisal report receives a score between 1 to 5. A 4 or 5 is a low quality or uncertain appraisal and will require more work. A 1 is a high quality and trustworthy report. 19:40 – The scale of 1 to 5; did appraiser write a credible report? 20:12 – Favorite story about an appraisal report: appraisal on a high rise and the entire house had been on fire. Insulation, ceiling was falling in and the interior was charred. They called it the "barbecue house." Lender passed on that home. Crispy home. 22:40 – Quote of the Episode: "Try not to become a person of success. Rather become a person of value." Success comes from the value you provide to your clients. 23:14 – Closing: Thank you Missy for joining us. Like a Reese's cup, the underwriter and appraiser are two great tastes that taste great together…in a non-weird way. 24:06 – Appraisal and underwriting are two huge hurdles to get through in the purchase process. Understand those processes and you will have greater success. SHOW LINKS Hot Shots, Part Deux - https://www.youtube.com/watch?v=aGOQyyQ_28I Def Leppard, "Bringin' On The Heartbreak" - https://www.youtube.com/watch?v=f_X5A-BYjO8 Does MTV play music videos? - https://ew.com/article/2012/11/13/mtv-stopped-playing-music-videos/ Acronym, AMC - https://www.investopedia.com/terms/a/appraisal-management-company-amc.asp Best Barbecue - https://www.escapehere.com/destination/the-8-best-states-to-experience-american-bbq/ Missy Arbuckle - https://www.linkedin.com/in/missy-arbuckle-841888167/ Reese's Cup Commercial - https://www.youtube.com/watch?v=DJLDF6qZUX0 and https://www.youtube.com/watch?v=GuENAWds5B0 BETWEEN THE LINES LINKS Email brian@brianclee.com cate@craftsmanrg.com Web brianclee.com catelee.com realestatebetweenthelines.com Facebook https://www.facebook.com/groups/realestatebetweenthelines/ https://www.facebook.com/Brian-C-Lee-111822417027919/? YouTube https://www.youtube.com/channel/UCcv4dHU39-b5_QVVCIhbcBA?