Among mortgage professionals, there's a great debate over which type offers better service
-- a lender like Citicorp, which is known to collect applications at its local branches and
then ship them to one giant, centralized St. Louis processing office, or one like Norwest
and Countrywide, which pride themselves on making most of their mortgage approvals and
denials at the local, field-office level.
"Our research consistently shows that when people are dealing with a transaction the size of
a mortgage, they want to sit down and deal with someone face to face," says a spokesman for
Norwest Mortgage. But does face time really matter? "Centralization of underwriting,
including credit scoring, has tended to make for better decisions," says JoAnn Barefoot, a
partner at KPMG/Barefoot Marrinan in Columbus, Ohio, who specializes in consumer issues for
financial companies. "Lenders are less likely to err on the conservative side."
The truth is, it depends less on where your loan is processed than how.
Increasingly, lenders these days are using automated underwriting programs to help them
speed the process along. These computerized evaluation systems function as a sort of
superstreamlining process -- digesting your application, credit and payment data, and
spitting out a preliminary approval or denial within hours. "These programs may create a
superbreed of loan officers, a one-man show," says Erick Wootton, processing manager at
Nationwide Mortgage Services. "They can take an application, process it and submit it for
underwriting, then come up with a pretty firm commitment to refinance within 24 hours."
Many lenders who sell their loans on the secondary market use automated underwriting systems
developed in the past several years by Fannie Mae and Freddie Mac. Bonnie O'Dell, a
spokeswoman for Fannie Mae, estimates that some 500 lenders nationwide, including Wachovia
Mortgage and HomeSide Lending, use their system. In addition, some top lenders such as
Citicorp and Norwest have their own systems that are similar to the ones used by Fannie and
Freddie. If you want a quick turnaround on your refinance application, the key question you
must ask is whether your lender can give you a preliminary approval within 24 hours.
Like streamlines, these systems are best for you if you have squeaky-clean credit and are
confident your home will be appraised at the right value, and if you haven't had anything
out of the ordinary in your personal life lately -- like a divorce or a change of job.
Otherwise you're better off with a lender that can promise you a real live loan officer and
underwriter. That way you'll have someone to complain to -- and, in a perfect world, to
reason with -- if something goes wrong. "On the whole, desktop origination is a good thing,"
says Barefoot. "But people who don't fit into the plain-vanilla category may find their
mortgage ends up on the bottom of the pile."