Peter Boutell, Lending a Hand: Mortgage approval goes beyond number crunching
When I started originating loans in 1986, underwriters would review the prospective borrower's tax returns, bank statements, job stability and credit report and make a subjective decision as to whether or not the borrower fit into the mortgage guidelines of the time.
Years later the mortgage industry created software that made the decision as to whether or not a mortgage would be approved.
Today that software is referred to as automated underwriting software [AUS]. Fannie Mae, Freddie Mac and FHA loans each have their own slightly different versions.
The AUS requires us to input the borrower's income, assets and job history into the computer program. Additionally, we tell the program what the borrower wants to pay for a home and what the loan amount and interest rate will be. The AUS downloads the borrowers' credit reports, digests the data that has been input and gives us either a loan approval or what is called an "ineligible," which is really a denial.
Additionally, we get a detailed printout of conditions or "findings." The printout that we get tells us what documentation must be supplied and reviewed before a final loan approval can be granted.
The actual computer time probably doesn't take more than 60 seconds but it takes considerable time and effort to be sure that the data going in is accurate and then it takes an underwriter to grant the final loan approval.
She [or he] reviews the "findings" to make sure we have all of the documentation that is called for and that the data that was input into the program was accurate.
Despite the fact that all loans must receive an approval from one of the automated underwriting software programs, loans must also meet the more stringent requirements of the investor that will be servicing the loan.
Even though a borrower receives an approval from an AUS program, it does not mean that there is an investor that will accept it.
For example, if a borrower receives an AUS approval but has a Debt-To-Income ratio [DTI] of 48 percent and the investor has set 45 percent as a maximum, an exception must be made in order for the borrower to receive this loan.
The good news is that investors will make exceptions if there are compensating factors. It is the underwriter that must make that determination.
From this perspective, the mortgage industry is actually moving back toward the days when a person made the underwriting decision.
Today, the AUS is viewed as more of a tool than it is an absolute loan approval. This is giving underwriters more latitude in their decision making.
Mortgage Underwriting Approval Requirements Guidelines - News
Despite the fact that all loans must receive an approval from one of the automated underwriting software programs, loans must also meet the more stringent requirements of the investor that will be servicing the loan. Even though a borrower receives an
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It seems to me that salaried employees who have come through the recession with their jobs intact are the 'poster children' of the mortgage underwriting fraternity. Those of us who are in business, freelance, or anywhere in between, are treated as
Peter Boutell, Lending a Hand: Mortgage approval goes beyond ...
When I started originating loans in 1986, underwriters would review the prospective borrower's tax returns, bank statements, job stability and credit report and make a subjective decision as to whether or not the borrower fit into the mortgage guidelines of the time.
Years later the mortgage industry created software that made the decision as to whether or not a mortgage would be approved.
Today that software is referred to as automated underwriting software [AUS]. Fannie Mae, Freddie Mac and FHA loans each have their own slightly different versions.
The AUS requires us to input the borrower's income, assets and job history into the computer program. Additionally, we tell the program what the borrower wants to pay for a home and what the loan amount and interest rate will be. The AUS downloads the borrowers' credit reports, digests the data that has been input and gives us either a loan approval or what is called an "ineligible," which is really a denial.
Additionally, we get a detailed printout of conditions or "findings." The printout that we get tells us what documentation must be supplied and reviewed before a final loan approval can be granted.
The actual computer time probably doesn't take more than 60 seconds but it takes considerable time and effort to be sure that the data going in is accurate and then it takes an underwriter to grant the final loan approval.
She [or he] reviews the "findings" to make sure we have all of the documentation that is called for and that the data that was input into the program was accurate.
Despite the fact that all loans must receive an approval from one of the automated underwriting software programs, loans must also meet the more stringent requirements of the investor that will be servicing the loan.
Even though a borrower receives an approval from an AUS program, it does not mean that there is an investor that will accept it.
For example, if a borrower receives an AUS approval but has a Debt-To-Income ratio [DTI] of 48 percent and the investor has set 45 percent as a maximum, an exception must be made in order for the borrower to receive this loan.
The good news is that investors will make exceptions if there are compensating factors. It is the underwriter that must make that determination.
From this perspective, the mortgage industry is actually moving back toward the days when a person made the underwriting decision.
Today, the AUS is viewed as more of a tool than it is an absolute loan approval. This is giving underwriters more latitude in their decision making.
Mortgage Underwriting Approval Requirements Guidelines - Bookshelf
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