Underwriting Accountability

 Written By: Bonnie Wilt-Hild

It seems that, I have never ending conversations with individuals who still want to believe that automated underwriting in and of itself is the only acceptable means of determining loan approval.  The conversation usually starts with “I have a DU Approve/Eligible but…” at this point I usually begin asking questions like “What does the borrowers overall credit look like and how about the ratio’s? Any reserves after closing?” and you know how the rest of the conversation goes.

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What I find most interesting, however, is that as we move through the discussion it always seems to return to the AUS Approve/Eligible and the fact that these underwriters really believe that they can’t reject because of this or worse still, that as long as they have the AUS Approve/Eligible, they have no liability from underwriting standpoint once they approve the loan. In short, if the case goes into default after closing it’s not their fault because the AUS system approved the case. Its time to loose this mentality.

Prior to automated underwriting, any and all underwriters were responsible for their loan decisions as well as any material representations included in the loan file. When automated underwriting was introduced, most underwriters would still over document because they did not feel that the documentation checklist provided by the AUS were requesting needed documentation if the case was approval and to exercise sound underwriting practices.

It seems, however, that once automated underwriting as a practice took hold, most underwriters embraced this method as not only a way to quickly underwrite a file but also as a means to eliminate any responsibility for themselves where the underwriting decision was concerned and quite frankly this was perfectly acceptable. The agencies did not want the files documented any further than the findings indicated and lenders embraced the ability to issue loan approvals on cases that would have otherwise been rejected under manual underwriting circumstances. This however, is no longer the case.

Our most recent history has taught us that underwriting with such abandon is not such a great idea and it appears that the agencies as well as FHA and VA have figured this out also. As we move into recovery, we are beginning to see a new mentality emerge from an underwriting standpoint which in my opinion puts automated underwriting into the proper perspective and that being its use as a valuable tool to assess risk, not as the tool to eliminate underwriting responsibility. The agencies are bombarding lenders with training tools designed to demonstrate proper documentation methods from an underwriting standpoint and reiterating constantly the term “Lender Responsibility” which equates to underwriting responsibility.

As an underwriter who has spent quite a few afternoons debating why I refused to approve a loan regardless of the AUS findings, I find this quite refreshing and by that I mean the return of responsible underwriting practices. I think it is imperative that any individual responsible for determining if a case is an acceptable risk from a mortgage credit standpoint should have the ability to assess mortgage credit risk without the use of underwriting software. This gives the underwriter a sense of ownership where the file is concerned not to mention where the final loan decision is concerned. When we accept ownership of something, we tend to treat it with a little more respect.

As we move into the future, I believe we will begin to see an absence of the ability to rely simple on the defense of the AUS and will be more liable as individuals to explain why we approved the case. I think documentation requirements will continue increase and further guidelines changes will continue to promote a more responsible lending mentality. With that in mind, I hope that more underwriters embrace the new, old mentality of mortgage credit underwriting and begin using their skills as underwriters to render their loan decision as opposed to simply relying on a computer model.

Need Underwriting Training? CLICK HERE:http://www.UnderwriterTraining.com

As always, happy underwriting.


About The Author

Bonnie Wilt-Hild - As an NAMP® staff writer, Bonnie currently serves as a senior instructor for FHA Online University (www.FHA-Classes.org) as well maintains a full-time mortgage underwriting position as the Senior FHA DE Underwriter for a major lending institution. With over 25+ years of senior-level FHA/VA Government underwriting experience, Bonnie is considered the "Queen of FHA Loans". If you're interested in becoming a writer for NAMP®, please email us at: contact@mortgageprocessor.org.

 


Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.