Going Manual

Written By: Bonnie Wilt-Hild, Op-Ed Writer

Over the past couple of months, I have a few conversations with underwriters who have conveyed to me that they have been getting their buts kicked during post endorsement technical reviews. This is actually not to surprising given how HUD has stepped up review procedures where lenders are concerned and quite frankly they are not letting lenders slide on things the way they used to.

A couple of years ago when the catch phrase of due diligence in underwriting was coined, HUD made it very clear to lenders that regardless of AUS findings, it was still the underwriters job to complete a full review of the mortgage case to determine not only if the information provided to Total Scorecard was valid but to also determine if there were any instances arising in the file which could not be assessed by Total which in my opinion is pretty much everything in the file in terms of documentation.

When we run a case through any Automated Underwriting System we only really provide it numeric characters which represent certain file information such as the borrowers’ monthly income, asset values, appraised value, credit scores and so on. What automated underwriting is never provided is a copy of the borrowers’ paystubs or information regarding deductions or year to date earnings, copies of the borrowers bank statements indicating total transactions and average balance information or if there have been any large deposits or overdrafts.

When automated underwriting systems consider the borrowers credit score, it’s not reading the credit report, considering overall credit history since the date of the first opened account, possible address variances appearing on the credit report or if new accounts are present which could have resulted in the borrower obtaining unsecured debt for the minimum required investment. In short, the AUS can use basic statistical data to assess overall case file risk but it can’t underwrite the file, only the underwriter can do that which pretty much puts us on the hook for everything where due diligence is concerned and provides HUD with all of the leverage they need when suggesting that any case is materially deficient after the completion of a post endorsement technical review.

Think about it, your case has a Total Scorecard Accept and proceed to document the case according to the documentation checklist provided by Total Scorecard. However, the case, once submitting for insuring, is picked up for post endorsement technical review and the underwriter at HUD who is reviewing the case determines that the borrowers credit report had sufficient late payments appearing to require the underwriter to request a written explanation for the delinquent payments appearing on the credit report and possibly downgrade the case to a refer and manually underwrite and document it.

All of this was required of the underwriter based on their responsibility to practice due diligence in underwriting. I know you are thinking, but I had an AUS approval and I am here to tell you that due diligence trumps AUS approval and in the scenario I just mentioned, the underwriter on that particular case could face an unsatisfactory rating for not providing sufficient supporting documentation where delinquent credit obligations are concerned and in truth, depending on the extent of the delinquencies, we really should ask what is going on.

If is for this reason, that I as underwriter began manually documenting every file I underwriter regardless of AUS documentation suggestion because it is the only real way to complete full due diligence in underwriting not to mention keep you bottom out of a sling should the case get selected for post endorsement technical review. I have had a few brokers complain about obtaining the additional documentation but once I explain why I need it, they have been pretty good about getting it for me and knock on wood; I have gotten no unsatisfactory ratings where PETR is concerned at this point. I prefer the better safe than sorry principal and no indemnifications. As always happy underwriting.

About The Author

Bonnie Wilt-Hild - As an op-ed writer, Bonnie has held many mortgage underwriting positions, including 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".


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