Written By: Bonnie Wilt-Hild, Op-Ed Writer
Very recently we have begun to see files being returned from the local Homeownership centers with NOR’s (Notice of Return) in the file which are indicating that the file has been downgraded and the case now requires a manual underwriter. This is causing quite a bit of confusion for the post closing people out there so I thought I would give everyone a little bit of insight as to why this might be happening.
As we are all aware, FHA Total Scorecard as it is run in DU or LP interfaces directly with FHA Connection. By this I mean all of the data that is configured in Total Scorecard in terms of credit scores, government monitoring information, income, assets, cash required to close and so on, auto populates directly into FHA Connection and more particularly to the Insurance Application screens. When a case is accepted by Total, Total feeds the insurance application screens the underwriting Chums ID of ZFHA for the credit piece of the file and than the post closer/insurer will fill the Chums ID data field for the underwriter of the appraisal with the DE underwriters ID that completed the valuation review.
In addition to completing the underwriter information, the post closers are also responsible for filling in all of the rest of the data fields that do not auto fill from Total Scorecard as well as correcting any information that appearing in the other input screens in Insurance Application that are not correct. This is when the problem begins, if the data that has auto populated from Total is not correct and the Post Closers neglect to correct it prior to sending the case to HUD for insuring, than an insurance tech at the Homeownership Centers will correct it.
It is very critical to understand that the Insurance application screens within FHA Connection have a VERY limited tolerance for change, so with this said, often times when an insurance tech corrects information with regards to income or cash to close, the insurance application system has the ability to refer the case for a manual underwrite when the data is changed beyond the systems bearable tolerance. When this occurs, HUD will return the case to the lender and tell them that the case now requires a manual underwrite.
What you can do at this point as the lender in order to avoid calling the borrower and telling them you need to verify rent, need an additional months bank statements, credit explanation and so on, is try to re run the loan through Total once you have determined what changes were made to the insurance application screens at a HUD level.
You can find this out by going back into insurance application and see what data has changed in comparison to the original pull. Once you determine the changes, go back into Total Scorecard and re run the loan. If you get another Accept, than put the corrected findings in the file and resend it to HUD. If you still get a refer then you have a big problem called serious material deficiency.
I strongly recommend that you make sure your Total Scorecard findings are completely accurate prior to closing the loan but if something goes wrong, try to catch it before it goes to HUD so that you don’t have problems getting the loan insured. 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".