Written By: NAMP® Op-Ed Ghost Writer
The past year has seen sweeping changes in almost every area of loan origination, underwriting guidelines, and loan disclosures. USDA and FHA have both created new handbooks that came with completely new guidelines. The CFPB introduced the Loan Estimate and Closing Disclosures which replaced the Good Faith Estimate, TIL, and HUD-1. Fannie Mae and Freddie Mac introduced new guidelines for many topics including review of Schedule-A Unreimbursed Expenses and required reserves for borrowers retaining their home as a secondary or rental property.
How does one keep track of all these changes and insure they are applying the most recent guidelines to current loan reviews? First, all new information must be kept organized and housed in an, easy-to-access location. Second, underwriting worksheets must be continually edited to include the new guidelines and processes. Finally, underwriters may need to return to a “back-to-basics” approach to underwriting which includes more frequent trips to guidelines before issuing loan decisions.
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There are a few ways to keep track of guideline changes. I like to combine an underwriting binder with storing the updates electronically. Generally, any notices from the Agencies, job aids, etc. will be printed, tabbed, and housed in my binder. In addition, if there is information I want to highlight, I will do so using varying colors. This also a great way to avoid searching multiple websites to find information on a particular topic.
However, I also keep copies of job aids and notices in PDF format on a desktop folder on my computer. This offers the option to pull up a document and using the “Find” function (CTRL + F), I can search the documents for key words. If any updates come to me through email, I will save them in an appropriate folder within my Outlook. I have folders labelled Conventional, FHA, USDA, and General UW Memos to help me keep track.
My underwriting worksheet is an excel document of my own creation that has evolved over the years I have underwritten. This makes it extremely easy to make revisions to my worksheet as guides change. When a guideline is obsolete, I simply delete that item. When something new comes along, I add it to my worksheet. In addition, I inputreference notes to guide me to other documents that may provide more in-depth information that is needed for a specific loan scenario.
Underwriting worksheets should also reflect prompts for investor or mortgage insurance (MI) guideline overlays. This will assist you in making loan decisions without having to look up the guideline on each loan. However, it is up to the underwriter to keep track of any guideline change notices issued by investors and MI companies. When these changes are announced, updating your worksheet is an easy way to keep track and insure you’re not underwriting to outdated guidelines.
Finally, shifting your focus to a more guideline rather than memory driven underwriting approach is advisable. When there are numerous changes to keep track of, it is just too easy to miss something. So you may give yourself one to two weeks of looking up guidelines in each area of the loan to re-familiarize yourself with the new rules. For example, if you are used to deducting Schedule A Un-reimbursed expenses from the qualifying income, you may want to look up the guideline on this piece before completing your underwrite. Conventional and government loans now have conflicting guides on this portion of income calculation. The same thought process applies when verifying reserve requirements, minimum down payment rules, and more. Getting back to basics by looking up guidelines before executing your calculations and issuing loan decisions is a great way to refresh your underwriting skills and keep yourself up to date with industry standards.
About The Author
All of NAMP® staff writers are veteran mortgage processing & underwriting instructors for Mortgage Underwriter University (www.MortgageUnderwriter.org). They have each conducted numerous mortgage processing & underwriting training classes and have worked in the mortgage banking industry for 25+ years. If you're interested in becoming a writer for NAMP®, please email us at: firstname.lastname@example.org