Written By: NAMP® Op-Ed Ghost Writer
As the weather warms and the housing market gains steam, volume will increase. Production standards will be revisited by management and rush requests will become the new normal. The pressure to get loans out of the underwriting queue will increase. As a result, we must tighten up our process flow and put some best practices in place. One of the most fundamentally important best practices is the validation of the findings.
As we all know, a mortgage is a sum total of many moving parts. Changes frequently occur from the time of the original underwrite to the time of the clear to close. As volume increases, there is a greater possibility that these changes will not be communicated with underwriting in a timely manner. Therefore we must have a fail-safe practice that acts as a catch-all for errors prior to the clear to close. A final validation of the automated underwriting system (AUS) findings report can perform this function for us.
Prior to finalizing the clear to close, take a close look at the final AUS run to determine if there are any changes. Compare it to the terms of your last approval to verify what those changes may have been. It is also a good idea to use your final Underwriting Transmittal form 1008 or 92900-LT as a checklist for comparison to the final AUS run. Double check your loan amount, LTV’s, debt-to-income ratios, cash to close, and more. Ensure that the final cash-to-close amount is covered by the assets you last verified. When underwriting an FHA loan, insure your final verified months of reserves listed on your 92900-LT match those listed on the final AUS run.
Next, double check the conditions on the final AUS to determine if there were any new documentation requirements. This can occur if the loan officer or processor omitted debts to update the debt ratios, utilized a new form of income or asset, or decided to pay off some debts. Executing a double-check of the conditions on your AUS can save you headaches further down the line when the loan is shipped for sale to investors.
Along these same lines, complete a final check of the credit report associated with the AUS. Double check that the credit report ID number and date are the same as the final credit report listed in your file. This is especially relevant on new construction loans where there is a delay in closing while waiting for the property construction to be completed.
Finally, it is a good idea to obsolete out, junk, or move any outdated AUS’s to the left side of the file. This will help prevent any confusion with the investors. Make sure the final validated AUS in the file is the AUS that matches your final 1003, 1008/LT, and credit. Utilizing this practice is a great way to make sure you catch all changes before the loan goes to closing. Errors are much easier to correct prior to close than after the borrower has signed the closing package.
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: contact@mortgageprocessor.org
