UNDERWRITING GUIDELINES

 

 

Mortgage underwriters are responsible for determining borrower risk and ultimately whether or not to approve the loan requested, must rely on receiving timely and accurate documentation provided by the borrower.

The position of Mortgage Underwriter carries the final responsibility of protecting the mortgage company from loans that could have a high probability of default, leading to foreclosure. It is the Loan Underwriter's responsibility to be fully aware of all current underwriting guidelines, policies, and procedures. This includes knowing how to detect fraud, and being aware of "red flags" when reviewing the documentation. It is also the Loan Underwriter's responsibility to ensure that the property is acceptable.

Good common sense, coupled with a complete knowledge of underwriting guidelines, is required in order to be able to make a fair decision on whether to accept or decline a loan application.

The job of the underwriter is to compare the loan application with the credit profile and supporting documents provided by the borrower with the requirements of the loan program offered by the lender. The underwriter issues a formal loan approval on behalf of the lender and also takes on the responsibility of understanding and communicating investor guidelines in conjunction with each transaction. The underwriter will make thorough investigation based on all the documents and in the event that the borrower has made any claim without providing supporting documents, it is the responsibility of the underwriter to ask for clarification documents. He or she will also check to see if there are any inconsistencies in the application or information provided. Also, it is their job to see whether the borrower will be able to make timely payments based on the supporting documents and other information. The underwriters often set the desirable loan amount and determine the conditions under which the transaction can close.

The underwriter makes sound decisions and ensures that all the decisions meet the appropriate legal, secondary market and lender policy requirements.

The underwriter must perform all duties in accordance with the company’s, state and federal regulations. Also, they must audit functions of loan origination, loan processing and loan administration.

Mortgage Underwriting is the process of getting an approval for a mortgage application based on verification of borrower's financial information such as credit history and scores. There are a number of rules pertaining to each mortgage program such as the eligibility of borrower, the type of property involved, the credit history and so on. It is also the process of determining and controlling the risk of loss.

The process of approving or declining a loan application is made by the underwriter after reviewing the supporting documentation and appraisal. If there are discrepancies in the loan application or a document is missing or inconsistent, then the application will be suspended and put on hold until the requirements are met.

A lender will review a loan prospect and concentrate on four basic categories. These categories are: credit, collateral, cash and cash-flow.

Credit addresses the amount of debt and financial obligations that currently exist and how well those relationships have been maintained.

Collateral addresses the property you wish to finance. Guidelines may vary for multi-family homes, condominiums as compared to a single family residence.

Cash addresses the resources you have to put toward a down payment and the other expenses of buying a home. These other expenses are closing costs, escrows, pre-paids, advance insurance and cash reserves.

Cash-flow addresses the amount of income coming into a household and the amount going out. The percentage of income allocated to housing costs and all other obligations is identified. Industry guidelines identify minimum guidelines for those areas and the lender will review all the documentation provided by a loan customer as it relates to those four basic categories

 

MORTGAGE FRAUD

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The Uniform Residential Loan Application (URLA) #1003 contains the following acknowledgement agreement requiring all mortgage applicants to sign and date.  All lenders use the same application.

 

IX. ACKNOWLEDGEMENT AGREEMENT

Each of the undersigned specifically represents to Lender and to Lender's actual or potential agents, brokers, processors, attorneys, insurers, servicers, successors and assigns and agrees and acknowledges that: (1) the information provided in this application is true and correct as of the date set forth opposite my signature and that any intentional or negligent misrepresentation of this information contained in this application may result in civil liability, including monetary damages, to any person who may suffer any loss due to reliance upon any misrepresentation that I have made on this application, and/or in criminal penalties including, but not limited to, fine or imprisonment or both under the provisions of Title 18, United States Code, Sec. 1001, et seq.(2) the loan requested pursuant to this application (the "Loan") will be secured by a mortgage or deed of trust on the property described herein(3) the property will not be used for any illegal or prohibited purpose or use(4) all statements made in this application are made for the purpose of obtaining a residential mortgage loan(5) the property will be occupied as indicated herein(6) any owner or servicer of the Loan may verify or reverify any information contained in the application from any source named in this application, and Lender, its successors or assigns may retain the original and/or an electronic record of this application, even if the Loan is not approved(7) the Lender and its agents, brokers, insurers, servicers, successors and assigns may continuously rely on the information contained in the application, and I am obligated to amend and/or supplement the information provided in this application if any of the material facts that I have represented herein should change prior to closing of the Loan(8) in the event that my payments on the Loan become delinquent, the owner or servicer of the Loan may, in addition to any other rights and remedies that it may have relating to such delinquency, report my name and account information to one or more consumer credit reporting agencies(9) ownership of the Loan and/or administration of the Loan account may be transferred with such notice as may be required by law(10) neither Lender nor its agents, brokers, insurers, servicers, successors or assigns has made any representation or warranty, express or implied, to me regarding the property or the condition or value of the property and (11) my transmission of this application as an "electronic record" containing my "electronic signature," as those terms are defined in applicable federal and/or state laws (excluding audio and video recordings), or my facsimile transmission of this application containing a fascimile of my signature, shall be as effective, enforceable and valid as if a paper version of this application were delivered containing my original written signature.

Borrower's Signature  Date  Co-Borrower's Signature  Date
 X    X  

 

 

 

 

 

 

FTC Statement

 

 

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