Colleen M. Olivas, Underwriter Roles and Responsibilities
1. Part 1 - Responsibilities and Roles as an
Underwriter…an Overview
2. As our society has evolved culturally,
ethnically, and demographically, so has the
approach to qualifying mortgage applicants.
3. Secondary market guidelines still provide
structure (and with good reason), but today's
underwriting flexibilities allow an underwriter
to review each situation individually.
In this way, the underwriter works as a team
with the loan officer.
4. The goal of this mini-course is not to
train the reader to underwrite any
particular program-- as specific
guidelines change regularly.
I simply want to present fundamental
underwriting concepts.
5. Many lenders use automated underwriting
systems (AUS) in their underwriting decision
making processes. An AUS, such as Fannie
Mae’s Desktop Underwriter or Freddie Mac’s
Loan Prospector is a computer software
program that empirically assesses individual
and overall risk of an application.
6. Federal Regulations make it clear that
mortgage lenders have a responsibility to
attempt to satisfy mortgage loan requests as
long as the risk is analyzed fully and deemed
acceptable.
7. The desire to make loans must be balanced by
a mortgage lender’s fiduciary responsibility to
protect whoever provides funds for those
loans: depositors, shareholders, government
agencies or secondary market investors.
8. All lenders, servicers, investors and insurers
share the danger that even properly
underwritten mortgages may become
delinquent.
9. Mortgage Brokers/Bankers have no margin for
error. Every loan they underwrite must be sold
to a permanent investor. If a poorly
underwritten loan is not secondary marketable
at a reasonable price, it may result in
considerable loss to a mortgage broker/banker.
10. The Underwriting mechanism has significant
and lasting financial effects. Therefore it is
imperative to adopt prudent guidelines,
maintain an objective auditing structure,
develop and maintain professional
underwriting expertise and review
underwriting performance through quality
control.
11. All mortgage loans involve the risk of possible
financial loss. The underwriting analysis
quantifies the risk factors present and
measures these against other strengths in the
file to determine whether the strengths offset
the weaknesses.
12. Risk is never completely eliminated…it is only
managed.
13. Credit – based on the credit history of the
applicant
Collateral – the condition and value of the
property being secured
Default – debt repayment
Interest rate – changes in market interest rates
vs. loan interest rates
….to name a few.
14. It is important to stress that only underwriting
guidelines exist, not specific, precise formulas
to apply to every applicant.
15. Although today’s underwriter has access to
sophisticated automated underwriting systems
(AUS), credit scores and mortgage scores, the
time-honored industry saying still rings true:
“underwriting is an art, not a science.”
16. A successful underwriter’s greatest asset is not
these powerful analytic tools, but the ability
to apply common sense and creativity to the
many situations that arise when qualifying
mortgage applicants.
