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Subprime issues just keep on keeping on

I gotta share what happened to me today. Let me start by saying that for the past 8-10 years for conforming loans, pretty much "A" paper loans we have been relying up automated underwriting systems. These systems are proprietary and over the years, the only way we could close these A paper loans is if we received an approval from the computer. Fannie Mae (FNMA) had DU and Freddie Mac (FHLMC) had LP both introduced these automated systems as an answer to stop prejudice in having a human underwrite the file, and apply historic data to determine the chances of default in the future. Of course like anything new, we fought the change, I fought the change......One day I realized this was not going away , so time to make the best of it. Call me a nut, but I would run one loan through it up to 30 times just tweaking numbers to see what got me an approval and what did not. that way I knew when I was speaking with a client whether or not I could with confidence tell them they will be approved soon this automated underwriting became my friend ( of course unless I was wrong and it declined a loan) which thank god did not happen alot. Anyways after working with this system for at least 8 years, and knowing we I had an approval through DU, it was a done deal. No exceptions, no problems for 8 years until today.....I start working on my sister in law loan. I run it through the automated underwriting system (DU) and beautiful thing that it is - it says "Approved" - I of course called sis in law to tell her the good news, and submitted to a large mortgage banker (aegis) to get it to docs.... To my chagrin they did not honor the DU approval, instead they manually underwrote it, disregarded the fact that they had a DU approval and declined the loan!!!!! Yipes, we stepped back 10 years in time in a matter of a week. the explanation given was with all of the subprime shake up they are looking at things differently. What a Mess we are in. Thank God my sis in law loves me, knows me and trust me and I was able to submit to another company that did honor the DU approval and now getting loan docs, but what a crazy time we are in.

Posted by lorraine leff on 03/15/2007 10:57 PM

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subprime, crisis, lending, mortgage, home loans, automated underwriting, du

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