The role of the Underwriter

Mortgage and Lending with Cranbrook Loans NMLS #134090

As a follow up to my blog on the role of the loan officer I'd like to say a few words about the role of an underwriter. 

First, understand that there are two underwriters, the automated one and the human one. All conventional and government loan files are first submitted through a software package that we generically refer to as an Automated Underwriting System or AUS for short. The two most common systems are Fannie Mae's Loan Prospector and Freddie Mac's Desktop Underwriter.

These systems take in all the info the loan officer input to the application, along with the credit report, and render a decision that the applicant does, or does not, meet the lender's guidelines. Keep in mind the old saying, "garbage in, garbage out". If the information the Loan Officer input into the system is incorrect, your approval may be no good. 

Enter the human underwriter. Their job is to first review the info input by the loan officer against the documentation provided. If the human underwriter finds that the info is incorrect (such as income) they will correct the info and request an updated decision from the AUS. This can result in the file losing it's approval. So the loan isn't really approved until the human underwriter says it's approved.

Underwriters are sort of the parents in a mortgage company. It's the loan officer's job to ask for approval of their loan, it's an underwriter's job to review the application and make sure it fits the investor's requirements. Sometimes that means they have to be the bad guy and decline a loan. Human underwriters can over ride the AUS approval or denial but they would need a very good reason to do so. They are more likely to turn down an approved loan than approve a loan denied in the AUS system but I've seen it done.

Before they say no, a good underwriter will explore possible options with the MLO to see if they can approve the application. They will make sure they aren't missing any important documentation. But ultimately they need to make sure the file meets guidelines and makes sense. 

Underwriters go through lots of training to do their jobs. At the start of their careers they are given simple files such as conventional rate and term refinances. As they get more experience they start underwriting more complex cash out refi's and purchases. Then they can take additional training and start to underwrite FHA, VA and USDA files. Only the most experienced underwriters are allowed to underwrite construction loans. 

As an applicant, you most likely will never speak to your underwriter. Some companies don't even allow loan officers to speak to them. If you have an issue with how your loan was underwritten you will need to speak to your loan officer and put together a letter to the underwriter. You will need documentation to back up your letter. 

Always keep in mind, the underwriter has a job to do and that is to protect the lender, not necessarily to approve your loan application.


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Comments (5)

Barbara Todaro
RE/MAX Executive Realty - Happily Retired - Franklin, MA
Previously Affiliated with The Todaro Team

Good morning Jerry Thomas-Construction Loans the underwriter is the master who surfaces at the end of the procedure.... the judge, the jury and the executioner, in my most humble opinion!

May 22, 2018 06:22 AM
Jerry Thomas-Construction Loans

Well said Barbara! :)

May 22, 2018 06:31 AM
Valeria Mola
SIB Realty - Miami, Sunny Isles Beach - Sunny Isles Beach, FL
305-607-0709 SIB Realty Condos for Sale and Rent

Yes, the underwriter is very very important in the process of getting loan. I did not know, it is 2 of them. Human and Authomatic. Thank you, I learned something new. Most of our buyers in our area Cash buyers. Thank you, Jerry Thomas-Construction Loans, for interesting information.

May 22, 2018 06:22 AM
Valeria Mola
SIB Realty - Miami, Sunny Isles Beach - Sunny Isles Beach, FL
305-607-0709 SIB Realty Condos for Sale and Rent

Well, said, Barbara. The Judge, The Jury and the execurioner. :)

May 22, 2018 06:24 AM
Evelina Tsigelnitskaya
SIB Realty - Sunny Isles Beach, FL

Agree, that is true. Without an approval of underwriters - no loan possible. 

Thank you, great  post,  Jerry Thomas-Construction Loans.

May 22, 2018 06:26 AM
James Grant
Asheville, NC

Good Morning, Jerry, Underwriters operate in many secrets of the financial world, including the mortgage industry, the insurance industry, Equity markets and common types of debt securities. Thanks for sharing!

May 22, 2018 07:26 AM