Originating & Underwriting
Underwrite the Loan
The loan is ready for underwriting!
Once a package with all processed verifications and documentation is completed, the file is sent to the underwriter. The underwriter is responsible for determining whether the package is deemed an acceptable loan by analyzing the 5C’s of underwriting:
How much can the Borrower afford?
Consider: DTI, Cash Flow, Occupation, Employment History, Income Stability, Timing of Repayment, Continuance, etc.
What will the borrower invest and have for reserves?
Consider: Checking/Savings, Investments, Liquidity, Cash for Close, Reserves, Overdraft/Non-sufficient Funds, etc
In the event of a default, what is the property worth?
Consider: LTV, Marketability, Appraisal Discrepancies, Liens, Easements, Judgments, etc.
What are unique factors surrounding the loan?
Consider: Market Conditions, Loan Purpose, Use of Cash Out (if applicable), etc.
Will the borrower repay the loan?
Consider: Borrower Attitude, Payment History, Credit Score, etc.
Underwrite the loan using either an Automated Underwriting System (AUS) or manually.
- For loans underwritten using Fannie Mae’s Desktop Underwriter® (DU®) or Freddie Mac’s Loan Product Advisor? (LPA?) automated underwriting system, follow the AUS feedback requirements for the applicable GSE and not the manual underwriting guidelines of the MPF® Traditional Selling Guide.
- The only MPF program requirements that supersede DU and LPA requirements are the following:
- Max LTV: 95%
- Minimum FICO: 620
- Full interior/exterior appraisal, or a DU or ACE LPA eligible appraisal waiver if MPF Program requirements for waivers are met (MPF Selling Guide 184.108.40.206.2)
- Occupancy requirements
- Property type eligibility (for example: Co-ops are not eligible under the MPF Program)
- Products or loan attributes on the ineligible list (see Selling Guide Chapter 2.7)
- For manually underwritten loans: Originators must follow the underwriting and eligibility guidelines of the MPF Traditional Selling Guide.
Determine if the loan meets all of the documentation and eligibility requirements of the MPF Guide.
- This includes all approval conditions generated on the feedback report (if using an AUS) or any additional conditions the underwriter may require.
- If more information is needed, the borrower is contacted to supply more information and/or documentation.
- If the loan is acceptable as submitted, continue on with the next steps in the loan process.
- Colonial's minimum loan term is 120 months.
- For Government Loans: See Chapter 4 of the Colonial Concurrent Servicing Sale Manual.
Tip: For additional Underwriting training, please view our on-demand MPF Traditional: Product Eligibility & Underwriting webinar or register to attend one of our Live Webinars!