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.
Mortgage loans can be underwritten manually or with Desktop Underwriter® (DU®) in accordance with the Fannie Mae Selling Guide. In addition, Loan Product Advisor? may be used with some additional criteria as explained further in the MPF Xtra Selling Guide Chapter 4.3.
For additional Underwriting training, please attend our on-demand webinars:
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.
- The only MPF Program requirements that supersede DU and LPA requirements are the following:
- Occupancy Requirements
- Property Type Eligibility (for example: Co-ops are not eligible for sale under the MPF Xtra product)
- Products or loan attributes on the ineligible list (See MPF Xtra Selling Guide Chapter 2.3.2)
- Specific Requirements for using Loan Product Advisor (See chapter 4.3 for additional information)
- For manually underwritten loans: Originators must comply with Fannie Mae Selling Guide Chapter B3-1, Manual Underwriting.
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.
• MPF Loan Eligibility Requirements
• Underwriting: Basics (Part 1)
• Underwriting: Basics (Part 2)
• Underwriting: Advanced