Written By: Stacey Sprain, Op-Ed Writer
After a long, hard Winter in many areas of the U.S., Spring is on the horizon which means business is about to pick up again for many of us with the start of construction season. This means NOW is the time to take a look at your loan processing and submission habits to seek out areas of improvement. Below are some standard processor submission tips to help you submit high quality, complete loan files to your underwriters.
Always use a cover letter. Though it’s an extra step, it’s ALWAYS a good idea to include a cover letter addressed to underwriting with each and every loan submission. The cover letter doesn’t have to be lengthy but should be in a consistent format that provides a brief overview of the loan file that follows it. Below is an example format for a standard submission cover letter:
Underwriting Submission Cover Sheet
To: (insert name of underwriter or underwriting department with a specific lender)
From: (insert your name) and (insert the name of your employer)
Email:(add your email contact address)
Phone: (add your contact phone number) Fax: (insert your contact fax number)
Next, insert some sort of standard verbiage such as the following:
Below please find an outline of the attached loan submission details. Please contact me using the above contact information if I can provide further information or when you reach a loan decision. Thank you!
Next, include standard loan details that would be relevant as overview for any loan type:
Loan purpose: (indicate whether purchase, cash out refinance, rate/term refinance, streamline refinance, IRRRL etc).
Proposed Qualifying Ratios:
Current housing expense:
Proposed Housing Expense:
Borrower Credit Score:
Co-Borrower Credit Score:
AUS Status: (indicate whether AUS findings are included for DO/DU or LP and what the actual findings status result is- Approve/eligible, Approve/ineligible, Refer/Eligible, etc.)
Relevant Loan Characteristics: (here you would want to indicate whether the loan includes certain loan traits such as an REO property, non-occupant co borrower, condominium or attached PUD property, manufactured property, 2-4 unit property, rural property, non-traditional credit or loan amount exceeding $417000 etc).
Use the categories in the sections below to specifically list and explain the most pertinent details of each topic.
What would be important for the underwriter to know up front?
Subject Property/Collateral: Indicate important details regarding the subject property to give an overview to the underwriter.
Employment/Income: Indicate noteworthy explanations on how you derived income calculations, background and history of a borrower’s employment history if needed, point out job gaps and brief explanations if necessary, or simply state that borrower is stable employed, how he/she is paid (hourly, weekly, monthly) and if additional sources like overtime, bonus were used in qualifying.
Assets/Funds to Close/Reserves: Point out the source of required downpayment, explain odd deposits appearing on statements, explain if borrower is saving to close, if receiving gift funds, if using proceeds from sale of personal property, if there are seller contributions being made for borrower closing costs, indicate sources of downpayment assistance or secondary financing, point out verified reserves etc.
Credit/Liabilities: Indicate credit scores, note non-traditional credit sources, explain outdated derogatory ratings, if accounts listed do not belong to borrower, if debt has been paid down, if debt has been omitted and why, include any comments relative to giving a brief overview of the credit for each borrower.
Comments/Compensating Factors: Use the last part of the cover sheet to identify potential negative loan factors recognized in processing and point out the compensating factors that offset the concerns. This is where you can clearly communicate to underwriting that you are aware of certain issues yet still believe the loan should be approved and most importantly WHY you feel the loan should be approved. This is also where you would want to list any items you have not included yet have requested and are expecting, etc.
Make sure the updated 1003 and any government loan application addendums are updated to coincide with the loan documentation you are submitting.
Make sure AUS findings are updated to match the 1008 Transmittal, 1003 and any government loan application addendums you are submitting.
Make sure the documentation you are submitting meets AUS Approve/Accept findings requirements or full documentation manual underwriting documentation guideline requirements if such is the case
Make sure credit report, asset statements, paystubs and appraisal are all considered valid at the time of submission.
Make sure asset statements include all pages.
Make sure non-payroll deposits are explained and documented for asset statements.
Make sure NSFs are explained for asset statements and that the explanations are sensible and reasonable.
Make sure tax returns include all pages and schedules.
Make sure qualifying income calculations are clearly explained.
Make sure all regulatory disclosures as well as the initial 1003 have been signed and dated by the required parties.
Make sure explanation letters are included for derogatory credit, inquiries, disputed credit and authorized user credit
Make sure you have double-checked the lender’s product guidelines and credit overlay requirements PRIOR TO SUBMISSION so you are certain not to have missed a requirement outside of agency standard guidelines.
Lastly, make sure you submit complete packages. It’s not fair to submit incomplete, poorly processed loan files because doing so directly contributes to delayed underwriting turn times for everyone- including YOU! Be sure to organize and prioritize your daily workload so that doesn’t happen.
About The Author
Stacey Sprain - As an op-ed writer, Ms. Stacey Sprain is currently a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution.