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How Do Automated Underwriting Systems Work in Mortgage Process?

posted by Chris Valentine

Automated mortgage underwriting is the process by which lenders evaluate mortgage loan applications using predictive models, artificial intelligence, and machine learning. It provides lenders with a comprehensive risk vs. reward analysis of the borrower. Applications are either approved or denied based on a thorough evaluation of the property and the borrower’s ability to repay the loan.

Given below are some of the ways in which automated underwriting works:

Assign Risk Values Instantaneously

Underwriters need to assign a risk rating to borrowers after going through the documents such as income statements, income to debt ratio, bank accounts etc.  Automated underwriting comes with predictive models that assign risk after browsing through borrower documents almost instantaneously.

Identify Missing Documents

Sometimes a loan application may reach an underwriter without proper scrutiny. When this happens, the underwriter may have to deal with applications with missing information or missing supporting documents. Automated underwriting nips this possibility in the bud. It doesn’t allow a loan application to pass till all documents are submitted along with the application form.

Pre-Approval & Title Order & Search

If the docs submitted by the borrower is proper and risk rating is within acceptable limits a pre-approval letter must be generated. Automation helps in generating an automated pre-approval letter in the lenders template. Besides, it also helps in auto searching the title agency/company in the state where the property is located along with credentials. The lenders need to take a call on whom to assign the title search process.

Automate Title & Appraisal Checks

Title and appraisal reports need to be evaluated properly to uncover inconsistencies. With underwriting automation, the manual effort involved in executing this task can be eliminated. Automated search can scan through the document in a matter of minutes to identify inconsistencies in liens, location, number etc. Automation also helps in carrying out a study of comparative property rates with the click of a button.

Recall Rules

Automated underwriting systems follow rules and guidelines that rarely involve exceptions. When exceptions are made, however, the underwriting system is adept at tracking them for later use to determine whether some rules need to be revised. This goes a long way in maintaining consistency in decision-making and removes confusion.

Automated mortgage underwriting brings a host of benefits to the lender. From better resource allocation and improved workflow to quicker loan approvals and refined product development, automated underwriting takes care of end-to-end aspects of underwriting. Although underwriting automation can be costly for some to set up, it means that loan decisions are generated quickly. This is important for improved productivity and efficiency, as well as for greater borrower satisfaction.

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