Depending on your business, your underwriting team may choose to underwrite the MI in-house (delegated) or send the file to Enact (non-delegated). No matter how your business underwrites, it’s always important to have a complete loan file.
In most cases, you can expect smooth sailing with the MI underwriting process. However, there are cases where the MI company needs clarification or additional documentation in order to approve the MI. This can slow down the underwriting decision.
Enact’s Risk Quality Assurance team analyzes all the data and documents provided by our lenders to help improve loan quality. Improved loan quality can lead to a faster time to close and less hassle for you and your borrowers. Here are the top three trends we’ve noticed most recently.
Lack of Proper Documentation of Borrower’s Assets
When it comes to analyzing a borrower file, it’s easy for an underwriter to analyze asset documentation in a borrower’s file like paychecks and deposits. Often, there are other types of funds that need to be documented like gift funds. For example, a borrower might be expecting a gift from family members or an acceptable donor like another relative, fiancé or domestic partner.
What often happens is gift funds are not properly documented in one of three ways:
- Missing the gift letter
- Lack of evidence of a donor’s ability to provide the gift
- Lack of documentation for the borrower’s receipt of the funds
The lack of documentation can cause a hang-up in the MI decision underwrite and delay time to close.
The transfer of funds – especially large amounts – must be properly documented and preserved in the loan file. It must meet the documentation requirements for the MI company, the AUS, and the Investor.
Verbal Verification of Employment (VOE) Missing or Incorrect
Confirming a borrower’s employment can feel like second nature to many lenders. So second nature, in fact, that they might forget to retain the verbal VOE in the underwriting file.
Forgetting to include the verbal VOE isn’t the only potential issue. In many cases, the verbal VOE might be incomplete or incorrect. There are four information points that are key when you’re performing a verbal VOE:
- Name, title of person who confirmed employment for lender
- Name, title of person who completed verification for employer
- Date of call
- Source of phone number
Depending on the Investor, you should also check timeframe requirements for completing the verbal VOE. For example, Fannie Mae requires that the verbal VOE not be completed more than 10 days before the Note date.
Income Not Documented as Required by Program and/or AUS Findings Recommendation
Depending on the AUS you use, you must follow specific documentation requirements for Desktop Underwriter® (DU) or Loan Product Advisor® (LPA) to support your underwriting decision.
One error we’re seeing more frequently is the lack of documentation for when a borrower switches jobs mid-year.
Per the 1003 requirements, you must provide a 2-year job history for the borrower. If your borrower has switched jobs in the last 2 years, you’re required to obtain documentation from the previous employer to reflect the change in income and employment. This could include a W-2 or a previous pay stub showing YTD earnings depending on when the borrower changed jobs. You might also need to address employment gaps if there are any.
Overall, you want to provide evidence for the continuity of income.
MI Decision Tips for You
Nothing feels better than getting an MI approval quickly and without any back and forth. Reviewing these common MI decision tips on a quarterly basis can help ensure the file you’re submitting for an MI underwrite is complete. Doing so can further reduce the processing time, creating a better experience for you and your borrower.
You can find all of the Underwriting MI Decision Tips on the Underwriting Tips page on the MI Site.