One of the single largest expenses in a lender’s underwriting operation is the incorrect disclosure and omission of information. While this occurs to varying degrees, and while it is still argued which instances are and are not mortgage fraud, it nonetheless drives up the cost of underwriting. This has a trickle-down impact to both broker partners and lenders, whether it means increased scrutiny on applications, increased application fees, etc.
Yes, you can approve an application with conditions and if those conditions are not met, refuse to fund, but that doesn’t mean that you didn’t spend resources on administration, credit reports, appraisals and more. It is beneficial for lenders to look at how they can catch incorrect disclosures and omitted information earlier in the application process, by paying attention to key attributes in the mortgage application.
One search that is performed by every lender in connection with every application – even before a preliminary approval is issued – is a credit report. Why? Obviously because poor credit means a full stop for many lenders, especially in the absence of substantial equity. Even if the applicant says they have great credit, do you take their word for it and look at their credit report later in the process? Not likely- that just doesn’t make much sense.
So why would you wait to validate things like home value, homeownership, registered mortgages, etc…? You shouldn’t. This information is just as accessible as a credit report and arguably more important. And, it can all be accessed instantly online.
When receiving an application, here are some other things that you should look to validate, well before issuing an approval:
- Who is the homeowner? Are there other people on title? In cases of refinances, this remains a very common reason deals do not close. A deal shouldn’t make its way all the way to closing before this is uncovered.
- What is the property worth? You or your customer do not need to incur the expense of an appraisal in order to validate if the homeowner’s estimate of their property value is accurate. An automated valuation model is an excellent way for an underwriter to check a property’s value to decide if a deal should move forward to the appraisal stage.
- What mortgages and/or liens are registered on title? Looking at mortgages and liens registered on title and when they were registered allows underwriters to uncover if the balance stated is consistent with what it should be when compared to the registration date and amount or if there is likely to be trouble ahead.
Not only does taking steps to review this information at the application stage mean that you save time and expense on the underwriting side of your operation, it also strengthens your relationships with partners who bring you business by demonstrating that you are committed to seeing effort focused on deals that can close which means profit for all.
At Purview, we make it easy to evaluate an application at the very beginning.
Find out more by visiting https://purview.ca/.