Would you agree that strong underwriting principals directly translate into the operations cost of your underwriting department? We think so. The further a deal goes down the funding process, the more time and expense it means to you.
The same reasons still exist for deals blowing up after an initial approval:
- Other parties showing up on title or the owner ends up being different than what was indicated on the application
- Registered mortgages that are greater than what was disclosed on the application
- Undisclosed mortgages and liens
- Undischarged mortgages
- Property value being less than what was disclosed
- Timing issues – property was refinanced many times in a short period and more…
Strong underwriting principals should mean that these kinds of issues would be caught sooner in the underwriting process. However, unlike credit reports that are relied upon at the application stage, some lenders don’t have the processes in place to catch these kinds of issues until time and expense has already been spent.
By far one of the most common issues, which leads to problems with deals closing are properties that don’t come in on value. This is often because the lender will rely upon the insurer to come back and agree or disagree with the stated value – which is damaging to relationships – or because the lender waits for an appraisal to be completed, which leads to unnecessary expense to the lender, broker or customer (whoever pays for the appraisal).
All of this can be avoided simply by integrating technology into your underwriting process at the application stage. Just as requesting a credit report is a must when a new application comes through, you can also mandate that a lender property report be required as well. A good lender property report will look at details such as who the legal homeowner is, what the property is worth, comparable sales and what encumbrances are registered against the title. Providers of these reports like Teranet’s Purview product even go as far as to provide a fraud check, which will highlight characteristics of a property that could indicate potential fraud.
Of course, any solution that enables you to search this information should be much less expensive than an appraisal and be available online and on demand.
Ensuring that the tools that you use match your core underwriting principles means that you will reduce the overall cost of underwriting mortgage applications, and will lead to stronger relationships with your brokers and insurers because your prudent underwriting will also save them time and expense.
Want to get your tools aligned with your core underwriting principles? Purview can help. Find out more by https://www.purview.ca/.