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Underwriting a Loan

This guide explains the underwriting workflow in ReversePilot, including reviewing applications, issuing conditional approvals, managing conditions, and clearing loans to close.

Overview

Underwriting involves:

  • Reviewing loan applications for approval
  • Assessing borrower creditworthiness
  • Evaluating property value and condition
  • Issuing conditional approvals
  • Managing conditions
  • Clearing loans to close

Underwriting Workflow

Step 1: Receive Application

When an application is submitted for underwriting:

  1. Loan status changes to "Submitted to Underwriting" or "Underwriting"
  2. Application appears in underwriter's work queue
  3. Review application completeness
  4. Begin underwriting review

Step 2: Initial Review

Conduct initial review:

Application Completeness

  • Verify all required documents are present
  • Check that all data is entered
  • Ensure calculations are complete
  • Verify third-party services are ordered

Borrower Eligibility

  • Verify borrower age meets requirements
  • Confirm property is eligible
  • Check loan product eligibility
  • Verify compliance with program guidelines

Step 3: Credit Review

Review credit information:

Credit Scores

  • Review scores from all three bureaus
  • Note any credit issues
  • Assess creditworthiness
  • Consider compensating factors

Credit History

  • Review payment history
  • Assess debt-to-income ratios
  • Evaluate credit utilization
  • Note any derogatory items

Liabilities

  • Verify all debts are accounted for
  • Check debt payments
  • Assess ability to pay property charges
  • Review residual income (if applicable)

Step 4: Property Review

Review property information:

Appraisal Review

  • Verify appraised value is reasonable
  • Check property condition
  • Review comparable sales
  • Assess property type and use

Property Charges

  • Verify existing mortgages
  • Check property taxes
  • Review HOA fees
  • Assess property charge set-aside (if applicable)

Title Review

  • Review title report
  • Check for liens and encumbrances
  • Verify property ownership
  • Note any title issues

Step 5: Financial Assessment

Review financial information:

Income Verification

  • Verify income sources
  • Confirm income amounts
  • Assess income stability
  • Review income documentation

Asset Verification

  • Verify asset values
  • Confirm asset ownership
  • Assess asset liquidity
  • Review asset documentation

Residual Income (HECM)

For HECM loans requiring financial assessment:

  • Calculate residual income
  • Compare to regional standards
  • Assess ability to pay property charges
  • Determine if set-aside is required

Step 6: Calculation Review

Verify loan calculations:

Principal Limit

  • Verify principal limit calculation
  • Check expected rate
  • Confirm PLF table usage
  • Review age determination

Available Proceeds

  • Verify available proceeds calculation
  • Check set-asides
  • Review payoffs
  • Confirm closing costs

Fees

  • Verify fee amounts
  • Check fee compliance
  • Review fee calculations
  • Ensure fees are reasonable

Step 7: Compliance Review

Review compliance requirements:

HMDA Data

  • Verify HMDA data is complete
  • Check demographic information
  • Ensure accurate reporting

Disclosures

  • Verify disclosures were sent
  • Check disclosure timing
  • Review disclosure accuracy

Licensing

  • Verify loan officer licensing
  • Check state requirements
  • Ensure compliance

Step 8: Decision

Make underwriting decision:

Approval Options

  • Conditional Approval: Approve with conditions
  • Clear to Close: Approve without conditions
  • Denial: Deny the application

Conditional Approval

If conditional approval:

  1. Issue conditional approval
  2. List all conditions
  3. Set condition deadlines
  4. Communicate with processor

Clear to Close

If clear to close:

  1. Change status to "Clear to Close"
  2. Add approval notes
  3. Notify stakeholders
  4. Proceed to closing

Denial

If denying:

  1. Change status to "Adversed"
  2. Enter denial reason
  3. Complete adverse action notice
  4. Notify borrower

Managing Conditions

Creating Conditions

When issuing conditional approval:

  1. Navigate to Conditions section
  2. Click "Add Condition"
  3. Select condition type
  4. Enter condition description
  5. Set deadline
  6. Assign to processor (if applicable)

Condition Types

  • Document Conditions: Required documents
  • Verification Conditions: Information verification
  • Property Conditions: Property-related items
  • Financial Conditions: Financial documentation
  • Other Conditions: Miscellaneous items

Tracking Conditions

  • Monitor condition status
  • Review condition responses
  • Verify condition completion
  • Update condition status

Clearing Conditions

When conditions are met:

  1. Review condition response
  2. Verify condition is satisfied
  3. Mark condition as cleared
  4. Update condition status

Outstanding Conditions

Before clearing to close:

  • [ ] All conditions cleared
  • [ ] All conditions verified
  • [ ] No outstanding items
  • [ ] Ready for closing

Clear to Close

Requirements

Before clearing to close:

  • All conditions satisfied
  • All documents received
  • All verifications complete
  • Calculations verified
  • Compliance confirmed

Clearing Process

  1. Review all conditions
  2. Verify all requirements met
  3. Change status to "Clear to Close"
  4. Add closing notes
  5. Notify stakeholders

Closing Preparation

After clearing to close:

  • Generate closing documents
  • Coordinate closing schedule
  • Prepare closing package
  • Notify all parties

Best Practices

  1. Be Thorough: Complete comprehensive review
  2. Be Consistent: Apply standards consistently
  3. Be Timely: Review within expected timeframes
  4. Be Clear: Provide clear condition descriptions
  5. Be Communicative: Keep stakeholders informed

Common Underwriting Scenarios

Standard Approval

  • All requirements met
  • No significant issues
  • Clear to close

Conditional Approval

  • Minor issues to resolve
  • Additional documentation needed
  • Property conditions to address

Complex Cases

  • Multiple conditions
  • Unusual circumstances
  • Additional review required

Documentation

Underwriting Notes

Add notes for:

  • Decision rationale
  • Special circumstances
  • Risk factors considered
  • Compensating factors

Condition Documentation

Document:

  • Condition requirements
  • Condition responses
  • Condition verification
  • Condition clearance

Troubleshooting

Incomplete Applications

  • Return to processing
  • Request missing information
  • Set clear expectations
  • Follow up on outstanding items

Calculation Discrepancies

  • Verify calculations
  • Review loan product settings
  • Check input values
  • Recalculate if needed

Property Issues

  • Document issues clearly
  • Set appropriate conditions
  • Coordinate with appraiser
  • Resolve before closing

Next Steps

After underwriting:

For questions about underwriting, contact your administrator or refer to the Support Documentation.