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Phase D: Underwriting

Phase D: Underwriting SIPOC Workflow Diagram

SIPOC Workflow Components

Suppliers (Received from)

  • Loan Processing Team
  • Third-party Verifiers
  • Document Management System
  • Quality Control Team

Inputs (Information)

  • Processed Loan File
  • Verification Reports
  • Supporting Documentation
  • Credit Reports

Process (Activities)

Outputs (Created)

  • Underwriting Decision
  • Conditions List
  • Risk Assessment Report

Co-Workers (Handed-off To)

  • Loan Officers
  • Processing Team
  • Closing Department

Systems Interaction Summary

  • 1. Access Borrower Data
    • Open the borrower's loan file in Encompass
    • Navigate to the Credit Report and 1003 Application Form
  • 2. Review Credit Report
    • Analyze the borrower's credit score and history from the retrieved tri-merge credit report
    • Focus on:
      • Credit scores (FICO)
      • Derogatory items (late payments, collections, charge-offs)
      • Credit utilization ratios
      • Public records (e.g., bankruptcies, liens)
  • 3. Assess Debt-to-Income (DTI) Ratio
    • Calculate Front-End DTI (housing expense to income ratio) and Back-End DTI (total debt to income ratio) using Encompass's built-in calculations
    • Ensure DTI falls within program-specific thresholds
  • 4. Analyze Income and Assets
    • Verify monthly income sources and confirm sufficiency to support the loan
    • Review asset statements to ensure there are adequate reserves for down payment, closing costs, and reserves
  • 5. Document Findings
    • Add notes to the Loan Notes section summarizing the creditworthiness analysis
    • Flag any concerns or potential issues for further review
  • 1. Retrieve the Appraisal Report
    • Locate the Appraisal Report in the eFolder once it has been uploaded by the appraisal vendor
  • 2. Verify Property Details
    • Check the appraisal report for:
      • Property value
      • Property type and condition
      • Comparable sales (comps)
      • Location details
  • 3. Validate the Appraised Value
    • Compare the appraised value with the estimated property value and loan amount
    • Confirm that the Loan-to-Value (LTV) ratio meets program guidelines
  • 4. Check for Issues
    • Identify red flags in the appraisal report, such as:
      • Major repairs required
      • Discrepancies in property condition
      • Overvaluation compared to comps
  • 5. Document Review Findings
    • Add notes summarizing the appraisal review in the Loan Notes section
    • Flag issues requiring follow-up with the appraiser or borrower
  • 1. Select Loan Program
    • Confirm the selected loan program (e.g., FHA, VA, Conventional) in the Loan Summary section
  • 2. Verify Borrower Eligibility
    • Check borrower qualifications against program-specific requirements, such as:
      • Minimum credit score
      • Maximum DTI ratio
      • Minimum reserves
      • Down payment requirements
  • 3. Review Income and Employment
    • Ensure income and employment history meet program stability and verification standards
    • Use third-party verification services for accuracy (e.g., The Work Number)
  • 4. Check Compliance
    • Run compliance checks in Encompass to ensure the application adheres to federal, state, and program regulations
  • 5. Run Automated Underwriting (AUS)
    • Submit the application to an AUS (e.g., Fannie Mae's DU, Freddie Mac's LPA) and review findings for alignment with lending guidelines
  • 1. Review the File for Missing Items
    • Identify gaps or incomplete information in the loan file, such as:
      • Missing documents
      • Unverified income or assets
      • Unresolved credit issues
  • 2. Add Conditions to the Loan File
    • Navigate to the Conditions section in Encompass
    • Enter conditions as Prior to Close (PTC) or Prior to Approval (PTA) based on their priority
  • 3. Track and Resolve Conditions
    • Monitor the status of conditions and update them as they are satisfied
    • Add resolution notes for each condition in the loan file
  • 1. Review the Complete Loan File
    • Ensure all required documents and data are present and verified
    • Confirm all conditions have been addressed or are listed as pending
  • 2. Make a Decision
    • Based on the analysis:
      • Approve: If the borrower meets all guidelines and conditions
      • Deny: If the borrower does not meet lending criteria, and issues cannot be resolved
      • Conditional Approval: If the borrower meets most requirements but specific conditions remain unresolved
  • 3. Document the Decision
    • Update the loan status in Encompass:
      • Approved: Change status to approved
      • Denied: Update status and provide detailed reasons for denial
      • Conditional Approval: Add conditions and change status to conditionally approved
    • Save all documentation and decision notes in the loan file
  • 4. Communicate the Decision
    • Notify the borrower and other stakeholders of the decision:
      • Use the eFolder or Communication Log to send formal decision letters
      • Provide clear instructions for next steps if applicable

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