MReport July 2020

TheMReport — News and strategies for the evolving mortgage marketplace.

Issue link:

Contents of this Issue


Page 29 of 67

28 | M R EP O RT FEATURE For instance, if a credit card becomes maxed out, the borrower has high utilization, or if they apply for a new credit card, that could be an indication their income or employment status may have changed. Therefore, we are seeing more frequency in looking into borrowers' current situation closer to the closing date. Utilizing tools that are more up to date to monitor the spending behaviors for things like credit cards is a good way to determine the status of a borrower. We are seeing lenders perform credit checks and verify employ- ment information a minimum of less than 10 days before—if the not the day of—closing to make sure there aren't any significant financial changes and to con- firm that the borrower is still in good standing. If their status has changed, the loan and closing pro- cess could come to an end prior to reaching the closing table. For borrowers that may be self- employed or have a nontraditional type of work, the process is a little different because it takes longer to verify current status. Because of that, it is important to utilize alternative means to verify employment. What COVID-19 also has done is extend the tax filing date to later this year, which has important implications for lenders. With tax filing being put off until the middle of July, it makes it more difficult for lenders to identify the income levels that allow them to provide a loan if the borrower does not file their taxes prior to the deadline. For lenders, this means that frequency and proactivity is their friend. Knowing that the borrower is not their typical situation, they must be sure to collect information early on and look into different ways to obtain current income tax information that is more up to date since the filing is delayed. Given the circumstances, year- to-date company profit and loss statements and monthly business bank statements are becoming more common documentation to obtain for self-employed borrowers. Understanding Unique Situations O ne other key part of navigat- ing the underwriting process during COVID-19 is taking into consideration those unique circumstances to ensure business continues as expected. Like previ- ously mentioned, some individu- als work for themselves or they may have been furloughed. While this makes verifying their current financial situation more challeng- ing, it does not necessarily mean that they are no longer viable for a loan. However, it does mean that the loan terms may change to ensure the lender is not underwrit- ing a loan with excessive risk or giving rights to a property that a borrower can no longer afford. Especially while interest rates are low, the number of borrow- ers applying to refinance has increased. While this is a great opportunity for the borrower, they must be careful about how they go about refinancing and if they are simultaneously looking into a new loan and property. As a lender, it is important to investigate previous or current status of loans from other lenders to make sure there isn't any alarm- ing activity. For instance, if the borrower currently has forbearance on their previous mortgage and is seeking a new loan, that will impact the new loan indefinitely. Seeking Flexibility for Borrowers F or a lender, while they need to continue the business of provid- ing loans, they also must make sure the loans show no signs of going into default. The lender must also look out for the borrower and make sure they do not get into a situation that could cause financial ruin later. Lenders also should remain up to date on the latest guidelines that have been adjusted due to COVID-19. There is some flex- ibility to make sure that individu- als that are impacted by the virus can still obtain a mortgage, but it requires some extra work from the lender. For lenders, this is the time to make sure that all avenues are being explored like adjusting loan terms and working with the borrower to make sure there is not a complete halt on their intentions of purchasing a home. Work with your peers to stay informed on what types of guidelines have changed due to the virus and look into flexible options to continue business. Underwriting Post COVID-19 I t is uncertain as to when things will return to "normal," or if things will ever be the same. Some industries have been hit harder than others and as a result will see changes, like the mortgage industry. For lenders, it is now part of their job to look more closely at the borrower's eligibility and go the extra mile to confirm that the borrower's status hasn't changed during the closing process. It also is important to make sure that there are options to be able to facilitate loans under these different circumstances. The underwriting process has seen many significant changes and will continue to do so. Lenders must now and in the future be sure to have their ducks in a row to ensure both borrower and lender are viable and protected during and after COVID-19. . BRIAN KUCAB is Director of Underwriting at Genworth Mortgage Insurance, where he has held various leadership roles with a focus on risk assessment and mitigation, as well as process enhancement. Brian began his career in financial services as a residential underwriter before joining Genworth in 2007 to focus on contract underwriting recourse. In 2009, he moved into loss mitigation as Director of Investigations, with responsibility for delinquent loan reviews and forensic underwriting. He returned to underwriting in 2013 to lead on-site customer fulfillment and product management before assuming his current role. The statements provided are the opinions of Brian Kucab and do not reflect the views of Genworth or its management. It is uncertain as to when things will return to "normal," or if things will ever be the same.

Articles in this issue

Archives of this issue

view archives of TheMReport - MReport July 2020