Credit
Scores
Credit Scores and Automated Underwriting are
two critical aspects of mortgage lending that must be addressed if one is to
have any meaningful understanding of the mortgage loan process.
Though credit scores have been around for quite a while they have taken
on paramount importance in the mortgage underwriting or approval process in the
last few years. With advances in
computer technology, the mortgage industry has been able to analyze statistical
data and draw extremely high correlations between credit scores and
delinquencies and defaults on individual mortgages.
Credit scores are in fact the most accurate tools used today in
predicting the future performance of individual mortgages.
Most borrowers have three credit scores, each one
provided by one of the three major credit repositories in the United
States. Repositories are the three
companies that maintain credit files on about 80 million Americans. The
computers at these three repositories are programmed to generate a credit score
for every borrower each time their file is accessed by one of the
thousands of credit reporting agencies throughout the United States.
These credit reporting agencies access the files of the repositories to
build the credit reports used by mortgage lenders to analyze a mortgage loan
application and decide what to do with the application, i.e. what programs
the borrower is eligible for and, to some extent, how that individual loan
will be priced. Though other factors enter into both the approval and pricing
decisions, credit scores have come to play an essential and dominant role in
both of these processes. Because
credit scores tend to drop every time a file is accessed it is best not to have
your credit pulled indiscriminately.
Computers have had an impact in the mortgage industry
beyond just the compilation and analysis of credit histories.
Most loan applications themselves are today decided
by automated underwriting systems. Once
a lender has a complete application on a borrower that application can be
uploaded electronically to an automated underwriting system, which will decision
the request based on information provided in the application and a credit report
that the automated system pulls internally.
Using automated underwriting, lenders are able to decision loan
applications much quicker and much cheaper than the old manual underwriting
method. Major investors no longer buy standard “A” paper loans
that have not been approved by an automated underwriting system.
In the market for sub-prime mortgage loans some investors still do
traditional, manual underwriting, though more and more even this sector of the
industry is moving to automated underwriting.
Credit Scores and Automated Underwriting streamline the
entire mortgage process by providing quicker approvals with less documentation
requirements than required by the old manual underwriting system.
As is the case with all technology, these systems do not function at
their optimal capabilities unless experienced, qualified professionals utilize
them. Would you really want
the point person on your transaction to be a telemarketer with limited mortgage
financing experience? That is why
only seasoned, experienced professionals are allowed to work at Neighborhood Mortgage Center.
Neighborhood Mortgage Center is on the crest of the technological wave, leading the industry into the
21st century by utilizing the latest technology to provide mortgage
borrowers with faster, more competitive loans requiring less documentation.
Speed. Efficiency.
Savings.
To
contact Preston Dumas: pdumas@nmcltd.com
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