Automated Underwriting System Approval: AUS Findings

This Article Is About Automated Underwriting System Approval: AUS Findings

The automated underwriting system approval is what is needed for a mortgage borrower to go forward with the mortgage process. The automated underwriting system will render three types of findings:

  1. approve/eligible per AUS: A/E per AUS means the borrower has an automated approval and the borrower meets all agency mortgage lending guidelines so the file can proceed
  2. refer/eligible per AUS means the borrower may be eligible but the automated underwriting system needs to refer the file to a human underwriter for underwriting
  3. refer with caution per AUS means the borrower is not eligible and does not meet the agency mortgage guidelines

Experienced loan officers can play around with the AUS if they do not get an approve/eligible per AUS. For example, they can see if they can make the down payment higher, add more reserves, or pay off debt so the debt to income ratios are lower. There are many creative ways of getting an approve/eligible per AUS if they do not get it the first time around. There are many instances where you may not get an automated approval with Fannie Mae’s DU AUS but may get an approve/eligible per AUS with Freddie Mac’s LP AUS. 

Automated Underwriting System Approval Versus Manual Underwriting

Automated Underwriting System Approval

Refer/eligible per AUS findings can be manually underwritten. However, only FHA and VA loans allow manual underwriting. FHA and/or VA manual underwriting guidelines apply. Manual underwriting requires verification of rent.  At Gustan Cho Associates, verification of rent is waived for borrowers who have been living rent-free with family in order to save money for the down payment and closing costs on manual underwrites. Living rent-free with a family member form provided by Gustan Cho Associates will need to be completed, signed, and dated.

Importance Of Timey Payments In The Past 24 Months On Manual Underwriting

You can have prior bad credit, outstanding collections, and/or charged-off accounts but the AUS and lenders want to see rebuilt and re-established credit. Timey payments after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale, late payments, collections, charge-offs, and other derogatory credit is what lenders want to see. Rebuilt and reestablished credit after prior bad credit with no late payments is the best assurance in getting an approve/eligible per automated underwriting system.

The key with manual underwriting is borrowers need timely payments in the past 24 months. One or two late payments are not always deal killers with a good letter of explanation with supporting documentation and extenuating circumstances. Not all lenders will manually underwrite FHA and/or VA loans. Many lenders consider manual underwrites too risky so they have lender overlays on manual underwrites where they do not accept them. However, a large percentage of our files at Gustan Cho Associates are FHA and/or VA manual underwrites. Mortgage underwriters have a lot of discretion on manual underwriting files.

How The Automated Underwriting System Approval Process Works

The automated underwriting system approval is what is needed to proceed with the mortgage approval process. One of the major changes that have developed in recent years in the mortgage industry and since the 2008 Housing Crisis is the use of technology and the advancement of the automated underwriting system (AUS). The automated underwriting system is the use and utilization of computers to underwrite mortgage loans. The automated underwriting system approval, also known as AUS, has made mortgage approvals automated.

The AUS is faster and can grant mortgage approvals in a matter of minutes. The AUS will analyze the mortgage applicant’s loan application, credit report, and all the information on the report including public records, income, assets, liabilities, and other factors, and render automated findings within minutes.

The Mortgage Underwriting Process

What is the Automated Underwriting System Approval By Lenders

The mortgage underwriting process is the process of evaluating mortgage loan applicants’ creditworthiness and their ability to repay a mortgage loan by analyzing the applicant’s income, debts, and credit history. A mortgage underwriter is assigned to every borrower. The assigned mortgage underwriter who underwrites the file is responsible for issuing the conditional loan approval, clearing conditions, and issuing the clear to close. The mortgage underwriter can also deny the file if the borrower does not qualify or does not meet the mortgage guidelines.

Prior to the invention of the automated underwriting systems, initial mortgage pre-approvals were done manually by loan officers. It took some time in order to render a mortgage approval. Once the automated underwriting system was created and launched, mortgage approval can be issued in a matter of minutes after a mortgage loan originator inputs all pertinent data into the AUS and get an automated underwriting system approval.

The automated underwriting system only picks up whatever is entered. For example, the AUS will read the listed credit tradelines, derogatory items, late payments, collections, charged-off accounts, public records on the credit report. The AUS does not pick up items that are not reporting on credit reports such as public records and/or judgments that do not report on credit reports. If this is the case, the automated findings are null and void.

Public records will get snagged by mortgage underwriters during a third-party national public records search all lenders do during the mortgage process. This is why it is very crucial and important loan officers go over the line items of their credit report one by one and ask about the validity of their credit report. 

Fannie Mae And Freddie Mac

The Federal National Mortgage Association, also known as Fannie Mae, and the Federal Home Loan Mortgage Corporation, also known as Freddie Mac, are the two largest mortgage investors in the nation. Each of these giant mortgage investors has created and developed its own automated underwriting systems approval for evaluating home mortgage loans. Fannie Mae has developed the DU, which is known as the Desktop Underwriter.

Freddie Mac’s version of their automated underwriting system is known as the LP, the Loan Prospector. These two systems are equivalent to a highly sophisticated brain. Both DU and LP AUS have the ability to determine and analyze each mortgage applicant’s risk factor. Evaluation of risk assessment by AUS is done by evaluating the inputted data and the applicant’s credit scores and credit history. The automated underwriting system approval determines whether an applicant is approved or not by issuing an AUS Findings Report. The report states whether the applicant is approved eligible or not.

If approved eligible, the Findings Report will indicate what documents are required to verify the application data. If the borrower does not get an approve/eligible per AUS, the loan officer can try different methods such as inputting larger down payments, adding reserves, paying down credit cards, or paying off outstanding collections to see if running other scenarios would render an approve/eligible. Another important note is if you do not get an approve/eligible with Fannie Mae’s DU AUS, try Freddie Mac’s LP AUS. There are many instances where Freddie Mac LP AUS may be more forgiving than Fannie Mae’s DU AUS and vice versa. For example, Fannie Mae DU AUS may not like late payments after bankruptcy but you may get an approve/eligible per Freddie Mac’s AUS.

Importance Of Automated Underwriting System Approval

Almost all mortgage lenders will go by the Findings report of the AUS initially. Lenders with no lender overlays will just go off the AUS Findings Report. However, if mortgage lenders have lender overlays, they will initially go off the AUS Findings. They will do a manual overview to see if the borrower meets their particular mortgage lender overlays.

If it is not approved by the automated underwriting system, the chances are that it needs to be downgraded to a manual underwrite only if the AUS Findings render a refer/eligible per AUS finding. Not all mortgage lenders will do manual underwriting. Gustan Cho Associates is one of the very few national mortgage companies licensed in multiple states with no lender overlays on government and conventional loans.

Gustan Cho Associates just go off the AUS FINDINGS and has zero lender overlays. A large percentage of our mortgage loan applications are FHA and/or VA manual underwrites.

Automated Underwriting System Approval By Lenders

Which means no lenders for mortgage lenders

All Findings, whether done at one lender or another, will render the same result. Most mortgage lenders will halt the mortgage process and will not submit a file that is not AUS approved. Not all mortgage companies do manually underwrite a mortgage loan. Only FHA and VA loans allow manual underwriting. Many mortgage lenders will not manually underwrite mortgage loans due to the added layered risk factor as part of their lender overlays.

All automated underwriting system-approved files are assigned to a human mortgage underwriter. The loan officer will make sure that all documentation, credit, income, assets, liabilities are correct before it is submitted to AUS. Proper documentation will be required to verify all data that was inputted into the computer to get the AUS approval.

No Lender Overlay Mortgage Lenders

Mortgage loan applicants with an approve/eligible per automated underwriting system approval that can provide all conditions from the AUS will not have any issues getting a clear to close. Proper documentation will be required. The great news with Gustan Cho Associates is we are a national mortgage company with no lender overlays on government and/or conventional loans.  Gustan Cho Associates only goes by Automated Underwriting System Findings and has zero overlays. Therefore, as long as the borrower gets an approve eligible per AUS and can satisfy the conditions of the AUS, the borrower will close on their home loan.

Mortgage Borrowers who are looking to get qualified with a lender with no lender overlays, please contact us at Gustan Cho Associates at 1-262-716-8151 or text us for a faster response. Or email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

Related> Automated Underwriting System: Case Scenario

Related> Manual Underwriting

Related> Fannie Mae Automated Underwriting System 

Leave a comment