Automated Underwriting – LP vs DU

The auto industry has done it with cars that park themselves.  The vacuum cleaner industry has done it with a vacuum that cleans an entire home on its own.  The Arizona mortgage world has gone robotic too!  When underwriting a file and determining whether a client is approved for a new home loan, the mortgage world largely depends upon something referred to as “automated underwriting.”  Automated underwriting is based on a computer system that analyzes a loan application from top to bottom (credit, income, assets, liabilities, loan to value, loan amount loan type and so on).  There are 2 primary automated underwriting systems used in today’s mortgage industry:

1. Desktop Underwriting (“DU” for short)
2. Loan Prospector (“LP” for short)

Desktop Underwriter is governed by Fannie Mae and Loan Prospector is governed by Freddie Mac.  While the two systems are very similar, there are subtle difference between the two that can make a very big difference.   For example, there are some loan applications that DU will approve  and LP will not and vice versa.

A loan officer submits a file electronically through either system and within 30 seconds (give or take) they will receive a findings report.  This report tells a loan officer whether the application is approved.  A DU approval shows up as an “approve/eligible”on the findings report and an LP approval shows up as an “accept.”  Both of these findings communicate/verify that a borrower’s application meets loan guidelines according to Fannie Mae and/or Freddie Mac standards.  An AZ mortgage company will then be able to close the loan based on the fact that they have the “backing” of an automated underwriting approval.

2 Underwriting Options is Better Than 1

With regard to automated underwriting, more is most certainly better.  Some Phoenix area mortgage companies work strictly off of Fannie Mae and DU while others are entirely based on Freddie Mac and LP.  In most cases, have only one automated underwriting outlet is a non-issue.  However, in situations where a “marginal” loan application has been declined by only one of these two systems having the ability to run it through the other system may result in an approval versus a flat-out denial.  A lender not having access to both could in effect handicap a client’s ability to purchase a new home or refinance their existing mortgage.

Having access to both DU and LP can also make a huge difference for an Arizona condo buyer: Learn more.

Processing a loan through either system (both DU or LP) is as simple as your Arizona loan officer pushing of a button.  A mortgage company that has access to both DU and LP can approve a loan application based on either a DU or LP approval (note: some loan types can also be manually approved even if these systems do not approve them).  They do not have to have an approval on both.

If you have any questions about the differences between LP and DU please do not hesitate to call.

By Jeremy House
Google

Comments

  1. Can you please let me know some scenarios where loan applications that DU will approve and LP?

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