For example, letting lenders approve an application if a collateral appraisal is slightly lower than expected is different from granting an approval without an appraisal, he notes. Its loan officers analyze each application through a risk-rating template the community bank developed and refined a decade ago.
Fair lending reviews at Four Oaks Bank are met by documenting mitigating factors that allow underwriting exceptions to be made on a case-by-case basis, Jewells says. Such stand-alone underwriting software is available to automate underwriting, without having to either spend much or rework their existing technology platform, for niche lending that might be done manually.
Not surprisingly, objective factors such as how long a borrower has held his or her current job as well as his or her credit score largely determine whether a credit request is approved.
Community banks thrive by providing customized lending that requires experienced judgments and decisions by people, not software programs. Examiners will ask why one application was granted an underwriting exception and approved while exception based underwriting a loan similar file was turned down, Meminger says.
Thompson also urges community banks not to overlook loan management systems, which can also serve as a powerfully useful control screen. At First Bank in Gladstone, Mich. Often loan officers are given lending authority to deliver this competitive advantage of customization.
Meminger says he is concerned that offering special loan conditions to long-term borrower relationships could expose Sauk Valley Bank to uncertain fair lending scrutiny and exposure.
One way to address these issues is to have deals subject to loan committee review and approval, consultants and community bankers say. Whether collateral is secured, and how liquid it is also should be considered when deciding how much lending authority to give staff.
Effective controls Alan Thompson, a managing partner at the consulting firm Bank Solutions Group LLC in San Diego, suggests that community banks carefully review their underwriting policies periodically for the authority given to loan officers to make exceptions.
Those software systems can assist in making lending underwriting decisions uniformly and cost effectively—as well as more profitably, he says. In addition to following relevant court actions, the association joined a legal brief in this case and in a separate disparate impact case—Mt. He believes first-time borrowers should be scrutinized more closely.
Further, the bank, which operates two lending offices and a satellite branch, has someone besides the originating loan officer review the details of all documents—including terms and conditions—before they are presented to borrowers.
Thompson says community bankers enjoy a competitive advantage by offering borrowers personalized service and potentially higher loan approval rates than their larger, less nimble competitors. Separating disbursement functions from lenders also can ensure that all proper conditions—including underwriting decisions—are met before a loan is funded, he says.
Holly Gardens Citizens in Action case—that is expected to reach the U. For example, a business with large deposits could be granted a lower rate, or a high-net-worth customer might be given some leeway on loan-to-value guidelines, he explains.
Willing to lend The underwriting exception policies and procedures at community banks can differ by degree, process and circumstances.
ICBA has long disputed the legality of the disparate impact theory. Staying within lending underwriting parameters is fundamental for bank strategy as well as safety and soundness.
While First Bank has underwriters and lenders in its branches, for example, Lektzian notes that two former producers have been moved into compliance roles.Exceptions from the Norm. February 2, Kleinfelter encourages community bank loan portfolio managers to track all underwriting exceptions granted by loan officers, and have explicit policies regarding what exceptions they can and cannot make.
For example, letting lenders approve an application if a collateral appraisal is slightly lower. PRMG’s Underwriting Exception Policy defines the process of obtaining any and all underwriting exceptions to our published program guidelines.
This applies to the Wholesale, Correspondent, and Retail delivery channels. Overview.
PRMG originates loans for sale in the Secondary Market through Wholesale, Correspondent, and Retail. Annual Standard Underwriting Guidelines* Annual Date: September guideline is based on guidance from Fannie Mae.
This document provides as a reference point as they The underwriter is to complete the Loan Exemption Form and follow the Loan Exception Request procedures. Exceptions are tracked by PBM Underwriting.
The Micro Equity Series™ is a small commercial loan program targeted towards borrowers that are unable to qualify for bank financing due to being self employed and not showing enough income on their tax returns or for low credit scores. Exception based underwriting; Micro Equity Series Program Guidelines: Commercial loans from.
Nov 01, · Compensating factors are things that reduce the risk level of the loan. Some examples would be very high credit scores, very low debt-to-income ratios, etc. If the underwriter thinks there are sufficient compensating factors, they may issue an "exception" to the guidelines and approve the loan, even though it does not meet all of.
underwriting and loan approval process Underwriting is the process by which the lender decides whether an applicant is creditworthy and should receive a loan.Download