The non-agency space has grown significantly in recent years — approximately 40% in 2015. But manually underwriting these mortgage loans can take hours, sometimes days, for just one loan, and these manual processes are also prone to human error, which can expose lenders to compliance risks.

Ultimately, lenders originating both conventional and jumbo products need multiple engines: one to underwrite agency and government loans, such as Desktop Underwriter or Loan Prospector, and one to underwrite non-agency loans that helps ensure compliance and minimize risk.

To meet this need LoanScorecard developed Custom AUS, which allows lenders originating non-agency loans to customize credit decisioning, and provides them with an assessment report so that they have an audit trail for underwriting and ability-to-repay decisions. The solution is cloud-based and can be integrated with a lender’s LOS, but it can also run outside an LOS, as long as the lender can import 1003 data and credit information into it.

“A lot of companies claim to offer automated underwriting engines for non-agency originations, but they’re really just providing rules engines or adding overlays to make decisioning stricter on top of an agency system,” said Ben Wu, executive director at LoanScorecard. “We’re currently the only non-agency AUS that offers lenders true customization and complete control over their underwriting criteria. It also helps streamline decisioning and improve customer experience.”

Custom AUS allows all rules, calculations and messaging to be built from the ground up, so there is no agency “scaffolding” or content that needs to be dismantled. Lenders can configure an AUS that reflects the underwriting guidelines of their loan programs, while ensuring consistent manufacturing.LoanScorecard logo

“While DU and LP are black boxes, Custom AUS is just the opposite: it’s a clear box. It is completely transparent, in that our clients know exactly what the engine does, every single data point that the engine will respond to, every calculation it’s going to make, every message that it may or may not fire, and so on,” Wu said.

In addition, Custom AUS is an integral part of LO Connect, a new LoanScorecard offering. LO Connect is an integrated automated distribution solution for aggregators and wholesale lenders sourcing non-agency loans from third-party originators and correspondents. It combines the power of Custom AUS with a product and pricing engine, as well as a unique integration with LOSs. The first version of this solution has been launched within Calyx Point and will eventually be available on other LOSs as well.

LO Connect allows third-party originators to see branded product and pricing offers from participating wholesalers within Point. If the originator likes an eligible product and fully adjusted price, they can run “upfront decisioning” against Custom AUS and get back an in-depth Findings Report, which delivers an early indication of the likelihood that the specific investor will approve the loan.

“Any Calyx Point originator can use LO Connect without first having a business relationship with the investor or needing to put together a full loan package. This saves time and effort for both the TPOs and the investors,” said Wu.

From an originator’s perspective, LO Connect helps lenders determine who to sell specific loans to and which investors to develop a relationship with. It also eliminates the likelihood that they will quote the wrong information to the borrower. For wholesalers and investors, LO Connect is a more efficient way to distribute and promote their product and pricing offerings to originators, and it reduces “false starts” that can increase operating costs, require HMDA filings and foster bad will with correspondents and brokers.

Wu added, “LO Connect and Custom AUS allow lenders to take advantage of the growing non-agency jumbo market and feel confident that they are underwriting those loans safely and compliantly.”

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