Reading a findings report the way the specialist does

A findings report is the page a loan turns on. DU and LPA put the answer at the top and the reasons underneath, in sections that each mean something different. A specialist who has read a few thousand of them knows at a glance which lines stop the loan, which ones only ask for paper, and which ones are there for the record. This is how that reading works, and how Proxara does the same reading on every file.

The top of the report

DU’s Underwriting Findings report opens with the recommendation, the casefile ID and the submission number, then three short columns: the mortgage information (LTV, CLTV and HCLTV, the loan type and term, the amortization), the qualifying ratios (the housing expense ratio and the debt-to-income ratio) and the property (occupancy, units and type, the loan purpose). LPA’s Feedback Certificate carries the same kind of summary under its own headings, with the number of submissions beside the key number.

The recommendation is two answers in one. On DU it pairs a risk assessment with an eligibility result: Approve/Eligible, Approve/Ineligible, Refer/Eligible, Refer with Caution, or Out of Scope, which in Fannie Mae’s words means DU “is unable to underwrite the particular product, mortgage, or borrower described in the submission.” On LPA the two are printed separately, as the risk class, Accept or Caution, and the purchase eligibility, Eligible or Ineligible. Reading them apart matters, because the fix for each is different: an Approve/Ineligible loan met DU’s credit risk assessment and still falls outside what Fannie Mae will buy, while a Refer with Caution did not meet the risk assessment itself.

The submission number is worth a glance too. It counts how many times the casefile has been run, and Fannie Mae lists excessive resubmissions among its potential red flag messages: a message that alerts the lender “when an unusually high number of loan resubmissions may be the result of data manipulation.” A file that is approved on its first submission never raises the question.

The sections underneath

Below the summary, DU groups its detailed messages by kind: Risk/Eligibility, Representations and Warranties, Potential Red Flags, Verification Messages/Approval Conditions and Observations, most of them divided again by topic: employment and income, credit and liabilities, assets and reserves, property and appraisal. Fannie Mae’s Selling Guide puts it simply: the report “is divided into sections. Each section contains a different type of message.” The Underwriting Analysis Report at the end restates the loan as DU saw it: the income, the ratios, the payment line by line, the funds and the reserves.

LPA groups its messages under its own names: purchase restriction messages, caution messages, opportunity messages, and topic sections for employment and income, assets and reserves, credit and liabilities, property and appraisal, and mortgage insurance. Freddie Mac’s Guide adds a warning worth keeping: the messages on the Feedback Certificate “are for guidance purposes only” and are not a substitute for the requirements in the Guide.

Four kinds of message

However a report is laid out, each message is one of four kinds.

An eligibility failure: the loan breaks a published limit. The debt-to-income ratio is over the maximum, the LTV is over the cap for the product and the property, the loan amount is over the limit for the county, the reserves or the funds to close fall short of what is required. These stop the loan, and each one has a number to beat.

A risk factor: the AUS weighed the file and did not like what it saw, usually a combination of things rather than one. Fannie Mae describes DU as “weighing each factor based on the amount of risk it represents and its importance to the recommendation.” A Refer with Caution is that weighing coming out against the loan: in Fannie Mae’s words, a layering and degree of risk factors that represent a greater risk of serious delinquency than an Approve.

A documentation requirement: what the lender must verify before closing, such as the paystubs, the bank statements or the level of property fieldwork. DU prints these under Verification Messages/Approval Conditions. They are the conditions of an approval, not the reasons for a decline.

An informational message: context, a confirmation, a note that something was checked. The potential red flags sit close to this kind. Fannie Mae is explicit that their appearance does not affect the recommendation; they are there to help the lender catch inconsistencies in the file.

Which failures have a number

The line that matters most runs between the first two kinds. An eligibility failure has a threshold the guides publish. For a DU loan casefile, Fannie Mae’s maximum debt-to-income ratio is 50%. The LTV caps are in the Eligibility Matrix, the loan limits are published by county, and the reserve requirement is stated. When the threshold is published, the exact change that clears it can be worked out: the loan amount that brings the LTV to the cap, the payoff that brings the ratio under the maximum, the assets that close the shortfall. Where a file breaks more than one limit, the change has to clear all of them at once, or the next report finds the one that was missed.

A risk-based Refer has no such number. The AUS’s credit risk assessment is not published, so no one, specialist or software, can compute the exact change that turns a Refer into an Approve. What a specialist does is judge which moves lower the risk the report points at, try the strongest, and let the AUS answer. Fannie Mae’s own guidance for a Refer with Caution reads the same way: review the data for accuracy, look for information outside what was submitted, update the application and resubmit.

A few LPA messages go one step further and state a single change themselves: the additional income, the reduction in loan amount or the additional reserves that would clear a finding on its own. Those numbers are the AUS’s own, and they are read and shown as the AUS’s own.

How Proxara reads it

Proxara reads a findings report the way it reads a paystub: into a fixed schema. The AUS and its recommendation, the risk class and the purchase eligibility, the submission number, the ratios, the loan amount, the LTV, the reserves, the product and the term as the report states them, and every message with its identifier, its wording, its section and its page. Where the report is in one of the layouts DU and LPA publish, code reads it straight from the printed words. Any other layout goes to the reading model, and every value it returns still has to be found on the page.

Each message is then mapped to one of a fixed set of issue kinds: a debt-to-income ratio over the limit, an LTV over the limit, a loan amount over the limit, a reserves or funds-to-close shortfall, points and fees over the qualified-mortgage limit, a credit risk factor, a documentation requirement, or information. A message that fits none of them is marked as one the product does not handle, and a person sees it. Nothing is paraphrased into a reason the AUS did not give, and a risk factor never carries a threshold, because the AUS never published one.

An eligibility failure is checked against the rule as well as the report. The number in the message is compared with the published limit for that product, and the section of the guide it comes from travels with it, so what the loan officer sees rests on the guide and not only on the report. Where a value on the report disagrees with one worked out from the documents, both stay on the result. The disagreement is often the reason the file failed.

What follows from the reading

Once the report is read this way, the next structure follows from it. Every failure with a number gets its exact change, and the changes are combined so that one structure clears every limit together. For a Refer, the moves that reduce the risk the report names are ranked, the strongest first, and DU or LPA gives the verdict. The loan officer sees the fields to change and their new values, runs the AUS, and the next report goes back in from where the loan now stands. That loop is the subject of The rerun loop.

The same catalogue of limits also runs before the first submission. The limits a findings report would name are checked against the loan as its documents describe it before the file goes to DU or LPA at all. The aim is a first report with nothing on it to fix, and a specialist whose reading is saved for the files that genuinely need it.