Mortgage lenders all agree that mortgage loan applications, underwriting, production, post-closing, and final auditing all require a dynamically skilled team. Moreover, managing regulatory requirements and compliance are labour-intensive tasks that depend on a highly specialized skillset and require considerable training. So much so that most lenders find it difficult to optimize their business, mitigate risks, or even scale properly with growing business volumes. That is why a growing number of lenders have started looking to outsourcing mortgage underwriting services as a final solution for their troubles. What are the key benefits that these lenders are looking to cash in on by taking this route? Let’s explore the benefits of outsourcing mortgage underwriting in more detail by first exploring what mortgage underwriting is and is not.

What Is Mortgage Loan Underwriting?

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Mortgage underwriting is detailed analysis of a borrower’s portfolio for creditworthiness by mortgage lenders in the home purchasing process. It is used to help lenders determine whether the risk of offering a mortgage loan to a particular borrower under certain restrictions is acceptable or not.

Mortgage loan underwriting is used to assess risk and ensure that a borrower meets all the minimum requirements to take out a home loan. These requirements include providing a multitude of mortgage documents needed to close on a given mortgage loan. An underwriter is responsible for making sure that all required documentation is accounted for and that all the data contained within those documents is accurate.

As part of the mortgage underwriting process, underwriters evaluate a borrower’s financial health, collateral value, and credit history. This is to give them a solid reason to approve, decline, or suspend a mortgage application across a range of factors. The underwriter is responsible for determining the potential borrower’s creditworthiness and to assign them a rating. This rating depends on the credit scores provided by the 3 major credit bureaus. It also represents the applicant’s ability to repay the loan, their employment history, and the amount of funds they have in reserve.

Why Is It Important?

It is during the mortgage underwriting stage that a borrower’s application moves from the desk of the loan processor to that of the mortgage underwriter. It is through underwriting that a lender decides to approve, suspend, or deny your mortgage loan request.

Underwriting is important because through it lenders can ensure that the borrower’s financial profile matches the lender’s loan criteria and guidelines. This is not something that takes a few seconds though. Going through all the paperwork, validating all the personal and financial data contained in the mortgage file, and performing all the financial calculations can be time-consuming and challenging. After making sure that they match, lenders can then move onto making the final mortgage lending decision.

Lenders and banks create financial guidelines and computer models to help underwriters evaluate the quality of a mortgage loan. These computer models analyze various aspects of the mortgage and even provide recommendations as to the total risks involved. Automated mortgage underwriting guidelines are critical in determining whether a mortgage loan will be extended and at what price. That said, it is always up to the underwriter to take the final decision as to whether to approve or decline the mortgage loan.

Mortgage underwriting is important because it is the stage at which a borrower learns whether they have the finances, credit history, and collateral in place to secure a mortgage loan or not. Without the underwriting stage, the loan approval process would be devoid of a risk assessment stage. This is critical, because without it lenders have no way of ensuring that they only take on mortgages that have a high likelihood of being repaid, and thus making profits. Mortgage lenders could be facing huge numbers of defaults, foreclosures, and even fraudulent losses if underwriting did not occur.

The Mortgage Underwriting Process

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The mortgage underwriting process has many steps to it. It can begin with pre-underwriting in some cases, but it always ends with a final lending decision. To gain a deeper understanding of the process entirely, let’s take a look at some of the mortgage underwriting process steps involved.


During pre-underwriting, mortgage underwriters are looking for potential issues or discrepancies in your financials, rental history, job, income, etc. that might set you up to be a high-risk candidate. If with a mortgage pre-approval you are certain you will be given a mortgage up to a specific dollar amount, with pre-underwriting clearance the deal is all but signed.

Pre-underwriting is one way to weed out mortgage applications from the pipeline that have absolutely no scope of being funded. It is one of the best ways to identify the most qualifying factors for a mortgage loan. Lenders who conduct pre-underwriting offer pre-authorizations to certain borrowers to put them in a better negotiating position with the relevant sellers.

Setting Up Loan Documents for Underwriting

Mortgage loans that do no go through pre-underwriting (because not all lenders offer the service) often start at this stage. Most underwriters spend up to 50% of their time simply setting up the loan. This could be through setting up the loan documents, executing data validation and data entry, reviewing assets and credit history, and calculating important financial ratios for appraisals, etc. The mortgage loan documents may also need to be run through a compliance checklist and have specific data validations performed prior to being thoroughly underwritten. All findings from this stage of the process are then sent to the lender’s in-house underwriters so that the loan review and credit decision can be expedited.

Clearing Loan Conditions

Underwriters will prepare and send ‘conditions to close’ to the appropriate loan officer once the loan review has been completed. These clearing loan conditions are a critical part of underwriting as a list of documents that have been specified by the underwriter will have to be prepared to support the borrower’s case. This list can contain a host of documents from purchase agreements and pay stubs to letters of explanation, etc. All conditions will have to be fulfilled before a ‘clear to close’ can be issued and the final approval for the mortgage released to the borrower and other third parties.

Title Support

At this stage of the underwriting process, the underwriters review the title documentation to ensure that the property being purchased is free of any lawsuits, legal claims, and liens against it.

Quality Control for Appraisals

Underwriters will generate an ‘Appraisal Quality Control Report’ that outlines their views regarding how appropriate the collateral provided is to support the intended property transaction at this stage. It will also validate whether the property valuation provided matches the current market value of the collateral in question. The underwriters will need to review the property’s sales history, adjustments, location maps, and photographs to ensure that no errors were made during the appraisal process. The appraiser’s signature, report date, and license number will be verified at this point as well.

Fraud Analysis

At this point in the mortgage underwriting process, the borrower’s creditworthiness will be reviewed through a fraud analysis. Any outstanding anomalies will be identified and potential falsifications flagged and scrutinized in the loan file. Some such potentially fraudulent items can include conflicting addresses, exceptionally large deposits or withdrawals, or other falsified information of any kind.

Final Lending Decision

Finally, the underwriter will issue one of 3 credit decisions towards the borrower’s mortgage application: approved, suspended, or denied. If the mortgage is approved, underwriters will issue specific conditions that have to be met for full approval. This might involve explanations for large deposits or past credit history or just simply taking care of a missed signature somewhere. If the application is suspended, underwriters require more than just a simple explanation. And if the mortgage application is denied, it cannot be processed in its current state. Oftentimes, it might just be that the borrower needs to rethink their down payment amount or which loan product would better fit their financial constraints. On the other hand, a mortgage may be denied due to a mistake on the application or a clear demonstration of bad credit history.

Benefits of Outsourcing Mortgage Underwriting Services

Benefits of Outsourcing Mortgage Underwriting Services

Most lenders that decide to outsource their mortgage underwriting services do so for several reasons. These can include payroll and technology infrastructure savings, zero downtime, greater customer retention, and rapid mortgage turnaround times. To gain a better understanding of why outsourcing underwriting to the professionals might be a good idea, let’s explore its benefits in greater detail.

Rapid Turnaround Times

It is most often the case that mountains of paperwork are required to process 1 mortgage application. These documents can range from income pay stubs and appraisals to title documents and bank statements. Because the credit risk evaluation process is time-consuming and every little detail must be validated in the application, lenders spend an inordinate amount of time underwriting these loans.

With an underwriting outsourcing partner, however, automated systems can take over so that document processing is carried out in a few hours, not weeks. By reducing the amount of time it takes to underwrite a mortgage loan, underwriters can ship out more loans in less time. This means that working with an outsourcing partner can yield more rapid turnaround times.

Improved Customer Retention

As outsourcing partners can provide automated mortgage underwriting assistance, the time it takes to complete loan underwriting can be drastically reduced. Even in cases where automation cannot handle the complexities of a mortgage loan, resources can be deployed to take care of the requirement instead.

Regardless of whether automation or outsourced resources are responsible for the drop in processing times, outsourcing improves customer retention. Since customers no longer need to deal with the hassles of following up every week to get updates on their progress, their frustration can be alleviated. Mortgage loan closing can also be accelerated when underwriting is handled in a fraction of the time it usually takes. By reducing their frustration and improving how quickly they get approved for a mortgage, outsourcing underwriting can lead to improved customer experience and greater customer retention long term.

Cost Savings

The cost of setting up a loan for mortgage underwriting can be very high. This is due to the fact that lenders have to keep track of all documents and conduct regular follow-ups with many third parties to underwrite the loan effectively. With outsourced underwriting, lenders can experience great cost savings as automated mortgage underwriting replaces the work that a human workforce would have to take on.

By eliminating the need to hire a team of underwriters on a permanent, full-time basis, mortgage lenders can drastically reduce their overhead costs. Even in the case where human underwriters are required to process more complex mortgages, outsourcing to the professionals will save lenders money. This is because outsourcing underwriting services from a third-world country is always more affordable than hiring equally qualified in-house personnel.

Greater Scalability

Mortgage lenders are often not in a position to take on additional business volumes with their in-house team of underwriters alone. Attempting to take on greater volumes of mortgage loans short term will only tax and stress your in-house underwriters. This is because a human workforce can only underwrite so many loans at any given period of time. By outsourcing, however, lenders can benefit from using automated mortgage underwriting systems that can take on the extra load effortlessly.

Scaling is not an issue when underwriting is outsourced to the professionals. Even in cases where the mortgage file is too complex to be processed by automated systems, increasing the number of resources is very easy. Outsourcing allows lenders to scale their resources up or down according to changing business seasons and cycles. This way, they do not need to worry about making losses while retaining the same number of in-house underwriters during off-peak seasons as well.

Reduced Errors

When mortgage lenders continue to rely on a human workforce to underwrite their mortgage loans, they stand to suffer from gross errors and inefficiencies. This is because humans are not machines and so suffer from procrastination, exhaustion, negligence, boredom, confusion, and even poor judgement while on the job. This leads to approving mortgage loans that are too risky to take on due to poor calculations or other such errors.

Outsourcing mortgage underwriting can help lenders completely eliminate gross errors, redundancies, and inconsistencies as automated systems execute the same tasks with zero variance or negligence for that matter. Lenders can rest assured that only thoroughly vetted mortgages will pass through the underwriting pipeline, so that their losses are mitigated as well. When lenders outsource their underwriting requirements, they are effectively guaranteeing that no human error will enter the equation. In this way, they can expect to work with greater accuracy and rely on solid data when generating underwriting decisions that will yield profits, not future losses.

Zero Downtime

Lenders are often not able to bring in as much revenue as they would like because their in-house team of underwriters can only process so many mortgage loans at one time. This means that when business volumes grow, their underwriters will not be able to keep up, leading to huge backlogs of applications piling up over time. To resolve this issue, mortgage lenders can look to outsourcing their requirements. By outsourcing the mortgage underwriting process, both automation and more personnel can take on the volumes of applications that need to be processed in the same amount of time.

This is possible only because the outsourcing partner has resources planted in multiple global delivery centers across the globe. This means that lenders can expect their outsourced help to be working at all hours across different time zones to get the job done. Zero downtime is only a feature and benefit that outsourcing underwriting requirements can yield to lenders, regardless of where they are located in the world.

Level of Expertise

Mortgage underwriting is not a small feat for humans or robots. It requires great expertise and knowledge of mortgage industry best practices, compliance requirements, and ever-changing regulations. In-house underwriters may only have limited exposure to the underwriting field and knowledge of the industry may vary from person to person.

When lenders choose to outsource their underwriting requirements, however, they are bringing on the experts in the field. These experts may have decades of experience in the field and understand the different loopholes that borrowers may look to leverage in their mortgage application. This in-depth knowledge of best practices and the types of errors or discrepancies that need to be looked into to minimize default risks is only something that experts have a good grasp of. Outsourcing partners only provide underwriting experts with a minimum wealth of knowledge in the industry. This level of expertise is not something you will see every lender having in terms of their in-house team of underwriters.

Outsourcing mortgage underwriting services can be great if you are looking to benefit from zero downtime or just acquire a certain level of underwriting expertise. You can also look forward to benefitting from reduced errors and increased rates of accuracy when specialized resources are brought onboard the underwriting team. In fact, it should come as no surprise that lenders are increasingly turning to outsourcing mortgage underwriting to benefit from improved customer retention from expedited mortgage lending decisions and approvals. Best of all, you can gain substantial cost savings from falling payroll and technology infrastructure expenses to greatly enhance your business operations and drive profits long term.

Who We Are and Why Our Opinion Matters?

This article is brought to you by Expert Mortgage Assistance, an enterprise-grade end-to-end mortgage loan servicing solutions provider with extensive expertise in prime residential and commercial mortgage markets. With more than a decade of experience in the US mortgage industry, we understand the importance of high-quality mortgage originations. We combine our expert knowledge, business acumen, and best practices to deliver exclusive mortgage back office support services that take our client’s business operations to the next level. We understand the diverse intricacies of mortgage underwriting and ensure that all critical processes and calculations are conducted with meticulous attention. In this way we only deliver best-in-class underwriting solutions to our clients to keep them forging ahead and locking down business growth at all times.