Most lenders today struggle with sourcing good quality underwriters, as there are only a handful out there and everyone needs their services. With the level of complexity and frequent regulatory changes, the chances of success in training someone from scratch to the position of underwriter is challenging. Not to forget the big effort and considerable amount of cost it takes for such a training program to be designed and conducted. Keeping in the mind the financial risk involved with smallest of the error on file, trying out options can be an expensive deal.

Contract underwriting is a solution for Lenders having a difficult time maintaining their underwriting turnaround times. Many are unable to find quality underwriters for hire. Although it seems tough to outsource a task that is critical to the existence of your business, there are number of success stories that prove that it works for a greater good.

It does require a strategic approach to make contract underwriting work for your company, and here are a few important points that help you get success with a contract underwriting service provider:

Evaluation of the Domain Knowledge/Experience:

Although there are many companies out in the market that claim to have extensive experience, only a few have a proven success record. It’s imperative to examine the depth of domain understanding and regulatory awareness before signing up with a service provider. A few references of current or past successful engagements can help you get a good idea of their capabilities and experience.

Knowledge Transfer:

Although the service provider is expected to have a good understanding of regulatory requirements and underwriting guidelines, it helps a great deal to share your style of underwriting with them. This ensures their income calculations stay in line with your in-house team so as to give them the comfort level of dealing with the offshore team. There could be specific investor overlays that you follow while underwriting loans and a clear instruction on the same is must to ensure the service provider doesn’t surprise you by missing a point.

Continuous Feedback:

Ongoing changes in guidelines and regulations keep on bringing new challenges periodically, hence the feedback mechanism between the service provider and the in-house team must be strong to ensure no gaps in communication of new rules to follow. The initial part of the engagement requires even closer feedback as this is a learning curve where the service provider adapts to “your way of doing things”.

The first few files must be reviewed by a senior underwriter internally and a detailed feedback should be provided. However, even after a long working relationship, a low percentage of files must be audited time to time and feedback given as required. This ensures the offshore and the in-house team stay on the same path and any deviation in process is identified and addressed soon.

Productivity Tolerance:

In most relationships, the initial period is crucial and even a small amount of discomfort at this stage results in breaking of the relationship. Contract underwriting requires a level of tolerance in the initial stages as during the first few weeks the service providers tries to adapt your style of underwriting. Usually the productivity in this period is very low hence it makes you feel as if you were investing in a no return zone.

The fact is, if you did evaluate them well before signing up then for sure you are going in the right direction even if you don’t see much results in the first few weeks. The results start showing only after 3rd or 4th week and by the time 6-8 weeks are over, you would feel comfortable be in a comfort zone not just with the quantity but the quality as well.

There is no plug and play option with Contract underwriting however it does get up and running at a fraction of time that you otherwise may spend in training new underwriters or searching for experienced underwriters in the market. These mortgage service providers have systems and processes in place that reduce the no of errors in long run and helps you enjoy tremendous cost saving.