Guaranteed Underwriting System – Components and Overview
Guaranteed Underwriting System, also known as GUS, is an automated process that has been designed specifically to cater to Single Family Housing Guaranteed Loan Program. This system performs applicants’ credit risk assessment, allowing lenders to make an informed lending decision.
Automated underwriting mechanism is rampantly used in mortgage industry due to its efficiency and consistency, as compared to conventional methods that are prone to human error. GUS was introduced purposely for approved Rural Development lenders to help them analyse credit risk of the loan applicant. Even though GUS is one of the most objective and accurate ways of automated underwriting, it does not eliminate the role of qualified underwriters.
GUS is a rules based tool that has been developed using advanced version of Federal Housing Administration (FHA) scorecard known as Technology Open to Approved Lenders (TOTAL). Once the mortgage loan application is entered into the system, GUS evaluates this data against potential borrower’s credit history and property information to determine their ability to repay. Most importantly, GUS offers quick underwriting recommendation to the originator, allowing them to process the file swiftly and accordingly.
That being said, let us discuss about important GUS components and overview to understand its use and benefits to the users.
GUS has been made available to approved lenders at no additional cost and can be accessed through a secure web-based environment. Its interface takes the borrower’s declared income and evaluates their propensity to repay the mortgage. Some important components of GUS are:
- Eligibility Assessment of Property and Income
GUS is integrated with Rural Development’s public website, such that when property information is entered in the system, it runs a quick check to determine if it is located in the eligible rural locations. At the same time, it also checks annual income that should not be greater than the adjusted limits, vis a vis, size of the household and state in which the applicant wants to live.
- Rules Based System
GUS Rules mechanism assimilates all the standards as found in RD Instruction 1980-D. These rules are augmented by Administrative Notices regarding origination of SFHGLP loans. The engine rules can be scaled from time to time as per analysis.
- TOTAL Scorecard
TOTAL is a reformed version of FHA mortgage scorecard that has been adapted to SFHGLP loans. This scorecard is proprietary to HUD and is open to modification as per the changing mortgage environment. The scorecard indicates favourably for applicants who have cash reserves to make housing payments after the loan closes.
- Interface Between GUS and Credit Bureau
Fannie Mae Credit Interface service provides the bridge between GUS and credit bureaus. This interface facilitates lenders with a credit report from one of the three reporting agencies, that too if it is available. For now, the report comes only from one national credit agency. However, the facility to take information from all the three credit agencies may be incorporated in the future.
This transaction based system was developed to automate credit risk evaluation and accelerate the process, making it cost effective. Let us talk about the general overview of GUS process:
Step 1: Originator enters the loan information into GUS. This information will either come from AUS or will be fed directly into the system. If you have additional information such as final count of household members or updated income details, then be sure to validate all the fields before going further into GUS. Entering inaccurate information may prompt the system to decline USDA loan.
- Step 2: Request for Underwriting decision from the tool. The system can provide preliminary underwriting decision to help the lender take respective action on loan file.
- Step 3: GUS integrates the applicant’s credit report and applies eligibility guidelines from the system to determine borrower creditworthiness. The tool will deliver as per information fed into the system. Hence, it remains lender’s responsibility to validate credit information and ensure that the borrower is meeting SFHGLP loan standards.
- Step 4: GUS requests for scorecard from the system. If borrower’s risk assessment is acceptable to GUS, it will issue “accept” rating. If not, it will reflect as “refer” or “refer with caution.”
- Step 5: GUS analyses the results and takes other criteria into consideration before providing an underwriting decision. When the system reflects “Refer” rating, it means that manual underwriting is required to assess borrower creditworthiness.
GUS, as a tool, helps lenders in understanding the qualification criteria for SFHGLP loans. This understanding of borrower eligibility and associated risks can improve the underwriting process. Expert Mortgage Assistance is a specialist outsource mortgage service provider with expertize in USDA loans. We also provide extended GUS support to help lenders and brokers in optimizing benefits. Speak to us today for an expert opinion.