Fund It or Fail It
The customer signs loan documents using a nickname instead of the legal name shown on the vesting documents.
What is Fail it, a signature defect requiring correction prior to funding or sale?
A customer qualified using a two-year history of hourly income. Two days before funding, a VOE reveals the customer is now paid solely by commission and has been in the new compensation structure for one week.
What is a material change in employment and income requiring re-underwriting before funding?
A loan purchased by an investor is later discovered to contain an undisclosed debt that affected qualification. The investor may require the lender to do this.
What is a mortgage repurchase (buyback)?
The loan was approved as a primary residence. During the final verification call, the customer mentions they plan to rent the property immediately after closing.
What is a potential occupancy misrepresentation requiring review and possible re-underwriting?
A customer owns 25% of a business listed on tax returns but does not receive qualifying income from it. Underwriting may still require analysis because of this potential impact.
What are business liabilities that could affect the customer's qualifying ratios?
Cash to close decreased after the CD was signed due to a lender credit increase.
What is Fund it, a revised Closing Disclosure that generally does not require a new waiting period?
After documents are signed, a final credit refresh reveals a newly opened auto loan with a $950 monthly payment.
What is a new liability requiring a DTI recalculation and possible loss of eligibility?
A loan closes successfully, but post-closing discovers the note was signed with a different vesting than the security instrument.
What is a document defect that could make the loan unsalable until corrected?
A borrower/customer becomes obligated on a new mortgage after initial underwriting but before closing. The new payment increases DTI beyond guidelines.
What is a significant credit event requiring re-underwriting and potentially making the loan ineligible?
The appraisal comes in $30,000 below purchase price and the customer refuses to renegotiate with the seller.
What is an increase in LTV that may require additional funds to close or make the loan ineligible?
The customer signed closing documents, but prior to disbursement, the closer notices the cash-to-close funds came from a business account that was never disclosed or reviewed by underwriting.
What is Fail It, because the funds must be documented, sourced, and approved before funding?
A loan receives an Approve/Eligible recommendation but includes inaccurate occupancy information entered in the AUS.
What is an invalid AUS finding requiring resubmission with accurate data?
This post-closing defect can prevent an investor from purchasing a loan even though the customer has closed and funded successfully.
What is a missing, improperly executed, or unrecordable security instrument?
A revised Closing Disclosure was issued because the APR increased beyond tolerance, but the loan closed the next business day.
What is a TRID violation because certain APR increases require a new three-business-day waiting period before consummation?
A customer pays off a vehicle loan during processing that had been counted in qualifying liabilities.
The processor receives a payoff letter. The debt still appears on the credit report.
What is documentation needed to remove the debt from DTI calculations?
The Note amount and Closing Disclosure loan amount differ by $1,000.
What is Fail it, a funding and document discrepancy requiring correction before purchase by investors?
A bank statement deposit used for assets appears one week before application and exceeds 50% of the customer's monthly qualifying income.
What is a large deposit requiring sourcing and documentation?
A customer's tax transcript shows self-employment income not disclosed on the application.
What is an undisclosed business requiring analysis for income and liabilities?
A customer needs an additional $15,000 to close after a low appraisal. The funds suddenly appear in their account three days before closing, and no paper trail accompanies the deposit.
What are unsourced funds that cannot be used until properly documented?
The file has Final Approval, but right before closing, someone notices the customer’s bank statements show recurring payments to an undisclosed mortgage company that does not appear on the credit report.
What is a potential undisclosed mortgage liability requiring investigation, documentation, and underwriting review?
The loan is Clear to Close, documents are signed, and funding is scheduled. A final credit refresh shows a new installment loan with a $725 monthly payment that was not included in the AUS or underwriting approval.
What is Fail It, because the new liability requires DTI recalculation, AUS update, and underwriting review before funding?
A customer changes from salaried employment to commissioned employment two weeks before closing. The loan was approved using salary income.
What is a material change requiring re-evaluation of income and underwriting approval?
Post-closing prepares the loan for investor delivery and discovers the Note is missing a required customer signature, but the mortgage/security instrument was signed correctly and recorded.
What is an investor suspense or kickback due to a critical document execution defect?
The customer receives a lender credit on the Loan Estimate. Before closing, the lender credit is reduced without a valid changed circumstance, increasing the customer’s cash to close.
What is a tolerance violation because lender credits generally cannot be reduced without proper justification and disclosure?
The customer insists they are purchasing a primary residence, but the insurance binder lists the property as tenant-occupied, the mailing address is different, and the customer casually mentions “my renters move in next month.”
What is potential occupancy misrepresentation requiring the loan to be paused and reviewed before closing or funding?