Friday, November 30, 2007

Loan Score: Linking itself to other AUS

By now I'm sure you're all sick of hearing the refrain, "It was bad underwriting that led to the subprime mortgage crisis." Actually, lenders have been using technology for years that practically guarantees every loan is underwritten very, very well. All you have to do is plug in your loan product requirements and let the engine run. The Automated Underwriting Systems (AUS) in place in the mortgage industry did a truly excellent job of funneling the billions worth of subprime and ALT-A deals into the pipelines in order to satisfy their Wall Street buyers.

Unfortunately, our modern AUS are not equipped to ask the questions: "Is this too good to be true? Can we really sell this crap and laugh our way to the bank?" Fortunately, technology is too much a part of our daily lives for anyone to have a "Terminator" moment and blame the machines for this mess. And yet, at least one AUS developer is betting on the machine to help lenders get out of it.

Loan Score Decisioning Systems LLC, Irvine, Calif., a provider of enterprise-class automated underwriting solutions for lending institutions, is promoting a platform that can combine various AUS to help the lender apply the right tools and guidelines to the various products the company wants to originate. An extra bell or whistle is the platform's ability to choose a product and determine the pricing for the deal as part of the process. Recently, the firm was in the news for establishing a seamless integration (terminology we see less frequently in the age of SOA) with Fannie Mae’s Desktop Underwriter.

The Loan-Score AUS can underwrite conforming, FHA and other government loans by adding embedded functionality that directly incorporates DU findings into the Loan-Score pricing and AU decision. Of course the lender still has to have an LOS old enough to remember how to process government loans.

David Colwell, director of strategic solutions at Loan-Score says his company has created a one-stop-shop with integrated access to multiple AUSs via a single, centralized automated underwriting platform, though it is not yet clear which other AUS are incorporated into the platform. I posed that question to Joe Bowerbank, the company's director of marketing.
"Essentially, our AU platform's 'multi-layered risk analysis functionality' is able to incorporate and evaluate the findings of other AUS's into our own AUS --- complete with conditions/stips. By way of web services integrations, lenders can also access the FHA's AUS, called TOTAL Scorecard. By year-end, we'll also connect to Freddie's LP. If needed, we can also seamlessly integrate with other PPE engines. So, our AUS's integrations work to create one-stop-shop integrated access to multiple AUSs via Loan-Score's centralized automated underwriting platform. Simply put, it's the ultimate in convenience!"
As more investors develop their own AUS, those that built on SOA-based technologies could be integrated into Loan-Score, allowing the user to working in a single environment but base decisions on a number of other engines' results.

Today Loan-Score maintains a library of investor guidelines and pricing to ensure eligibility is met and market conditions are adjusted to deliver precision-based underwriting that results in fundable loans, the company said.

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