DU or LP? How can one lender do something that another lender cannot...04-07-2015
How can one lender do something that another lender cannot these days……………….DU and LP. What? You have never heard of those acronyms or maybe you have but not 100% sure what that means to you? I’ll let you know how this can help you close more transactions in a moment but first a little background. Most Realtors have heard of these but may not know the “back-story”. All loan originators know the power of these two initials. They stand for Desktop Underwriter (DU) and Loan Prospector (LP). Over the course of the last 6 years since 2007, I bet 90% of all loans that have been underwritten and closed across the nation have been underwritten to these two government “agencies” better known as Fannie Mae and Freddie Mac (along with USDA and FHA). These two “agencies” (as they are called in the biz) singlehandedly saved the housing market. Without them to purchase the loans on the secondary market every lender from the biggest institutional bank to the smallest mom-and-pop lender would have closed their lending doors. They alone established the new lending guidelines and qualification standards after the housing meltdown……………and for the most part still do. OK, so here is how that can be a benefit to know this. Each of the two agencies, while very similar in many ways, differ on a few “niche” areas. Not all mortgage banks are seller/servicers like Blue Adobe Mortgage is to both of these AND allow our loan agents to choose (without any pricing difference) between the two when needed. While Fannie Mae (DU) has always been the industry leader to underwrite loans (more than 60% of the closed loans flow through them) and most big box banks use a version of DU to underwrite their loans, Freddie Mac (LP) expands their guidelines to include a few niche things like: The following scenarios are possible with Blue Adobe Mortgage in-house mortgage bank and would require us to ALWAYS use Loan Prospector (LP)/ Freddie Mac’s system……………..(ask your lender if they can do these in-house).
- Conventional Loan with non‐occupant co‐borrowers used for qualification purposes. Otherwise known as “Blended Ratios”;
- Conventional Owner Occupied loan with an LTV in excess of 80% on a Condominium project in order to achieve a “limited review” finding;
- Conventional loan with a Self Employed borrower in order to achieve a 1 year Tax Return documentation requirement;
- Conventional loan with a DTI in excess of 45% ‐ at this time LP tends to be more forgiving on higher DTI ratios;
- Freddie Mac Open Access loan program.
Have a great week!!