7 Ways to Identify if a Deal May be High Risk

When underwriting a mortgage application, the quality of your underwriting process and policies directly dictate the proportion of high risk deals that go on the books. Sometimes you can do your basic underwriting and a deal seems to check out, but there could be information that you are unaware of because of non-disclosure or innocent oversight on the part of a broker/agent or client.

As an underwriter you have access to different tools and systems to support you through the process of underwriting your applications. If you have access to Purview For Lenders, there is a report called the Lender Report that summarizes property information that can enable you to quickly look beyond your mortgage application and identify if a deal you are working on is high risk.

Here is a short list of ways that you can use the information in the Lender Report when underwriting a deal and assessing the potential risk - both as it relates to the client and the property being financed:

1.      View property details and visually inspect the outside of a property and its surrounding neighbourhood – What if the property is under construction? Does it actually exist?

2.      Confirm who the homeowners are – What if other people are on title?

3.      View the sales history on the property – For example, if the property was purchased last year for $300,000 and now the owner thinks it is worth $450,000, there may be an issue.

4.      Estimate property value using an AVM (automated valuation model) – What if the applicant thinks the property is worth way more than it is actually worth?

5.      Learn the history of mortgages registered against a property – If the applicant wants to refinance there could be other mortgages on title that weren’t disclosed.

6.      View comparable sales in a particular neighbourhood – This can help you to identify if the value is off.

7.      Identify potential fraud – What if the application is for a mortgage on a house that is paid off free and clear but then later you learn that there is no house and the property is just land?

These are some of the many examples of why it’s important to scratch below the surface and take advantage of all the tools available to you when assessing risk on an application. If you don’t have access to these types of tools at your financial institution, champion having them. The more information you have when underwriting your application, the faster and more efficient you can be when underwriting.

For more information about real estate tools that are available to lenders and underwriters of mortgage applications that help to identify high risk deals please visit www.purview.ca/lenders or call 1-855-787-8439.