Underwriting: The path to doubling your volume

Nothing slows down a good underwriter more than outdated procedures and time wasted on poor-quality applications. Moreover, customer expectations have changed. Underwriters today are under tremendous pressure to deliver fast, high-quality underwriting to meet these expectations. It’s often the procedures that can be optimized most easily that pose the biggest obstacles to swift application processing.

Are you making the most of your resources, or are there certain steps of your underwriting process that are holding you back? What can you do to help your underwriters?

A day in the life of the modern underwriter

Before assessing ways to optimize your underwriting, consider what the existing daily process looks like. In a typical day, an underwriter in auto lending will need to work on a variety of issues:

• Routine applications – Ideally, a loan application is quick and simple; the borrower has submitted a full application, has acceptable credit and there are no snags in the next steps. The only downside is the repetitive grind to working through these applications.
• Non-routine applications – For underwriters, these applications are more interesting. These require judgment to assess borrower behavior, such as limited credit history files. In some cases, you may decide to request additional information before making a decision.
• Follow-up activities – Underwriters may need to put additional effort into resolving applications where data is missing or doesn’t make sense. For example, if a borrower states in their application that they are a waitress with an income of $100,000, additional verification would be necessary to validate the claim.

The modern underwriter needs to deliver on all these responsibilities and more. Let’s look at ways you can facilitate your underwriters completing this daily work more easily.

3 ways to make life easier for your underwriters

To improve underwriter productivity, you need a robust procedure in place to reduce inefficiencies in the underwriting process, equip your staff with the cleanest data possible and stay on top of any recurring anomalies.

In order to do this, you have three key options.

No. 1: Optimize your current processes

Checklists: Using a checklist is one of the best ways to ensure your underwriters are all on the same page, taking the same steps and working to the same criteria. If this is the case, you mitigate the risk of procedural errors and have more consistent data on your processes if you decide to make improvements.

Eliminating redundant steps: If you are unable to map out your processes, you’ll find it very difficult to identify areas that are taking up the most resources. Mapping out all steps of the current underwriting process and asking if any steps in it are redundant immediately frees up time for more relevant work. This includes if you have official policies and procedures at your company; it is still valuable to take note of actual everyday steps taken as formal procedures tend to get outdated.

Once your baseline underwriting process is optimized, turn to people matters next.

No. 2: Invest in your people with training and incentives

Improving underwriting quality from a people perspective is another strategy to examine.

Firstly, it’s vital to assess the quality of underwriting training regularly provided to frontline staff.

Many organizations only offer training to staff when they are hired. It is better long-term to provide regular training to reinforce critical practices, such as when to request additional documentation, and to ensure the quality of underwriting expected.

Secondly, some lenders use an incentivized approach to having their underwriters make manual decisions quickly. Lenders who exercise rewarding underwriters for fast decisioning and service level, such as offering underwriters a bonus if they can complete a certain volume of applications per month, frequently see better performance and quality of work, as well as staff that are more motivated to do a good job for you.

Underwriters who are involved in the negotiation process are often expected by dealers to manually tweak the structure of a loan. In this case, some lenders help their underwriters to clearly see the effect of these changes on the deal’s profitability to further incentivize faster (and more profitable) underwriting decisions.

For example, if underwriters are told to focus on approving high-profitability loans, the profitability showing onscreen during each amendment makes them significantly easier to identify. It also gives underwriters an immediate indicator of less profitable deals or amendments.

Lastly, when looking at your processes and procedures, take note of your top performers and encourage a culture of sharing best practices. The more your underwriters are on the same page, the more consistent their performance will be.

No. 3: Leverage technology

The first two strategies are powerful, but they do have limitations. At a certain point, we encourage leveraging technology to keep a competitive response speed to higher volumes of applications. Specifically, there are several ways you can use technology.

• Workflow optimization: Typically, your underwriters will see a higher volume of straightforward applications than complex ones. Underwriting technology can be used to automate the easier scenarios, sort the appropriate application metrics to highlight priorities and show the next step in the workflow checklist. Cutting out the manual humdrum and data-checking stage means less time spent sorting tasks and figuring out what to do next, freeing time to spend on more complex applications.
• Application recommendations: Rather than starting from scratch on each application, you can use software to obtain recommendations and suggested ratings. Software might be utilized to create risk rating scores, such as low, medium and high, or a 0 to 100 scale. Based on these ratings, the underwriter can adjust their level of review over the information provided.
• Central deal update management: When new information comes in from a dealer, that information must be tracked and assessed. With new technology, you can use a single platform to track critical updates both within and outside of the loan origination system, such as new documents, dealer comments or deal updates, as well as emails and texts.

What’s next?

Underwriting quality and productivity are critical to the success of a healthy lending business. If you are competing in a time-sensitive field like auto lending, you need to leverage every speed advantage available to you.

Ask yourself which optimization strategy — whether it involves process, people or technology —you might be able to utilize to improve your underwriting productivity.

Shim Mannan is the Global Head of Services Sales Enablement at global fintech Solifi, formerly known as IDS.