The two major mortgage underwriting corporations are Freddie Mac and Fannie Mae. Freddie Mac uses a software program known as LP, or Loan Prospector, to give its lenders and idea if a potential borrower will be able to qualify for a new mortgage debt. It is simply the first step in the process of getting a mortgage underwritten.
The results from running an application through the LP program help a lender to determine if the borrower needs to be reassessed for another loan program or if he simply needs to make some financial changes in order to be qualified for a mortgage. If a borrower receives a result of approve or accept, it means that the borrower qualifies for a mortgage. However, it does not mean that the loan will close, it simply means that there is a high likelihood of final approval.
LP is a good tool for a mortgage lender to use to weed out successful mortgage applicants from those that will not produce a mortgage closing. Additionally, it tells the lender automatically what changes need to occur in order for the borrower to be able to qualify later. This gives the lender valuable information to pass on to a borrower who received a declined response from the program.
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Freddie Mac's LP is not the only mortgage underwriting software in the industry. Another major program is known as DU, or Desktop Underwriter and is the official loan underwriting software of the other major mortgage underwriter, Fannie Mae.
A decline by the LP software does not officially mean that a borrower will be denied for a mortgage. The lender should review the application and his entry work into the computer to determine if the decline was due to the applicant or the lender's entries into the program. Sometimes an error causes a borrower's application to be erroneously denied.
LP is a good tool for lenders to use to determine quickly and effectively which clients he should focus on and which ones he should educate for future loan opportunities. It helps the lender to keep from wasting both his and the borrower's time on a mortgage as well.
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