Business News

Desktop Underwriter Turns 21, Continues to ‘Transform Industry’

By Karen Nielsen | March 03, 2016

Desktop Underwriter Turns 21, Continues to ‘Transform Industry’Remember the eight-disk version of Desktop Underwriter® (DU®)? Lenders who do, know that the ubiquitous underwriting system required sequential installation on each desktop using it.

My, how times have changed.

At its launch, DU underwrote only one-unit, owner-occupied transactions. Additional products and transactions came over the years – including four units, investment property and second homes.

Now it’s the primary distribution channel for all of Fannie Mae’s product policy and eligibility guidelines. And, with 24/7 availability, lenders can process transactions even on weekends with releases and code migrations.

DU turns 21 this year, now on Version 9.3 – an important milestone. So we thought it would be fun to look back at its evolution. What better way to understand why lenders have chosen this innovative technology to underwrite millions of loan casefiles a year?

Back in the Day

DU Version 1.0 represented Fannie Mae’s first attempt at automating its Selling Guide. The company designed the guide to streamline the underwriting process and create consistencies in underwriting for its lenders, says Mindy Armstrong, senior product manager. She has worked on DU for 15 years.

In some of the early feedback, there were concerns that DU was “too fast,” she recalls.

“There was definitely some surprise, and even some resistance, that lenders could enter a casefile for the borrower, pull in their credit report and have that loan underwritten through DU in a matter of seconds,” Armstrong says.

The manual underwriting process would normally take hours or even days. How long depended on the underwriter. Automating the process gave lenders immediate notification of a loan’s eligibility for sale to Fannie Mae, she says. And that’s what lenders appreciated the most.

Industry Impact

It’s hard to overstate DU’s impact on the mortgage industry.

“It was really transformational in terms of having that automation of our guidelines,” Armstrong says. “Think about an 800-page Selling Guide that contains all of our policies. Coding all of them in a system where lenders can provide data and obtain an underwriting recommendation in less than a few seconds, that’s just transformational.”

Since 1995, Desktop Underwriter has averaged two to three major releases and a number of smaller releases a year.

“Being able to automate any new product or policy that comes out really has helped the industry,” she adds. “Our lenders better understand our policies and ensure they are applied consistently on all their loans.”

Brokers and lenders often share how DU provides a competitive advantage. They say it’s clear and concise about a requirement or verification. It also tells the lender what they need to do in order to deliver that loan to Fannie Mae.

“It really took out a lot of the guesswork by simplifying lenders' processes and creating efficiencies,” she says. “They didn’t have that before.”

DU’s evolution over the years included a direct integration giving lenders an automated connection to Fannie Mae and updates from the servers.

DU is actually a large platform consisting of 40 different services and components. Think of them as puzzle pieces that come together to provide the total underwriting assessment.

“There are a lot of things to keep up with,” Armstrong says. That can include new policies and eligibility guidelines from the Single-Family Credit Policy Group. Or there can be a new regulatory or compliance item. “There’s always something we are changing or updating,” she says. “There’s never a time we don’t have a release we’re working on.”

Behind the Curtain

The DU product and technology teams understand DU’s importance to the industry and to Fannie Mae’s lenders. They are there to ensure a thoughtful DU change and management process that avoids disruption.

The teams are always thinking about the next innovation. That way, Fannie Mae can continue offering the efficiencies and certainty lenders value as they underwrite their loan casefiles through DU.

“The folks who developed DU were way ahead of their time in terms of the architecture they used,” Armstrong says.

“DU has evolved and we can underwrite a lot more transaction types today than in 1995,” she says. “But the architecture itself has been extremely reliable. It has truly transformed the industry.”

 

Karen Nielsen is a freelance writer based in Dallas.