Lender Response to a Refer with Caution Recommendation
When a loan casefile receives a Refer with Caution recommendation, the lender should:
- Review the Desktop Underwriter (DU) loan data for accuracy and verify that all income, assets, and liabilities were accurately recorded and fully disclosed by the borrower. If meaningful information was not included in the data submitted to DU, it should be entered and the loan casefile resubmitted.
- Review the credit report data to determine if the information accurately represents the applicant’s credit history. Erroneous data in the credit report, or contradicting or derogatory information, could have affected DU’s recommendation. (See B3-2-01, General Information on DU, for additional guidance.)
- Determine if there is any information outside of the data submitted to DU that could have affected DU’s recommendation, and should investigate whether there were any extenuating circumstances that contributed to serious instances of derogatory credit.
If the loan casefile is resubmitted to DU and still receives a Refer with Caution recommendation, the lender may manually underwrite the loan in accordance with this Selling Guide (if the loan product or transaction otherwise allows for delivery of manually underwritten loans), and deliver the loan as a manually underwritten loan.
For additional information, see B3-2-07, Refer with Caution.