Bank of Oklahoma Zeroes In on Undisclosed Mortgage Liabilities

Fannie Mae’s Loan Quality Initiative (LQI) requires lenders to establish processes for identifying all of a mortgage applicant’s liabilities, including those incurred between the time of application and the closing of the loan. While many lenders still struggle with undisclosed liability issues, Bank of Oklahoma worked with CSC Credit Services on an innovative service that allows its loan underwriters to find undisclosed liabilities with the push of a button.

Loan quality has always been a top priority at BOK Financial, a $24 billion regional financial services company that was the largest commercial bank to decline assistance under the Treasury’s Troubled Asset Relief Plan (TARP).

“When Fannie Mae announced its Loan Quality Initiative, I think we reacted a bit more methodically because it was already on our list to do,” said Darren Honegger, underwriting manager for Bank of Oklahoma Mortgage Group. “We wanted to maintain our low repurchase rate, and one of the top threats to that is undisclosed debt coming up in post-close audits. So rechecking of credit, even though it’s suggested and not required, is really the only practical way to protect ourselves.”

A Tailored Solution

The bank’s mortgage team turned to CSC, which is the exclusive provider of credit reports to Bank of Oklahoma Mortgage Group. Bank of Oklahoma was already planning a project to roll out Fannie Mae’s Desktop Underwriter system and wanted to integrate a credit recheck capability into this system.

The bank chose CSC’s Customized Undisclosed Liabilities Report Service, which automates the process of accessing new credit data and comparing it to the report prepared at the time of application to uncover undisclosed debt activity.

“We preferred the soft inquiry with CSC’s solution, which is less invasive than pulling a whole new credit report and doesn’t impact the applicant’s credit score,” explained Honegger.

Bank of Oklahoma wanted a customizable solution that would allow the bank to focus on the data that the bank identified as indicating possible repayment obligations. This involved working with CSC to tailor reports that automatically find significant changes in the use of credit over the normal fluctuations, using the bank’s own thresholds.

“The Undisclosed Liability Report lets us focus on the big-ticket items that indicate a credit risk, like new mortgages, new installment debts or increases in credit card balances over a certain amount,” said Honegger.

Rapid Implementation

Bank of Oklahoma went live with the Undisclosed Liability Report service in December 2010, just 9 months after beginning its initial discussions with CSC.

“CSC was able to tell us what the performance impact would be when we turned the product on based on which criteria we used in comparing the reports,” said Honegger.

“After fine-tuning our procedures, we were able to save labor and time by focusing only on root causes that lead to repurchases and automating the review instead of manually pulling and comparing the reports.”

The bank’s loan processors embraced the system partly because of the seamless integration into their existing processes. “They had all these requirements dumped on them in the past couple of years and this was just one more step. But CSC helped us develop an approach that kept the extra effort to a minimum,” Honegger said.

“From a process standpoint, we incorporated the Undisclosed Liability Report with the verification of employment, which was an action they already had to take prior to closing, and with the Customer Identification Program,” he added. “So the loan processors don’t have to get up and fax the request in or log in to a different website. You literally push a button and the report is ordered.”

Quick to Respond

Honegger was impressed with CSC’s support and quick response times. “When we started pulling this together, it wasn’t weeks after I had the first discussion with CSC — it was days. And they always follow up on questions right away.”

Get More Information

Download the full case study (417 KB PDF).

Learn more about CSC’s Undisclosed Liability Report Services or contact us by phone or email. Only CSC will use the information you provide.