Make credit decisions you can defend to auditors

Pull the credit report and really dig in -- don't just glance at the score. You're looking for the full picture: payment patterns over time, how much of their available credit they're using, and any red flags like collections, judgments, or recent late payments. Next, verify their income. W-2s and pay stubs are your bread and butter, but self-employed borrowers need extra scrutiny -- look at two years of tax returns and watch for declining trends. Calculate their debt-to-income ratio (DTI) and residual income. A borrower might look fine on paper with a 40% DTI, but if they've got three kids and a car payment that's about to reset, the real picture is different. **Pro tip**: Check for undisclosed debts by comparing the credit report to the application. Borrowers sometimes "forget" about obligations they don't want you to see. **Watch out for**: Recently opened accounts (credit shopping?), authorized user accounts inflating the score, or a sudden payoff of revolving debt right before application (someone coached them).

For secured loans, you'll need to assess whether the collateral actually protects the bank if things go wrong. Start with the appraisal -- is it recent, and does the appraiser's value make sense for the market? Don't just accept the number at face value. Check title work carefully. You're confirming clean title, verifying lien positions, and making sure there aren't any surprises (tax liens, mechanic's liens, easements that affect value). Calculate your loan-to-value (LTV) ratio and compare it against your bank's policy limits for this loan type. Think through the worst case: if you had to liquidate this collateral tomorrow, what would you realistically get? Appraisal value and liquidation value aren't the same thing -- especially for specialized commercial properties or equipment. **Pro tip**: For real estate, check comparable sales yourself rather than relying solely on the appraiser's comps. For equipment or vehicles, use NADA or industry guides as a sanity check. **If it's unsecured**: Skip the collateral valuation fields, but make sure the borrower's credit profile and cash flow are strong enough to justify lending without a safety net.

This is where everything comes together. Based on your credit analysis and collateral review, you're making the call: approve, deny, or counteroffer with different terms. Before you decide, ask yourself: would I be comfortable defending this decision to an examiner two years from now? If you're approving, make sure the file tells a convincing story about why this borrower will repay. If you're denying, your reasons need to be specific and defensible -- "credit history" alone isn't enough. **For approvals**: Spell out any conditions clearly. "Satisfactory appraisal" is vague -- specify what LTV you need, what type of appraisal, and any other requirements the borrower must meet before closing. **For counteroffers**: Maybe the borrower doesn't qualify for what they asked, but they'd work at a lower amount, shorter term, or with additional collateral. Don't just say no when you can offer an alternative. **For denials**: You must comply with fair lending rules. Document specific, legitimate reasons. If you're denying someone who's a protected class member, your file better show clearly that it's the numbers driving the decision, not anything else. **Remember**: Inconsistent decisions across similar borrowers are what get banks in trouble with regulators. Apply the same standards to everyone.

Wrap up your underwriting memo. It should read like a complete narrative -- someone picking up this file cold should understand what you reviewed, what you found, and why you decided what you did. Don't leave gaps that force a reader to guess at your reasoning. Make sure all your supporting documents and calculations are attached. Spreads, ratio analyses, collateral valuations, and any exception justifications should all be in the file. **Routing the file**: - **Approved loans** go to the closing team. They'll need your conditions list front and center so they know what to collect before funding. - **Denied loans** get routed for adverse action letter generation. Federal law requires you send this within 30 days, so don't let it sit on your desk. - **Conditional approvals** go back to the loan processor with a clear list of what's still needed. Be specific -- "verify employment" isn't helpful. Say "obtain verbal VOE from current employer confirming active employment and salary of $X." **Pro tip**: Before you close the file, do a quick self-audit. Check that your DTI calculations tie out, your LTV is correct, and there aren't any loose ends. It's much easier to fix something now than after an examiner flags it.