Offers & Underwriting
This guide covers the offer generation process, underwriting decisions, and the different types of declines in the SavvyMoney platform.
Offer Generation
How Offers Are Created
The system generates offers based on:
| Factor | Impact |
|---|---|
| Credit Score | Rate tier, eligibility |
| Debt-to-Income | Maximum amount |
| Loan-to-Value | Secured loan amounts |
| Membership | Special rates, terms |
| Product Rules | Min/max amounts, terms |
Offer Components
Each offer includes:
| Component | Description |
|---|---|
| Amount | Loan amount offered |
| Rate | Annual Percentage Rate |
| Term | Repayment period |
| Payment | Monthly payment amount |
| Fees | Origination, processing fees |
| Total Cost | Total amount to be repaid |
Offer Types
| Type | Description |
|---|---|
| Pre-Qualified | Based on soft credit pull |
| Pre-Approved | Based on hard pull, conditional |
| Approved | Final approved terms |
| Counter | Alternative to requested terms |
Pre-Qualification vs Pre-Approval
Pre-Qualification
- Soft credit inquiry (no score impact)
- Based on limited information
- Preliminary offer only
- Not guaranteed approval
- Used for shopping/comparison
Pre-Approval
- May involve hard credit inquiry
- More detailed analysis
- Stronger commitment
- Subject to verification
- Conditions may apply
Comparison
| Aspect | Pre-Qualified | Pre-Approved |
|---|---|---|
| Credit Inquiry | Soft | Soft or Hard |
| Score Impact | None | Possible |
| Accuracy | Estimate | More accurate |
| Commitment | Low | Higher |
| Verification | Minimal | More required |
Underwriting Process
Automated Underwriting
Most applications go through automated underwriting:
┌─────────────────┐
│ Application │
│ Submitted │
└────────┬────────┘
▼
┌─────────────────┐
│ Rule Engine │──── Rules evaluate automatically
│ Evaluation │
└────────┬────────┘
▼
┌────┴────┐
▼ ▼
┌───────┐ ┌───────┐
│APPROVE│ │DECLINE│
└───┬───┘ └───┬───┘
│ │
▼ ▼
┌───────┐ ┌───────┐
│Counter│ │ Hard │
│ Offer │ │ Soft │
│(maybe)│ │ Pend │
└───────┘ └───────┘
Rule Groups
Rules are organized into groups that run at different stages:
| Group | Stage | Purpose |
|---|---|---|
| Pre-Bureau | Before credit pull | Initial eligibility |
| Soft Inquiry | After soft pull | Pre-qualification |
| Hard Inquiry | After hard pull | Full underwriting |
| Stipulation | During processing | Condition checks |
| Fraud | Throughout | Fraud detection |
Manual Review
Applications may require manual review when:
- Rules refer to manual queue
- Score near threshold
- Exception requested
- High loan amount
- Complex situation
- Fraud indicators
Underwriting Decisions
Decision Types
| Decision | Description |
|---|---|
| Approved | Application approved as requested |
| Approved with Conditions | Approved pending stipulations |
| Counter Offer | Approved for different terms |
| Declined | Application not approved |
| Pending | Needs more information |
| Referred | Sent for manual review |
Decision Factors
Each decision considers:
Positive Factors:
- Good credit score
- Low DTI
- Stable employment
- Existing relationship
- Strong income
- Adequate collateral
Negative Factors:
- Recent delinquencies
- High utilization
- Short credit history
- Multiple inquiries
- Collections
- Insufficient income
Three Decline Types
Understanding decline types is critical for proper applicant communication and next steps.
HARD Decline
Definition: Definitive decline that cannot be overcome in the current application.
Characteristics:
- Based on fundamental eligibility
- Cannot add co-applicant to overcome
- Must wait before reapplying
- Adverse action notice required
Common Reasons:
- Credit score below minimum threshold
- Recent bankruptcy (within exclusion period)
- Previous charge-off with institution
- Active fraud alert
- Does not meet membership eligibility
- Legal or regulatory prohibition
Next Steps:
- Send adverse action notice
- Explain decline reasons
- Provide required disclosures
- Inform of reapplication waiting period
SOFT Decline
Definition: Conditional decline that may be overcome with changes.
Characteristics:
- Based on modifiable factors
- May overcome with additional information
- Co-applicant may help
- Can reapply with changes
Common Reasons:
- DTI too high (can add co-applicant)
- Insufficient income (can verify additional)
- Collateral issues (can substitute)
- Missing documentation (can provide)
- Employment gap (can explain)
Next Steps:
- Explain what can be done
- Offer specific remediation paths
- Discuss co-applicant option
- Provide guidance for reapplication
PEND (Pending) Decline
Definition: Application pending additional information before final decision.
Characteristics:
- Not a final decline yet
- Awaiting documentation
- May become approved or declined
- Time-limited status
Common Reasons:
- Income documentation needed
- Employment verification pending
- Collateral information required
- Stipulation incomplete
- Verification in progress
Next Steps:
- Request specific items needed
- Set deadline for response
- Follow up regularly
- Make final decision when received
Decline Type Comparison
| Aspect | HARD | SOFT | PEND |
|---|---|---|---|
| Finality | Final | Conditional | Pending |
| Overcome | No | Yes | Maybe |
| Co-applicant helps | No | Often | Maybe |
| Reapply | After wait | Immediately | N/A |
| Communication | Adverse action | Guidance | Request docs |
Counter Offers
When Counter Offers Are Made
Counter offers are presented when:
- Applicant doesn't qualify for requested amount
- Lower rate tier warranted
- Different term more appropriate
- Product better suited to profile
- Risk factors require adjustment
Counter Offer Components
| Original Request | Counter Offer |
|---|---|
| Amount: $25,000 | Amount: $15,000 |
| Rate: 6.99% | Rate: 9.99% |
| Term: 60 months | Term: 48 months |
| Payment: $497 | Payment: $380 |
Counter Offer Process
- System generates counter offer
- Present to applicant
- Applicant reviews options:
- Accept counter offer
- Decline counter (decline app)
- Request manual review
- If accepted, update application
- Continue to funding
Adverse Action
When Required
Adverse action notices required when:
- Application declined
- Counter offer made (lower than requested)
- Terms less favorable due to credit
- Existing account terms changed adversely
Required Elements
| Element | Description |
|---|---|
| Action Taken | What decision was made |
| Reasons | Top 4-5 decline reasons |
| Credit Score | Score used in decision |
| Bureau | Credit bureau used |
| Consumer Rights | Right to dispute, free report |
| Contact Info | How to get more information |
Timing Requirements
| Action | Deadline |
|---|---|
| Completed application | 30 days |
| Incomplete application | 30 days after deemed incomplete |
| Counter offer declined | 30 days |
Standard Reason Codes
| Code | Reason |
|---|---|
| 01 | Amount owed on accounts too high |
| 02 | Delinquent past or present |
| 03 | Proportion of balances to limits too high |
| 04 | Too many accounts with balances |
| 05 | Too many consumer finance accounts |
| 06 | Length of credit history too short |
| 07 | Too many recent inquiries |
| 08 | No recent revolving balances |
| 09 | Insufficient credit file |
| 10 | Unable to verify information |
Risk Assessment
Risk Scoring
The system calculates risk scores based on:
| Factor | Weight |
|---|---|
| Credit Score | 30% |
| Debt-to-Income | 25% |
| Payment History | 20% |
| Employment Stability | 15% |
| Collateral | 10% |
Risk Tiers
| Score Range | Risk Level | Typical Decision |
|---|---|---|
| 800-1000 | Very Low | Auto-approve |
| 600-799 | Low | Approve |
| 400-599 | Moderate | Review |
| 200-399 | High | Decline likely |
| 0-199 | Very High | Decline |
Underwriting Best Practices
For Auto-Decisions
- Trust the rule engine for clear cases
- Review exceptions carefully
- Document override reasons
- Monitor decision quality
For Manual Review
- Be consistent in application
- Document reasoning
- Know approval authority
- Consider compensating factors
- Communicate clearly with applicant
Compliance Considerations
- Treat applicants consistently
- Follow fair lending rules
- Document decisions
- Send adverse action timely
- Use correct reason codes
- Maintain audit trail
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