Can anyone point me in a direction to obtain informaiton on dos and don'ts of MLO performing the underwriting on the same loan?
If the MLO is a "certified" underwriter is there a conflict of interest, fair lending or other compliance issues?

I'm just addressing the fair lending part!

If a MLO is receiving a commission on a loan that they obtained and underwrote, it is a HUGE conflict. They have a vested interest in approving the loan and denying it would be a waste of time and loss of money. There would also be the potential for a lot of prescreening. This could lead to a lot of safety and soundness issues loss of confidence by the regulators on the internal controls in the bank.

If there is a lesser experienced MLO that won't take the same chances (discretionary) and the outcome might be different, the lender is subject to Disparate Treatment.

During a fair lending exam, the regulators look at all applications and decisions. Since it is a bank decision, they will compare the decisions of all loan officers. If there are differences, the bank will be liable. This is especially critical of any HMDA loan where the GMI is mandated.

Recommendations - centralized underwriting and a 2nd review. Giving MLO's the authority to approve their own loans IMHO is suicidal. it would be like the fox guarding the henhouse.

Lenders do not receive a commision nor are the bonuses based on mortgage production. Even taking that out of the equation, IMO it is still a conflict on many levels. Perhaps there is a work around where the MLO/underwriter only reviews the underwriting on loans originated by others?

Lenders do not receive a commision nor are the bonuses based on mortgage production.

Even though no commissions or bonuses, many banks have some type of performance goals or minimum quotas for loan officers. (If not, LO's would not be hustling the way they usually do.) The incentive would be to keep employed by the bank.

Some banks do have LO's approving other LO's loans. I personally think it is a bad deal, because again, "you scratch my back, I'll scratch yours." IMHO, I would still disagree to LO's underwriting their own or another LO's mortgage loans.

The MLO proves the ability to repay by using an underwriting program, is this acceptable?

W2K - I hope someone else chimes in.

Someone approving their own work IMHO is a train wreck waiting to happen. I heard the expression a long time ago from someone in accounting - "you make the beans, I'll count the beans", even if the maker has a bean counting program.

Having been in auditing and compliance, it is too easy to manipulate data, especially the amount that is needed now. Actually, it might be slightly slower, but a separate person looking would protect the LO from potential criticism.

Besides the obvious risk of manipulating data purposefully, there is also a greater risk for mistakes with the loss of a second set of eyes reviewing the information. I can look at my own error over and over all day long and not see it, but I will spot someone else's error from a mile away in an instant. Those errors could even look purposeful in that type of arrangement.

Even if the LO doesn't gain from it financially, there would still be pressure to approve the loans for your clients. No one likes to tell a client that they are being denied.

I agree with Rocky's train wreck analogy.

There's also more potential for direct discrimination as the one approving the loan has knowledge of the gender, ethnicity, etc. of the applicant.