The Mortgagee must evaluate the Borrower’s credit history in accordance with the Accept Risk Classifications Requiring a Downgrade to Manual Underwriting found in Handbook 4000.1 II.A.4.a.v. If a determination is made that the mortgage must be manually downgraded, the Lender must cease its use of the Automated Underwriting System and comply with all requirements for manual underwriting when underwriting a downgraded mortgage.
For additional information see Handbook 4000.1 II.A.4.a.v. and II.A.4.b.iii. available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh