It's not uncommon for busy loan professionals to lack the technical knowledge concerning the processing aspects of a mortgage transaction. The reasons for this range from some companies not allowing originators to process, loan officers being too busy to spend time handling files after an application, or maybe they just don't have the time to learn. Whatever the case might be, processing a mortgage is not that difficult. Let's take a look at the basic steps.
Most loan origination duties end at the point where a borrower has committed to moving forward with a proposed mortgage offer. The loan officer has completed their task of "selling" the loan, getting the required loan disclosures signed, and gathering preliminary income and asset documentation. It is at this point where the loan file is typically handed off to a processor. The steps after this point are straight forward and simple.
Step 1: Obtaining Automated Approval -- The application is screened for completeness and likely uploaded to a Fannie Mae or Freddie Mac underwriting system. This system is either run through at interface at the bank or from within a wholesale lender's system if the loan is being originated by a mortgage brokerage. In general, the process is straight forward.
The loan application is exported using the loan origination software and converted to a file that can be recognized by the automated approval system. Save the file, follow the directions for loan uploads on the lender's website, and then upload the file. A credit report can be re-issued or re-ordered in almost all circumstances after a loan has been uploaded to a lender's system. Follow the directions for re-issuing or re-ordering a new report before submitting the file for automated approval. Assuming the automated underwriting system grants a pre-approval, it will also generate various items that should be submitted with the loan for a full approval.
Step 2: Order an Appraisal -- Next, an appraisal needs to be ordered to determine the value of the subject property. This is simply done by completing an appraisal request form found in the loan origination software being used. This can be submitted to the appraiser and they will schedule a time to inspect the property with the home owner. In the case of a purchase transaction, you will want to submit a complete real estate purchase contract with the appraisal request. If you are not using a loan origination software that includes an appraisal request form, you can simply contact the appraiser and ask what information is required to schedule an appraisal.
Step 3: File Submission -- Submit your loan documents/package to the wholesale lender or underwriting department. The actual methods for submitting this information varies between institutions. You might just have to walk the files down to the underwriting department if you are in a bank, correspondent, or mortgage banking office, or you might need to fax or electronically upload your loan package in a brokerage scenario. Whatever method is required for your situation, adhere to the loan submission guidelines the lender can and will provide you. These guidelines will address minimum documentation requirements as well as if the lender has a preferred stacking order the documents should be in.
Step 4: Order Title and Proof of Hazard Insurance -- If your lender has not required proof of property/hazard insurance upon original submission of the loan file, order that now. All that is needed is the insurance declaration page from the borrower. If the borrower does not have the insurance declaration page, ask them for the name and number of the insurance agent. Once you have this information, the best practice is to formally request the updated insurance policy through fax or email. Again, this type of request document can be found in the loan origination software. You will want to include the loan number, loan amount, and mortgagee/loss payee clause for the lender that will be funding the loan. The mortgagee clause can be found on the lender's website, by calling the lender, or contacting your assigned account representative.
If the loan being processed is a purchase transaction, the proof of hazard insurance will often need to be ordered after the appraisal is complete. The appraisal must be completed first because many insurance companies need to review the appraisal for certain property characteristics as well as document the replacement cost of the property.
You will also need to order a preliminary title report on the subject property. This is as simple as ordering the proof of hazard insurance. You will complete a formal request that can typically be found in the loan origination software. Complete the form in its entirety or to the best of your ability. Email or fax this request to the title company being used. In the case of a refinance, you will also want to instruct the title company to order any payoffs that are needed for current mortgages on the subject property. Include the loan number and phone number found on the credit report as well as a signed borrower's authorization to release information when requesting the title company to order payoffs.
Step 5: Fulfill Loan Conditions -- Once you loan is out of underwriting with a conditional approval, you will need to gather any extra items the mortgage underwriter is asking for. These might include letters of explanation from the borrower regarding credit, employment, or income. It might include additional information pertaining to income, assets, or residence history. Whatever the items might be, collect them from the borrower and resubmit the loan conditions all at once. If a certain loan condition is not clear, contact the underwriter for clarification.
Step 6: Order Loan Documents -- If all loan conditions have been met, the loan will be ready for documentation to be forwarded to the title/escrow company for signing. Most lending institutions have different requirements for their "doc order" process. The most common ways are to either complete a doc request through the lenders website or manually fill out and fax/email a doc order request to the lender. The request contains information about the borrower/s, subject property, interest rate, title/escrow company, and fees. It is imperative that this document or electronic form is completely filled out and one hundred percent accurate in order to ensure the loan documents are drawn properly.
Step 7: Funding -- Assuming the documents were ordered correctly, delivered to the title/escrow company, and signed by the borrowers, the loan documents will be sent back to the lender for review. If anything is missing, unsigned, or still needed in order to fund the loan, the lender will contact the loan officer (assuming it is the loan officer processing), or the title company. Provide the additional funding conditions promptly.
These are the basics of processing a conventional mortgage. Government loans have additional steps for loan processing and that will be covered in a later article.
Matt Madlang
President of http://www.beatmybroker.com where borrowers can find the lowest mortgage rates across the nation.
0 comments:
Post a Comment