Written By: Bonnie Wilt-Hild
I know, it doesn’t sound like something that any self respecting processor would engage in but it is happening all around us, it being meatball processing. Defining it is easy enough as well, just think processing on the fly and the end results as you can well imagine is a loan approval or more often, suspense, that resembles the collective works of Shakespeare, at least in page length and as we get busier, the items overlooked during processing continues to grow.
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It seems that more and more, in an attempt to expedite the time a case spends in the processing area of any mortgage lender, processors are told to simply put their hands on the basics and get the file into underwriting. In this, a processor may have a couple of paystubs, a W-2 and credit report and pending orders for the appraisal and tax transcripts. If they are somewhat diligent, they update the loan origination system and submit the file to underwriting subject to receipt of just about everything which leaves it up to the underwriter to make sure that nothing is missed. Now as much as many of you think this is fast way to get the file into underwriting and get the loan approved so that you can get back to your borrowers with the good news, I have to tell you in a lot of cases this method of processing more often than not, slows the process down tremendously. It might not seem that way out of the gate but trust me, it comes back to bite you shortly before closing.
Now I will tell you from an underwriting stand point this method of processing does make conditioning the file easier because simply put, you just condition for everything and a few other things and it’s a done deal. Clearing the conditions however is a nightmare and typically resembles a second underwrite which provokes more conditions. Now as you can well image, many of processor are lured into a false sense of security because they have a loan approval in their hands, what they don’t realize however is that the conditions listed on the loan approval are basically requiring every document know to God and man with regard to loan approval with some things easier to obtain than other. So feeling confident about the loan approval, the processor puts the file on the back burner because after all its approved and about 7 days prior to closing, after receipt of the appraisal and transcripts, they pick the case up to clear to conditions and it’s at this time the panic wells up inside of them. Yes the loan is approved however it is approved subject to receipt of a satisfactory verification of rent, explanations as to why the borrowers paystubs don’t match the income listed on the VOE, evidence that the taxes due as indicated on the borrowers tax returns have been paid in full and evidence of sufficient funds to close because there are not bank statements in the file and of course a front and back copy of the EMD check. Seeing all of this processor get to work calling the borrower, getting letters from the employer and so on and upon receiving the documentation realize that the borrowers are 2,000 short to close, the employment issue has to do with employees work schedules being reduced to 32 hours weekly which result in excessive ratio’s and as indicated by the transcripts the borrowers taxes owed for the prior to tax years have not been paid and the borrower has neither the funds to pay them nor wiggle room in their ratio to set up a payment plan. You guessed it, the loan that has set approved on the processors desk for 3 weeks has now been declined and worse yet, 3 days prior to loan closing.
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Hindsight being what it is, it is just my opinion that if the loan officers took a better application and collected the documentation required getting the file into underwriting, and the processors could actually spend a week focusing on the documentation they know the underwriter will require due to special file circumstances. This would allow a more complete file to enter underwriting which would allow for fewer and less critical conditions required prior to closing which quite frankly results in less work for processing and underwriting where single files are concerned giving support staff more time to process and underwrite a greater number cases. Oh yea, and your cases won’t get rejected 2 or three days prior to closing. With that said, originators should develop a borrower checklist which will allow for more critical documents to be collect at application so that processors can determine during a single review what else might be required to get the deal to the table. Review the documents the borrowers provide at time of application to see if they prompt further questions and if they do, ask them. For example if the bank statements provided demonstrate $1.22 as the balance, ask the borrower where the cash to close is coming from and tell them what you need to demonstrate that. Make a few notes for the processors so they can convey the information to underwriting and at the end of the day, everyone wins. Remember everyone the cleaner the file goes into underwriting the cleaner it comes out and fewer conditions equates to faster closings. Have a great week!
About The Author
Bonnie Wilt-Hild - As an NAMP® staff writer, Bonnie currently serves as a senior instructor for FHA Online University (www.FHA-Classes.org) as well maintains a full-time mortgage underwriting position as the Senior FHA DE Underwriter for a major lending institution. With over 25+ years of senior-level FHA/VA Government underwriting experience, Bonnie is considered the "Queen of FHA Loans". If you're interested in becoming a writer for NAMP®, please email us at: firstname.lastname@example.org.