Tips for a Clean Closing

Written By: Frankie Lacy, Op-Ed Writer

The mortgage industry is a service industry that relies heavily on customer satisfaction for repeat business and referrals. There is no greater way to tarnish your company’s reputation with a customer than a poorly executed closing experience. From the customer’s perspective, they have been through an intrusive, uncomfortable process of obtaining their loan. Their greatest desire is to wrap up the process as quickly and painlessly as possible. To that end, we on the operations side should strive to make the closing experience smooth and error free.

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The first way to ensure a clean closing is to get a clear understanding of the borrower’s goals and perception of what will transpire at the consummation of the transaction. For example, when processing a refinance loan, we must ask the customer how much money they are willing to bring to the table. Notify the customer that escrows, per diem interest, and other charges could have an impact on the amount of money required at closing. Also, ask the borrower if they would rather bring any extra funds to closing or increase their loan amount to roll the funds into the loan.

Secondly, we must be aware of the minute details that could cause an interruption or delay in the closing. Some examples are:
• Rate lock expiration dates
• Credit, income, asset, collateral expiration dates
• Verifying sufficient funds to close
• Payoff expiration dates

Expired rate locks could result in additional fees assessed to the borrower. Expired documentation could create delays as the docs are resubmitted back to underwriting for review. If the tax amounts or homeowners insurance premium has increased, this could cause the cash to close to increase. Processing and underwriting should double check the verified liquid assets against the required funds to close as frequently as possible. If the borrower has made an additional payment and the payoff in file is no longer accurate, the borrower could receive an excessive amount of funds back at closing. This could move the file out of rate and term refinance eligibility and cause the file to be returned to underwriting for restructuring.

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Finally, a review of the final title policy and HUD-1 closing statement are essential to a clean closing. Processors must verify whether the loan is closing in a community property state. If so, spouses must sign certain disclosures and mortgage documents, regardless of whether they are borrowers on the loan application. Title vesting must also be checked to ensure the property is not held in a trust. Vesting in a trust requires additional documentation and is not permitted in some cases. Liens on title should be double checked to ensure there are no outstanding liens that the title company will want cleared before closing.

Comparing the last disclosed good faith estimate to the final HUD-1 closing statement can help you determine what has changed on the loan prior to conducting the pre-closing call. This will help you prepare for any questions the customer may have about increased fees, required funds to close, or other loan terms that have changed.

About The Author

Frankie Lacy - As an op-ed writer, Ms. Frankie Lacy is a 15+ year mortgage industry veteran with extensive conventional mortgage underwriting experience. Topics of Frankie's expertise include: Fannie Mae, Freddie Mac, USDA Rural Housing, underwriting to investor overlays, self-employed borrowers, personal and business tax return analysis, rental income, condos/co-ops/PUDs, and more. Frankie is a Davenport University graduate with a degree in Business Administration.



Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.