Most loan origination responsibilities end after a client has committed to moving forward with a proposed mortgage offer. The loan officer has finished their task of “selling” the mortgage as well as collected preliminary documentation prior to handing the loan off to a loan processor. The steps after this point are straight forward and simple.
Step 1: Getting an Automated Approval -- The process will usually check the application for completeness as well as correctness in the loan setup. Then the file is uploaded to a Fannie Mae or Freddie Mac underwriting system. This system is either submitted through a system at the bank or from within a wholesale lender’s website if the loan is being done by a mortgage brokerage. All in all, no matter where it is being submitted for automated approval, the process is similar no matter where the loan is being originated.
The loan file can be exported using the loan origination software and converted to a file that can be processed by the automated approval system such as Fannie Mae’s Desktop Underwriter. Save the file to a convenient location, follow the directions for loan uploads on the lender’s website/interface, and then upload the loan file. A credit report can be re-issued or re-ordered in almost all cases 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. You always need credit reporting data in the system before it can be electronically underwritten. Assuming the automated underwriting system grants a pre-approval, it will also generate loan conditions that should be submitted with the loan for a full approval.
Step 2: Order the Appraisal – An appraisal needs to be ordered on nearly all mortgage transactions unless the lender will accept an appraisal waiver, automated valuation, or if the loan is a home equity line of credit. You can order an appraisal by completing an appraisal request form found in the loan origination software. The request can be submitted to the appraiser and they will set up a time to appraise the property with the home owner. If it’s 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. They will likely be glad to help out.
Step 3: Submitting the File -- Submit your loan document package to the lender or underwriting department. The actual methods for submitting this information varies between institutions. You might just have to take the files down to the underwriting department if you are in a bank, or you might need to fax or electronically submit your loan package in a brokerage scenario. Whatever method is required, 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 you need 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 obtained the information, it is best 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 executive.
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.
As you can see, the basics for processing a mortgage are not that complex. One final tip when processing and communicating with underwriters and third parties to a mortgage transaction is to be clear and concise. You will get the best results if the underwriter, insurance agent, or title company you are working with knows exactly what you need, when you need it, and why you need it.
by: Matt Madlang, President of BeatMyBroker.com
We work with loan professionals that are devoted to providing the lowest mortgage rates to their clients.