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Post-closing in mortgage processing is an emotionally charged step. Buyers are excited about their purchase being finalized while you’re probably eager to close your sale. Though it certainly calls for a celebration, it’s best to remain cautious throughout the process to successfully seal the deal. Rising cases of malpractices such as the recent infamous Wells Fargo incident has led to tighter regulations making the post-closing process even more challenging for mortgage lenders.
That said, a smooth post-closing process can benefit lender and buyer in many ways. Here’s all you need to know about this process.
US Mortgage Post-Closing Process – What Lenders Need to Know
A mandatory mortgage post-closing audit following the mortgage closing process can help lenders ensure the legitimacy of collateral and the entire loan application.
As part of mortgage post-closing audits, auditors verify documents and ensure that all necessary rules and regulations are being followed.
The process includes activities such as reviewing documents, verifying third parties, analyzing credit risk and underwriting evaluation taxes; to name a few. To effectively complete the process, it is important to verify that all documents comply with investor guidelines. Next, you must check that signatures are in place before passing on loan documents to relevant service providers. Strict quality control procedures are followed to identify and address errors. Once all these steps are completed, the borrower is notified about the processed loan and all necessary documents are shared with them.
As lenders, you’re always exposed to loan defaulters leaving you with uncleared dues. You can minimize this risk by making sure your borrower provides collateral that can cover the potential loss.
Here are some factors that will determine a smooth and efficient post-closing process.
#1. File Review
File review can be the most time-consuming step in the process and absence of appropriate skills may increase chances of errors. So, you could make a smart move and outsource the process to a skilled team of auditors who can meticulously review all files starting from initial loan application to closing documents. Auditors use a checklist that comply with Consumer Financial Protection Bureau (CFPB), Fannie Mae, Freddie Mac, Federal Housing Administration (FHA) and other important guidelines.
As a lender, your loan file should include adequate supporting documents for underwriting. At the same time, the underwriting decision must comply with Fannie Mae regulations and the information in the documents must be consistent with the underwriting decision.
#2. Financial Re-verification
The second step in the US mortgage post-closing process is financial re-verification. It is done to recalculate Loan to Value ratio (LTV) and Combined Loan to Value Ratio (CTV). The loan to value ratio is an indicator of loan quality; if it’s high, the mortgage value will not cover the defaulted loan. Applicant liabilities and debt-to-income ratio are also recalculated in this step to assess applicant’s financial stability and the ability to generate income. The recalculation helps determine an applicant’s ability to pay off debts with existing income. Apart from these recalculations, it is also important to determine borrower’s assets.
#3. Report Findings
Within 30 days of completing the QC review, auditors combine their report findings and share them with the management for final review. A comprehensive report is generated with detailed loan audit findings including details of defect rate, top defects, possible corrective actions, comprehensive report summary and distinctions between underwriting and compliance related errors.
You should report to Fannie Mae within 30 days if any report findings make the loan application ineligible.
#4. Appraisal Desk Review
The last step of the process, appraisal desk review, involves reviewing the work of the original appraiser. The reviewer must verify the legitimacy of report data, accuracy of comparable property sales and that the furnished value is correct and supported with proof. They must also assess any calculation errors by appraisers. No new property information is collected at this stage.
Outsourcing the Mortgage Post-Closing Process – Why Consider It?
Mortgage post-closing process requires expertise. Attention to detail helps avoid errors and denial-related contingencies. Here are some reasons why should consider outsourcing mortgage post-closing process
- Higher accuracy
- Regulatory standard compliance
- Ability to handle business volume spikes
- Quality control
- Ability to focus on core business
- Minimum turnaround time
Aritas Mortgage Solutions offers pre and post-closing solutions that allow you identify, manage and communicate risks effectively. Over 15 years of industry experience enables us to tailor solutions to address your needs and goals. Get in touch to explore how we can work together.
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