Glitches pertaining to mortgage post-closures, lack of oversight and follow-up continue to be some of the resurgent issues that bar a fuss-free future sale of a property. The previous and the looming real estate crisis have exposed the inadequate practices conducted in the mortgage closure process. This led the governing authorities to tighten the regulatory leash around this sector which require more dedicated focus on all sorts of forms, affidavits, sale deeds, among others. Such tightening scrutiny made the mortgage post closing procedure all the more critical for lenders.
Mortgage Post-closing involves final checks to ensure that no glitches arise during the sale of the loan in the secondary market. Securitization helps lenders to free up their capital from their previous lending’s and use the same to facilitate a fresh batch of loans. Securitization involves the selling of the previously issued loans in the secondary market. Mortgage Post Closing is carried out to ensure that the loan is suitable for both the lender and borrower, and there is no trouble for the lender during the securitization process.
Why is Mortgage Post-Closing so important?
Mortgage Post-Closing contains important steps like file document review, third-party re-verification, analysis of credit risk, underwriting evaluation, tax, and insurance compliance, etc. This is the final stage in which all the trailing documents are gathered and processed. It is ensured that all investor guidelines are met. Stringent audits and reviews are performed to ensure that everything is complete and in compliance. It is seen whether all loan documents are signed and processed before relaying them to the respective service provider. Quality Control reports are generated to highlight discrepancies and possibilities of errors. Once all the above steps are performed correctly, the loan is sold. After this, the borrower is notified about the sale of the loan, and the closing documents are sent to the borrower.
Things that Lenders Must Factor in and Follow in Mortgage Post-Closing
Lenders are the ones, holding the greatest risk. They are giving away their capital based on the quality of the collateral. This fact makes it crucial for lenders to ensure that the collateral is worthy enough to cover the shortfall in case the borrower defaults. All these checks are performed minutely in the Mortgage Post-Closing Process.
Here’s taking a better look into the process flow that every lender must religiously follow to execute an accurate and time mortgage post closure:
File Review– This process is time-consuming without proper technical support and skill. It is advised that lenders join hands with a team of auditors who have the requisite skills to diligently review each mortgage file, starting from the initial application to the closing documents. This process is done using an audit checklist. The Audit checklist should be designed to meet CFPB, TRID, Freddie Mac, Fannie Mae, VA, FHA, and HUD guidelines and must be aligned with the latest regulatory changes. Several documents need to be submitted in the Post-Closing process, the lenders need to do a meticulous check to ensure that whether all documents are accurate and properly submitted.
The lender will have to confirm that the loan was underwritten in accordance with Fannie Mae’s requirements and there should be adequate support for the underwriting decision mentioned in the loan file. All information in the closing documents should be consistent with the underwriting decision and final terms of the loan. Loans that are underwritten through DU(Desktop Underwriter), which is an automated underwriting system, must have all verification Messages/Approval conditions that appear in the findings report be resolved and supported by proper documentation.
Financial Re-verification– The lender needs to recalculate LTV (Loan to Value Ratio) and CLTV (Combined Loan to Value Ratio). The Loan to value ratio portrays the quality of the loan. If the loan-to-Value ratio is too high, it means that the collateral may not be enough to cover the loan amount in case of default. There is a permissible ratio, and the lender will have to recalculate the LTV and CLTV in this stage again to confirm that it is per the standards. Recalculation of liabilities and debt-to-income ratios are also done in this step. Liabilities are recalculated to find the financial position of the borrower and whether the borrower will be able to pay off the debt with its existing income generation capability. The lender also needs to check the Employment and asset of the borrower. These are vital checks and are required to be qualified for Freddie Mac and Fannie Mae. Re-verification of Borrower’s Asset must include re-verification of all sources of funds used for the down payment, reserve requirements, and closing costs.
The Post Closing process should include re-verification of the borrower’s credit history. If earlier the credit history was measured using a traditional credit report, then at the re-verification stage, the latest new tri-merge credit report should be used. If a Non-Traditional credit report was used earlier, then the lender must reverify each of the credit references on that report.
The lender needs to maintain a 30-Day turnaround period, once the files have been uploaded.
Report Findings– All the findings from the Audit Team should be collated and relayed to the top layer of the management for a final review within 30 days after the month in which the QC review is completed. The final generated report should be comprehensive, which means it should contain detailed findings of each loans that were audited. The post-closing QC report must contain the final defect rate for the results of the current review period, the issues and the top defects, corrective actions that are intended, summarize results into a comprehensive report, distinguishing between underwriting and compliance defects. If there is any finding in the review process that makes the loan ineligible, then the lender will have to report to Fannie Mae within 30 days of the confirmation.
Appraisal Desk Review– Appraisal Desk Review is the process of reviewing the original appraiser’s work. The reviewer need not be an appraiser but should be familiar with the subject’s market area and be qualified to address whether data presented in the report is appropriate, address the appropriateness of comparable property sales, and conclude that the appraiser’s final value is supported with documents and is correct. The person should review the calculations of the original appraiser’s and look for errors or miscalculations. The person does not collect any new information about the property.
Why Trust Third-party Teams for the Mortgage Post-Closing process?
Mortgage Post-Closing services are lengthy and involves critical steps that requires industry-specific acumen to be fulfilled for the benefit of lenders. It requires the utmost attention, expertise, and proper technical support to avoid errors. The core operation of the lenders is never mortgage Post-Closing services. So, Outsourcing the Mortgage Post-Closing services and handing it over to an expert will not only increase the efficiency but will also eliminate the risk of error. Some of the benefits of outsourcing the mortgage post-closing process are listed below:
- Increased Accuracy
Third-Party conducts the Mortgage Post-Closing process with utmost accuracy. There are multiple critical steps like analyzing the validity of the documents to running audits on data, and all the steps are susceptible to errors. The loan closing process offered by third parties is a comprehensive process. The team assigned to the Post Closing process comprises of expert professionals who are focused on their core responsibilities. They are expected to not allow any room for discrepancies that can jeopardize the whole process. The best Third-Party Post-Closing service providers know that error is not planned but also can’t be avoided even with the strictest checks. So, they conduct reviews of a percentage of the closed loans on a random sample set, this allows them to process error-free and remove inconsistencies and omissions.
- Adhering to Regulatory Compliance
Mortgage Post-Closing involves lots of complex procedures which necessitate absolute adherence to all the relevant state and global regulation gold standards. The Mortgage approved should meet the minimum regulatory requirements which are necessary for the investors in the secondary market. Third-Party service providers have expert compliance teams who are not only well versed but also stay abreast of the frequent dynamisms introduced by governing authorities in the processes and underwriting rules.
- Handling greater business volumes
Lending companies are not capable of handling a huge volume of Mortgage Post-Closing works during peak seasons. If they hire new employees to meet the increasing work requirement, then they can’t sack the newly hired employees when the volume goes down. So, the increased number of employees will add to their Fixed operational cost. Third-Party providers have the liberty to deploy workforce in accordance to work volumes, thereby reducing he burden on the overall operational costs incurred by lenders. They have several clients, and the employees are engaged in Post-Closing services throughout the year. The volume remains well balanced throughout the year.
- The best and comprehensive quality control process
Best Third-party Mortgage Post-Closing service providers should help lenders draft a detailed process of quality control post-closing. The huge amount of information provided, mentioning the control measures should be highly accurate. Elaborate Quality control measures give confidence to auditors, regulators, and rating agencies that all protocols are followed. Outsourcing the Mortgage Post-Closing service increases the confidence of all related parties in the transaction. As the third party is engaged in only Post-Closing services, so they know how to maintain the highest quality of Internal Control.
- Lenders can Focus on Core operations.
Mortgage Post-Closing works are not front-end jobs; they don’t lead to an increase in revenue. Revenue can be increased when lenders focus on front-end works like client acquisition, planning to deal with competitors, more loan generations, etc. Post-closing services require immense back-office support to handle them effectively. If lenders channelize most of their resources in the post-closing services, then they will lack the required resources to engage in more productive revenue generation activities. So, it is always advisable to outsource Mortgage Post-Closing services to third parties that are specialized in handling these services.
- Access to Highly Qualified professionals
Highly qualified professionals in the Mortgage Industry are scarce. It requires several years to gain the expertise required for a person to be a Qualified Mortgage Professional. Hiring an industry veteran will be costly for a lender if there are not enough businesses to cover the cost. So, the lenders will have to settle with an under-qualified professional, which increases the chance of errors. Third-Party Mortgage Service providers are dedicated to this industry. Qualified professionals are looking to work for the best third-party Mortgage Providers as it will help in their career. It is always advisable to outsource the Mortgage Post-Closing Process and let the experts handle the process.
- Minimum TAT
The entire process of Mortgage Post-closing is lengthy. It involves steps starting from trailing document recovery, HMDA compliant audits to reserve audits, title recording verifications, and bringing together the ultimate post-closing mortgage loan package. This process is time-consuming and requires to be effectively dealt with. Streamlining the entire process will reduce the turnaround time, and more loans can be processed in the same amount of time. Highly qualified professionals know the exact way to complete the task effectively. Third-party providers have a team of professionals who are doing Mortgage Post Closing services for several years. They know the exact way to streamline the process to save time and increase business.
How to choose the best Post-Closing Vendor?
Choosing the best Post-Closing Vendor is very important. Here are the considerations that a lender must make while exploring partnership with a post-closing vendor:
The service providing company should be tenured enough and should have enough experience in the Mortgage Post-Closing Process. These are critical services, and only experts can provide the best service effectively.
- Fees Charged
The fees charged by the Third Party should be reasonable. If the fees are too high, then there is no point for lenders to outsource the service as they will not be able to reduce the operational cost then.
- Services Provided
The service provider should provide end-to-end loan processing services. Once the lender outsources the process, they shouldn’t worry about anything.
- Experience of the In-House Team
The team responsible for Post-Closing services should have a rewarding track record. The reduction in turnaround time can be achieved through the expertise of the team. Highly expertise Team members know the streamlining required to perform the checks at a greater speed and error-free.
- Technological Advancement
Automation eliminates the chances of error. A lender should look for service providers who have automated most of the backend processes. Minimizing Human intervention not only reduces the chance of error, but it also reduces the Turnaround time by a great deal.
Who We Are and Why We Are An Industry Authority?
This article on the mortgage post-closing service is authored by professionals at Expert Mortgage Assistance. We are a leading mortgage loan servicing solutions provider and have been in this Mortgage Industry for more than 10 years now. Catering to the prime residential and commercial mortgage markets in the US has helped us to acquire profound industry knowledge. We have a highly trained and qualified team who are experts in providing Mortgage Servicing Solutions. Our extensive industry experience has helped us to gather the proper knowledge required to stay compliant to all the relevant regulations and deliver top-notch service quality.