What is Mortgage Closing?
Mortgage closing as a process is often labeled as ‘complex.’ It requires lenders to submit multiple mortgage closing documents like transaction details with an itemization of closing costs and fees. It is a necessary process that needs to be executed within a stipulated deadline with extreme precision.
The revamped mortgage closing process is comparatively stringent, and levies sharp penalties on violators. Lenders must safeguard the integrity of borrower’s data, as evident in mortgage closing documents. Additionally, a mortgage closing company is now required to send across documents three days before signing the dotted line. This means lenders need to be more cautious in delegating mortgage closing services.
Why is Mortgage Closing Important?
After the global recessions that hit the world markets hard, the public demand and the widespread unrest of things made the government recognize the lax practices in the mortgage business field prevalent all over. Gradually, mortgage lending businesses faced stringent lending regulations and compliance requirements. Even mortgage closing and post-closing processes witnessed sharp revamp like increased scrutiny and proper documentation like forms, disclosure, sale deeds, and affidavits, etc. These documents must be verified before the transfer of ownership to investors. Mortgage closing processes help apprehensive lenders who treat it as a part of their profit cycle.
What are the Basic Mortgage Closing Steps?
Here is a brief guide explaining all the necessary steps involved in the mortgage closing process:
- Pre-Closing Audit
The pre-closing audit stage requires lenders to thoroughly review the purchase offer and ensure that it has been duly acknowledged. Lenders collect accurate borrower information, review payoff statements, etc. that involve cross-checking of all the details such as balance due, interest rate, and loan amount. This stage also involves HUD settlement, a lengthy process requiring approval from multiple parties like lenders, other party’s attorneys, before the final closing.
- Starting the Mortgage Closing Process
It all begins with a sales contract that is signed between the property buyer and seller, which is then shared with the closing agent, along with a deposit cheque. The escrow agent accepts the escrow through a written notation on the contract. The escrow agent then begins the closing process with the title order and sets the file to be processed. As soon as the processing starts, relevant legal documents like tax information, loan payoffs, surveys, maintenance fees, details of hazards, reports, and other insurances are ordered for a title search.
- Title Search and Examination
The title search is primarily search made of public records like mortgages, deeds, paving assessments, liens, divorce settlements, wills, and other relevant documents that affect the title of the property. On the other hand, the title examination can be defined as examining the documents that affect the title of the concerned property found during the title search. Title Examination of the property is when the debts owed against the property are showcased and verification of the legal owner is made. Once the title search is complete along with the examination, a preliminary title report is prepared, thoroughly reviewed, and shared with the interested parties.
- Request to Produce
A designated closing agent then carefully reviews the new lender’s instructions and requirements, along with getting significant reviews from other parties about the transactions, legal and loan documents, assembly charges, etc. After the review process, he or she prepares a closing statement and schedules the closing of the mortgage process.
- Settlement / Closing the Transaction
An escrow agent or settlement agent oversees the closing of the transaction. First, the seller signs the Deed and closing affidavit after which the buyer signs the new note and mortgage. The old loan is duly paid off at this point. Payments are also made to the seller, , attorneys, real estate agents and other such pirates present at the time of closing the transactions.
- Post Closing
When the signing process is completed, the escrow or the settlement agent is supposed to forward payment to any prior lenders and pay all the pirates or service providers involved in closing the transaction, if they are not paid initially. Then, the transaction documents are sent to be recorded in the county where the property is located. Followed by that, title insurance policies are prepared and sent to the new lender as well as the buyer.
List of Important Documents Signed During the Mortgage Closing Process
A mortgage closing can be haphazard if you do not understand the details involved. Here are some of the necessary documents involved in the mortgage closing process:
- Closing Disclosure
A closing disclosure is a document that details the actual fees, costs, and credits associated with the closing of the loan. Ideally, lenders must prepare and forward the closing disclosure three business days before the scheduled end of the property to ensure there is enough time to review the loan terms and costs provided in the Loan Estimate received.
- The Promissory Note
Another legal document that buyers sign agreeing to repay the loan according to the terms agreed upon mutually. The promissory note charts the details of the loan, the fixed dates when payments must be made, and where the payments are sent. The note also elucidates what will happen if a payee fails to make the payment on time.
- Deed of Trust
Deed of Trust is a document that explains the rights and responsibilities of a borrower. The document also gives the lender a right to take back the property through foreclosure, when the concerned borrower fails to pay back the loan as agreed upon.
Different from the Deed of Trust, a Deed is signed by the seller to transfer ownership to the buyer. The Deed has the names of all the buyers on it. The title is held with a third-party trustee until buyers pay for the house in full. However, buyers do receive a copy of the Deed at the time of closing.
- Affidavits and Declarations
Affidavits and Declarations are legal statements declaring all the information provided by the buyer is correct.
How can Lenders Streamline the Mortgage Closing Process?
Ideally, the mortgage closing process involves opening the sale file and starting a closing action log.
In order to streamline the mortgage closing process, here are some steps that every lender must take:
- Begin with collecting detailed information about a buyer and even his/her lawyer. Lenders need to check the status of the lawyer’s employment and license status in the state the lawyer functions.
- Secondly, lenders must get their hands on a recent copy of the sales contract to mark all the uncertain terms and conditions specified therein. It’s essential to determine who would eventually pay for all the closing process invoked costs and who is holding the earnest money.
- Lenders must then retrieve the following documents from invoked third parties like tax records, trust deeds, judgments, modifications, UCC records, etc.
- Next, lenders must source the precise legal description of the property seeking lawyers’ help through a title search.
- Collect the complete names, details of the home and work contact details, marital status and SSN etc. of both sellers and buyers. All these details need to be verified against the title document.
- Moreover, lenders must verify the commission split and obtain photo identification proofs of all parties involved during the final day closing process.
- Ascertain as to when the property survey was ordered and if it was accomplished within the stipulated timeline. Include the copy of the contract and pottery appraisal details in the mortgage closing package.
- Wait to receive the zoning certifications along with clearances on oil, gas, and minerals involved.
- Make sure that all the stakeholders involved in the closing process have been notified with necessary details like time and date and make any last-minute changes that need to be made.
- Record the day of closing the deal exclusively in clean and well-organized files as soon as the closing procedure is finished. Also, ensure on time completion of the process and adherence to all the rules and regulations involved.
Why Outsourcing is the Best Option for Mortgage Closing?
Lenders can outsource mortgage closing support services to a Freddie Mac compliant third-party mortgage closing company for the most efficient execution. Be it increased operational efficiency or slashed fixed costs; mortgage lenders should opt to outsource mortgage closing support services. Outsourcing mortgage closing processes to mortgage closing companies helps lenders in mitigating challenges in a cost-efficient manner.
To outsource mortgage post-closing services remains a tough choice for present-day mortgage lenders. In the view of recent shifts in the real estate and mortgage markets, lenders are expected to be more flexible regarding how they operate. Narrowing down on a mortgage closing company to outsource the mortgage closing process, including the mortgage title support phase and the post-closing phase, can ensure seamless execution.
Here we elucidate as to why a lender must outsource their mortgage closing process:
- Optimal Operational Efficiency
Outsourcing post-closing services ensure that the whole process is executed well within a stipulated period of time. It saves precious time and allows the core lending team to focus on other loan applications, leaving them to do what they do the best.
- Full Regulatory Compliance
Outsourcing the mortgage closing to an outsourcing mortgage service provider helps ensure that each document is checked duly for accuracy. This significantly reduces the chances of any errors and inadequate paperwork that can deteriorate the mortgage closing process. Outsourcing companies also take care of verifying the owner’s occupancy and concerns pointed out by the underwriters.
- Process Larger Loan Volumes
Outsourcing mortgage closing processes to a professional mortgage closing partner leaves lenders to process higher mortgage volumes, focus on their core processes, and fetch better returns without any additional burden on their internal workforce.
- Rebuild Focus on Revenue Generating Activities
If the core staff at the lending business gets involved in the mortgage closing process, they cut corners with their actual work i..e loan approval and management. Outsourcing these services helps lenders deliver the best outcomes to their borrowers and leaves them free to indulge in revenue-generating activities like mortgage processing etc.
- Cut Down on Fixed Costs
Efficient mortgage closing outsourcing service providers ensure processes that minimize fixed costs compared to what lenders bear when they handle mortgage closing in-house. Lenders can divert these savings towards their core business instead.
- Access to the Latest Technology
With rapid advancements in technology and software, lenders should steer clear outdated technologies for the mortgage closing process. Mortgage closing outsourcing companies rely on the very best that the technology has to offer with a high level of data security.
Why Trust Expert Mortgage Assistance for Mortgage Closing?
Expert Mortgage Assistance is a renowned partner for any lender looking to outsource mortgage closing support services. Expert Mortgage Assistance has built distinct expertise in US commercial and residential markets as a mortgage closing company with more than ten years of experience in the field.
What distinguishes Expert Mortgage Assistance from other mortgage closing companies in the market is how we have well-defined processes for all types of mortgage processing services. Insightful domain expertise and knowledgeable mortgage underwriting skills set our company apart from other mortgage closing providersin the US market. As an expert mortgage closing partner, we furnish complete backend support to lenders for mortgage closing services.
A well-crafted mortgage closing approach that encompasses everything right from preparation of documents to HUD settlement allows Expert Mortgage Assistance to be the best at mortgage closing while being fully compliant. With an almost inherent sense of inefficiencies and challenges involved in mortgage underwriting, westay ahead of the curve and promise better returns.