Obtaining a mortgage can be a difficult and intimidating task. There are numerous mortgages available. You should gather numerous documents to apply for them, and calculating the monthly cost of your future mortgage can be difficult.
Nonetheless, the mortgage process can be divided into several distinct steps. When looking for a new mortgage, most people go through six stages: pre-approval, house hunting, loan processing, closing, mortgage application, and underwriting. Apart from these steps, generally, the post-closing step is highly crucial yet overlooked.
Before diving into the details of the post-closing of the Mortgage process, let’s start with the basics.
What is Post-closing in Mortgage?
A mortgage post-close audit is a crucial process that the mortgage lender must undergo after closing the loan. In a mortgage post-close audit, auditors review all mortgage documents and processes to ensure compliance.
Some of the post-closing process duties include assuring all potential post-closing issues and questions are resolved, including preserving repair escrows, upholding, and paying occupancy security deposits post-settlement, returning original reports to the lender, as well as responding and addressing any prospective post-closing queries.
Top Post-Closing Mortgage Mistakes to Avoid
At the time of closing the mortgage application process, there are certain mistakes that one might make, leading to disrupting the whole process. Let’s follow up on these mistakes to avoid them in the future.
- A file review is one of the most tedious and time-consuming tasks in the whole process. Without accurate technical skills, there will be a higher chance of errors. Therefore, to avoid this mistake, it is beneficial to have a group of auditors who can meticulously audit every file, from preliminary loan applications to the end documents. The documents should be thoroughly reviewed to maintain the accuracy of information.
- Lenders should ensure that the file of the loan contains sufficient supporting documentation for the underwriting. The documents’ information must be compatible. You must include approvals and verification messages if you use automated loan underwriting systems.
- LTV (Loan to Value Ratio) and CLTV (Combined Loan to Value Ratio) must be recalculated by the lender. The Loan – to – value ratio reflects the loan’s quality.
- In the event of a default, if the loan-to-value ratio is too elevated, the collateral may not be sufficient to cover the loan amount.
- There is a permissible ratio, and the lender must recalculate the LTV and CLTV at this stage to ensure that it meets the standards.
- Recalculating liabilities and debt-to-income ratios are also included. Liabilities are recalculated to determine the borrower’s financial situation and whether the borrower can repay the debt with its current income-generation ability.
- The lender must also investigate the borrower’s employment and assets. The borrower’s asset must be re-verified, which includes re-verifying all sources of funds used for the down payment, reserve requirements, and closing costs.
Appraisal Desk Review
- The work of the original appraiser being reviewed is a part of the appraisal desk review. The person who is revising must confirm the validity of the report data, the precision of comparative property sales, and that the provided value is supported and correct by evidence. Also, they should evaluate appraisers’ calculation errors. At this time, no other new property data is being collected.
These points should be considered as a part of the mortgage processing outsourcing to ensure that the whole mortgage process is carried out successfully.
Why is Post-Closing Mortgage Process Necessary?
Important steps in the post-closing process of a mortgage include file document review, third-party re-verification, credit risk analysis, underwriting evaluation, tax, and insurance compliance, and so on. This is the stage at which all of the supporting documents are collected and evaluated. It is made certain that all investor guidelines are followed.
Audits and reviews are conducted to ensure that everything is thorough and in conformity. Before relying upon loan documents to the service provider, it is determined whether all loan documents have been signed and processed. Quality Control reports are generated to identify discrepancies and potential errors. The loan is sold once all of the preceding steps have been completed correctly. Following that, the borrower is notified of the Loan’s sale, and the closing documents are sent to the borrower. Being such an important task, Many people prefer mortgage post closing procedures to eliminate errors.
The post-closing mortgage process requires dire efforts as it is one of the most crucial steps of the whole mortgage process. Avoiding errors requires the highest concentration, expertise, and appropriate technical support. In today’s rapidly changing world and marketplace, lenders face many challenges and are required to stay in compliance with stringent rules and regulations. Therefore, it is of paramount importance to be accurate and detail-oriented while going through the post-closing mortgage process.