What's Taking So Long With My Mortgage?

We've discussed how you can speed up the mortgage process in the last post. Now I'd like to tackle a topic that many borrowers are fustrated with constantly: What's causing the delay!

I'm assuming you've done everything in the previous post thus optimizing your loan's processing time. If you've done all that and there are still delays, then something may be wrong. But what could it be?

Good question. Ask your loan officer. Sounds simple but he may just be too busy to give you an honest answer. He may push you to the processor who then claims that only the Loan Officer can answer your question. And the wheel goes round... To get to the bottom, it's best to review the procedure for approving and funding a loan.

When he spoke with you to do the original application, you were asked questions about income and he pulled your credit and so forth. He took that information and ran it by some of his favorite lenders. The Account Executive at the lender told him whether or not they could do the loan and at what interest rate. A good Loan Officer will also check the guidelines of this bank to make sure that your situation fits their lending criteria. This is the information that the Loan Officer uses to give you a quote and Pre-Approval.

Now you've signed the documents and given him your additional documentation. Your Loan Officer sends this information to the Lender. Now, remember the application you took originally? If the documentation doesn't match the application (very often it doesn't) the Lender may give the Loan Officer a hard time. Instead of saying "We can't do the loan", they ask for additional documentation. This may include additional income or asset documents or an explanation letter from you. Sometimes it's the appraisal or title report that surprises us and causes the problem. Every piece of info the Loan Officer gives the Lender goes through a system of checks. This causes the delays.

First, you should recognize the delays early. If your Loan Officer asks for additional documents, ask why. Let him know that you are saavy by asking what reason the Lender gave for requesting these documents. The biggest delays will happen when your Loan Officer gives up on one Lender and has to switch to another, especially if they switch documentation type. A "Full-Documentation" loan requires W2's, paystubs, and the whole lot. A "Stated-Documention" loan requires much less. If the income proven by the documentation you gave is drastically different from the application, he may be forced to switch documentation types.

Just being aware of the different obstacles that a Loan Officer must overcome can give you a better understanding of what causes delays and how you can speed them up. Most often, speeding up your loan just involves getting the proper documentation in a short period of time.

If you get the feeling that your Loan Officer is too busy or won't answer your questions frankly and honestly, then you may have a much worse problem: an incompetent loan officer. This problem is easily corrected because there are so many of them out there and they're all competing for your business.

How can you speed up the Mortgage Process?

The mortgage process can be a daunting and painstaking task given certain circumstances. The fault could be pointed at the Loan Officer, Processor, Underwriter, as well as many people behind the scenes. The truth, however, is that the Applicant is truly to blame a good majority of the time.

If you'd like to confront my statement, feel free to email me directly at ydl1423@yahoo.com

The speed of the mortgage process is directly proportionate to the quality of communication by all parties. A good Loan Officer will explain the process to their borrower in detail. The applicant should know exactly what is going to happen in the next 2-4 weeks and what their role will be. Without cooperation from the borrower there's nothing a Loan Officer can do but twiddle his thumbs.

The following is a sample of some of the responsibilities that the borrower has to the completion of their loan.

1. Provide complete and truthful information on the initial application

The Loan Officer's obligation is to ask all the questions to completely fill in the application but also get a strong idea of the overall situation. They should know why you are buying a home at this time. They should know what circumstances surround your decision. They should aslo know of any potential obstacles to your loan approval.

Most issues that suddenly turn an approval into a denial during the process could have been avoided on day #1 simply because: the Loan Officer didn't ask the correct questions to get the full story or the borrower was not completely truthful in their answers.

2. Sign the application documents and return them quickly

Hopefully you've chosen a local broker and have signed the documents in his presence. If you haven't, the papers will be sent to your home with a return envelope to send them back. This is a window where the Loan Officer is unable to do almost anything for you. They have not fully disclosed to you until you have signed so they may not work for you without your written permission. If they do, they may open themselves to legal liabilities. Can you hear the twiddling?

3. Provide all additional documentation required for the loan

You've disclosed on the application that you make "x" dollars. The Loan Officer has to prove that to their investing lender by showing W2's to show that you made about that much last year. He'll also have to show paystubs that show your year-to-date figure to prove that you're on your way to making that much this year.

I could go on but just remember this: there is a logical reason for each piece of paper he asks from you. He should be able to explain to you fully the reason for each one.

4. Stay in touch and Make yourself available

It is understandable that you may work a 9-5 shift and have no time for phone calls. However, it is extremely helpful if you are able to be interupted briefly if the situation calls for it. If you absolutely can't talk during normal work hours, set appointments for late hours ahead of time to talk to your Loan Officer about the mortgage process and get updates.

5. Be flexible with scheduling the closing

As the mortgage process winds down, we are trying to coordinate all parties to meet at one place. We need to make sure the title attorney is available. We need to make sure the seller and his representation can be there at the given time. We need to make sure you and your Realtor are available and we'll need to make sure our schedule is clear as well. We'll also need to make sure the lender is available to disperse the funds. The choice of closing date and time by the Loan Officer is hardly a selfish decision. Do all you can to work with everyone's schedule, including asking for a half-day at work. We're only asking for an hour usually.

The bottom line is that you are mostly in control of the speed of your mortgage process based on your cooperation. There are other things that are out of your control that can speed up or slow down the process. In my next post I'll explain how you can recognize these things and bring them back under your control so you can keep things moving.

Please feel free to email me with any questions, concerns, or comments at ydl1423@yahoo.com

Cast of Characters - Part III

The Processor

Loan Processors are the workhorses of the mortgage broker team. They look at a loan file objectively and dig deep into the details. After the Loan Officer originates the loan and determines what bank or banks to send the loan to, that is when the Processor gets involved.

She will stack the file so that all the information and documentation that you gave to your loan officer can be easily read and organized. It will then be sent to the Underwriter at the selected lender for review. Then, we wait.

When Underwriting is complete and they have created the list of stipulations it is the processor's job to collect the necessary documents to close the loan. Sometimes the processor will call you directly and ask for these papers from you. Often, the processor will tell the loan officer what they need and the loan officer will contact you directly. Each mortgage brokerage is set up differently.

Because of the nature of the Processor's job, the Loan Officer and Processor work very closely throughout the process. In my office, my Processor sits about 15 feet away from where I sit. We meet twice a week to talk about each of our files. A great relationship between your Loan Officer and Processor is critical.

So, how can you use this information to help in the speed of your loan process? The Processor is one of the people in the process that you may or may not ever meet. I suggest that when you stop in at the office (which I suggest strongly that you do), ask to meet the person that will be processing your loan.

The people coordinating your loan and moving it towards closing are constantly staring at documents with your name on them. It's a great idea to give them a face and personality to match with the name. Your loan team is human and they will be apt to work on something more often and more diligently when they have a personal attachment to it. Just be careful not to take too much of your loan team's time. Their time is extremely valuable and they are usually trying to coordinate many loans simultaneously. When a problem arises close to a closing the mortgage office can look more like an Emergency Room after a major accident. It can get pretty intense. Let your Loan Officer know that they can tell you when they just can't be disturbed and you'll gladly stop by or call back at a later time.

To help expedite your loan process your best effort should be made to cooperate with your loan team. I've seen bad communication and unwillingness to cooperate destroy peoples' dreams to become a homeowner. You should make sure your Loan Officer has multiple ways of contacting you and let him know that you are comfortable talking to the Processor as well. Creating a positive impression on these two characters and displaying a willingness to help will cause your loan to glide right through the process to closing.

The Cast of Characters - Part II

The Underwriter

If you think it sounds a little too close to "The Undertaker" you're absolutely right! This is the person that could make or break your real estate transaction. The funny (but awful) thing about this is that the underwriter absolutely has the most power over the decision of your loan, yet you will never meet or even speak to this person.

After your buddy, the Loan Officer, has put together the loan file in a neat and easy-to-understand package, the underwriter will begin to tear it apart limb from limb. She will disect the loan into each of its 4 factors: income, assets, credit, and property type (we'll dive into more detail about these on a later post. Knowing these four loan factors can give you the control in the decision of your loan!)

The underwriter is someone paid by the lender to minimize thier risk in a transaction and uncover any potential fraud. This is how they do it:

Let's say you said that you make $100,000 per year at your job. The loan officer asked this question and wrote that number on the application. Now the underwriter has to prove that. She'll do that by looking at last year's income to make sure you made what you said. She'll also look at this year's income to make sure you're on track to make about that same amount. That's why she asks for last year's W2 form (or sometimes complete tax returns) and your most recent paystubs (to see your year-to-date income). A good loan officer would have already collected this information knowing that the underwriter will need it eventually.

This process is repeated for each of the 4 factors we discussed earlier. She'll need bank statements to prove the assets you said you have. The bank will need to verify at least the amount you need to bring to the closing table for settlement. Some banks will need to verify "reserves". This is a safety net. If the worst thing happened and you lost income, would you still be able to make your payment? The bank wants to be sure of this in some cases so they'll require you to put anywhere from two to six months of monthly payments (reserves) away in a checking or savings account.

She'll pour over your credit report and ask you or the loan officer to explain any strange items. She'll do the same thing with the appraisal report to make sure that the appraiser is accurately stating value.

Most lenders tell loan officers that they do "common sense" underwriting. They say to ask ourselves the question "Would I lend money to this person and expect to get it back?" The truth is that if the bank decides during the process that the loan isn't as attractive as it started out or there are too many twists and turns, they will simply give us stipulations that we couldn't humanly get.

An example of this: I was helping an investor get a loan for a 4-unit property. Everything was going well. We sent the appraisal to the bank and they reviewed it. They couldn't find anything wrong with the appraisal but the house was in a not-so-desirable section of town. But it was a nice house, nothing wrong with it! We were scheduling the closing and coming very close to the deadline when the bank faxed us new conditions at the last minute. They wanted the appraiser to get pictures of every room of the house. There were 18 rooms. We were panicked because the appraiser was backed up and the seller was pushing us to close ASAP. We got it done but that was the lender's idea of saying "We don't trust that this house is in good shape." They couldn't believe that a nice house like that was available in that area.

The moral here is that surprises can and do happen. Imagine if that appraiser didn't know me as well as he did and didn't do me the favor of going out and taking those pictures. I would have had to go to my borrower and say "For reasons I can't control, I can't help you buy this house. You are going to lose it to the next bidder." As a consumer, I ask that you be patient with your loan officer and get the full story. Sometimes, things are out of their control.

This in no way should scare you out of dealing with a loan officer. On the contrary, it should give you an incentive to work with one. If you had been dealing directly with a bank and they pop a suprise on you, you don't have someone on your side pulling strings to get this done.

My coworker had a similar situation where the underwriter suprised her with impossible stipulations. She asked the seller to extend the deadline and was able to switch the loan to another lender to get it done. If you are working directly with a bank you have their loan products to choose from and that's it. Loan officers have the benefits of working with plenty of lenders at the same time.

The Cast of Characters - Part I

There are many people involved in the mortgage loan process. Some you will meet or speak to, some you will never know existed but each has a very important role in the processing of your loan. If you know the people, you can better understand the process. I'll start at the start.

The Mortgage Loan Officer
The term "originator" is also often used and its more relevant to his role. This is the person that seeked you out and created the loan application. He may have found you through a referral, he might have found you on the internet, or he may just know you. One way or another he got your attention and sold you on the fact that you would be best off if he helped you get a loan. This person will earn a commision upon the loan closing and is in charge of the overall process of your loan. You should meet this person face-to-face since they have the most control over your application.

After he has originated the loan by seeking you out his next step is to "place" the loan. A mortgage broker works with 5-50 different lenders at any given time. They all try to get his loans by offering special incentives and promising great service and a quick closing. First the Loan Officer will determine which lenders will accept this particular loan. He'll then pick 2-3 lenders he feels comfortable with and sends them an overview of your file. The lender will normally fax him the interest rate and terms they can get based on the summary he showed them within 24 hours. He then picks the best lender to use. The "best" lender sometimes has less to do with rate than: the loan officer's comfort level with that lender and the people that work there, the incentives (in the form of monetary rebates at closing or rate cuts) that the loan officer receives for doing business with them, and the reputation of that lender's underwriting department.

He will then quote the rate with the lender he chose to you and let you know what your monthly payments will be. If you're local, the next step would be to set up an appointment where the two of you can sit and go over the details of your loan. He'll go over your payments, costs, and your credit report. He'll ask you to bring documentation to support your application. At this point you will be asked to sign your application and disclosures. We will get into the application and required documentation in a later post.

If your loan is a refinance, the loan process begins immediately. If you're buying a home he will issue you a PreQualification Letter. This is a letter of good faith to show the seller or their Realtor that you do have the ability to secure a mortgage. Often, this letter is required to view a property or start working with a Realtor. Having one gives you a distinct advantage in that the seller knows that once you sign a Sales Agreement your loan process begins immediately.

After you've signed the Sales Agreement (or right away if you are refinancing) the Loan Officer will order an appraisal and title search. He will also send your signed application and supporting documentation to the lender's underwriting office for review. This process usually takes 24-48 hours. It is then his job to collect all the information and documents that the underwriter requires before the loan can be "Clear to Close". After all is collected, the loan is "Clear" and the closing is scheduled. If you've chosen a local Loan Officer, he will be by your side as you sign your closing documents at the attorney's office.

We'll describe some other characters and their roles in the next post. The Loan Officer is the one person that's in it from start to finish so I needed to devote a whole page to him.