Written By: Stacey Sprain, Op-Ed Writer
Right now we all have much to be grateful for. Record low interest rates have brought us record numbers of refinances which are boosting business for all of us in the industry. But while business is plentiful, so also can be the frustrations that come along with it. When times are as busy as they are right now, it’s important we all think ahead and do our part to make the processes as smooth as possible from the point of loan application all the way through settlement.
Following are a few important tips to keep in mind starting at day one on each refinance transaction.
For Originators and their Assistants
Communication is key from the very start of the loan process. Be sure to agree on a target closing date with the borrower and make sure everyone is clear on if and when the next mortgage payment must be made as well as how it needs to be made. When possible, advise your borrower to make their next mortgage payment online or by phone so that it is recorded immediately with the lender. This allows you the ability to request and obtain an accurate payoff statement much sooner in the loan process. You won’t have to wait for the borrower’s mail to reach to reach the servicer and for the check to clear. The sooner you can get an accurate payoff, the sooner you’ll be able to figure an accurate loan amount for the loan file.
Be sure to get an idea of how much equity the borrower has in the property. If there is potentially enough equity to allow the borrower the opportunity to waive escrows, make sure it’s clear whether or not your borrower wants to exercise that option to waive escrows for taxes and insurance. Never assume whether or not the borrower wants to waive escrows. The question needs to be asked regardless of how much equity is in the property and regardless of whether or not the borrower currently waives escrows with the current mortgage servicer.
Be sure to obtain a copy of the borrower’s current insurance policy information which should include the name of the insurer, the agent’s name and phone number, the current coverage amounts, the current annual premium amount and the current renewal due date. All of the insurance information is crucial to obtain early in the process for a number of reasons:
1. You need the next renewal date so that you can calculate the appropriate number of months of insurance escrow reserve for the transaction
2. You need the next renewal date so you can determine whether or not the renewal needs to be paid out at closing. Many lenders require that any insurance renewal due within 30-90 days of the closing date be paid at the time of closing on a refinance.
3. You need to know the amount of current coverage so that you can verify the coverage meets the new lender’s minimum coverage requirements for the new loan. In many cases, the current coverage may not be sufficient for the new loan and may need to be increased to meet requirements.
4. You need to verify the current annual premium so that if the borrower is escrowing for taxes and insurance on the new loan, the correct amount is included in the new monthly PITI.
5. You need the insurance agent’s name and contact information so that you can request any necessary adjustments to coverage which in turn will adjust the annual premium amount. You must also request that the policy be updated for the new loan closing to reflect the new loss payee which will be the new lender on the refinance loan.
Be sure to obtain a copy of the borrower’s most recent property tax information. This is necessary so that you can verify the property taxes are paid current, can verify the next tax payout date and the amount of taxes that will need to be escrowed on the refinance if indeed the borrower will be escrowing for taxes on the new loan.
Regardless of whether or not it appears up front that the borrower will need funds for closing, be sure to list assets on the 1003 and obtain bank statements to document the assets. This is a common mistake that gets made by originators and processors and causes a lot of frustration for underwriters. Just because the transaction is a refinance doesn’t mean assets aren’t necessary.
If for no other reason, you should always have the bank statements in the file ready to use if needed in case your numbers all change at any point in the loan process. Often numbers change at last minute and the borrower may need a very small amount for closing. Unfortunately if there are no assets on the 1003 or statements in hand, when AUS gets updated and requires verification of funds for closing, you’ll look like a fool having to run back to the borrowers at last minute to get banking information. Always think ahead and be prepared!
For Processors and Processing Assistants
Do not submit your refinance files to underwriting until you have the appraisal and accurate payoff statement in hand. The file is completely useless without those two key documents and quite frankly, a complete waste of an underwriters time if those documents are not in the loan file when you submit it. Underwriting is already backed up so don’t contribute to the frustration and added turn times by submitting incomplete loan files. At times like this there are no excuses for sloppiness and no time for mistakes. If you are submitting refinance files that are not coming back clear to close the first time through underwriting, you need to tighten up your processing skills. Don’t let loan officers pressure you into submitting files before they are ready to be submitted. When needed, go to your supervisor and stand up for yourself because you should know better.
You will be doing no one any favors by submitting incomplete refinance files to underwriting during a refinance boom like this one. You know darn well that numbers will change when the appraisal and payoff come in so wait for them! You will save yourself and everyone else a ton of time and effort by holding your refinance files until you have everything you need in them, all numbers tight and right before you get them in line for underwriting. Don’t contribute to the back up with turn times! Be one of the processors who “does it right” and you will earn the respect of your peers and colleagues in underwriting!
About The Author
Stacey Sprain - As an op-ed writer, Ms. Stacey Sprain is currently a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution.