IFG Blog |
Mar 08
2007
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The Loan ProcessPosted by DCC in Untagged |
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The first step – the loan application
As might be expected, the first step in obtaining an AU (automatic underwriting) is to provide a complete credit application (also called a “Fannie Mae 1003”) or “Uniform Residential Loan Application”. This is the most important document in any USD mortgage loan package.
It must be accurately and fully completed in order to be able to obtain timely loan decisions.
Application needs to disclose verifiable information, so Loan Processor will be able to confirm it
Unverifiable information, misrepresentations or omission of facts will create a cause for denial.
AU - Automatic Underwriting
It’s great to have a system that generates a loan decision that will allow us to issue a 24 hours loan commitment, but Broker needs to understand that all loan decisions are based on the information they provide in the 1003 Application.
If errors, misrepresentations or omissions occur, it will create a faulty loan decision.
Questions or any concerns can be addressed to dcc@financeandsales.com and we will respond within just a short time, during business hours from 10 AM to 5 PM
Once we have analyzed the AU and within 24 hours, we’ll proceed to generate a fourteen-day written loan commitment that Broker receives via e-mail and that includes all loan disclosures.
At this point Broker has 14 calendar days to deliver all conditions contained in the notification, thereafter loan will not be available in the terms that were disclosed in the loan commitment.
Please note that some times you may be quoted more than one option.
Submission of Loan Package
Submission of Loan Package must be made via a traceable courier such as USPS – FEDEX – DHL – UPS, etc. It’s Broker’s responsibility to protect and make sure that all documents reach IFC, Inc.’s office.
The most important issue is to make sure that you are submitting every single condition that was requested in the Loan Commitment, so your file goes to processing without any delays. If your Loan Package is not fully complete, we’ll email a notification and place your file aside until all conditions are received.
Loan Processing doesn’t start fully until all conditions are received
Processing Begins
Once we’ve received your Loan Package we proceed to assign the loan processor
Processing begins when every single data contained in 1003 is about to be verified via different channels such telephone calls, mail, public records, data providers obtained from Internet sources, etc.
These are the first five steps taken by Loan Processor.
1. First step for the processor is to merge loan into the processing system.
2. Order title work, appraisal and survey
3. Check existing insurances on property and have them endorsed with mortgagee clause
4. Mail verifications as per loan commitment instructions
5. Issue a Loan Status Report within 72 hours from the date processing started
Loan Status Report contains all details of any information missing, wrong, inaccurate, omitted, discrepancies between original and final application and any other issue considered appropriate by Loan Processor. Loan Status Report is e-mailed to the Broker and we expect a response within 24 hours.
Verifications
IFC, Inc. requires as standard procedure a great deal of quality control for all loans, and Loan Processor must keep record of all names, telephones and sources used to determine accuracy of all information in 1003 Application.
Most verifications are made by calling the party in question to confirm that the information provided is correct and in some instances, when information cannot be obtained via normal channels, we mail a written request. Verifications vary according to type of loan transaction. Unverifiable information is not accepted in any loan
Here is a list of the most common requirements for processing:
Full Doc:
Two (2) full years of verifiable employment within the same line of work, profession or business
Last two (2) years W-2, last 30 days worth of Y-T-D pay stubs and/or verbal verification of employment VOE
Self-employed requires two (2) years 1040s along with current Profit & Loss, we may also require 1120, 1065, or K1
Self-employed requires to obtain written verification of income via IRS (form 4506) prior to final decision
Bank Statements:
Last 12 bank statements can be used as a full doc, provided borrower is either self-employed or 1099 earner
12 months average of deposits are taken into consideration as total income minus expense factor as follows:
30% for off-site business – 20% for out-of-residence business – 0% for 1099 earners
Stated Income:
Income will not be verified, still income must meet reasonableness test for the line of work performed
Two years within the same line of work, and business or profession will be verified
No Income:
Income is not to be verified, nor can be disclosed on credit application and debt ratios are not calculated
Two years with same employer, profession or business will be verified
Sisa: Income and assets must be disclosed, but are not verified
Two years within the same line of work, profession or business will be verified
Nina: Income and assets are not to be verified, nor can be disclosed on the credit application
Two years with same employer, profession or business will be verified
No Doc: Income, assets and employment are not to be verified, nor can be disclosed on credit application
Verification of Employment For Non-Verifiable Income:
Salaried Borrowers:
Current position and dates of employment must be verified for two years either through a verbal VOE obtained by Loan Processor and/or provide an original letter issued by employer showing date hired, title, position and probability of continued employment written on employer’s letterhead
Self-employed Borrowers:
Existence of the Borrower’s business over two (2) year period of time as evidenced by a copy of business license, or CPA / Registered Accountant letter showing type, position, length of business and for how long he/she has prepared Borrower’s tax returns. Letter must be signed, dated and written on provider’s letterhead.
Professionals:
Must have copy of two (2) years license issued by Department of Business and Professional Regulations
Completion of Processing
Consists of going thru a check list to make sure loan is in full compliance with company policies as well as with our Quality Control Program
Once all aspects have been checked, Loan Processor will take file for a final senior underwriter’s decision.
Final Underwriter Decision
Loan has reached the final step to obtain all conditions cleared and sign-off by senior underwriter
Underwriter will analyze that all documents that were processed are satisfactory
Appraisal will be checked in three different ways to obtain Fair Market Value for the area
Underwriter may or may not require additional conditions if some new discoveries were found as a result of our Quality Control Program. If additional conditions are required, file will go back to Loan Processor for review, correction or changes that may be necessary.
If a clear to close is obtained, your Loan Processor will simply complete the final step …schedule closing/completion.
Processor to Schedule Closing/Completion
At this point processor needs to make sure survey and all necessary insurances are properly endorsed and in full effect as the date of scheduled closing.
Closing Documents can be only obtained upon evidence of all insurances required.