Mortgage Processing Policy Manual Table of Contents [Sample Client] Table of Contents

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1 Table of Contents Table of Contents TABLE OF CONTENTS... 1 CHAPTER 1 INTRODUCTION GOALS AND OBJECTIVES REQUIRED REVIEW APPLICABILITY... 3 CHAPTER 2 ACCOUNTABILITY AND MONITORING INTERNAL CONTROLS BOARD/SENIOR MANAGEMENT OVERSIGHT (OPTIONAL)... 5 CHAPTER 3 STAFF AND TRAINING ONGOING TRAINING NEW HIRE TRAINING JOB SPECIFIC TRAINING (OPTIONAL)... 7 CHAPTER 4 THE LENDING PROCESS PARTIES TO THE TRANSACTION STAGES OF A LOAN PROCESSOR S ROLE PROCESSING TASKS PIPELINE MANAGEMENT CHAPTER 5 LOAN FILE REVIEW AND DOCUMENTATION SUBMISSION TO PROCESSING BOARDING UNIFORM RESIDENTIAL LOAN APPLICATION (NEW 2018 URLA) INTEREST RATE Lock Float BORROWER ID AND ELIGIBILITY DOCUMENTATION CREDIT REPORT LIABILITIES INCOME AND VERIFICATIONS Written Verification of Employment (VOE) Verbal Verification of Employment (VVOE) ASSETS AND VERIFICATIONS Liquid and Non-Liquid Assets Account Statements

2 Table of Contents Gifts Verification of Deposit PURCHASE TRANSACTION REFINANCE TRANSACTIONS SECONDARY FINANCING UPDATE THE LOAN ORIGINATION SYSTEM (LOS) CHAPTER 6 PREPARE DISCLOSURES ISSUANCE OF INITIAL DISCLOSURES CHAPTER 7 AUTOMATED UNDERWRITING SYSTEM (AUS) SUBMISSION CHAPTER 8 COMMUNICATE WITH ALL PARTIES CHAPTER 9 UNDERWRITING SUBMISSION INITIAL SUBMISSION RESUBMISSION DISPOSITION Conditional Approval Suspended or Incomplete Clear-to-Close Denial CHAPTER 10 COORDINATE THIRD-PARTY SERVICES ADDRESS VALIDATION TITLE DOCUMENTATION APPRAISAL FLOOD ZONE DETERMINATION HAZARD INSURANCE MORTGAGE INSURANCE (MI) PAYOFF STATEMENT CHAPTER 11 CLOSING STAGE

3 The Lending Process Parties to the Transaction Chapter 4 The Lending Process A mortgage loan application is executed for the purpose of obtaining financing to either purchase a new property or refinance an existing property. A processor must understand how a loan flows through the approval process and who the parties to the loan transaction are so the application is processed successfully. 4.1 Parties to the Transaction The parties involved in the loan process include the borrower or applicant, mortgage loan originator, processor, underwriter, closer, and outside third parties. The borrower/applicant is a person, persons, or entity who applies for home financing. The mortgage loan originator (MLO) is a representative of who meets with a prospective borrower and takes the loan application. In retail lending, the mortgage loan originator, the processor, and the underwriter usually work for the same lender. In wholesale lending, a mortgage broker or third-party originator (TPO) is involved. The mortgage broker consults with a borrower and arranges a lender for financing. The processor collects information and documentation and prepares the loan file for submission to the underwriting department for a decision. The processor sends disclosures and coordinates communications among the borrower, MLO, underwriter, title company, and other parties. The underwriter evaluates the information supplied on the loan application and feedback from an automated underwriting system and compares it with supporting documentation provided by the borrower, the originator, and the processor. The underwriter considers the quality of the information with the lender or investor requirements for the loan program, and then makes the decision to grant approval for financing or to deny financing. The closer prepares the closing package and may be authorized to conduct the closing. Alternatively, the closing package and process may be handled by a title company or a third-party settlement agent. Other parties not employed by who may be involved in the loan transaction include the appraiser, title company, property seller, realtors, and attorney. 4.2 Stages of a Loan The stages of a mortgage loan application file include origination, boarding, processing, underwriting, closing, post-closing, and servicing. 8

4 Loan File Review and Documentation Submission to Processing Chapter 5 Loan File Review and Documentation When a mortgage loan originator takes a loan application, the borrower is required to supply information including employment status, income, debts and financial obligations, and other nonpublic personal information. Borrower credit documents such as paystubs, bank statements, tax returns, and evidence of monthly obligations are often not provided at the time of the application; however, the review and validation of these documents is key to underwriting the loan. Persistent follow up of required and outstanding documentation is the processor s responsibility. The processor conducts a file review which includes a thorough examination of the loan application against credit documentation received. The processor will validate facts recorded on the application regarding liabilities, income, and assets and will verify employment status. 5.1 Submission to Processing The mortgage loan originator is responsible for taking a loan application that is complete, accurate, timely, and in accordance with agency, loan program, and s policies and guidelines. The mortgage loan originator should submit a loan application to the processor that is complete, accurate, and includes the following documents: Uniform Residential Loan Application (URLA or FNMA Form 1003/FHLMC Form 65) that is complete, accurate, and signed by all parties. Initial disclosures required by or by a regulator, agency, or investor which are signed originals or copies of those delivered to the applicant. Evidence of intent to proceed received from the applicant. Supporting documentation including a credit report, initial AUS finding, any required letters of explanation from the borrower, paystubs, tax returns, and bank statements. Background information and pertinent notes that will aid in effective processing, such as these used for illustrative purpose: o Borrower requests a tax waiver o Borrower contact is limited to that conducted by the mortgage loan originator o Borrower prefers to be contacted by only Processors must follow a methodical process to determine and clarify certain attributes of the loan application. Consider these questions as prompts to begin processing the loan application: Is the loan financing conventional or government? The answer will dictate the need for certain disclosures, use of AUS, and required documentation. 12

5 Underwriting Submission Initial Submission Chapter 9 Underwriting Submission A loan must be submitted to the underwriter for review in the manner prescribed by. This pertains to the initial submission of the loan for underwriter review and any subsequent submission for additional review. 9.1 Initial Submission may allow for a loan application file to be submitted immediately for review by an underwriter or may require submission only after all documentation, such as appraisal or title documentation, is collected. The processor should strive to submit an application package that is as complete as possible, as quickly as possible, to ensure a timely review and to limit resubmissions. The underwriter will review the loan application file as a whole and will evaluate the creditworthiness of the borrower as well as the soundness of the collateral property. The processor should consult with a supervisor about any factors that will impact submission or require submission to the underwriter outside of normal prescribed procedures. 9.2 Resubmission It may be necessary to resubmit the loan file to underwriting for review multiple times until the loan is cleared to close. Processors are required to resubmit the file whenever there is a change in loan terms. A change in loan terms or fees may also require new disclosures be sent to the borrower for regulatory compliance. 9.3 Disposition s underwriter must issue a decision on the loan application within 30 days of application. A disposition will be either a conditional approval; an incomplete file or suspense; a full approval (clear to close); or a denial. The clear-to-close status is necessary before a mortgage loan closing can occur Conditional Approval 33

6 Coordinate Third-Party Services Address Validation Chapter 10 Coordinate Third-Party Services After review of the AUS feedback and determination of what additional documents may be needed, the processor must request the information from the appropriate parties. This can include verification requests such as: Verification of Deposit (VOD) Verification of Employment (VOE) Verification of Rent (VOR) Verifications are performed in accordance with [Sample Pages Client] s procedures Address Validation The address of the subject property must be a true address. The address, as validated, should be the address that appears on the title documentation, appraisal, hazard insurance policy, flood determination, loan application, and other documents. Although there are various ways to validate the property address, the most common way is through the use of the website Any changes or corrections to the address may necessitate the generation of a new application, new flood determination, and disclosures as well as corrections to the appraisal and hazard insurance declaration Title Documentation Title documentation can be ordered from the title company by the processor, mortgage loan originator, or another department, depending on s procedures. Title documentation serves multiple purposes, including the following: Confirming ownership Identifying existing liens Providing parcel ID and tax payment information Generating lender and owner title policies The lender s title policy protects and should be in an amount that equals or exceeds the approved loan amount. The owner s policy protects the applicant as the new property owner, or existing owner refinance.sample in a 36