The art of processing proficiencyMarian DeBonisMortgage processors
Processing—is it an art, or just another part of the
mortgage process? Is having a proficient processor important to
your loan production, or just a thorn in your side? If you believe
processing is just another part of the mortgage process, then
obviously you're correct, because it is—just like origination
is part of the mortgage process. However, if you also believe that
it's an art, then my hat is off to you. You may be one of those
mortgage professionals who truly appreciates a strong, intelligent,
problem-solving and compliance-oriented processor. I used to
support a mortgage broker named Sam K. who called me the queen of
cover letters. He said that my cover letters were famous; they were
a part of my processing protocol. He said this because every time I
submitted a loan for him, I would draft a cover letter outlining
what was being submitted in the loan package. What made him call me
the queen of cover letters was that I would emphasize certain
points about the loan that were vital to the underwriting of the
file. Sometimes the loan would be so clean that it didn't need any
explanations, but he always knew that I would never submit the
package without that cover letter. I learned that from the first
account executive I met 14 years ago—thanks, Pamela N.
Allow me to explain further ... For example, automated
underwriting might have given us a referral, yet I would explain
via my cover letter why this referral should be approved, and for
every point, I would supply validated documentation. Remember the
term "compensating factors?" It's an old school term, but it is
very relevant to the way we process loans, even today. It's all
about the three R's. Underwriting has the four C's and processing
has the three R's. If you know the three R's, then hopefully, you
are applying them. If not, please allow me to explain.
The three R's are as follows:
1. Read. Believe it or not, when documentation
comes in, someone has to read it, review it and validate it.
2. Run the numbers. The loan officer pre-qualified
the borrower with raw data. Processing takes it to the next level
by running the validated numbers to be sure that the borrower still
qualifies for the product the loan officer sold. My favorite
scenario is when the loan officer sells the borrower on an
interest-only deal. It seems to be a recurring theme. Most (not to
be confused with all) interest-only deals are qualified at a rate
above the note rate and not at the note rate. For some reason, loan
officers seem to bypass the guidelines, pre-qualify the borrower at
the note rate and then send the file to processing. Hopefully, your
proficient processor checks the lender guidelines (like he should
be trained to do) to validate whether or not the borrower will be
qualified at the note rate or not. Moreover, your proficient
processor will probe further to be sure what the maximum debt ratio
is, since it isn't the typical number we see on our standard loan
programs. These niche products require not only that the loan
officer be knowledgeable, but the processor, as well.
3. Record. Finally, document everything. That
means following your timelines, tracking the documents you ordered
and writing all critical conversations with borrowers and third
party providers in a conversation log.
A tandem relationship—working together as
a team—that's what it is all about. The crazy part is that
one entity cannot exist without the other. If the origination side
is weak and documents are not turned in properly (incomplete 1003s,
GFEs or incorrect TILs, just to name a few), this can have a major
impact on the timeline for closing the loan. Conversely, if the
processing side is weak (bank statements were not read thoroughly,
income was not validated, payoffs were not ordered and date
recorded for follow-up, etc.), the timeline for closing the loan
can be put in jeopardy. Nothing is worse than doing the same task
more than once or, worse yet, not catching obvious errors due to
laziness. You can bet the errors will be caught be underwriting;
so, why take the chance?
Underwriting relies on processing, not origination, to tell the
story of the borrower and validate why this borrower should receive
hundreds of thousands of dollars to purchase a piece of real
estate. Take a moment to look around and see if you are in an
environment with proficient processing. In fact, if you're a loan
officer, before you deliver your next loan to processing, think
about how you have presented your documentation. Is it complete? If
your borrower is escrowing his loan, did you show the required 12
months of pre-paid insurance (if applicable) and the correct number
of months for escrowing taxes and insurances (again, if insurances
are applicable)? Or, if the borrower is purchasing a property, did
you complete the details of the transaction section on page three
of the 1003? It's impossible to determine the borrower's cash to
close and whether he has enough cash unless this section is
completed, isn't it? This is not rocket science; you don't need a
master's degree to process or originate loans. What you do need is
a strong dose of common sense and street smarts. Data integrity and
validation of information are the cornerstones of the mortgage
world. Once we lose sight of these concepts, our fiduciary
relationships with our lenders will be in jeopardy of being
severed, and no one wants that.
Most of the time, processing is not a walk in the park. We all
know that some loans need more TLC than others and that some
borrowers need more handholding than others. So, be part of the
solution, and not part of the problem. Remember the old saying,
"There's no 'I' in team?" For all you football fans like me, the
New England Patriots are a great example of teamwork. No
superstars, just a bunch of hardworking guys with no egos, playing
together to win the Super Bowl, which they happened to do three out
of the last four years.
Marian DeBonis of Tamarac. Fla.-based Cyberspace Financial
Inc. is a licensed mortgage broker, contract processor and mortgage
trainer for Cyberspace Financial Mortgage School. She can be
reached at (954) 724-4591 or e-mail
[email protected].
