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National Mortgage Professional
Jun 29, 2006

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]
Jun 29, 2006
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