Sunday, 05 April 2020

What It Means When Your Loan Goes Into ‘Processing’

Written by Posted On Thursday, 19 March 2020 05:30

At the very early stages of your loan application, you’ve likely spent most if not all of your time speaking with your loan officer. It’s your loan officer that prequalifies you, reviews your basic information such as income, credit and employment, among other items, and presents a list of loan options for your review. Your loan officer will also accept your loan application and can run a preliminary credit report including credit scores. Different lenders have different processes during this stage. Your loan officer may be the one that requests all your documentation upfront. Or, your loan officer may run an initial automated underwriting request which will list items needed both initially and at your closing. 

This can mean sending copies of your most recent paycheck stubs, W2s and income tax returns. If you’re self-employed you can be expected to provide both personal and business returns but also a year-to-date profit and loss statement. Bank and other asset statements will be forwarded to verify there are sufficient funds to close on your transaction. Once you’ve passed this initial stage, your loan application goes to the Loan Processor. What does your loan processor do and what can you expect?

Your loan officer will then hand off your file to the processor. The loan officer is always there to talk about the progress of your application and answer questions as your file moves along, but it’s the processor’s turn now. The loan processor will review the automated underwriting “findings” to make sure that what is asked for is being provided and if not, when the needed items will be submitted. The processor’s primary job is to prepare your loan file for submission to the underwriter. If you’re asked to provide your most recent paycheck stubs covering a 30 day period and there is only one in the file covering two weeks, the loan processor will ask for additional paycheck stubs to meet this 30 day requirement. The processor will also review the information you’ve submitted to make sure it matches up with what the lender needs.

The loan processor will also begin ordering information from third parties to complete the loan file prior to submission to underwriting. This means contacting the title company to get a preliminary title report and to open up an escrow and schedule a closing date. You’ll need to have an insurance policy to cover the property and protect both you and the lender. You’ll provide the processor with your insurance agent’s contact information so insurance can be ordered. The processor will also provide your agent the Mortgagee Clause which will appear in policy. The mortgagee clause provides the insurance company with the legal entity which would receive a claim against the property and provide a payoff.

After the file has been completely documented, it is forwarded to the underwriter. The underwriter is the individual responsible for making sure the loan package conforms with the guidelines issued for the selected loan program. The underwrite will review the submission and in doing so may have additional questions or request more information or documentation. These requests go back to the loan processor who then contacts you to fulfill the underwriter’s request. You won’t be able to speak with the underwriter directly, instead you’ll provide what is being asked for by the underwriter to your loan processor. After all questions have been answered and needed documentation supplied, your loan processor is no longer involved.

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David Reed

David Reed (Austin, TX) is the author of Mortgages 101, Mortgage Confidential, Your Successful Career as a Mortgage Broker , The Real Estate Investor's Guide to Financing, Your Guide to VA Loans and Decoding the New Mortgage Market. As a Senior Loan Officer and Mortgage Executive he closed more than 2,000 mortgage loans over the course of more than 20 years in commercial and residential mortgage lending.

He has appeared on CNN, CNBC, Fox Business, Fox and Friends and the Today In New York show. His advice has appeared in the New York Times, Parade Magazine, Washington Post and Kiplinger's as well as in newspapers and magazines throughout the country.

Reed was the former Technology Chair for the Texas Mortgage Bankers Association, Board Member and President of the Austin Mortgage Bankers Association. He is married and a father of three in Austin.
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