Mortgage Lending - Behind the Scenes

We're currently working a loan for my cousin, and trying to get the loan funded. As most of you know, there is a 3-day right to rescind a refinance loan after the close date, a sort of buyer's remorse thing. The recision period ended Saturday night at midnight, and the loan was due to fund on Monday. It's Wednesday. Still no money.

So allow me to pull aside the curtain for a moment and describe to you how the process works from the time your loan arrives at the originator until you make your first payment:

1. You contact (or are contacted by), an originator. This person is variously referred to as a loan officer, loan consultant, or what have you.
2.Information is collected by that originator and compiled, along with other information (appraisal, title report, credit, desktop underwrite, etc.) into a loan file.
3. The loan file is handed off to a processor, who submits it to a lender.
4. The lender underwrites the file according to the loan program guidelines. All information in the file is verified (supposedly), appraisal is reviewed, etc.
5. The underwriter sends the file to the closing department for final review.
6. The closing department conducts its review and clears the file to close.
7. The clear is communicated to the processor, who tells the originator, who tells you.
8. Closing is scheduled, and the file moves from the closing department to the documents department at the lender.
9. Documents and instructions for closing are transmitted from the lender to the title company. This step actually invilves the preparation of the docs at the lender, transmission of those doc instructions to the processor, to the originator, who approves the docs and sends them back, then the docs are prepared and sent. Most of theses steps, incidentally, involve about ten substeps I just don't feel like typing in there.
10. The file closes at the title company (or the attorney, or the escrow company, depending on your state). The title company overnights the documents back to the lender's closing department.
11. The file, now with signatures on the loan documents, moves from docs to funding at the lender.
12. Funding reviews the docs for errors and transmits the funding conditions to the processor.
13. Conditions are filled and sent to the lender.
14. The lender wires funds to the title company, which disburses the money.
15. The loan moves from the funding department to the warehouse line management department, where the loan is packaged with other loans and sold on the secondary market to a servicing lender, who sends you a little book of payment slips to use in making your payment.

Quite a bit of stuff, huh? Even in the best companies, with the cleanest files, there aer a large number of places where things get hung up. Usually there's a delay after the underwriter first gets the file while conditions to meet the approval are gathered and sent. And re-sent when the fax does not go through. And re-sent when the underwriter goes on vacation and the file is moved to another underwriter. And so on.

On this file, we sent all this stuff in. Then there was a review appraisal. That took a week and a half. Then there was a large delay for something, we're not sure what, before we could get to docs. Finally, we got docs drawn and we closed. We waited for the recision period to expire so we could fund.

Oh, but then the fun began. The funding conditions are usually things like "you missed a signature on a document" or "we need the most recent paystub from the borrower" or even sometimes "the insurance needs to be changed to match the property address". Piddly stuff like that. There are sometimes as many as ten of these. This lender sent us - no exaggeration - 30 conditions. Stuff like "verify employment" and "ascertain recipient of benefit check". They argued with the payoffs at the table, which payoff procedure THEY PROVIDED TO US. And so on ad infinitum. Ray faxed over the stuff three and four times. Nobody ever seemed to know what the bleep was going on.

By now we've spoken to the general manager, the regional sales director, and the angel Gabriel, all without any discernible success. The clients are not only nervous, but getting frantic, because of course the end of the month is coming and late payments are not pleasant things to have to make, especially when the payments were supposed to have been made from the refinance. And what can I tell them? Nothing. We're trying. But we are at the mercy of the competence - or incompetence - of the lender.

The moral of the story is that however much we try to provide world-class service and speed, and we do, in fact, try to provide this, we have to be very careful what lenders we work with and what title company we use and what appraiser we select and so on, or we can promise nothing. The further moral of the story, I can promise you, is: don't screw with our clients' files, or you will never get a loan from us again, or from anyone we know. We talk.

The lender is First NLC. The website is www.firstnlc.net. More information about how to avoid these people available on request.

MEantime the Fed has raised rates for the 15th consecutive time, thank goodness, since we were beginning to think that Ben Bernanke was not going to provide us any material for this column about how ridiculously inept the Fed is. Short-term mortgages have now moved to rates worse than the 30-year fixed. A delightful situation for many of our borrowers.

However, defying the Fed and all the hosts of evil it employs, the real-estate market in Utah is exploding. I've not seen buying this fierce in the last 3 years.