Vail Daily column: ‘Typical’ mortgages now heavily regulated
I have been originating, processing and closing residential mortgage loans for more than 12 years. During this time, I have seen the mortgage industry go through dramatic and monumental changes. Some aspects of mortgage financing that were at one point very easy and smooth are now tedious and difficult and vice versa to be completely fair. As an illustration, let’s look at the “typical” flow or process of securing residential mortgage financing from start to finish.
Acquiring a residential mortgage begins with the potential borrower having a discussion with me in person or via phone. During this preliminary conversation, we will discuss what the borrower is trying to achieve with the transaction and what their qualifying criteria look like. This qualifying criteria can be just a snapshot of the borrower’s income and employment, credit and debts and their asset base. From there, I can begin to put together specific numbers, thoughts and financing options to discuss with the borrower in person.
Preliminary proceedings such as this have not changed during my tenure or at least in the way I conduct my business. What has changed is the mass of regulatory laws and guidelines that begin at this point in the process. Without boring you with details, after this point of initial application, I now have to provide very specific lending materials to the borrower within a short time frame. Delivery and timing of these loan disclosures and paperwork must be meticulously kept on file by me and the company I work for to ensure regulatory compliance.
Assuming the borrower and I meet and agree upon a course of action for their mortgage financing needs, the entire process heats up a bit. To begin with, I need to gather supporting documentation from the borrowers — a lot of documentation. Every borrower is a little bit different, but I will need to gather documentation on their qualifying criteria noted previously and various other documents supporting their financial makeup. During my time in the industry, borrowers have always had to supply their documentation for getting qualified and approved for a loan with the exception of a few low documentation type loans that are by the wayside now.
The manner in which the documentation is underwritten or reviewed by the lender has also changed a bit over the past few years. No stone is left unturned and every aspect of the file is reviewed and accounted for. As a loan officer, I am now more so than ever required to be acutely aware of every detail of both the loan program in which I have placed the borrower and of the borrower’s qualification documentation. Whether I or the borrowers like it or not, the underwriting approval process can be intense in the current environment, which is not necessarily a bad thing in the grand scheme of things. Current lending processes and the current regulatory and financial environment now require loan officers to be more savvy, educated and perhaps creative in their thinking than in previous years.
Assuming the borrower is qualified, the appraisal of the property and particular project (if applicable) are acceptable and approved by the lender (which is the topic for another column), and I have done my job to properly navigate the file through underwriting and to a full loan approval, the process takes yet another new turn. The Real Estate Settlement Procedures Act now takes control of the process in order to get the final figures and numbers of the loan processed and approved. Nothing can change from the beginning to the end as far as what I have told the borrower about the terms and the figures of the transaction, which again is not a bad thing. This act’s reviews make sure of this and various other internal aspects before the deal can close.
If you get the drift of the column, there is now a lot more regulatory oversight and control in the mortgage lending process and a lot has changed over the past five or so years. While this can make the process tedious, I do believe it is all for good reason and cause. Those of us in the business of originating residential mortgage loans are now required to be on top of every aspect of the transaction, which includes those seen and not seen by the borrower.
William A. DesPortes, of Central Rockies Mortgage Corp., can be reached at 970-845-7000, ext. 103, and email@example.com.