What Is Post-Closing in Mortgage? A Complete Guide

As important as it is, post-closing in mortgage processing is often overlooked.

Issues like errors in mortgage post-closures hinder the successful sale of properties. What’s worse, the 2009 crisis in real-estate has brought malpractices of the U.S. mortgage post-closing process to the fore. For this reason, the federal government has imposed regulations that require forms, affidavits and sale deeds to be attended to with dedicated focus. It makes the post-closing process even more challenging for mortgage lenders.

Having said that, lenders may wish to learn more about what is post-closing in mortgage? This blog features everything to learn and factor-in about the process.

U.S. Mortgage Post-Closing Process – What Lenders Need to Know?

Lenders should undergo a mandatory mortgage post-closing audit following the mortgage closing process. It can help ensure the legitimacy of collateral and the entire loan application per se.

Mortgage post-closing audit requires auditors to verify documents and ensure compliance.

To elaborate, it involves reviewing documents, verifying third parties, analyzing credit risk, underwriting evaluation taxes, and much more. Subsequently, all the documents are processed. It is crucial to comply with investor guidelines and ensure that the process is thoroughly completed. The loan documents are verified for signatures before being handed over to relevant service providers. Quality control is conducted to highlight and control errors. The borrower is notified about loan sale and documents are shared.

We understand that lenders are at the greatest risk as far as mortgage loans are concerned. Besides mortgage post-closing audit, it is equally important for you to ensure that the collateral must cover the shortfall in defaulter cases.

To ease the load, we have explained everything that lenders must factor-in at each step of the U.S. mortgage post-closing process, below.

File Review

File review can be the most time-consuming step in the process. A lack of technical skills may increase the chances of errors. So, it is practical to hire a team of auditors who can diligently audit all files starting from initial loan application to closing documents. The auditors will use a checklist which complies with the Consumer Financial Protection Bureau (CFPB), Fannie Mae, Freddie Mac, Federal Housing Administration (FHA) and other guidelines. Documents must be meticulously checked for information accuracy.

Lenders must ensure adequate supporting documents for the underwriting decision in the loan file. At the same time, the underwriting decision must comply with Fannie Mae regulations. All information in the documents must be consistent with the underwriting decision. In case you’re using automated systems for loan underwriting, it is important to enclose verification messages and approvals.

Financial Reverification

The second step in the U.S. mortgage post-closing process financial reverification, is to recalculate Loan to Value ratio (LTV) and Combined Loan to Value Ratio (CTV). The loan to value ratio is an indicator of loan quality. In case it is too high, the mortgage value will not cover the defaulted loan. So, after the recalculation auditors must ensure that LTV and CTV are within the permissible limits. They also recalculate applicant liabilities and debt-to-income ratio in this step. It is done to check applicant’s financial stability and income generation capability. The recalculation helps in determining an applicant’s ability to pay off debts with existing income. Aside from these recalculations, it is also important to determine borrower’s assets.

Report Findings

In this step of the U.S. mortgage closing process, auditors combine all report findings and relay them to management for final review within 30 days after QC review completion. A comprehensive report is generated with detailed loan audit findings. The QC report must include details of defect rate, top defects, possible corrective actions, comprehensive report summary and distinctions between underwriting and compliance related errors.

The lender reports to Fannie Mae within 30 days if any report findings make the loan application ineligible.

Appraisal Desk Review

The last step of the process, appraisal desk review, involves reviewing the work of the original appraiser. The reviewer must verify the legitimacy of report data, accuracy of comparable property sales and that the furnished value is correct and supported with proof. They must also assess any calculation errors by appraisers. It may be worth noting that no new property information is collected at this stage.

Outsourcing U.S. Mortgage Post-Closing Process – Should Lenders Consider It?

Mortgage post-closing requires technical expertise and subject matter knowledge. Attention to detail is crucial to avoid errors and denial-related contingencies. For this reason, outsourcing U.S. mortgage post-closing process is a practical idea. Below are some benefits.

  1. Higher Accuracy
  2. Regulatory standard compliance
  3. Ability to handle business volume spikes
  4. Quality Control
  5. Ability to focus on core business
  6. Minimum turnaround time

At HelioNext, we offer post-closing solutions that let mortgage lenders identify, manage and communicate risks effectively. Servicing mortgage lenders and small banks for 15 years has helped us develop in-depth industry experience and knowledge of U.S. mortgage laws. Get in touch with us today to address any questions you may have or for your mortgage post-closing assignments. We’re here to help you stay compliant and achieve long-term business goals.