Given the events of the past few months, mortgage market participants are under tremendous pressure to balance record loan application volume, a seemingly unending barrage of guideline changes, and documentation requirements fueled by COVID-19 pandemic related credit risk factors. Add to it all, the new challenges faced with working from home and it’s easy to see how mortgage originators are finding it more difficult to deliver complete, saleable, and serviceable loan packages. We also understand that warehouse banks have become increasingly rigid with previously flexible lending requirements due to heightened credit risk concerns, which may lead to missed opportunities for growth and profitability for originators.
As a company focused on relationships, reliability, and results, AmeriHome is committed to ensuring service levels stay consistent and our clients can continue to turn their warehouse lines over quickly to keep up with the increasing demand for loan fundings. At AmeriHome, one of our goals is to maximize the efficiency of interactions with our clients. One way we do this is by assisting our clients with reducing the number of conditions per loan delivered to us. This, in turn, may improve results for loans delivered to any investor. As part of our commitment to transparency and providing feedback, this article shares insights from our loan purchase review process. The goal here is to help our clients deliver complete loan packages with their initial submission, increase their “Funded at First Review” results, and accelerate the loan purchase process. Typically, clients with higher Funded at First Review percentages have quicker purchase turn times and thus shorter warehouse bank dwell times.
Loan submissions with missing or deficient income, asset, and VOE documentation as required by the AUS have driven up underwriting and operational conditions per loan by 41% and 19%, respectively, since January 2020. The increase in conditions per loan has in turn resulted in a reduction of Funded at First Review results. Specifically, the top 5 file delivery deficiencies we are seeing:
- Assets: Missing bank or investment account statements to support required reserves and cash to close
- Assets: Missing Proof of Gift Funds Transfer
- Income: Missing complete set of W2 forms for all borrowers for the correct periods
- Income: Missing Lease Agreements supporting rental income
- Employment: Missing Verbal Verification of Employment for all income sources for every borrower as required by employment type or loan program
To maximize your Funded at First Review score, here are 10 tips for credit package and collateral delivery:
- Complete Credit Package Delivery: Deliver all documentation together at initial delivery. Multiple uploads create an opportunity for documentation to end up in the wrong place and/or duplicate versions of documents being delivered.
- Income and Asset Documentation: Make sure that all supporting documentation for income and asset documentation, as required by the AUS, is included in your document set to be delivered to the investor. These missing documents drive additional conditions and delay the loan review process.
- 3.2 Data File: Ensure 3.2 data file is current (re-generated) and aligns with the final AUS and loan documentation prior to file delivery. We often see 3.2 data that does not match the final documentation, which causes the file to be routed for manual review.
- Required Documents Only: Only include documents in the credit package that are required by the investor or the AUS Certificate. Duplicate copies of the LE, CD, and 1003 for example, cause re-work, issuing of additional conditions, and overall delays to the loan review process.
- Multiple Notes: Copies of the Note for a previous loan should be clearly marked as such and provided in the credit package when necessary, e.g., meeting gov’t seasoning requirements, Texas (a)(6), or 2nd lien re-subordinations.
- Tax and Insurance Documentation: Include all property tax and insurance information, including current and renewal/date paid information as applicable, for the Subject property and all other REO. Missing tax and insurance information causes additional conditions and can lead to post-purchase reconciliation issues.
- Complete Credit Package Delivery: Ship complete collateral packages including all required documents in the same package to the Document Custodian. We often see Original Notes, Allonges, and Power of Attorney documents missing or sent in multiple packages. Incomplete/deficient collateral packages can cause purchase delays.
- Disclosures and Regulatory Requirements: Include all applicable federal and state required disclosures, as well as the LCA (Loan Closing Advisor) and UCD (Uniform Closing Dataset) documentation when required by the investor.
- Stacking Order: When required by the Investor, follow the Investor’s recommended stacking order – this will ensure that the Investor’s file indexing, data extraction and pre-purchase review processes will operate at maximum efficiency.
- To reduce risk of borrower employment status changes, many of our clients are including a final VOE from the day prior to loan closing.
- For Fannie Mae and Freddie Mac Rate and Term Refinance transactions, when using an exterior-only inspection appraisal, make sure to provide evidence showing the loan being refinanced is owned by the provider of the AUS.
Our experience is that clients almost always have the supporting documentation on hand when we issue the conditions report for the file. Spending a few extra minutes making sure the credit package is complete could save days in the purchase process. Funded at First Review results will improve, investors will purchase your loans faster, warehouse line dwell times will be reduced, and you will be able to fund more loans!
Thank you for your time,
EVP, Head of Operations