We’d like to pass along some valuable advice from BM&G veteran Millie Simmons, our superb closing supervisor/fulfillment manager in Flower Mound. We hope you’ll find it useful:
Know your Investors overlays!
Developing an internal audit process to include safeguards against your investor overlays is a best practice in the industry. It’s the responsibility of the lender or their representative to perform due diligence and ensure a delivered closed loan meets all investor requirements, so it’s always wise to run a quick audit check prior to closing to ensure you have met and/or are prepared to meet all your investors closing guidelines.
Here are some common overlays that differ from Investor to investor:
- Interest Credit closings – how many days into the month do they accept loans closed with an interest credit?
- Principal Reduction allowance – and if allowed, the max allowed per program.
- Date sensitivity — some investors allow loan docs to be signed on or after the date of the documents, while others require them to be signed on the date they are drawn or have even different requirements based on the transaction type. Knowing this information will help you avoid a re-close.
- Trust/POA Closings – know your investor’s signature requirements prior to closing. For instance, some require specific verbiage to be included in the printed signature block, as well as in the acknowledged signature.
- Collection of Taxes & Insurance – most investors require you to collect any payments for the renewal of taxes and/or insurance when either payment is due within 60 days of closing.
Be proactive, not reactive!
All parties in a loan transaction are motivated to get through closing. Keep in mind, once the loan has disbursed, motivation to procure any necessary items to complete the loan purchase may not be less than prior to closing. Considering, you should know before you close all items necessary to deliver a complete loan to your investor for purchase review.
Here are some common items that may be required post-closing/pre-purchase:
- VOE – verbal verifications of employment for any salaried borrower(s) are required at the time of funding. Self-employed borrower(s) must also have employment verified at the time of funding. Most investors will accept proof of existence of the business (CPA letter, business license, etc.) for the VOE requirement.
- Final inspections – any work required to be completed per the appraisal must be done at the time of funding/disbursement. Most warehouse banks will require the final inspection (with photos) before they will release the funds for disbursement. Make sure to schedule any required final inspections to complete – and not delay – your loan funding.
- Make sure you have your funder thoroughly check the closing package for signatures, dates, initials, notary acknowledgments, etc. After a loan has disbursed it take time and is costly for the lender to obtain missing signatures/dates/initials to complete the loan package. The lender can accrue unnecessary interest on their warehouse line until the loan is purchased. A funder is the last line of defense for the lender to ensure they have a complete loan package for purchase review.
Cross-train employees for multiple functions!
Each employee should have a backup in the office – someone who can seamlessly slip into the role. This ensures a smooth flow through closing/funding, allowing us to deliver excellent customer service for our clients. Set up each function to have at least one additional person cross-trained. This will help with high volume days, and when inclement weather or vacation/sick days leave a department short-staffed. Having the ability to maintain turn-times and deliver the highest quality customer service ensures a great experience for borrower(s) and client(s) alike.
While these practices are not a guarantee, they’ll certainly help minimize any issues that may crop up at closing.