December 19th, 2013 4:09 PM by Richard T. Cirelli
The New Normal - 500-Page Mortgage Applications
If you have recetnly gone through the mortage process or heard from someone that has, you are not alone if you thought the amount of paperwork was ridiculous.
According the CEO of the Mortgage Bankers Association the average mortgage application file has now ballooned to 500 pages! Thanks to additional Government regulations and fear that lenders will have to re-purchase loans form Fannie Mae, Freddie Mac and other agencies, I don’t see the situation getting any better.
Every file is required to contain a slew of Disclosures required by Federal regulations; at least two years of personal income tax returns plus two years of Corporate returns for the self-employed; two months of complete statements from each bank, investment & retirement account; proof of the source of down payment money; explanations for any large deposits into the borrower’s accounts; a letter of explanation for credit inquires and just about anything an underwriter can think of for anything out of the ordinary; plus the credit report, appraisal, title report, escrow instructions, etc.
The checklists that underwriters use to review a loan package can run several pages as they check each disclosure for compliance, plus the income and asset documentation, the appraisal, title report and so on.
Nearly all loans are sold after closing to the Government agencies known as Fannie Mae and Freddie Mac or are insured by the Federal Housing Administration. Jumbo loans are now mostly sold too. If the investor isn’t satisfied with the quality of the underwriting package, the lender can be forced to buy the loan back. The new Qualified Mortgage rules that go into effect in January put even more responsibility on the originating lender.
To be prepared, homebuyers should begin the pre-approval process well in advance of buying a home. When done properly, it can shave weeks off the loan process by identifying and documenting everything in advance. This avoids the last-minute scramble to close a loan on time.