The Apple Peeled Question: What on earth is happening behind the scenes after you’ve completed your mortgage application and you’ve sent in all of your supporting documentation? Why does it so often take 45-60 days to get through the mortgage process?
Jablonski: It’s not necessarily because your file is collecting dust on the same pile for weeks at a time. It’s more accurate to say that your file gets moved from one pile to another six or seven times, and it sits in those different piles for two or three days at a time, sometimes longer. While there’s no real opportunity for your application to collect dust, two days here & three days there starts to add up to a lot of wasted time.
During the mortgage process, an applicant might only speak to their loan officer and maybe an assistant or a processor on the loan officer’s team. Rarely would an applicant have the need to speak to someone else affiliated with the lender, so most people are completely unaware of just how many different employees that have a hand in their file getting through the process. Along the way, there are multiple touchpoints, in which specific employees complete a specific task. It works almost like an assembly line.
The Apple Peeled Question: What are the Typical touchpoints during the mortgage application process?
- Opening Department – Some lenders have their loan officers send new applications to an opening department that serves mostly as a quality control mechanism, ensuring that the file is compliant with federal regulations that have become more stringent in recent years. An opening department might even order/request certain services that are required, like an appraisal or a flood certification, but mostly an “opener” is making sure that all of the disclosure statements were accurate and sent to the applicant on time.
- Processor – Most loan officers are assigned to a processor. A processor might also be categorized as a gatekeeper for quality control. Their tasked with holding each application to a certain standard. In other words, the processor would not, or perhaps could not, submit an applicant’s file to an underwriter unless certain boxes have been checked. For example, they’ll inspect to see if every document related to calculating the applicant’s income has been collected (e.g. tax returns, W2s, pay stubs). Or, they’ll look to see if all the up-front disclosures or letters of explanation have been signed. A processor is also typically responsible for ordering certain items that are required. For instance, a lender might require that an applicant’s employer provide them with a written VOE, or verification of employment that provides very specific information about the applicant’s compensation.
- Underwriter – The underwriter is the decision maker. They approve your loan or decline it. Sometimes, when they think they don’t have enough information, they’ll “suspend” your file until the processor, or the loan officer can obtain the clarifying information they need. Usually, the underwriter will “touch” a file at least twice during the process. In fact, two touchpoints with the underwriter is ideal – once to approve the loan, and a second time to “clear” any conditions associated with the approval, and to officially change the file’s status to “clear to close.” Suspensions and/or incomplete files would mean more than two touchpoints with the underwriter and would cause further delays.
- Collateral Review – Some lenders have a separate group that review only the appraisal reports for the subject properties associated with each application.
- Project Review – Many lenders have a separate department to review condominiums and co-ops. In this instance, one underwriter would review an applicant’s qualifications, and a completely different underwriter would review the building the condo or co-op unit is in to ensure it is financially sound.
- Closer/Closing Department – After a file is “cleared-to-close” by an underwriter, it is often transferred to a closing department. If a closing date has been set, a closer might work with the buyer’s and lender’s attorney to gather enough information to create a final closing package with a settlement statement that includes all final costs. The closer would likely also send out a final closing disclosure package to the applicant.
The Apple Peeled Question: How much interaction does the loan officer have with all of these people at all of these different touchpoints?
Jablonski: In many instances, the loan officer isn’t allowed to help complete some of these tasks. For example, some applicants are compensated by more than just a straight salary. They might receive bonus, commissions, or overtime income. In instances like these, a lender would often send a VOE (Verification of Employment) form to the applicant’s employer. The form would itemize the different streams of compensation. Lenders do not want loan officers or the applicant to have any part in obtaining that data. A loan officer only gets paid if a loan closes, so lenders assume that some loan officers would stop at nothing to ensure a loan application is approved, even if it means altering data or coaching an employer into providing information helpful to their client. For that reason, they want documents like a VOE to be passed directly from the applicant’s employer to someone who works in operations for the lender (likely a processor).
A loan officer also does not have the ability to approve or decline an application. That job is left to an underwriter.
Since a loan officer isn’t allowed to perform many of the functions in the assembly line, and since most have more than enough to keep them busy already, a loan officer is often at the mercy of all of those people at all of those touchpoints. It’s up to them to get the application from one pile to the next. When the pressure is on, and advancing the process is out of the loan officer’s hands, it’s easy to feel powerless.
Allow me to paint a picture of one phenomenon that’s constantly in play behind the scenes…
What I repeatedly witnessed or took part in for 15 years as a loan officer, was an unusual transference of pressure.
The pressure’s inception occurs the moment a contract of sale is signed. That’s when the clock starts ticking. It starts out tiny, unnoticeable even, because there’s plenty of time. But there are deadlines along the way, like a mortgage contingency date and the anticipated closing date. As those dates draw closer, the pressure builds and begins to take on a life of its own.
It manifests for the first time as a phone call from a real estate agent, or an attorney, or the mortgage applicant. They all need answers, because they’re all under pressure to complete a transaction on-time. They’re calling to remind the loan officer that they’re up against the clock. They call every four or five days at first. Then every day. Then sometimes a couple of times a day when things are getting down to the wire.
A loan officer is always under pressure to perform in a timely fashion. If they can’t, there are hundreds of others lining up asking for the opportunity to prove themselves. Whoever is referring clients is constantly monitoring performance, as they should. They call and ask, “Why hasn’t the appraiser scheduled yet?” or “Are we clear-to-close yet?” They pressure the loan officer, most likely because they they’re being squeezed by the seller’s side. Then after that, the loan officer starts to put pressure on all the different people at all those different touchpoints in the mortgage process. It’s like a game of hot potato. Nobody wants the pressure, so they try to hand it off, and it spreads like the flu.
If an application falls behind schedule, a loan officer might find themselves prodding someone at one of those touchpoints, so the file in question can move from one pile to the next. It’s awkward for so many reasons, starting with the fact that the loan officer isn’t really anyone’s boss. So, when they’re in this type of position (which is quite often), they’re truly asking for a favor – They’re asking someone to prioritize their file ahead of another loan officer’s file, or they’re asking if someone will stop what they’re doing so they can address the file that was infected with all that pressure.
One’s approach must be calculated to avoid ruffling feathers. A misstep could tarnish a relationship with someone the loan officer will need help from again at some point in the very near future. Every situation calls for a different approach because A) sometimes the level of pressure will dictate the approach, or B) different personalities respond differently to different approaches.
Here are some examples:
Nudging – The passive aggressive version of asking someone at one of the touchpoints to prioritize one of your files.
Example: “Hey there. Hi… Ummm… I haven’t asked for a favor in a really long time, and I know you’re busy… and I know you have a lot on your plate… but if you get a chance, it would be awesome if you could take a peek at the Dawkins file. It’s super clean… super easy. It won’t take long. No pressure… but it would be great. I’ll come back in a few hours.”
Bribery – This request comes with an offer to buy lunch, for an individual, or maybe the entire opening or closing department.
Example: “Lunch is on me the rest of the week if you get that Dawkins file cleared.”
Begging – This request always comes with a sob story.
Example: “If the Dawkins family doesn’t close by Thursday, they’ll have no place at all to live!” Or, “The real estate agent that referred this loan is my #1 referral source. If we don’t close this loan by Thursday, they won’t refer me any more business!”
Arguing – This should be a last resort for a loan officer. It usually only happens when one or more people at one or more of the touchpoints has totally dropped the ball.
Example: “The Dawkins file was put together perfectly and then it sat in processing for seven days and now it’s been laying around in underwriting waiting for someone to look at it!!! This is unacceptable!!!
The Apple Peeled Question: What can the loan officer do to make that process more efficient and shorten the application cycle?
Jablonski: Separate from being skilled in the art of diplomacy (see answer above), there is more that a loan officer can do.
Since they’re probably not in position to hire the largest and most proven operations team in the world who have the most efficient technology available, the best thing a loan officer can do is put together the most complete loan application possible. They should anticipate every document that will be requested of their client, and they should collect it up-front and review it thoroughly looking for potential pitfalls. They should proactively obtain letters of explanation from their client for any situations that might not be easy to decipher. When a loan officer consistently submits complete, high-quality, applications they have a right to expect the same from the operations staff.
Apple Peeled Question: What else happens behind the scenes? Tell us more.
Jablonski: More conversations. But it’s not just about moving a file along. Sometimes there are disagreements on how to interpret a mortgage guideline and sometimes loan officers calculate an applicant’s income or assets differently than an underwriter does. There are definitely some behind-the-scenes battles going on. The final interpretation could ultimately be the difference in a loan getting approved or declined, so an underwriter’s office can have the feel of a courtroom where the defense is pleading its case to a judge.
The best underwriters reach out directly to a loan officer when they don’t see eye-to-eye with them. They ask how the loan officer came up with their numbers and they share their own calculations. They might even offer practical solutions for getting the loan approved. When these problems don’t get resolved, and both sides have really dug in their heels, the situation gets escalated to a higher-level underwriter, and sometime another layer after that, like a court of appeals.
An excellent loan officer would thoroughly review the application before it’s officially submitted, proactively in search of anything an underwriter might “red flag.” If a particular characteristic of an application is questionable – like exceeding the debt-to-income ratio threshold or falling short of a liquid asset reserve requirement – the loan officer might even prepare an exception request, which adds another time-consuming layer to the process.
Apple Peeled Question: Do you have a juicy, behind-the-scenes story about any of these interactions that you can share?
Over the years, I had the opportunity to work with a lot of amazing people. Processors and assistants that made my life easier, closing departments that stayed late at work so my clients could close the next morning, and underwriters that were open-minded and helped search for solutions before declining an application. But, I also crossed paths with some pretty toxic characters too.
The italicized text below is a pretty solid transcript of a real conversation I had with a processor about 7 or 8 years ago. (I apologize for its inappropriate nature)
Processor: “This file is a piece of f*^%ing s*%t!”
(Then she dropped the 2-inch thick file wrapped in a manilla envelope at the floor near my feet – this really happened! It took me a second to process the previous 10 seconds, so she spoke again before I could say anything.)
Processor: “The debt-to-income ratio is 61%!”
(Finally, I came to my senses).
Me: “I would never submit an application with a debt ratio that high. What did you change?”
Processor: “I didn’t change anything.”
Me: “C’mon… You had to change something.”
Processor: “We tax search came in, so the only thing I changed were the taxes. You had them down as $7,000 a year, but they were really $19,000.”
Me: “What are you talking about? I live down the road from that house… there’s no way taxes are $19,000. Let me see the file.”
(The processor handed me a title report that was flipped to the tax search page. The report was for a property address on Long Island. The subject property was probably a hundred miles away in Putnam County.”
Me: “This isn’t even the same property! And you changed the numbers, and then you tell me that my file is a piece of s*#t! Don’t you think that’s crazy?”
(That day I asked management not to send any of my future applications to that processor. I couldn’t work with her anymore.)