Mortgage Origination Cycle

Loan Requirement >> Origination >> Processing >> Underwriting >> Closing >> Post Closing >> Servicing

A typical loan cycle starts with borrower shopping for mortgage loan. Borrower might be seeking loan to refinance with better rate or term or a cash out or might be for purchase of new property. If its purchase he might also have a listing agent or a realtor involved helping him identify the new property.

Borrower submits his initial mortgage application with a Loan Officer / Mortgage Broker who makes an initial offer in a form of loan estimate. Borrower also submits all supporting documents pertaining to his income and assets along with an application. This is called an Application stage or an Origination stage of the loan cycle.

Application as disclosed along with supporting documents is then submitted to Processor who boards the loan in a loan application system. Processor also validates Income and Assets and orders Credit Report, Preliminary Title and an Appraisal to complete the application. All information as sourced through borrower and vendor documents is then submitted to Automated Underwriting System to pull Desktop Underwriting Report (DU). This stage in loan cycle is called as Processing.

A complete file along with DU report is submitted to Underwriter for his discretion. Underwriter reviews entire loan application and supporting documents to ensure that loan meets all agency program guidelines and that can be approved and closed in compliance. Underwriting involves Income Calculation, Credit Reconciliation, DTI Calculation, Collateral Review, Review of DU report and requirements for other supporting documents. After initial review underwriter gives conditional approval with Loan Conditions seeking additional documents, clarification required to approve the loan file. Loan Conditions can be further categorized as Prior to Docs (PTD) and Prior to Funding (PTF) conditions. Prior to Docs condition are to be meet to approve the loan file while Prior to Funding are to be taken care at the time of closing. After condition approval loan file is moved back to processing queue wherein Processor works on underwriting condition to get additional documents required to approve the loan file. Once all conditions are satisfied file is again sent back to Underwriter for final approval. A typical loan approval takes 3-4 touches by Underwriter before he sign-offs the loan file. This stage of the loan cycle is called as Underwriting.

As approved files are moved to Closing queue, doc drawing team prepares and pulls closing documents to be disclosed and signed by the borrower. Once closing documents are signed funds are wired to Escrow who does the Settlement and the Disbursement of the loan file. After loan disbursement entire loan package is sent back to lender along with final closing disclosure. This stage of the loan cycle is called as Closing.

Closing package received from escrow are audited in detail for compliance by Post Closer. Disbursement and Recording dates are confirmed to retrieve final Title Policy and Recorded Mortgage Deed to be retained in the loan file. Loan file is entirely audited by the Originator at Post Close stage if to be shipped to Investor in Secondary Market. Shipping team co-ordinates with Investor to work on pre-purchase conditions before the loan file is transferred to the Investor. This stage of the loan cycle is called as Post Closing.

Investors including GSE’s and Private Investors do not typically service the loan file. Servicing activity is thus retained by Originator or Servicing firms through Master Servicing Agreement. Servicing activities involves payment collections, escrow management, tax and insurance and other service payments. Servicing may also involves default management and foreclosure. This stage of the loan cycle is called as Servicing.

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