Written By: Frankie Lacy, Op-Ed Writer
Once a file has been fully underwritten and all conditions are satisfactorily met, it is ready to be cleared to close (CTC). Underwriting and processing must perform a final quality control check prior to releasing the loan to the closing department. This process will prevent errors at the closing table and delays in the post-closing process of selling the loan.
The first step toward issuing a CTC is to validate the AUS findings. We do this by comparing the loan terms, ratios, and conditions on the AUS report to the final 1003 and 1008. Validating the findings report prior to CTC helps us avoid variances between the closing documents and the AUS findings.
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The second step is to do a final review of the loan package to make certain all required documentation is in the file. Processors and underwriters frequently create CTC checklists to accomplish this task. Checklists can be updated and corrected as company policies, underwriting guidelines, and compliance rules change. The following are some items that may appear on a CTC checklist:
• Review disclosure dates and signatures
• Ensure the subject property address matches on all docs (HOI, flood cert, purchase agreement, appraisal, title, 1003/1008, AUS)
• If credit was re-pulled, insure AUS shows the most recent credit report data
• Verify that any last minute purchase agreement addendums are fully executed (signed and dated by all parties)
• Review the appraisal to make sure any purchase agreement updates were added to the report
• Double check expiration dates on credit, income, asset, and appraisal docs. If any have expired, get updated docs from the customer prior to closing.
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• Make sure to notate the file if there are escrow holdbacks, power of attorney, escrow waivers, subordinate financing, etc. This is a great way to give closing a heads up about important characteristics of the transaction
• If the loan has mortgage insurance (MI), compare the premium on the certificate to the MI premium on the 1003/1008 & AUS findings
• Clear out any duplicates or illegible documentation. In other words, clean up the package.
• Double check the funds to close requirement to ensure the loan has sufficient assets to close
Utilizing checklists can assist with the accuracy of loans submitted for CTC, especially if the loan was reviewed as a rush request. It is easy to get caught up in the “big” problems of a loan and forget the mundane details. When you validate the findings and use a checklist as a reminder, CTC’s are a breeze!
About The Author
Frankie Lacy - As an op-ed writer, Ms. Frankie Lacy is a 15+ year mortgage industry veteran with extensive conventional mortgage underwriting experience. Topics of Frankie's expertise include: Fannie Mae, Freddie Mac, USDA Rural Housing, underwriting to investor overlays, self-employed borrowers, personal and business tax return analysis, rental income, condos/co-ops/PUDs, and more. Frankie is a Davenport University graduate with a degree in Business Administration.
