Reminding Your Borrower to “Freeze” after Pre-Qualifying for a Loan

There’s no bigger frustration to the borrower then after receiving an “approval” from the loan officer, they’re subsequently told the loan cannot close.

A recent article in USA TODAY was a reminder of a big frustration that occurs on both sides of the funding table.  It emerges when the borrower does something, or fails to document something, that changes their financial and/or subject property’s “snapshot” that’s taken once the loan is issued an approval to fund.

Are your loan officers reminding borrowers to freeze after pre-qual?  Most do, but implementing a policy of always reminding the borrower of the verifications that are likely to occur is a good step in reducing non-funding risk.   Even providing the borrower a written check list of actions to avoid during origination is a good idea.

Most mortgage industry professionals are aware of the pitfalls to successful origination when it comes to the borrower(s) shooting themselves in the foot.  Don’t buy new furniture and a new car before closing.  Don’t fudge income on your application or your tax returns.  Don’t cuss out your boss at work and lose your job a week before closing.  All this information is being verified or monitored during origination.

But, beyond frequent interaction between the loan officer and borrower on the freezing tactic, there are tools to foster better communication between parties during origination.  Last year, there was a noticeable new crop of marketplace solutions providing a portal for the borrower and lender to better communicate, and electronically upload/download documents needed by both parties.  Examples of these platforms are Pavaso (www.pavaso.com)  and BorrowerMobile (www.docmagic.com).   Platforms such as these help to ensure data integrity, overall communication between the lender and borrower, timeliness of the information required to close the loan, and the ability to close and enhance options in servicing the loan.

Investor verification requirements are with us for some time to come – and that’s a good thing for the health of mortgage finance.  Additional rule making, such as the upcoming enactment RESPA-TILA this year, is also a hopeful positive for the industry.  Successfully managing these potential roadblocks to better ensure another loan on the books is an obvious one for originators in 2015.  Better communication with your borrower will certainly enhance customer satisfaction, and increases your firm’s ability to close that loan – and hopefully the referral after it.