If you’ve ever taken out a mortgage loan, whether when buying a house or refinancing, you found out it’s a very detailed process, with lots of communication and hard work between you and your mortgage broker or loan officer. But while it may seem that a loan is a one-on-one proposition at times, in fact, a whole host of professionals work on any mortgage loan. A wide array of parties the banking, underwriting, real estate, and legal industries, as well as governmental agencies and even investors, might find your mortgage file on their desk at some point. So from cradle to grave, just how many people work on, or “touch” a mortgage loan? We made this list to find out:
#1 Loan Originator
The first point of contact between a consumer and the mortgage application process is usually with the loan originator (also called loan officer), who works for a mortgage broker or lender. For instance, Jeff Compton (me!) is a loan originator at Guild Mortgage.
It’s the loan officer’s job to find out what the consumer needs (purchase loan, refinance, loan amount, etc.) and prescreen them for eligibility (prequalify based on credit score, jobs, income, etc.) and match them with the loan product that best fits their situation.
Think of a loan officer as basically your ambassador to the lending process; the person who is “on your side” and works hard to set up the application with the best chance of getting approved, organizing all of the paper work, delivering information on rates, fees, closing costs, etc., and then working diligently to get the loan closed for you.
#2 Loan Processor
Despite getting not enough recognition, loan processor are some of the most vital people on any mortgage loan, working tirelessly behind-the-scenes to set up and deliver the application to the bank or lender. But their job is just starting there, as they also meet conditions the lender places on the loan, provide any other supporting documentation, communicate with the loan officer and sometimes the applicant, pacify the underwriters, and help it all transition to the title and escrow company’s closing before being funded. Come to think of it, loan processors deserve all of our thanks and most of the credit for loans closing!
#3 Appraiser
Not everyone who is involved with the loan works directly for the consumer – or the lender, for that matter. In fact, appraisers are enlisted by banks and lenders to assess the accurate market value of a property, but are paid by the consumer through the loan fees, but act as neutral third parties, with a vested interested to serve no one and nothing but the facts. The appraiser’s job is so crucial because the lender wants to ensure they are making a wise investment in funding the loan since the value is there down to the penny. If the value isn’t what it needs to be, the loan could be denied, the loan amount adjusted, or the deal needs to be renegotiated between buyer and seller.
#4 Underwriter
The underwriter works for the bank or lender (the important person who has the money!) to gauge if a consumer is, indeed eligible for the mortgage loan they’ve applying for. Underwriters bear the important responsibility of final responsibility checking the box on all factors that determine of the loan is going to fund and close, issuing conditions, asking questions, and generally exercising a high standard of diligence to protect the lender. Underwriters also make sure the loan meets standard guidelines, so that it can be packaged and resold to investors, as we’ll see later on.
#5 Title agent
A title agent issues a title insurance policy for the property, and as we mentioned, often performs other tasks integrated into escrow and closing in some places. The title search procedure ensures the home is legally available for sale by the seller, and is free of clouds on title like liens, unpaid taxes, or other property restrictions.
#6 Escrow officer
In some states and regions, title and escrow is under one roof (like in Northern California,) while in others, they are separate; and some locales even use real estate attorneys instead of escrow companies. But when an escrow officer is part of the process, they are integral to coordinating all parties throughout the loan (and, or real estate) transaction, as well as handling the signing of loan documents by the consumer, closing, and finally, funding of the loan.
#7 Funder
The lender’s underwriter works on a loan up to a point, but when all conditions are met and documents signed, etc., the lender usually has a separate department where a funder gives final sign-off on disbursing the money.
While this may seem like a good number of people working on a mortgage loan already, there are more parties and professionals sometimes involved:
#8 Governmental agencies
The Federal Housing Administration (FHA), a division of the U.S. Department of Housing and Urban Development (HUD), helps fund loans for those who would traditionally have a hard time qualifying, or buying their first home. Likewise, the
Veterans Administration (VA) helps our military service men and women get loans and buy homes. The FHA and VA aid and foster the mortgage process by insuring a portion of the value of the mortgages, protecting lenders against losses and encouraging homeownership. Therefore, the FHA may have their own personnel involved in these loans in a limited manner.
#9 Servicers
When a loan is first funded, someone has to service the loan, which entails sending out mortgage statements, collecting monthly payments, dealing with late and non-payments, and keeping tabs on amortization and payoffs. Each lender has their own mortgage servicer division to handle this, though they may not have that task for long, as we’ll see.
#10 Investors
Most banks or lenders who approve mortgages and disburse funds do not “keep the paper,” or, hold and service the mortgage during its lifespan. In fact, a good portion of loans are sold into the secondary mortgage market, where even more people are involved, from aggregators to Securities Dealers to Institutional Investors.
***
Look for part two of this blog, where we break down the selling of mortgage loans to investors, or the Secondary Market.