- WHY do I have to provide my tax returns?
- WHY do you need all pages of my bank statements?
- WHY do you need an explanation of an inquiry on my credit report?
- And finally, WHY does it take so long to get approved for a mortgage today?
Most people understand the impact of documentation on mortgage lending, as we remember programs like “No Income Verification” and sub-prime loans – that contributed to the housing crisis. Today, most consumers have the expectation that it will be more difficult and take more time to obtain a loan, but they do not expect the extent that lenders must go to document the file.
There is a great article written by Forbes called “The Perfect Loan File.” It provides good insight by an objective and respected third party on the “Why.” Basically it is the combination of extensive regulation/compliance requirements, tied with the increasing underwriting requirements by FNMA, Freddie Mac and FHA that demand the processes we need to follow as mortgage lenders today.
It is increasingly common that loan applications are pushed back to the originating lender for incomplete documentation, fraud or missed deadlines. As the Forbes article notes, the goal is to originate loans that will avoid default for the consumer, as well as ensure the lender has a saleable loan.
So if your mortgage loan process seems to include more questions than answers, please don’t take it personally. More documentation and longer timeframes are simply the way the mortgage industry must do business for the foreseeable future.
By Lisa Green (Vice President of Loan Origination)