Taking the mystery out of the mortgage process – part II
In the last issue of More Than Mortgage, we reviewed the loan process from pre-approval to closing and what your customers should know at each step. With keys in hand, the process is completed for the homebuyer, but there are still a number of steps that take place behind the scenes after closing.
- Warehousing: About 10 days after closing, the lender uses their warehouse line to finance the new loan until it is "sold" to an investor on the secondary market.
- Secondary market: Allows lenders to sell mortgages to investors, providing them with new funds to offer home loans to new borrowers. Your customers' mortgage rates are influenced by the yields demanded by these investors.
Typical investors of mortgage-backed securities in the secondary market include:
- Fannie Mae and Freddie Mac for conventional loans
- Ginnie Mae for FHA and VA loans
- Insurance companies, pension funds and private investors
- Shipping and delivery: Once an investor is secured, the loan is packaged with other loans and applicable documentation and becomes part of a mortgage-backed security (MBS). These mortgage-backed securities are then delivered to the investor.
- Loan administration/servicing: A loan servicer takes care of the administrative duties once the mortgage-backed securities are delivered to the investor. This includes: customer support, collection of mortgage payments, management of escrow accounts and fund recovery efforts.
We hope you found this unraveling of the mystery of the mortgage process helpful. As you've read in parts I and II, it is a fairly complex series of steps and there are many parties involved in taking a loan from origination to closing and beyond. Having the right lender on your side will help ensure that your customers will be satisfied with the end results – their new home and best in class loan management and service.