A mortgage broker prepares a loan application from a borrower and obtains documentation necessary to support the loan request. A loan processor takes the information provided and orders confirming documentation to present to an underwriter. The underwriter then reviews the information and requests any additional documentation needed from the processor. When the underwriter has enough information to approve or decline a loan he will make the decision and notify the processor who will then inform the broker.
Documentation required will include federal tax returns, bank statements, pay stubs, explanation of derogatory credit and any other pertinent information. If the loan is for a purchase, a copy of the purchase agreement will also be required.
A loan processor orders a verification of mortgage from the borrower's existing mortgage holder(s) to confirm the borrower's mortgage payment history. They also order a credit report that combines information from the three major credit-reporting agencies. The processor will request an explanation from the borrower for any derogatory items on the credit report. In some cases, the processor will ask the loan officer to obtain the explanation from the borrower. The processor will also obtain other documentation to verify the information provided.
The underwriter receives the completed loan package from the processor and determines if the borrower is a good credit risk. He reviews an appraisal on the property, debt ratios, job stability, derogatory credit, cash reserves and anything else included in the loan package. The underwriter's job is to determine if the borrower meets the criteria of the lender that will ultimately fund the loan.
A mortgage lender or broker has little or no interaction with the underwriter. The underwriter is required to make an unbiased decision without any outside influence. Occasionally he may request clarification of something in the documentation, but in most cases, the request would be to the loan processor.
- The Federal Reserve Board: Home Mortgages: Understanding the Process; June 2001
- US Legal: Purchase Money Mortgage Law
- Federal Reserve Board: The Mortgage Application Process
- Department of Corporations: 20 Questions to Ask a Lender or Mortgage Broker
- Federal Citizen Information Center: Your Credit Scores
Phil Altshuler has written award-winning ad copy and sales-training literature since 1965. He is an expert in conventional and sub-prime loans, bankruptcy, mortgage loan modifications and credit. Altshuler was a licensed mortgage broker in California and Arizona, as well as a licensed electrical contractor. He has a Bachelor of Science in electronic engineering from California Polytechnic State University.