Josh thought he’d planned his day perfectly. At 9:00 a.m. he was going to close on his new house. Later, he would meet the cable company and gas company at the house so they could install service.
Little did Josh know that the entire closing process had been mired in delays and errors, causing a last-minute snowball effect — and a stressful afternoon — at what should have been a happy time.
The Mortgage Snowball Effect
Lack of Communication To Buyer
Josh had planned to write a personal check for the closing, as his checking account balance had been verified and documented by the underwriter. Then Josh’s lender called to tell him that closing had been rescheduled for 1:30, and to bring a cashier’s check for his closing costs.
Prior to this, Josh had not been informed that it is standard practice to transfer large amounts of money via cashier’s check. Unfortunately, Josh used an online bank and a cashier’s check was out of the question.
A Tense Situation at Mortgage Closing
Josh had no choice but to wire the money from his account. However, his bank informed him that the wire had to be processed by 1:00 or it would go on the next day’s transactions. It was already 12:50.
Halfway through the closing process, Josh checked his bank balance to find that the money had not yet left his account. When the title agent realized this, she stopped, took off her glasses and said, “If the wire doesn’t make it today, then none of this matters and we’ll have to do it all over tomorrow.”
It was a tense situation until Josh got notice at 1:45 that the money had transferred out of his account.
It would be easy to blame this issue on inconvenient methods used by banks to track money, but that’s not the root of it.
Let’s Trace The Mortgage Problems Back To Their Source:
Payment Instructions Were Sent Late, Because…
The HUD (Settlement Statement) wasn’t balanced on time.
The HUD Wasn’t Balanced On Time Because…
The file didn’t get out of underwriting on time.
The File Didn’t Get Out Of Underwriting On Time Because…
Of problems outlined in previous blog posts in this series, including:
a. Redundancy/errors in paperwork
b. Confusing and misleading information relayed to borrower
c. Outdated technology and
d. Inefficient processes and policies
In the current mortgage industry, emphasis is placed on data and documents, and money validation comes last. This prioritization should be flipped, because the money is why everyone comes together in the first place.
Mortgage Companies Need a System That Starts With Tracking the Money
This system could identify participants and allow them to upload and share the appropriate data and documents. This would help streamline appropriate approvals, achieving both efficiency and efficacy. This system could verify when each party has viewed and approved where the money came from and where it needs to go, with digital sign-offs.
Josh’s credit was good, and he had his closing funds in place along with the proper documentation. But he could do nothing to prepare for the snowball effect of inefficiency and lack of communication inherent in the closing process. This need not be the case. There can be a better way.
Check out the previous post in this series: “Hey Mortgage Industry, Pass the Ball! Part Three”