Question

Prepare at least 3 recommendations to improve the loan application approval process including additional steps in the process and/or additional information that may be useful in the process.

Answer 1

Loan Processing Step-By-Step Procedures

We will outline all the major steps needed to be completed by a loan processor in order to ensure a successful loan package. While there are variations to these steps depending on your employer, local and state laws, and others, the following guide will still serve as a good checklist in any loan processing environment.

1. The Loan File

The loan file is where it all begins. Depending on whether or not you are the loan processor of a larger company or both the loan officer and loan processor of a smaller office, the work of the loan processor starts here with this file (well folder). The loan file will contain--you guessed it--the loan application. In addition, it will include comments made by anyone who has had their input in the loan application process as well as any notes about the potential borrower that was made during the loan interview process. Read through the application, comments, notes, and overall loan request. You should make sure that you understand the loan in its entirety before moving forward. If you have any questions about the loan you need to clarify these issues with the Loan Officer before moving forward.

2. The Credit Report

In many cases, the credit report may already be provided for you. The loan officer may have already run this report from the beginning before going any further with the loan application process. The loan applicant has consented to have their credit report pulled for purposes of evaluating their loan worthiness. If the credit report is not already attached to the loan file, then you'll need to double check the application to make sure that they have consented to the credit report check and then pull their credit report. Most of the credit reports you pull will be stored electronically in your loan processing software, but if not, print at least 2 copies to attach to the loan file.

3. Title Records and Information

If you are processing a loan request for an automobile, boat, house, and so on, you will need to verify the title information (VOT: Verification of Title). This will not be necessary for all loans which you might handle. Title verification helps to determine if there is a lien on the object that the borrower is requesting a loan on.

4. Verify Income Sources

Probably the most important step is to verify all the income, assets, and employment information of the borrower. You need to verify the employment of the borrower (VOE). You need to verify the income of the borrower (VOI). You also need to verify the assets listed by the borrower (VOA) and any other income information required or produced by the borrower.

In summary, your file should include the loan application, this is the typed and signed application with all information provided by the loan applicant, the credit report, all verifications of employment, income, assets (W2s, paystubs, tax returns, and bank statements, for instance), any valuation reports (inspections, appraisals, proof of insurance), any title reports (particularly noting any liens), and any public legal disclosures that must be signed by the loan applicant. The final product should be sent registered mail to the appropriate parties (most likely the lender or the underwriter).