Mortgage Loan Origination Activities
Origination activities cover the file from first contact to funding: taking the application, issuing disclosures, processing, underwriting, clearing conditions, closing, disbursing, and handing off servicing. Questions usually place you mid-transaction and ask what must happen next, and when.
Application through processing
An application exists once you have the six pieces of information. Collect the URLA, authorization forms, and the initial disclosures, then order credit, title, flood determination, hazard insurance, and the appraisal. Appraisal independence rules bar anyone in the production chain from selecting, pressuring, or compensating the appraiser based on value. Automated underwriting findings drive much of the condition list.
Underwriting and closing
The three Cs - capacity, credit, collateral - frame every decision. Conditions are cleared with documented sources; large deposits need sourcing, gift funds need donor letters. The Closing Disclosure must be received three business days before consummation, and changes after issuance may force re-delivery. Funding follows recording and, for rescindable loans, expiration of the rescission period. Servicing transfer notices go to the borrower at least 15 days before the transfer date.
Worked example
A borrower refinances a principal residence; consummation and delivery of disclosures occur on a Thursday. The right of rescission runs three business days, and for rescission a business day is every calendar day except Sundays and federal holidays, so Saturday counts. Friday is day one, Saturday day two, Monday day three, and the right expires at midnight Monday. Funds disburse Tuesday. A purchase loan, or a loan on an investment property, carries no rescission period at all.
Traps that cost marks
- Counting only weekdays for rescission; Saturdays count unless it is a Sunday or federal holiday.
- Assuming rescission applies to purchases or non-owner-occupied property.
- Allowing last-minute fee changes on the Closing Disclosure without the required re-disclosure and waiting period.
- Ordering the appraisal before the application is complete or before required disclosures are delivered.
- Overlooking that a servicing transfer requires both a goodbye letter and a welcome letter with specific content.