The biggest challenges for mortgage loan officers during a boom

With declining mortgage rates near a three-year low, more consumers will look at refinancing, leading to challenges for mortgages lenders in tracking, storing and retrieving critical documents.

Refinance lending has nearly doubled over the past three quarters, according to a CNBC report. In the third quarter alone, refinance volume jumped 132% annually to its highest level in nearly three years.The biggest challenges for mortgage loan officers during such a boom is ensuring they can quickly and efficiently track, store and retrieve all critical documents. Among the documentation needed to refinance a loan are the applicant's income and credit information, full details on any existing mortgage(s) on the property, homeowner's insurance information, title details and the borrower's personal information.

Prime refinance time

Since interest rates fluctuate, homeowners tend to refinance when rates drop, meaning a jump in volume for mortgage loan officers, resulting in more documentation to complete, track, store and retrieve from initial application until final closing. As of late 2019, mortgage rates were trending well below late-2018 levels, according to Freddie Mac data cited in The Mortgage Reports. Refinancing homeowners could save as much as $100 monthly on a $300,000 loan, based on Freddie Mac's findings. Any time there is a significant drop in rates - particularly if the rates are starting to trend back up, as they were in the final quarter of the year - is a good time to consider refinancing. As of mid-October, U.S. refinance activity was nearly three times what it was a year earlier, according to HousingWire.

Some homeowners want to take advantage of the savings, while others will see that the lower rates give them additional credit capacity, enabling them to borrow more without increasing their monthly payments - as long as their credit score and the home's value support the larger loan amount.

Passing the documentation buck

In order to offer customers any benefit of refinancing, mortgage lenders need to have all the necessary documentation from the borrower's existing loans, which can be a complex undertaking. Most mortgages are sold into the secondary market, meaning they are no longer held or serviced by the originating lender. Even the original purchaser on the secondary market may sell the loan again, further complicating the loan documentation issue. Finding and retrieving the borrower's income and credit information, not only for loan processing but also for resale on the secondary market, can be one of the biggest challenges for mortgage loan officers.

Freddie Mac expects mortgage refinancing originations for single-family homes to reach $789 billion in 2019.

The Home Buying Institute

Digitizing the right way

When all the documentation was paper-based, transferring information from one document to another, such as from a preliminary application to a loan closing statement, was error-prone - numbers could be transposed or otherwise miscopied. Additionally, the paper documents could be misfiled or lost.

While most lenders have digitized their processes to eliminate paper documents, digital processes do not solve all issues. Just like their paper counterparts, electronic files can be lost because they weren't saved and stored in the right location or in the right format, or were saved multiple times, perhaps at different stages. For example, one version might include the most recent payment information, another might not, but the "correct" version may not be immediately apparent. Using the wrong documentation can be the difference between the loan being approved or denied.

To ensure all documents are properly stored and tracked in such a way that they are easily retrievable, lenders will want to work with a trusted partner with experience in mortgage documentation storage and retrieval. That way, lenders can retrieve the right files at any time.