QC Review Prior Clear To Close During Mortgage Process
In this blog, we will be covering the QC Review Prior Clear To Close During Mortgage Process by some mortgage lenders. The mortgage application and approval process starts when borrowers submit all of their financial and credit information to the mortgage lender. The mortgage process starts once the borrower is pre-approved and submits an executed real estate contract.
The Role of the Mortgage Processor
The mortgage processor will request and put together the documents needed to move the mortgage loan application along and be ready for underwriting. The mortgage underwriter will then issue a conditional mortgage loan approval. Once all the conditions are submitted, the underwriter will issue a clear to close. However, there are mortgage lenders where the mortgage underwriter cannot issue a clear to close until the file goes through QC review prior to clear to close. QC Review prior to clear to close during mortgage process is just another step in the mortgage process to double-check the original underwriter has not missed anything. It is normally a fast process and does not take as long as the original mortgage underwriting process.
Documents Required To Start The Mortgage Process
Information such as the following need to be processed by mortgage processors:
- two years tax returns
- two years W-2s
- two months bank statements
- signed mortgage application
- signed disclosures
- verification of rent and/or verification of mortgage
- verification of employment
- letters of explanations on credit inquiries and/or derogatory credit tradelines
- other forms required by lenders
First Step of the Mortgage Process
All documents get reviewed and crossed checked and processed by the assigned mortgage loan processor:
- Once the processor compiles the file and submits it to the lender’s underwriting department
- The mortgage underwriter gets assigned to the file
- The underwriter then underwrites the loan application
- If everything is good, the underwriter will issue a conditional mortgage approval
Conditional loan approval will have conditions necessary for the underwriter to issue a clear to close.
What Is A Conditional Mortgage Loan Approval?
Mortgage Conditions can be things that need to be reviewed and checked off by underwriters in order for the issuance of clear to close.
Examples of conditions are the following:
- income verification
- IRS verification
- insurance information
- updated bank statements
- updated paycheck stubs
- updated verbal verification of employment
- other items that may need verification on what the mortgage loan applicant has listed on the mortgage application
Once borrowers submit all the conditions, the processor prepares the file for clear to close. Underwriter checks off all of the items received to see if they can issue a clear to close. Most mortgage companies will have the underwriter issue a clear to close. However, there are some lenders where the file that has been underwritten by a mortgage underwriter needs to go through the company’s Quality Control Desk prior for the original underwriter to be able to issue a CTC.
What Does A Clear To Close Mean?
A clear to close is what the main goal is in the mortgage approval process. A clear to close means that the lender is ready to prepare docs and fund the loan. Lenders have different policies on how they issue a clear to close. Many lenders allow mortgage underwriters to issue a clear to close once he or she approves all the conditions. However, other mortgage lenders have a QC Review process after the initial original underwriter signs off on conditions.
What Does QC Review Prior Clear To Close Mean?
Not all mortgage companies have a separate Quality Control Underwriting Process.
A QC Review Prior Clear To Close process is when a separate mortgage underwriter reviews the file. In a way, it is reviewing the work of the original mortgage underwriter. QC Review Prior Clear To Close Underwriters makes sure everything that has been checked off by the original underwriter and all of the conditions are correct. In a way, it is the second set of eyes. Once the QC Review Prior Clear To Close has been signed off, the lender can then give the thumbs up to the closing department to prep docs and schedule the home closing. However, once the mortgage loan underwriter deems the mortgage loan application clear to close, it gets sent out for QC Review Prior Clear To Close underwriter.
Role Of The QC Review Mortgage Underwriter
Depending on the mortgage lender, a QC Review Underwriter is often a different underwriter that cross-checks the original underwriter’s work:
- The QC Underwriter goes through everything the original mortgage underwriter has done to see that there are no errors
- The QC Review underwriter often times will run a soft credit check pull to make sure borrowers have not incurred any additional debt
- Also makes sure there are no fraud alerts issued
- Once QC Review underwriter signs off on the QC Review, it goes back to the original mortgage underwriter for them to sign off on a clear to close
- The QC Review process normally takes 24 to 48 hours
Mortgage Lenders That Have QC Underwriting Review
QC Underwriting Review is the final stage done by lenders prior to sending out the mortgage documents and sending the wire out to the title company. Not all lenders have a QC Underwriting Review process. Why have QC Underwriting Review when the mortgage underwriting has fully underwritten the borrowers and issued the clear to close? A QC Underwriting Review may just be a senior underwriting manager signing off on a mortgage underwriter file prior to a clear to close. Other lenders will literally re-underwrite the whole file by a separate underwriting department. In the following paragraphs, we will discuss and cover QC Underwriting Review After Mortgage Approval Prior To Clear To Close.
Why Even Have QC Underwriting Review
I have worked at many mortgage companies and the majority of lenders do not have a QC Underwriting Review department. If they do, it is just a second underwriter overlooking the initial mortgage underwriters’ work to make sure that the initial underwriter did not miss anything. Other lenders do a complete mortgage underwrite which may take over a week.
We will be discussing the QC Underwriting Review Process by lenders that do have such a process during their mortgage process:
- QC Underwriting Review is Quality Control Underwriting Review
- The QC Review process normally only takes 24 to 48 hours
- A Quality Control mortgage underwriter will review the whole mortgage loan file that was underwritten by the original underwriter
- QC Review Underwriter’s role is to make sure there are no errors made
- Their role is also to make sure that the mortgage loan will be sellable on the secondary market after the mortgage lender funds the loan
- The QC Review Department will contract with a third party search company like Lexis Nexus or Data Verify to do a nationwide search on the borrower
- The third-party search company will do an extensive public search to see if they can discover any public records that have not been disclosed by borrowers and/or that is not reporting on the credit report
QC Underwriting is either done just prior to issuing a clear to close or right after a clear to close has been issued, depending on the lender.
When Is QC Review Prior Clear To Close Done?
QC Underwriting Review depends on the mortgage lender. Some lenders will do QC Underwriting Review prior to issuing a clear to close. Other lenders will issue a clear to close and the QC Underwriting Review will be done prior to funding. A clear to close is when a mortgage underwriter has cleared all the conditions from the conditional mortgage loan approval. The underwriter gives the green light to fund the mortgage loan. If the QC Underwriting Review is done after the clear to close, then if Quality Control finds something wrong with the file with the third party search, the clear to close will be on hold until the issue or issues are cleared up. Some common issues that are caught during QC Underwriting Review are when public records such as judgments show up by third-party searches where the judgments or other public records did not report on the borrower’s credit report.
QC Review Prior Clear To Close: Loan Denial After Clear To Close
There are cases where there is a mortgage loan denial after a clear to close has been issued:
- This is because Quality Control finds potential fraudulent issues with the mortgage loan application
- With the company that I work for, Quality Control takes over after the mortgage underwriter issues a clear to close
- Normally most of our clear to close files move on to closing and funding and we have no issues
- However, there are some cases where QC may find issues that were either overlooked by the mortgage underwriter or items and factors that were not disclosed by the loan applicant and/or items that were not picked up on the credit report
Let’s look at a case scenario where a clear to close can get revoked.
QC Review Prior Clear To Close On Discovery From Third-Party National Public Records Search
Let’s say a mortgage loan borrower went through credit repair and the credit repair company removed and deleted a bunch of derogatory credit items such as collection accounts, charge off accounts, judgments, tax liens, student loans, bankruptcies, and multiple foreclosures. The mortgage loan applicant marked all NO’s on the last page of the 1003 mortgage application. This is where the application asks for have ever filed bankruptcy, have you had any foreclosures, do you have any outstanding judgments, and are you a party to any lawsuit. The mortgage loan applicant marked NO to the above questions. This is because all of the derogatory items were removed on all three credit bureaus by the borrower’s credit repair consultant he hired. The mortgage originator, the processor, and the mortgage underwriter did not think anything of it. This is because those items were not reported on the credit bureaus. The underwriter saw that on the questionnaire the borrower marked all NO. The mortgage underwriter has based his decisions on the income, assets, liabilities, credit, credit scores, and credit history from the credit reports of the borrower. The underwriter then issues a clear to close.
How Long Does The QC Underwriting Review Prior To Clear To Close Take?
The file gets submitted to the Quality Control Underwriting Review Department for final review prior to closing and finding. QC orders third-party national searches using third-party vendors like Lexis Nexis and/or Data Verify where they do a national public records search. The third-party vendor comes back that the borrower has multiple bankruptcies, multiple foreclosures, multiple judgments, and multiple tax liens. Public records that got deleted from the borrower’s credit report do not disappear from public records. Derogatory credit items such as collection accounts and charge-offs can be deleted and third-party companies cannot find out about it because they are not public records. However, public records such as bankruptcies, foreclosures, short sales, judgments, tax liens, child support, alimony, and other public records do not disappear and mortgage lenders will find out about it. It is best that you disclose all public records at the beginning of the mortgage process because the Quality Control Division of the mortgage company will definitely find out prior to closing and funding the mortgage loan.
Again, not all lenders have a separate QC Review Prior Clear To Close Process. There are instances where the QC Review Process takes longer than 48 hours and can delay the mortgage closing. Borrowers who are getting the run around with a lender due to their QC Review and cannot get a clear to close can contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] GCA Mortgage has no lender overlays on government and conventional loans and has no QC Review. We are available 7 days a week, evenings, weekends, and holidays.