Written By: Frankie Lacy, Op-Ed Writer
When reviewing loan documentation, we often focus on the big things; making sure the debt ratio and LTV are correct, validating loan terms, and matching up names and addresses. Signatures are an equally important and often overlooked area in documentation review. They are required on a variety of documents from borrowers, loan originators, and third parties.
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The loan application and disclosure package are the main area of focus for borrower signatures. It is important to verify the loan application is signed and dated. The signature line at the top of page one is only completed when a borrower and co-borrower are applying for joint credit. However, a signature and date on the last page of the 1003 is always required. In addition, the loan originator must sign and date with the borrower.
All disclosures must also be signed and dated, including the Good Faith Estimate, Truth-in-Lending statement, Servicing, and ECOA disclosures. The correct signing and dating of these disclosures is particularly important to be compliant with RESPA guidelines. As loan originators, we must be able to demonstrate that we notified the borrower of all of their rights and options in proceeding with the transaction.
The sales contract is another document that requires borrower signatures. On this document the borrower will be signing as the buyer. All pages of the sales contract must be initialed, signed, and dated on the appropriate line. This is how the buyer and seller certify that they agree with the terms of the contract including sales price, earnest money deposit amount, closing date, and seller concessions (if applicable).
It is also important to insure sales agents have signed on the correct line. Legibility is often a problem on sales contracts because they are faxed between offices to obtain the relevant signatures. It is important to request a legible copy of the contract so the buyer, seller, and agents names are clearly visible.
The Verification of Employment, Verification of Rent, and Verification of Deposit must be signed and dated by the party completing the form. The signer’s name must also be legibly printed, along with a contact phone number, for follow-up and auditing purposes. When vendors complete the verification forms, it is important that any handwriting is legible. If the underwriter is unable to read the information, the relevant data cannot be verified.
The appraisal must be signed by the appraiser on the date of appraisal completion. In addition, the appraiser’s license number and expiration date must be listed. If there is a supervisory appraiser, their signature and license information must be listed as well. Typically, this information is digitally inserted into the appraisal report; however it is sometimes missing and must be requested from the appraiser.
Finally, the title commitment must be signed and dated by the title examiner for the commitment to be valid. The examiner’s signature certifies that the title search and data within the commitment is valid effective the date of the report. Without this signature, the title commitment has no value.
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As you can see, signatures are an important component in the documentation collection process. Signatures are how we verify that an individual is responsible for understanding the terms of a loan or for the accuracy of the information within the document. With signatures, we can track information to its original source and request clarification if needed.
About The Author
Frankie Lacy - As an op-ed writer, Ms. Frankie Lacy is a 15+ year mortgage industry veteran with extensive conventional mortgage underwriting experience. Topics of Frankie's expertise include: Fannie Mae, Freddie Mac, USDA Rural Housing, underwriting to investor overlays, self-employed borrowers, personal and business tax return analysis, rental income, condos/co-ops/PUDs, and more. Frankie is a Davenport University graduate with a degree in Business Administration.
