Mortgage Business Is Document-Intensive

It Is Legal Documents That Create a Mortgage

A mortgage consists of pledging a borrower's property to a lender. The lender then advances a long-term loan to the borrower against this security. Middle-income people cannot typically afford to buy their own homes without such a facility. Businesses might also mortgage their property to raise funds for buying expensive plant and machinery.

A mortgage charge is created through a legal document that is formally recorded at the county office. The original property deeds also pass into the custody of the lender when the mortgage is executed.

These documents constitute the key evidence for the mortgage, and the terms that have been agreed upon. In the case of any dispute, the lender has to produce the documents in the court. As mortgages could run for up to 40 years, it becomes extremely important to make storage arrangements that would provide extra protection to the documents.

Incidental Documentation

Lenders have to ensure that the loan would be repaid. They do this through different kinds of verifications. The key verifications relate to the creditworthiness of the borrower and valuation of the property pledged. Creditworthiness is assessed by examining the borrower's credit record, assets and liabilities, current income levels and such things.

Property verification would cover different issues. Does the borrower has, or will have, proper title to the property? Are there any liens on the property? What is the value of the property? The verifications would involve going through many documents. Valuation is entrusted to specialist surveyors.

A mortgage transaction typically proceeds through the following steps:

Each of the above transactions would give rise to documents such as reports, proof of payments made, insurance policies and so on. These too go into the relevant mortgage file.

The mortgage processing and documentation formalities are complicated further by the existence of different forms of mortgage. Each form would require a differently worded agreement, and might involve a different mix of formalities.

Mortgage lenders also have to keep themselves updated about Fannie May pronouncements, insurance and legal matters and market trends. These involve getting and maintaining relevant reference documents.

Mortgage Documents

A typical mortgage loan creates the following documents:

Conclusion

Mortgage is a highly document-intensive business that generates a huge volume of documents. As recovery of the principal and interest might require producing these documents in case of a dispute, it is important that the documents must be stored safely and in a readily available manner. Mortgages run from 30 to 40 years, and hence the storage arrangements must be tailored for long storage periods.

In a separate page, we look at DMS in the mortgage industry.