In the past, mortgage applications were so thin and hardly comprised of any pages. Lenders loved these since they were so easy to evaluate. Ever since the crash, things have changed. Now a typical mortgage application comprises of nearly 500 pages according to the CEO of a reputed lending agency. The CEO told the press that ever since the housing bubble, the size of a mortgage file has grown rapidly.
Just a couple of years back, the files contained only 10 pages and if there are no documents attached, they had a much lesser number of pages. In fact, the only requirements were a credit report, appraisal and information about the property.
In today’s times, the number of pages have grown and the files contain a lot of information such as income statement, asset records, balance sheets, tax returns and so on. According to a representative of a lending agency, the tax returns of the past two years, monthly statements of the past two months, and records of every deposit have to be submitted by all the applicants.
A person who is from a middle class family and has an average yearly income may still have no more than a few hundred pages in their mortgage files. However, people who belong to the upper class and are associated with wealth, will have to file applications that contain more than 500 pages.
So what changed the size of the mortgage application file? After the financial crisis, many laws were changed and the financial agencies and lending firms set up even tighter requirements. The new policies required many things to be disclosed on behalf of the borrower which led to an increase in pages. One of these is the Patriot Act legislation which compels the lender to verify the identity of the applicant. Before approving the application, the lender must ensure that the borrower is not laundering or providing money to terrorist groups.
Though extensive paperwork has been initiated to minimize risks, it does involve a lot of time, energy and money. Things were already tough and from the 10th of January when the new mortgage polices went into effect, they have become even tougher.
A representative at a mortgage firm told us that everything has to be checked nearly three times. Buyers can make it easier for both them and the lenders if they have all the documents with them before they apply.