Lenders are aiming to reduce the bloated time frame it takes from agreeing to buy a home to actually closing on the deal. The new target is a closing window of just 21 days, according to a group of lenders looking to speed things up.
CrossCountry Mortgage Inc., based in Brecksville, Ohio, has ordered its staff to aim to close a loan within 21 days of the application being made.
"When you look at contracts, they are typically written for 30 days,” says CrossCountry Mortgage’s Chief Operating Officer Jodi Hall, told National Mortgage News. “Many of them have gone out to 45 and 60 day contracts because of the long turn times that have occurred within the industry. If you can deliver well ahead of a 30 day contract it's very attractive to our Realtor partners and customers. That is the best practice."
During 2016, the average closing time for a purchase loan was 47 days, according to Ellie Mae data.
To try and reduce that gap, CrossCountry Mortgage gets its borrowers to agree to a timeline before any deal is made.
"One of the first things that we coach our loan officers on, in terms of their engagement with the borrower, is to explain our loan process and turn times," Hall explained. "If the borrower commits, we can often close their loan in 21 days or less."
Back in 2014, one company even promised borrowers it would be ready to close on home loans with 15 business days of receiving the appraisal receipt, and would even apply a $500 closing cost credit in cases when it failed to meet this deadline.
However, CrossCountry Mortgage admitted it didn’t offer the same kind of guarantee.
"We don't guarantee the 21-day turn time because there are so many things that play into a guarantee," Hall said.
That’s because sometimes things are outside of the company’s control, Hall said, with the most common reason for delays being appraisals. The industry is struggling with a shortage of qualified appraisers, which means it sometimes takes time to book an appointment. Moreover, says William Fall, Chief Executive Officer of Valuation Partners, an appraisal firm, the process is “much less predictable than the title, credit or other parts of the process.
Still Jonathan Corr, President and Chief Executive Officer of Ellie Mae, says lenders could cut times substantially by adopting technology.
"Lenders could eventually bring their closing times down under 30 days if they embrace technology and do everything perfectly," Corr insisted. “They could even get it down to a couple of weeks.”