When you take out a mortgage, the process is straightforward: you start with the application and provide whatever documentation your lender asks of you, and they review it. If all goes well, at the end of this process, you’ll have a mortgage.
While you see this procedure from the consumer’s perspective, your lender sees it from the investors’ point of view. Soon after you sign the closing papers, the lender will likely sell your mortgage (along with many others like it) to investors.
This is called mortgage bundling, and this is what keeps the funds flowing back and forth between lenders and investors.
Investors send money to lenders, who send loans back to them so they can send more money.
What does this mean for you as a consumer? It means your lender must make detailed efforts while putting together your mortgage file. They must ensure it will pass an investor audit so it can be sold to investors.
If the file has too many defects (missing or incorrect documentation or lack of compliance with laws), investors can decline the file. This is the last thing any lender wants.
To avoid this situation, lenders are extra careful when they are putting together your file, and they will go out of their way to make sure it is of adequate quality.
Often, this means requesting additional information and documentation from you.
Please let me know if I can answer any additional questions you have about this process. I’m here to help.