Posted by Brenda J Khan on 9/18/04 11:37pm
Msg #8341

End of the Month

Why do Lenders/Title Companies/Escrow Companies all tend to wait till the end of the month to rush and get closings done? When a borrowers locks in a loan rate and terms there are usually a specific amount of time that these terms will be honored, so why do they wait till the last minute to complete the transactions? It would be much easier to complete the closing once all the paperwork chancing & tracing, surveying, appraisal and everything else involved prior to closing was done. I know not everyone getting a loan is only calling in at the first of every month! Just thought I would ask in the hopes that someone would know this answer. BK-FL

Reply by Hampton/CA on 9/19/04 12:08am
Msg #8344

They rush at the end of the month so they can get paid that month. Also, some of these LO's have quotas to meet, so they push for the end of the month closing rather than looking at the want ads at the first of next month.

Reply by Grayce NJ on 9/19/04 6:06pm
Msg #8384

INterest is paid in advance. They want to close by the end of the month to save the Borrower some $. Interest is due from the date of closing to the end of the month.

Reply by sue on 9/19/04 7:01pm
Msg #8389

...to save the borrower some $...

I know that is the pat answer always given but in a refi it makes no sense. it saves the borrower from paying additional money UPFRONT but interest is calculated daily (the per diem) so it would make sense to pay off the older, higher interest loan as soon as possible and have the interest at the lower rate start accruing.

I go with the they get paid when a loan funds. I've had several settlements recently and the loan officers at my bank work on salary, not commission. they didn't care one bit what day I settled.

Reply by Grayce NJ on 9/19/04 7:16pm
Msg #8392

Yes, they may be obtaining a lower rate. However, they have already made the payment with interest for the month.

Reply by Everette/VA on 9/19/04 10:03pm
Msg #8407

I retired 3 yrs ago as a loan originator. Probably the reason is two-fold. (1) The workable loans applications during the first part of the month are viewed as "money in the bank" Thus
no sense of urgency! So the L.O. keeps going for more applications and does'nt keep
on top of the processing or underwriting until around the 20th of the month. Then they work
like crazy to get the loan closed before the end of the month for reason number 2.

(2) L.O.s , Mortgage Brokers and lenders usually set goals on a monthy basis. The L.o is
mostly compensated on commission scale ie. 50% of first $5000.00, 65% of second $5000.00,
75% of anything over $10,000. The percentage is based on the loan origination fee.
Disclaimer... This example is not based on any particular broker or lenders pay scale and is
intended as and example only.

Reply by Jon on 9/21/04 12:31am
Msg #8478

I agree with Sue. The payment the borrowers made for the current month includes interest for the previous month, not the current month. Example, the September payment covers principal for Sept. and interest for Aug. Interest is always paid in arrears, that is why you have interest to be paid on the payoff and also interest to be paid for the new loan. This is also why the borrowers get to "skip" a month in their payment.