Challenging the Status Quo for Faster Mortgage Closings
Image: Tom Dowling, Corporate Development Manager, Republic of Ireland
In the Irish mortgage market, much of the focus is on securing fast approval for customers, and understandably so. Homebuyers need to know their borrowing capacity to make an offer on their dream home before someone else does. This urgency is especially pronounced today, with demand of property far outstripping supply. But what about the closing process? The legal requirements and time taken to issue funds and complete the process are often overlooked, leading to undue stress for buyers and those within a chain.
A Realistic Timeline
Lenders often advertise a 6-to-8-week timeline, but the reality is far different. Once all deeds, legal documents, and required searches are gathered, the process often stretches to 3 to 4 months, sometimes longer. For buy-to-let (BTL) properties, this can be drawn out further due to the Central Bank’s three-way closing requirements. Many cases exceed the 6-month validity period of a loan offer, which leads to re-issuance, additional documents, and further underwriting, all adding to delays, blocking processes, adding to lender pipeline timescales and ultimately creating stress for all involved. Similarly, valuations only have a validity period of 4 months as set out by the Central Bank and in most cases, a re-valuation is needed before closing or issuing a new loan offer, which results in additional costs for the borrower.
Comparatively, closing times in the Eurozone average between 30 and 60 days, with anything longer being an exception.
What’s Causing the Delays?
Certain legal requirements must be met to satisfy the lender’s due diligence, ensuring no costly surprises with the property or title, should they need to recover the asset. However, interactions between legal parties and necessary searches can take weeks, or even months, adding significant time to the process.
But is this overkill? Is it outdated?
Our claims history, built over 20 years, shows that only around 10% of issues stem from defects in title. The remaining 90% relate to transactional defects, such as borrower or solicitor fraud and negligence, including failure to register the lender’s charge. The time-consuming requirements and searches that many lenders rely on may not be as high a risk or necessary as once thought.
The Perfect Title Policy: Streamlining the Process
Our Perfect Title Policy for lenders does not just protect against title issues, it also covers borrower, vendor and solicitor fraud and solicitor negligence. While we are not suggesting that errors are common in the legal profession, mistakes can happen, and when they do, they can be costly for lenders.
As fraudsters grow more sophisticated, lenders are left with minimal protection against such risks. The Perfect Title Policy fills this gap. While the cost of any insurance policy can be a concern, the benefits here far outweigh the expenses. Once the policy is in place, the closing process can be completed significantly faster, realistically within 6 weeks from loan offer to fund release.
Benefits Across the Board
- Superior Protection: Offers mortgage lenders greater security compared to a traditional Certificate of Title, reducing potential risks and liabilities.
- Accelerated Transactions: Facilitates faster move-in dates for homebuyers, streamlining the process and enhancing lender satisfaction by reducing the time between closing and occupancy.
- Rate Lock Assurance: Enables switchers to secure new rates without concern for rate fluctuations between offer issuance and drawdown, mitigating the risk of adverse market movements.
- Faster Investment Property Closures: Allows landlords to complete property purchases 3 to 4 months ahead of schedule, leading to quicker rental income generation that offsets the policy costs and improves cash flow.
- Efficient Conveyancing: Reduces the need for file reopenings, cutting down on time and costs for solicitors. A clear set of requirements for each case helps in precise time and resource allocation, optimising conveyancing operations.
It’s important to understand that this policy does not shield lenders from arrears or defaults, as these risks are evaluated through credit criteria and risk appetite. However, when a loan defaults and transactional or title defects become apparent, straightforward recovery can become challenging. Our policy enhances financial protection for lenders by ensuring prompt recovery, avoiding costly delays. With our 6-month ‘cure or pay’ promise, we thoroughly investigate each claim and resolve issues within six months, or we pay the claim.
Ready to Streamline Your Closings?
Contact us today to learn how Perfect Title Policy can benefit your organisation and customers.
