Table of Contents. Book 1. Book 4. Book 2. Book 5. Book 3. The Mortgage Cycle & Its Key Players Regulatory Compliance Loan Types & Programs

Transcription

1 1

2 Table of Contents Book 1 The Mortgage Cycle & Its Key Players Regulatory Compliance Loan Types & Programs Book 2 Taking the Loan Application Book 3 Processing the Loan Automated Underwriting Uniform Underwriting & Transmittal Summary (1008) Book 4 Underwriting 4 Cs Credit Capacity Capital Collateral Book 5 Private Mortgage Insurance 2

3 Book 1 Understanding the Mortgage Cycle Eight Stages of the Mortgage Cycle Key Players in the Mortgage Industry Regulatory Compliance Loan Types & Programs 3

4 Understanding the Mortgage Cycle Helps You: Increase your credibility with your client base Recognize and understand common terms Set buyer expectations Book:

5 Pages 2-4 Eight Stages of the Mortgage Cycle 5

6 Key Players Page 5 Borrowers Lenders Retail Originators Mortgage Brokers Correspondents Investors Fannie Mae & Freddie Mac (GSEs) Depository Institutions (Bank, Credit Union, etc.) Insurance Companies & Pension Funds Foreign Investors Other Key Specialized Players Realtors Book:

7 Regulatory Compliance Page 6-7 Book:

8 Fair Housing Act Page 6 Designed to eliminate discrimination Protects consumers against unfair activities which would deny housing Prohibits discrimination based on: Race Handicap Color Familial status Religion National origin (ethnicity) Sex Book:

9 Loan Types & Programs Pages 8-10 Book:

10 Loan Types Page 8 Conventional loans NOT insured or guaranteed by the Federal Government Conforming Nonconforming Government loans insured or guaranteed by the Federal Government, i.e., FHA or VA Book:

11 Determine the Best Loan Program Page 9 How important is payment certainty? How important is rapid equity buildup? Anticipate rising or stable income? Book:

12 Common Mortgage Loan Programs Page 9 Fixed-Rate Mortgage (FRM) Fixed-Rate Balloon Fixed-Rate with Temporary Buydown Interest-Only Adjustable-Rate Mortgage (ARM) Book:

13 Summary Book 1 Eight Stages of the Mortgage Cycle Key Players Regulatory Compliance Loan Types & Programs Book:

14 Book 2 Taking the Loan Application The 4 Cs Detailed Review of Loan Application 14

15 Understanding the Loan Application Helps You: Minimize buyer anxiety about the home buying process Increase your credibility with your client base Set buyer expectations Book:

16 The Loan Application Page 2 Framework of the Loan File The 4 Cs Credit Borrowers willingness to repay Capacity Borrowers ability to repay Capital Borrowers investment in property Collateral Property s value & marketability Book:

17 Loan Application Page 15 I. Type of Mortgage and Terms of Loan Collateral II. Property Information and Purpose of Loan Credit III. Borrower Information Capacity IV. Employment Information Book:

18 Loan Application Page 15 Capacity IV. Employment Information (continued) V. Monthly Income and Combined Housing Expense Information Capital VI. Assets and Liabilities Book:

19 Loan Application Page 15 Capital VI. Assets and Liabilities (cont.) VII. Details of Transaction VIII. Declarations Book:

20 Loan Application Page 15 VII. Details of Transaction VIII. Declarations IX. Acknowledgement and Agreement X. Information for Government Monitoring Purposes Book:

21 The Loan File Checklist Page 20 Checklist Assists with packaging loan for underwriting Check investor requirements Book:

22 Summary Book 2 Purpose of Loan Application Relationship of 4 Cs Asking Appropriate Financial Questions Importance of an Accurate Loan Application Book:

23 Book 3 Processing the Loan The Many Hats of a Mortgage Processor Automated Underwriting Uniform Underwriting & Transmittal Summary (1008) 23

24 Understanding Loan Processing Helps You: Understand why different documentation is required Set realistic expectations regarding closing dates Increase your credibility with your client base Book:

25 Processing the Loan Page 2 Data integrity Communication among all parties Gathering & verifying documentation Preparing & submitting to underwriting Satisfying underwriting conditions Book:

26 Documenting the Loan File Page 3 Traditional Documentation (Full Doc) Alternative Documentation (ALT Doc) Reduced Documentation (ALT A) Book:

27 Automated Underwriting (AU) Pages 4-5 Provides U/W recommendation based on loan data Streamlines processing & underwriting DU/LP: most common AU systems Book:

28 Uniform Underwriting & Transmittal Summary (1008) Pages 6-14 Summary of Loan Information Borrower & Property Mortgage Underwriting Book: Seller & Contract & Contact Info 28 28

29 Qualifying Ratios Pages Evaluates borrowers ability to repay the loan Qualifying Ratios Primary Housing Expense/Income 16.1 % Total Obligations/Income 26.9 % Total Primary Housing Expense Total Income = Housing Ratio Book: Total All Monthly Payments Total Income = Total Debt Ratio 29 29

30 Loan-to-Value (LTV) Ratio Page 11 Book:

31 Summary Book 3 Significance of Processing in Origination Cycle Three Documentation Types Importance of AU systems in Mortgage Lending Uniform Underwriting & Transmittal Summary (1008) Book:

32 Book 4 Evaluating Credit, Capacity, Capital & Collateral 32

33 Understanding Underwriting Helps You: Recognize the 4 key elements of the underwriting evaluation Credit, Capacity, Capital, Collateral Be familiar with the documents/data an underwriter evaluates Increase your credibility with your client base Book:

34 The 4 Cs Page 1 Credit Borrowers willingness to repay loan Capacity Borrowers ability to repay based on the amount & stability of income Capital Borrowers investment in the property from savings & other sources Collateral Property s value & marketability to provide adequate security for the loan based on an appraisal Book:

35 Credit History Page 2 Demonstrates borrowers willingness & ability to repay debt Past credit history is indicative of future credit performance Book:

36 Page 3 Types of Credit Traditional Documentation Credit history as reflected on credit report Nontraditional Documentation Used when borrowers have not established traditional credit (i.e., utility payments, rent history, ) Book:

37 The Credit Report Page 3 Credit Repositories TUC: TransUnion Corp. XPN: Experian EFX: Equifax Credit Agencies Provider of credit report Uses repositories to gather credit information Book:

38 Types of Credit Reports Page 3 Residential Mortgage Credit Report (RMCR) Minimum 2 repositories Data researched & merged Merged Credit Report Minimum 2 repositories, merged into single report Not researched In-File Data pulled separately from each repository Not merged Nontraditional Credit Report (NTMCR) See UW Guide Book:

39 FICO Score Predictor of loan performance Calculated using mathematical equation considering these factors: Payment history Amounts owed Length of credit history New credit Types of credit Range from Higher score = lower risk Majority of scores fall between Book:

40 Capacity - Income Page 12 Assess borrowers ability to repay mortgage plus other monthly obligations Identify documents required to verify income Calculate monthly income Book:

41 Page 13 Source of Income Salaried Retirement Social Security Family Employment Hourly Self-Employed Commission Contract Income Rental Income Alimony Income Child Support Book:

42 Capital - Assets Page 16 What is borrowers cash investment in the property? Do borrowers have sufficient cash to close loan? Cash reserves? Do borrowers demonstrate ability to save? Book:

43 Types of Assets Page 17 Liquid asset statements (i.e., savings, CDs, retirement account) Sale of real property Gifts Sale of personal assets Borrowed funds Stocks, bonds, mutual funds Book:

44 Collateral Page 18 Sales contract Appraisal Book:

45 Sales Contract Page 19 A legally binding agreement with dates that set timelines for the loan process. Book:

46 Page 20 Checkpoint: Sales Contract Does information on contract match 1003? Is contract signed by all involved parties or certified by escrow company, if applicable? Are any contingencies noted (i.e., sale of current home)? Does contract reference chattel property? Are any sales concessions noted? Are any seller contributions noted? Book:

47 The Appraisal Page 18 Describes the property Estimates the value Identifies positive & negative factors that affect value & marketability Evaluation considers neighborhood, site, physical characteristics & property condition Book:

48 Evaluating the Appraisal Appendix D, Page Is property thoroughly described? Has appraiser explained any unusual situations? Is appraiser s estimate of value consistent with description? Is value supported by sales of similar properties? Book:

49 Summary Book 4 Underwriting Credit Borrowers willingness to repay Capacity Borrowers ability to repay Capital Borrowers investment in property Collateral Adequate security for loan Book:

50 BOOK 5 Understanding How Mortgage Insurance Works MI and the Big Picture MGIC Premium Plans Calculating MI Premium 50

51 With MGIC MI, Page 4 It s Possible To Help home buyers who have little or no money down Sell more homes Broaden borrower options Book:

52 How does MI fit into the big picture? Page 2 Book:

53 What is Mortgage Insurance? Page 3 Investor: a financial guaranty Borrower: a credit enhancement Originator: a way to close loans Book:

54 Why MI? Page 4 Provides homeownership with < 20% down Secondary market requires MI on loans with < 20% down Book:

55 Advantages for Borrowers Page 4 Become homeowners sooner Increase buying power & broaden options MI premiums are tax deductible MI may be cancelled Book:

56 Advantages for Lenders Page 3 MI = Risk Protection Increase Customer Base Book:

57 MGIC Rate Finder Pages Book:

58 Page 4 MGIC MI: now tax deductible through 2010! Book:

59 Summary Book 5 How MI fits into the Big Picture What is Mortgage Insurance? MGIC Premium Plans Calculating MI Premium Book:

60 Thank you! 60