Melissa Strohl January 2016 Carma Parrish January 2016 POLICY: Real Estate First Mortgage Lien Loan Policy BOD Approved

Transcription

1 January 25, 2016 General Statement It is the policy of NorthPark Community Credit Union (hereinafter referred to as NPCCU) to offer first-lien mortgage refinance and purchase-money real estate loans to its members, complying with Indiana Credit Union Act IC for state chartered unions. It is also the policy of NPCCU to comply with the letter and intent of all applicable federal state and local laws and regulations promulgated thereunder. This policy is specifically intended to include all facets of the granting of credit and making of first mortgage loans, the handling and processing of credit applications, credit inquiries, information concerning interest rates, credit terms and cost, earnings and penalties on shares, and all other requirements of the Federal Consumer Credit Protection Act and associated regulations. Discrimination Statement No Member will be denied any service of this credit union due to discrimination because of race, color, religion, national origin, sex, gender identity, marital status, age (provided the applicant has the capacity to enter into a binding contract) or any other protected class. No Member will be denied based upon the fact that all or part of the applicant s income is derived from a public assistance program, or the fact that the applicant has, in good faith, exercised a right under the Consumer Credit Protection Act or similar State Law. No NPCCU Officer or Staff Member of NPCCU will, in any manner, discourage a Member from submitting an application for credit. NPCCU will accept and consider an application from any Member who wishes to submit a request for credit. Requests for loans may be oral or written. Official Family Member mortgage loan requests (submitted by NPCCU Board members or other NPCCU Boardrelated committee members), regardless of the loan type and amount, will require documented Board approval. Staff mortgage loan requests, regardless of the loan type and amount, will require CEO approval. Real Estate Loan Policy Residential (Non-Commercial) Guidelines 1. GENERAL REQUIREMENTS: It is the generally accepted practice of NPCCU to originate all first lien mortgage loans to secondary market standards, for the purpose of purchasing or refinancing existing mortgage loans. It is the generally accepted practice of NPCCU to originate fixed rate or adjustable rate mortgage loans for the purpose of selling them immediately into the secondary market. Mortgage loans with a maximum term of 240 month (20 years) may be retained in the mortgage loan portfolio. It is the policy of NPCCU to use one property to secure a loan. It is not acceptable to use more than one property as collateral for a single loan. Page 1

2 January 25, 2016 All real estate loans shall be limited to a 30 year amortization period or less, and shall comply with Indiana Credit Union Act IC , and meet applicable secondary market standards. 2. PORTFOLIO LIMITATIONS Though perhaps limited by the Asset Liability Committee (ALCO to a lesser percentage, in accordance with the Indiana Credit Union Act, NPCCU s will limit fixed rate mortgage loans (with fixed rate periods in excess of five years) held in its loan portfolio to a maximum of twenty percent (20%) of Total Assets, as determined at the time the loans are originated. There are no regulatory limits on holding variable rate mortgage loans (with initial fixed rate periods equal to or less than five years) in NPCCU s loan portfolio. All real estate mortgages (fixed and variable) held in portfolio cannot exceed 65% of Total Loans. 3. LOAN TO VALUE GUIDELINES: Mortgage loans originated for sale into the secondary market will be underwritten to secondary market standards, including loan to value (LTV) standards. Real estate loans in the first lien position (excluding home equity loans) with loan-to-values (LTV s) exceeding 80% will require (PMI) private mortgage insurance coverage, as determined by secondary market standards. Real estate loans to be held in NPCCU s mortgage loan portfolio (destined not to be sold into the secondary market, and with terms not to exceed 240 month (20 years) with LTV s equal to or less than 80.00% will be charged a base rate. Exceptions approved by the VP Lending and the President/CEO, for real estate loans in excess of 80% LTV can be approved without mortgage insurance up to, but not to exceed 90% LTV, by adding to the interest rate. Exceptions approved between and 85.00% LTV will have 25 basis points added to the base rate. Exceptions approved between and 90.00% LTV will have 37.5 basis points added to the base rate. Debt to Income (DTI) Approvals of real estate loans are limited to DTI s consistent with secondary market standards. For adjustable rate real estate loans in the first lien position, the initial DTI calculation must be based on the fully indexed interest rate, including the maximum rate changes for the first five (5) years of the loan. This is intended to protect the borrower and the credit union from payment shock caused by dramatically rising interest rates early in the life of the loan. Real Estate Property Types: Page 2

3 January 25, 2016 Mortgage loans are secured by consumer, residential properties that are owner-occupied primary or second homes used for vacation use. Mortgage loans are approved to applicants who meet NPCCU s established credit qualifications and to secondary market standards, using properties that meet secondary market guidelines. Executive Management may approve real estate if the loan requests is equal to or less than those amounts permitted under Board-approved Loan Authority Limits found in the NPCCU Consumer Loan Policy. 4. ADJUSTABLE RATE MORTGAGE LOANS Adjustable rate mortgages (ARM s) will be written in compliance with IC and to secondary market standards. An ARM has features that: a. Include an initial fixed rate period not to exceed five years, b. Have interest rates based on an external index, such as the 1-Year Treasury Bill. c. Have effective interest rates determined by an external index, plus a disclosed margin, d. Interest rate adjustments will be reflected in a change to the monthly payment, e. Have initial rate change caps, f. Have annual or quarterly rate change caps, g. Have lifetime caps, h. Have floor rates, i. Have ceiling/lifetime rates, 5. VACANT LAND AND SUBDIVISION LOT LAND Vacant Land and Subdivision Lot Loans are limited to purchase money purposes only, in the first lien position. Refinancing of other financial institution loans is not permissible. NPCCU will not permit second lien position loans on vacant land or subdivision lot land loans. Vacant land must not be used for commercial or strictly recreational purposes, must be zoned single-family residential, not exceed twenty acres and be intended for use as a future building site for a single-family home. Terms may not exceed twenty (20) years. Loans will be variable rate loans priced using the same rate structure as NPCCU s fixed-term home equity loans. Loan to value cannot exceed 70.0% with verified cash down payment documented in the file. Loan requires a full appraisal by a qualified appraiser on the credit union s Approved Appraisers List. Vacant Land and Subdivision Lot Loans must be secured by real estate within the credit union s immediate field of membership. Page 3

4 January 25, CONSTRUCTION LOANS At this time NPCCU does not offer Construction Loans 7. FLOOD DETERMINATIONS Flood determinations must be made immediately after the loan is approved for credit and budget to give the member ample time to shop for flood insurance, and to provide proof of coverage no later than the loan close. If primary residence is found to be in a flood zone, flood insurance is required, with hazard policies showing on NPCCU as loss payee. If structures on property not attached to the primary residence are found to be in a flood zone, flood insurance is not required. 8. Approvals Time Limitations Approvals and rate commitments made on portfolio loans (not sold into the secondary market) expire after 30-days. 9. Fair Market Value of Real Estate Appraisals On first-lien real estate-secured mortgage loans, a qualified, certified real estate appraiser approved and listed on NPCCU s Approved Appraiser List shall be retained to complete a written appraisal performed to acceptable Uniform Residential Appraisal Report to USPAP and secondary market standards. Appraisals shall comply with NCUA Part 722.5, any amendments set forth by NCUA, and secondary market standards. Part of the NCUA Regulations relates to appraiser independence. NPCCU does not have an appraiser on staff and utilizes outside, independent appraisers to perform all necessary appraisals. These appraisers are paid a fee for their service and appear on the Approved Appraiser List that is managed by NPCCU management. This list contains the names of appraisers who have no direct or indirect interest, financial or otherwise, in the property securing the transaction. A loan processor, not the originating loan officer, may order an appraisal from the Approved Appraiser List. Likewise, this person can evaluate and make recommendations based on the credit report information. However, separation of duties requires an independent underwriter decision the loan. Appraisals on real estate outside of NPCCU s general marketplace require appraisers that are on the Approved Appraisers List of nearby credit unions, as documented by written notification from the other credit union, and must be approved by a member of NPCCU s Executive Management. 10. Proof of First Lien Position Title Insurance Each Mortgage loan requires a determination to be made to assure that NPCCU s mortgage loans are secured by a lien in the first position. To prove and document lien position, NPCCU will order title insurance from a reputable title insurance company, and ask that the loan be closed, the mortgage lien recorded and verified by the title insurance company. Page 4

5 January 25, Real Estate Loan Documentation Policy Real estate loans will be documented based on secondary market standards, permitting NPCCU to sell all real estate loans into the secondary market, while maintaining the safety, soundness and integrity of individual mortgage loan files. 12. Neighborhood Mortgage Solutions (NMS) and NPCCU Relationship NPCCU has a strategic business relationship with NMS, a CUSO offering mortgage services. These services include, but are not limited to, mortgage loan processing, underwriting, loan document preparation, loan closing and funding services. Additionally, NMS facilitates the sale of mortgage loans to the secondary market (ex: Fannie Mae) and offers mortgage loan servicing to NPCCU s members. NMS offers its services as compliant with all federal and state regulations. NPCCU pays fees to NMS for these services. This relationship enables NPCCU to originate mortgage loans in a manner consistent with its strategic goals. Questions regarding this policy are to be directed to the Operations Manager. Page 5