Ch: 3 - Mortgage Loan Origination Activities

B. 2. g. - Facts on appraisals - Flood Zones (Zones "A" or "V") "As Is" or "With repairs""

"As is" = everything is good you can move forward with the loan "With Repairs" = issue - if the borrower is paying for those repairs. Then a new LE is going to have to get issued.

B. 1. g. - Tangible net benefit

18-24 months but no more then 30 to make it a "Tangible Net Benefit" to refinance.

B. 4. c. ii. - Forced-placed insurance

1st mortgage and second mortgage and IRS Tax Lien and judgement At foreclosure only the 1st mortgage and the Tax Lien will be included.

A. 3. b. ii. - Methods of verifying assets

2 months banks statements 2 months investment statements Verification of Deposit (VOD). Gift Letter Or evidence of withdrawal from retirement accounts.

B. 1. c. ii. - Documentation required for a self-employed applicant

2 years tax returns with a 4506T - That document is sent to the IRS and it needs to match up to your tax returns. And if it doesn't match it then you most likely you have fraud. Form 1084 Fannie Mae Form 91 for Freddie Mac If the borrower owns 25% or more of their company then they need 2 years tax returns of their company and year to date operating statement.

A. 5. c. iii. a) Timeline of when a Loan Estimate must be provided

3 Business days from "signed application"

A. 5. c. iii. e) Time period for the delivery of the Special Information Booklet (Know Before You Owe)

3 Business days from signed application

A. 5. c. ii. - Timing of early disclosures

3 Business days from the signed application

A. 5. c. iii. d) Time period for the delivery of the Affiliated Business Disclosure

3 Business days from when you (the lender or LO) disclose that there is a conflict of interest.

A. 5. c. iv: - Issuing a list of third party vendors - Preferred Providers

3 Business of receiving "signed application"

B. 2. i. - Definition of "appraiser"

3 Calificitations of Appraiser Certified - only one that can sign off on final value License - can do all the work Trainee - cant do anything except get coffee

A. 5. a. iii. - Consumer Handbook on ARMs (CHARM booklet)

3 business day on ALL ARM Loans

A. 5. c. i. - Timing of notification of action taken

30 Days from when you have a complete application package delivered to underwriters. (Actions Taken= Declined or approved see ECOA)

A.1.a - Information on Form 1003

AKA - Uniform Residential Loan Application (URLA) -This is the Loan Application to start the loan process 1003 Fannie Mae. 65 Freddie Mac 1003 Form Includes: -Income -Assets -Liabilities -2-year employment history

A. 5. c. vii. b) Timing of Disclosures

An "Outdated Closing Disclosure" For what ever reason if there is an "error" that is found on the Closing Disclosure , then the lender has "60 Days" to issue a refund and get any of the documents corrected.

B. 1. b. i. - Liabilities listed on a loan application

Everything that is on the credit report + any debts the liabilities that the borrower has volunteered that are not on the credit report.

B. 4. a. iii. - Limits of flood insurance - $250,000 for home and $100,000 personal property

FEMA determines the flood plains.

B. 2. f. - Appraisal Waiver

Fannie Mae/ Freddie Mac - can get a waiver on primary loan or refinance.

C. 1. b. - Priority in multiple mortgage scenarios

First Mortgage is priority over all liens with exception of Tax Lien At foreclosure the second mortgage and judgment dissappear

B. 1. a. i. - Types of asset classifications

Liquid: Any down payment has to be liquid assets along with the closing costs -Bank Accounts -Savings Account -Money Markets -Money Deposited from a Gift -Withdrawal from a retirement account Long Term Assets: Can be used for the reserves that are needed

B. 1. c. v. b)Paid every other Friday - pay amount times 26 pay periods divided by 12

b)Paid every other Friday - pay amount times 26 pay periods divided by 12 because there's 26 pay periods if it's paid every other Friday. On the 15th and 30th you use 24 pay periods divided by 12.

B. 1. e. iii. - Loan to Value on a purchase - Lower of purchase price or appraised value divided into the loan amount = LTV ($200,000 purchase price, $190,000 appraised value divided into Loan Amount of $150,000 = 79% LTV

$190,000 divided into Loan Amount of $150,000 = 79% LTV. Would actually have to come up with $50,000, not $40,000.

A. 5. c. vi. c) Standard Mail

-3 business application or overnight

A. 5. c. viii. - Homeownership Counseling Disclosure - 10 counselors

-Given 3 business days from application -Has to have 10 counselors listed that are with in reasonable distance from where the borrower is at Only Mandatory for 1. High Cost Mortgages 2. Reverse Mortgages

A. 5. c. vii. e) Definition of a business day for delivery purposes

-Includes Saturday wether the company is open or not

A. 5. b. ii. - Service charges subject to a 10% tolerance

-Title -Recording Fees -Lender Required Inspection

A.1. c. - Handling credit report discrepancies

-You're not authorized to do any credit repair. You can sit down with the borrower and give counsel, but that's it. -Consumer submits and errors to credit report agencies -Law: FCRA - Credit Reporting Company has 30 days to respond.

A. 5. a. iv. - Reverse mortgages

-that the loan is negative amortization -Borrower has to pay taxes and insurance -Mandatory counseling -62 years old or older to get a reverse

B. 1. h. - Occupancy types

1. Primary Residence - (right of rescission only required on this one - on primary residences refinances) 2. Second Home 3. Investment

What are the 5 subsections underneath Section A : Loan Inquiry and Application Process Requirements

1. Subtopics 2. Loan Inquiry Process 3. Application Process 4. Suitability of products andj programs 5. Disclosures

A. 2. a. - Required disclosures that must be provided to a borrower in response to a loan inquiry - AN LE only if you're the items in PENCIL (See b)

1.Special Information Booklet for settlement services 2. Loan Estimate 3. Mortgage Servicing Disclosure Statment (2a. LO/MB are required to provide what 3 documents after Loan Application)

A. 5. c. iii. f) Timeframe for the consideration for settlement charge before the expiration - 10 days from date of LE

10 Business days

B. 1. d. ii. - Factors used in determining a credit score

5 types of income you must have a 2 year history -Self Employed -4506 signed and it needs to match up with your tax returns -Capital Gains -Overtime -Bonuses -Commission

The 4 Sections of this Chapter 3 - Mortgage Loan Origination Activities

A. Loan Inquiry and Application Process Requirements B. Qualification: Processing and underwriting C. Closing D. Financial Calculations Used in Mortgage Lending

A. 5. a. i. - Information included in the Loan Estimate disclosure

All costs Programs Terms

A. 5. c. vi. d) Overnight Delivery

All disclosures have to be deliver 3 business days from signed application If its mailed it has to be documentation that you mailed it with in the 3 business days

A.1. b. - Percentage of bank account assets attributable toward a loan application

All monies needed for the down payment and closing costs needs to be liquid assets.

B. 2. a. - Purpose of appraisals

An appraiser is giving you an opinion. Is the value of what the property is purchased. It is their opinion. Same on the refinance.

A. 5. c. vi. b) Face-to-Face

Any

B. 1. a. ii. - Acceptable assets that may be used for a down payment

Any down payment has to be liquid assets along with the closing costs

A. 5. c. vii. c) Final Closing Disclosure

Any items CAN change as long as it doesn't affect the following 3 1. Programs 2. Prepayment 3. APR 1/8th on a fix and quarter on ARM

B. 1. d. i. - Information included on a credit report

Any liability payment that is less then 10 months on convention loan 6 payment or more on FHA Student Loan - you have to count 1% on Fannie Mae - Freddie Mac is .05% Credit Card: If a payment is not listed on the credit report you have to use 5% of the balance Car leases have to be counted no matter what

B. 4. b. v. - Loan to value ratio that triggers private mortgage insurance

Anything above 80% Has to be dropped at 78%

A. 5. c. iii. h) Reissuing a Loan Estimate. Timing of tolerance corrections

Anytime there are a change circumstance, with in 3 business days of the change.

C. 1. c. - Definition of "easement"

Area on either side of the property line -of either side of the property line. 15 feet on either side of that line. They can come in with out the borrower able to stop it

B. 2. e. - Requirement/timeline to inform applicant of the right to receive an appraisal

At completion or no less then 3 business days before closing

B. 1. c. v. d)Bonuses - two year history and the company has to indicate if it will continue. Bonus was $10,000 two years ago and $4,000 last year, you use $4,000. Bonus was $4,000 two years ago and $10,000 last year, you use $7,000. Average of the two

Bonuses you need two year history again and an indication that it's going to continue. If the bonuses are going down, you have to use the lower number. If the bonuses are increasing, you average them.

B. 1. a. iv. - Actions not permitted with respect to Verification of Deposits

It has to be independently obtained, faxing, mailed or emailed.

B. 1. c. iii. - Utilizing capital gains income on an application

Capital Gains= Need 2 year history Do they have anymore assets that they can sell - cause if they don't then there is no more capital gains income

A. 3. a.i. - How MLOs accept loan applications

Computer apps Telephone In person Mailed

B. 4. a. i. - Flood insurance requirements

Let's a borrower do less then 20% down. Mandatory escrow.

B. 1. f. ii - Allowable debt to income ratio at loan consummation

Debt to Income stays the same at application or closing the ratio needs to be the same

C. 1. e. - Reconveyance - return of the deed on a trust loan when paid in full

Deed of Trust is paid in full - Deed of Trust has to be returned to borrower.

A. 5. a. ii. - Adjustable-rate mortgage loan disclosures

Document that has -Margin -Index -Rates determined at adjustment -Caps -Terms -Programs

B. 1. e. iv. - What is the acquisition cost - $164,000 purchase price, the closing costs are $5,000 of which the seller is paying $2,000 of the costs. $164,000 + $5,000 - $2,000 = $167,000 acquisition cost

Payment history Debt Utilization Inquiries

A. 3. b. i. - Forms used to authorize the release of information

Form = Borrower Authorization. Allows the lender to send out verification's to the employer and to the bank and also certify that if there is a error, that the borrower will repair - will cooperate in getting the error fixed.

A. 5. c. iii. b) Expiration of charges and terms in a LE - 10 days from the date of the LE

From the date of the LE the borrower has 10 business days to bring you a signed intent to proceed. If they don't bring it to you in those 10 days chargers and terms can change.

B. 4. b. iii. - Facts on private mortgage insurance and ratios

Higher the loan to value - the higher the amount of mortgage insurance is required = higher the costs That can be paid Lender paid upfront Borrower paid upfront Borrower can pay part of it up front with MPI. The monthly premium calculated Principle balance X Mortgage Insurance Factor divided by 12.

A. 5. c. iii. c) Exceptions to providing the Loan Estimate

If the loan is declined, withdrawn, or if you do not have all the items under "PENCIL" .

B. 4. a. ii. - Designated zones for flood insurance "A" or "V"

If they are A or V = you have to have flood insurance no exception

B. 2. d. - Cost Approach

If your house got destroyed - what would it cost you to replace that property in today's market.

A.1. d. - Acceptable gift donors

Immediate Family Employer Donor must be a relative: -Blood -Marriage -Adoption -Legal Guardian Cant Come from -Interested third party -Conventional Loan 20% down: Gift can cover all funds -Conventional less then 20% down: Restrictions on what funds can cover and it varies by loan type. -For FHA and VA Loans 620 and up: Gift can cover all cost regardless of down payment. -FHA and VA Loans 620 and down: Borrower has to put their own 3.5% down no gift can cover that.

B. 1. a. iii. - Assets permissible to be used toward reserve funds

In verified liquid assets can be used for down payment Unless its a gift or withdrawal of money from retirement accounts If you don't withdraw it you can use it for reserves

C. 1. a. - Title insurance coverage

Insurance that protects the borrower and the lender

B. 1. f. i. - Factors taken into consideration when reviewing an applicant's ability to repay a loan

Is that money going to continue in the future

A. 4. a. - Reflecting the type of loan on a mortgage application

It needs to reflect what they want

A. 3. a. iii. - How MLOs manage information on an application

MLO - Completely confidential except internal people.

B. 3. b. - Timing of title reports and commitments

Mandated by escrow

B. 2. b. - Market approach or Market data approach

Mandatory pre-comparables: 1-They same time of property 2-Sold within the last 6 months 3-No more then a mile away from the subject property. The Adjustments: The Net adjustments on all the comparables can't be anymore than 15% more then the comparables sold for.

A. 5. b. iii. - No tolerance

No Tolerance -attorney fees -realtor fees -homeowners insurance -Escrows -Prepaid Interest The final cd can not be anymore then 10% more then the final loan estimate

B. 1. e. i. - What is capacity? On a QM loan - $5,000 gross income times 43% = $2,150 for housing and debt

On a QM loan - $5,000 gross income times 43% = $2,150. for housing and debt. -QM and FHA - 43% -DA and USDA - 41% -Conventional - 36% Capacity for Qualifying Ratios= PITI = Debt Qualifying Ratios: The capacity number that you should use is the Capacity - Gross-income times the overall ratio Need to know how to calculate capacity

A. 3. b. iii. - Methods of verifying employment

Paystubs W2 1099 2 years tax returns VOE (Verification of Employment)

B. 4. b. i. - Purpose of private mortgage insurance

Protect lender from potential loss and foreclosure. Only on Conventional Loans.

B. 4. c. i. - Hazard Insurance requirements

Protects borrower and lender from flaws on title

B. 1. e. v. - Down payment needed = $300,000 purchase price, borrower is going to put down 15% = $45,000 required verified assets (liquid assets, gift or down payment assistance). Will PMI be required?

Purchase price, borrower puts down 15% = $45,000 which has to be verified liquid assets. PMI would be required.

B. 1. f. iii. - Safe harbor provisions and scenarios

Safe Provisions and Scenarios 2 Options to Obtain Safe Harbor: 1. 43% maximum debt to income and 3% maximum fee's. 2. Approved eligible from Fannie or Freddie.

B. 1. e. ii. - How do you calculate Debt to Income (DTI) = $5,000 verified gross income divided into gross monthly payments including mortgage and debts ($2,000) = 40% DTI

Social Security and Disability Only: you can (gross it up) by 25% if it was taxed before the borrower received.

A. 5. c. v. - Valid reasons for a Changed Circumstance

Terms, Programs, Costs or natural disaster. Any time there is a change circumstance you have to issue a new LE, to borrower within 3 business days of the change.

B. 4. b. ii. - Benefits of private mortgage insurance

The borrower can put less then 20% down

A. 5. c. vii. a) When applicants are entitled to advance inspection of a Closing - 3 business days before closing

The initial closing disclosure must be delivered 3 business days before closing If the Program changes, prepayment is added or APR tolerances is exceeded APR Tolerances are: -1/8th on a fix -A quarter on ARM Then you have to reissue a new closing disclosure and 3 business day delay

A. 5. c. vii. d) Timeframe of providing an updated closing disclosure

The lender has 60 days to

B. 1. c. i. - Income requiring two years history (self employed, capital gains, overtime, bonuses and commissions)

There are 5 types of income that require a two year history before you can count it: 1. Self Employed 2. Capital Gains 3. Overtime 4. Bonuses 5. Commissions

B. 2. h. - Appraisal is required for a high-risk mortgage

There are certified licenses or trainees. Cannot use an appraisal waiver.

B. 1. b. ii. - Types of liabilities

These don't have to be counted as debts: -utilities -cell phone bills -insurance premiums -child care. These are considered monthly debts -Banks Loans -Student Loans - if there isn't a payment listed on the credit report, then you have to use 1% of the balance for Fanniemae and FHA, Freddie Mac its a .5 % (half percent). -Credit Cards - if there isn't a payment listed on the credit report then you have to use 5% of the balance. -Car Loans -Car leaseses - have to be counted no matter what. -Child Support -Alimony -Tax Liens -Any liability payment that is less then 10 months on conventional loan and less then 6 months on FHA Loan. Do not, have to be counted in the debt to income ratios -Car leases have to be counted no matter what.

C. 1. d. - Encumbrances

Think fence on the wrong side of the property line. It will have to be fixed before that house can be sold because that would be a flaw on the title.

A. 2. b. - Application accuracy and required information on an application (e.g., name, SSN, address of property to be financed, estimated property value, income, loan amount)

Those are the 6 items required for PENCIL PENCIL - P - Property E - Estimate of Value N - Name C - Credit I - Income L - Loan Amount

B. 3. c. - Preliminary Title Reports

To protect the lender if the borrower defaults the insuacnre company pays them them out.

A. 5. c. iii. g) Timing of providing the appraisal report

Upon receiving however no less then 3 business days before closing.

B. 2. c. - Income approach

Used on any rental property

B. 1. i. Verification of Deposit scenarios

VOD: Make sure all is looking good and verifies it look out for Red Flags. Look for doctoring of documents on the bank statements - $10,000 deposit - where did it come from?

A. 5. c. vi. a) Electronic

Written approval from borrower, identification, issue the right to go back to "Hard Copy". MLO - has to determine if they can handle the technical part of it all.

A. 2. c. - Permissible questions on an application

You can ask anything you need to get the loan approved or denied. Can't ask - Religion National Origin Child support and Alimony they have to volunteer, you can't ask.

B. 1. c. iv. - Types of applicable incomes types for loan qualification

You can use any income that is claimed on their Income Tax No Tax income can ever be used.

A. 3. a. ii. - Offering and negotiating the terms of a loan

You got to be licensed to offer and negotiate terms. Any information must be confidential, but it must be verified. No one but a licensed person (LO) can negotiate terms or lock an interest rate.

B. 3. a. - Obtaining title reports

You want to get this asap. Owner on title report should be the person selling the property. If the inhabitable part of the house is in the flood plain - then you have to have flood insurance.

A. 5. b. i. - Scenarios with Zero tolerance

Zero Tolerance mean= Borrower doesn't have a choice See law document

B. 1. c. v. a)Hourly - Hourly wage times no. of hours, times 52 divided by 12 gives you monthly income. Overtime with two years history is the same calculation using time and a half

a)Hourly - Hourly wage times no. of hours, times 52 divided by 12 gives you monthly income. Overtime with two years history and you have a good idea that they're going to be receiving it in the future is the same calculation using time and a half