Origination and Underwriting

Acceptable gift donors

-A relative defined as the borrower's spouse, child, or other dependent, or by any individual who is related to the borrower by blood, marriage, adoption, or legal guardianship; or -A fiance'/finance'e or domestic partner

Post Close Loan Review Elements

-Accuracy and completeness of Loan application -Existence and accuracy of UW documents -Data integrity review -Supported UW decision -Reverifications of UW documents -Output from third party analysis tools -ATR Standards -Appraisal review -Property eligibility -Project eligibility -Documentation of adequate MI coverage -Compliance w/ MI Guidelines -Existence and Accuracy of legal and closing docs -Compliance w/ all applicable laws and regulations

Mortgage fraud schemes

-Builder bailout: Is used when a builder, who has unsold units in a tract, subdivision, or condo complex employs various fraudulent schemes to sell the remaining properties. -Buy and bail: Typically involves a borrower who is current on a mortgage loan, but the value of the house has fallen below the amount owed. The borrower continues to make loan payments, while applying for a purchase money mortgage loan on a similar house that cost less due to the decline in market value. After obtaining the new property, the borrower walks or bails on the first loan. -Chunking: Occurs when a third party convinces an uninformed borrower to invest in a property or properties with no money down and with the third party acting as the borrower's agent. The third party is also typically the owner of the property or part of a larger group organizing the scheme. Without the borrower's knowledge, the third party submits loan applications to multiple lenders for various properties. The third party retains the loan proceeds, leaving the borrower with multiple loans that cannot be repaid. The lender is forced to foreclose on the properties. -Double selling: occurs when a mortgage loan originator accepts a legitimate application and documentation from a buyer, reproduces or copies the loan file, and sends the loan package to separate warehouse lenders to receive funding twice. -Equity skimming: Is the use of a fraudulent appraisal that over values a property, creating phantom equity, which is subsequently stripped out through various schemes. -Fictitious loan: is when the fabrication of loan documents or use of a real person's information to apply for a loan which the applicant typically has no intention of paying. -Mortgage servicing fraud: Fraud perpetrated by the loan servicer and generally involves the diversion or misuse of loan payments, proceeds from loan prepayments, and/or escrow funds for the benefit of the service provider.

QC Staff Requirements

-Can be performed by employees or outsourced -Report to senior management -Be independent of production staff -Staff must be properly trained and experienced in the audits they perform

VA Loans - Key Items

-Can have LTV up to 100% -Guarantee up to 25% of loan (up to an adjusted max GSE loan amount ) -Veteran must receive Certificate of Eligibility -No mortgage insurance -Loan can be assumable -Veteran must maintain a certain level of residual income -Co-signers can be spouse and/or more than one eligible veteran (VA benefit is equally divided) -Nonveteran or non spouse can cosign but VA will only provide benefit to the proportion of veteran's ownership interest -Charge a funding fee that can be financed into the loan -Funding fee can be waived for applicants who are service related disable veteran, surviving spouse of veteran who died in service or due to service related disability -Closing costs payable by the veteran is limited to specific items plus a flat fee equal to 1% of loan (origination fee). -Closing cost can not be financed into the loan for a purchase or construction loan -Greater scrutiny for DTI greater than 41% -VA selects appraiser at random from VA approved list, borrower receives a Notice of Value

4 C's of Credit

-Character/Credit: borrower has shown the willingness to pay debts -Capacity: borrower has the ability to pay current and future debts -Capital: borrower is willing and has the ability to have skin in the game by providing a down payment -Collateral: is property pledged to protect lender from borrower default

Loan application requirements (Fannie)

-Completed, signed, and dated URLA -Copy of the ratified sales agreement -Escrow/closing or settlement instructions -Any other information or documentation needed to verify, clarify, or substantiate information in the borrower's application -Any other documentation that is needed to make a prudent UW decision

Mortgage loan file requirements (Fannie)

-Copy of participation certificate, if applicable -Originals of the recorded mortgage or DOT, rider(s), and any other docs changing mortgage terms or otherwise affecting legal or contractual rights of investor -Copy of the related schedule of mortgages for a mortgage loan or participation interest in a mortgage loan if an MBS mortgage -Copy of unrecorded or recorded assignment to Fannie or the original assignment to MERS that includes a valid registered MERS Mortgage ID number if the mortgage loans is registered with MERS and MERS is not named as nominee for the beneficiary and copies of all required intervening assignments -Copy of FHA mortgage insurance certificate, VA loan guaranty certificate, RD loan note guarantee certificate, HUD Indian loan guarantee certificate or conventional MI certificate -Copy of UW documents, including DU reports -Copy of title policy, property insurance policy, flood insurance policy, title evidence, survey -Copy of Closing Disclosure

IPC types

-Down payment assistance programs -Financing concessions -Sales concessions -Interest rate buydowns -Payment abatements

Elements of QC

-Enable the mortgage lender to detect fraud -Be independent of sales/origination and UW -Be staffed by experienced mortgage personnel -Have direct communication line to senior management

QC Plan Objectives

-Ensure the production of quality loans to sell to investors -Maintain compliance with contractual obligations and applicable federal, state, and local laws and regulations -Guard against fraud, negligence, errors, and omissions -Assess compliance with internal policies -Improve loan quality and production processes

Market Analysis - 4 Factors

-Geographic area: should plan to originate in a limited geographic area to ensure good customer service and knowledge of the area -Neighborhood: know the general make-up of each neighborhood and properties. Be aware of the number and types of available housing units in the area. Keep abreast of the physical condition and market values. -Population: gather demographic information of the geographic area, such as age, income levels, and education information. -Competition: must identify and know the competition in the geographic area, including competitor's personnel, products, and reputation.

RHS Single Family Housing Guaranteed Loan Program - Key Items

-Guarantee up to 90% of loan amount -30 year fixed -Assesses an upfront guarantee fee (at 4/28/16 it is 1% of loan amount) which is charged to the lender but can be passed on to the borrower -Charge an annual guarantee fee (at 4/18/16 it is 0.35% of the loan amount) which is charged to the lender but can be passed on to the borrower (lender will typically collect this fee as part of the monthly mortgage payment) -Adjusted annual income limit determines if the household is eligible -Max loan amount cannot exceed FMV of property. -Can exceed 100% LTV if excess amount is used to finance the upfront g-fee -Does not require a credit score and lender can use nontraditional credit information -Third party IPC is limited to 6% of property's sales price Eligibility: -Borrower(s) must certify they are unable to obtain traditional conventional mortgage w/out RHS guarantee -Borrower(s) annual income can not exceed the adjusted annual income limit for the borrower(s) household size (# of people who occupy the property) -Annual income: All adult household members regardless of whether are parties to the loan -Adjusted annual income: Cannot exceed the adjusted annual income limited based on household size and 115% of median income for the area -Repayment income: Adequate and stable income used to calculate the housing and total debt ratios. It is common that annual income is higher than repayment income Max DTI 29/41 (exceptions are allowed with compensating factors) -Nontraditional credit history (must be for a 12 month or more period): -Rental or housing payment -Utility payments -Insurance payments -Retail store payments

Rural Development Loan Guarantee Loans - Key Items

-Guarantee up to 90% of original loan balance --Fully reimburse losses of 35% of the original loan balance --85% reimbursement for losses above 35% For communities with population of 10,000 or less and in some cases towns/cities with population between 10,000 and 25,000 Eligibility: -Applicants can have income up to 115% of median income for the area -Family must be without adequate housing but can afford mortgage payments plus taxes and insurance -Must have reasonable credit history Terms: -30 year fixed, interest rate set by lender -Must use repayment (gross) income to mortgage/taxes/insurance payment plus total family debt -Can finance LTV up to 100%

FHA Direct Endorsement Eligibility Requirements

-Must have basic FHA mortgage lender approval -Must be supervised or non-supervised lender or government institution -Must have five years experience in the origination of single family mortgages or have a principal officer with a minimum of five years managerial experience in the origination of single family mortgages -Must have on staff a full time employee to serve as an underwriter -Must have developed and implemented a QC program -For single family program, must have NW of at least $1MM plus an additional NW of 1% of total volume in excess of $25MM of FHA single family insured mortgages originated, underwritten, purchased, or serviced during the prior fiscal year up to a maximum NW of $2.5MM. Not less than 20% of the NW must be liquid assets. Test Case Approval Process: -Must submit a minimum of 15 mortgage loan application "test cases" for review -If review reveals acceptable UW, FHA issues a firm commitment to the lender to insure any of the eligible test cases and grant **Unconditional approval to lender, then FHA will perform post endorsement technical reviews on the first 30 cases (loans) submitted by the lender to ensure continued compliance with FHA UW standards

FHA Branch Review Requirements

-Office is properly registered w/ FHA and address is current -Regulatory lending signage is posted and evident in each branch location including Fair Housing and Equal housing signage -Operations are conducted in professional, business like environment -Office has adequate office space and equipment -Office does not employ or have a contract with anyone currently under debarment or suspension or a Limited Denial of Participation

Loan Production - 4 Phases

-Origination -Processing -Underwriting -Closing

QC - Fannie

-Random Post Close (10% of book of business) -Discretionary Post Close -Prefunding (perform after clear to close) -EPD (if servicing) -QC of the QC vendor (10% monthly review of vendor if outsourcing QC) -Selection of sample w/in 30 days of end of month closed -Reviews and rebuttals w/in 60 days of selection -Management report due within 30 days of review (if more than 30 days behind must report to Fannie) Must retain QC documentation for 3 years

QC - Freddie

-Random Post Close (10% of book of business) -Targeted/EPD (if servicing) -Discretionary -Preclosing -Selection of sample w/in 90 days of the note date -Report to management w/in 90 days of selection Must retain QC documentation for 3 years

QC - FHA

-Random Post Close (10% of loans closed) -EPD (regardless who holds servicing) -Rejected Loans/Adverse Action (must review at least 10% each month and w/in 90 days of the end of the month the decision was made) -Branch Audits (at least annually) -Prefunding -Review w/in 90 days of end of month closed -Management report due w/in one month of the completion of the initial report -Must review 100% of EPD files (90 days PD in first 6 months), review must be completed w/in 45 days of the month the loan was 90 days PD Must retain QC documentation for 2 years.

Prefund QC

-Verify data entered into AUS -Verify SSN used to verify borrowers -Income calculations consistent w/ supporting documentation -Verification of employment -Assets are adequate to meet cash to close and reserve requirements -Appraisal valuation data is acceptable -MI is acceptable -Review of past 120 inquiries -Review of condo project approval -Review loan file against investor and agency guidelines

Direct endorsement

A HUD program that enables an eligible lender to process and close single family applications for HA insured loans without HUD's prior review.

Accept mortgage

A LP mortgage that receives a risk class of accept.

Loan guarantee certificate (VA)

A VA document that certifies the dollar amount of a mortgage loan that is guaranteed.

Lender Appraisal Processing Program

A VA program that allows approved lenders to directly receive appraisals from VA approved appraiser. The appraisal is reviewed by the lender's staff appraisal reviewer (SAR) for accuracy and adequacy. SAR must: -Be a full-time salaried employee of the lender, and -Have at least 3 years of work experience which qualifies him or her to competently perform administrative appraisals reviews in conjunction with underwriting loans for VA loan guaranty purposes. Lender must have an effective QC program for SAR.

Certificate of reasonable value

A document issued by the VA that establishes a maximum value and loan amount for a VA guaranteed mortgage.

Non-supervised Mortgagee

A lending institution that has as its principal activity the lending or investing of funds in real estate mortgages, consumer installment notes or similar advances of credit, the purchase of consumer installment contracts, or from a directly related field. A directly related field is something directly related to the lending or investing of funds in real estate mortgages, not simply actions related to real estate in general. May originate, underwrite, close, endorse, service, purchase, hold, or sell FHA insured mortgages.

Gift letter

A letter signed by a gift donor that must: -specify the dollar amount of the gift -specify the date the funds were transferred -include the donor's statement that no repayment is expected, and -indicate the donor's name, address, telephone number, and relationship to the borrower

Conventional loan

A mortgage loan that are not insured or guaranteed by the federal government or its agencies, such as FHA, VA, and RHS. Loans are segmented into conforming and nonconforming.

Conforming mortgage

A mortgage loan that meets all requirements for purchase by Fannie or Freddie.

Buydown mortgage

A mortgage loan which a lender accepts below market interest rate in return for an interest rate subsidy paid as additional discount points by the builder, seller, or buyer.

Scratch and dent mortgage

A mortgage that fails to meet all the UW requirements or standard R&W in a sales transaction. These mortgages are typically returned or retained by the bank and sold in separate transactions, in which the deficiencies are acknowledged by the buyer.

Payment option ARM

ARM allows the borrower to choose from different payment options, such as: -Minimum payment based start/intro/teaser interest rate (can cause negative amortization) -Interest only payment based on the fully indexed interest rate (no principal reduction) -Fully amortized principal and interest payment After an established number of years or if the loan reaches a negative amortization cap, the loan is recast to require payments that fully amortize the outstanding balance over the remaining loan term.

Qualifying income (RHS)

Adjusted annual income compared to established income limits to determine eligibility of the household for the single family home program.

Split (hybrid) PI premium

Advantages: -By paying some of the premium upfront, the monthly MI payment is lower than a standard monthly MI payment. -If upfront is financed, receive higher tax deduction benefit Disadvantages: -Pay more interest over the life of the loan (higher principal balance) -If not financed, results in higher closing costs and counts against QM points and fee limits

Subprime loans

Are mortgage loans offered to borrowers that display a range of credit risk characteristics that may include past delinquencies, foreclosure, repossession, bankruptcy, high DTI, or low FICO. These loans typically have a higher interest rate than the prime rate offered on traditional loans.

Single PI premium

Advantages: -If financed, receive higher tax deduction benefit since the premium is financed in the loan -Lower monthly payments Disadvantages: -Increased principal balance and more interest over the life of the loan if financed -Higher initial cost if borrower paid and results in higher closing costs that count against the QM points and fees limit

Monthly PI premium

Advantages: -No add on to the note rate or loan amount -No upfront MI premium cost Disadvantage: -Monthly mortgage payments are higher

HECM purchase

Allows seniors, age 62 or older to purchase a new principal residence using loan proceeds from their reverse mortgage. The program allows seniors to purchase a new residence and obtain a reverse mortgage within a single transaction. This program is beneficial to seniors who are downsizing and/or want to move to a new geographic location.

VA Refinances - Interest Rate Reduction Refinance Loan (IRRRL)

Allows veterans in financial distress due to high rate subprime loans to refinance into safer and more affordable VA loans.

Allonge

An addendum attached to a note that can be used for endorsements.

Lender approval (USDA/RHS)

Approval from another recognized source: Acceptable secondary market organization or federal government agency showing the lender is approved for participation by that entity (e.g., State Housing Finance Agency, HUD/FHA, Ginnie, Freddie, Fannie, VA) If does not have approval from one of the government or SMO agency then must provide: -Summary of mortgage lending activity that includes dollar amount and number of loans originated and/or serviced along with percentages of delinquencies, foreclosures, and losses. -Summary of origination, underwriting, and closing P&P -Evidence of experienced UW on staff (signed resume showing at least 2 years experience in UW single family) If lender does not plan to service RHS loans, the lender must certify that it will contract with an agency approved lender. If lender plans to service, must provide: -Summary of servicing P&P -Written plan if lender contracts for escrow services -Evidence lender has serviced single family loans in the year before applying for agency approval. A federally regulated depository institution must provide documentation indicating they have the ability to process, underwrite, and service single family residential mortgage loans from a federal regulatory agency. A Farm Credit System institution or lender can participate RHS lending.

Sales concessions

Are IPC that take the form of non realty items, such as cash, furniture, automobiles, moving costs, etc. These concessions value must be deducted from the sales price when calculating LTV and combined LTV for UW and eligibility purposes.

Interested party contributions (IPC)

Are costs that are normally the responsibility of the property purchaser that are paid directly or indirectly by someone else who has a financial interest in, or can influence the terms and the sale or transfer of, the subject property.

FHA loans

Are mortgage loans insured by FHA against foreclosure loss. FHA supports itself by charging borrowers a mortgage insurance premium, which paid in both upfront and monthly installments, or financed in the maximum mortgage amount depending on the loan program, terms, and conditions. These loans are designed for low and moderate housing markets and they generally benefit first time borrowers, borrowers with cash liquidity restrictions, or borrowers who do not meet criteria of the conforming market.

VA loans

Are mortgage loans partially guaranteed against foreclosure loss (up to 25%) by the VA. These loans are only offered to Armed Services veterans, those currently on active or reserve duty, and their spouses. The VA guarantees the repayment of mortgage loans made to qualified borrowers up to a specified amount. The VA charges the borrower a funding fee for guaranteeing the mortgage loan, which is usually financed as part of the loan amount. Eligible veterans are required to obtain a Certificate of Eligibility. They may apply for this certificate through an online portal, through a lender, or by completing a written Request for a Certificate of Eligibility an returning it by mail.

Alt A loan

Are mortgage loans that do not satisfy the regular criteria for conforming or jumbo loan programs, but are first lien loans to a prime quality borrower. These loans may have an LTV above 80% but lack PMI. These loans may be extended to temporary resident aliens, secured by non-owner occupied property, or lack requirements that specify minimum income relative to expenses. Borrower sometimes are reluctant or unable to provide standard loan documentation. Some typical borrowers are small business owners and highly commissioned salespeople.

USDA/RHS loans

Are offered and guaranteed by the RHS within USDA. The loan program protects mortgage lenders who make these loans on residential properties located in rural areas by offering them a guarantee should the borrower default. LTVs can be up to 100% and repayment terms can exceed 30 years. Borrowers must meet income guidelines (the ceiling is usually 115% of the median income for the area in which the property is located) in order to qualify for RHS programs.

Financing concessions

Are: -Financial contributions from interested parties that provide a benefit to the borrower in the financing transaction -payments or credits related to acquiring the property, or -payments or credits for financing terms, including prepaids

HECM nonrecourse

As long as the borrower keeps the taxes and insurance current, FHA will cover any losses associated with the home value. Also, if there is any remaining equity at the time of settlement, the equity will go to the remaining survivor of the borrower's estate. Borrower is required to pay an upfront mortgage insurance premium to FHA.

Payment history for nontraditional credit sources (Fannie)

Cannot be any delinquency on rental housing payments within the past 12 months. -Only one account excluding rent can have a 30 day delinquency in the past 12 months -No collections (other than medical) or judgments have been filed in the past 24 months -Judgments, liens, collections, and charge off of nonmortgage accounts must be satisfied per guidance.

Acceptable sources of reserves

Checking or savings account, stocks, bonds, mutual funds, CDs, money market funds, trust account, amount vested in retirement account, and cash value of a vested life insurance policy.

Rural Development 502 Leveraged (Blended) Loans - Key Items

Combines a direct low interest rate 502 loan with a bank conventional loan -502 loan has interest rap cap of 3% -Lender receives first lien (must finance 20 to 50% of purchase price) -Usually 30 year fixed -RHS takes second position and funds the remaining portion of the purchase price -Borrower(s) income can not exceed area low income levels and at closing can not exceed area moderate income level. -Very low income DTI max is 29/41 -Low income DTI max is 33/41

Recordation

Creates a permanent public record of transfer of title to real property. -Enables anyone to search public records to find out who owns the property and what restrictions may be on the ownership -Not required for a valid transfer of real property -Evidence of the priority of right to or interest in real property according to recorded documents

Allowable age of credit documents (Fannie)

Credit documents include credit reports, employment, income and asset documentation must be no more than four months old on the note date.

Title deed

Documentary evidence of ownership of real estate.

QC - Appraisal Reviews

Fannie, Freddie, and FHA require appraisal desk reviews and appraisal field reviews. Field reviews must be completed on 10% of the files selected for audit. (must be performed by a licensed appraiser) The remaining 90% reviews can be done as a desk review.

QC - Re-verifications

Fannie, Freddie, and FHA require re-verifications on: -Employment -Gift Funds -Income -Rent -Assets -Nontraditional credit FHA requires all verifications be written. If re-verification is not returned, then a follow up phone call must be made. Fannie and Freddie both recommend written but allow verbal re-verifications. If re-verification is not returned, lender must document all attempts made to verify documentation.

Margin

In an ARM, the spread between the index rate used and the mortgage interest rate.

Escrow closing

Is a closing held through an escrow company. The buyer and seller do not actually meet across a table and exchange documents, but submit their documents separately to the escrow company. When all conditions of the settlement have been met, the escrow company notifies all parties that the escrow has been closed.

Agency closing

Is a closing where the buyer's lender has an agreement with the closing agent, generally a title company. The closing agent then follows the instructions of the agency agreement along with specific conditions set forth in the contract.

Cash closing

Is a closing where the conditions of the contract call for the buyer to pay cash for the property with no financing involved. The buyer pays the seller directly with funds at hand.

Government mortgagee

Is a federal, state, or municipal governmental agency, a Federal Reserve Bank, or GSE. May originate, underwrite, close, endorse, service, purchase, hold, or sell FHA insured mortgages.

Supervised mortgagee

Is a financial institution that is a member of the Fed or whose accounts are insured by the FDIC or the NCUA. May originate, underwrite, close, endorse, service, purchase, hold, or sell FHA insured mortgages.

Gift of equity

Is a gift provided by the seller of a property to a buyer. The gift represents a portion of the seller's equity in the property and is transferred to the buyer as a credit in the transaction.

Defect rate

Is a metric created by Fannie to track loans identified in the QC process that do not meet Fannie guidelines and/or ineligible for delivery. Calculation: # of loans w/ a defect divided by # loans in the QC sample

High balance loan

Is a single family mortgage loan originated with a note date on or after October 1, 2008 with an original principal balance (minus the amount of the upfront MIP) that exceeds the conforming loan limits as determined by FHFA and in effect at the time the loan is made.

Promissory note

Is an acknowledgement of the debt by the borrower and is a promise to pay. This document specifies the when, where, and how the mortgage payment, contains the interest rate, loan term, and place of payment. The document does not need to be recorded publicly and in the absence of a contrary agreement is negotiable and transferrable.

Payment abatement

Is an incentive provided to the borrower by an interested party in which the IPC provides funds to pay or reimburse a certain number of monthly payments on the borrower's behalf. The monthly payments may cover in whole or in part principal, interest, taxes, and other assessments. These funds are provided to the lender or a third party to be distributed over the term of the abatement period or credited against the borrower's future obligations.

Investing mortgagee

Is an organization that invest funds under its own control. May purchase, hold, or sell FHA insured mortgages. May also service FHA insured mortgages if it is receives approval. May not originate, underwrite, or close FHA insured mortgages in its own name or submit applications for FHA MI.

Unconditional approval (FHA DE)

Is granted when the lender has successfully underwritten and process 15 test cases (loans), as evidenced by the issuance of firm commitments by the FHA.

Home Equity Conversion Mortgage (HECM)

Is insured by FHA and are a form of credit extension secured by first mortgages on single family residences and are available to borrowers 62 years of age and older. Borrower receive loan proceeds (typically 30% to 40% of the property's value) in the form of a lump sum or line of credit or in regular monthly advances. The advances may either be for a specified number of months (term loans) or be paid as long as the borrower lives in the home. If there is only one borrower and one mortgagor, a reverse mortgage, a reverse mortgage loan matures when the borrower either dies or moves. If there are two borrowers, the loan matures when the survivor dies or moves. At that time, lenders are repaid out of the proceeds from the sale of the home and the lender's recovery from the borrower or the estate is limited to the proceeds from the sale of the home.

Borrower paid MI

Is paid or financed by the borrower through a single upfront, monthly premium, or combination.

Security instrument

Is the document that conveys an interest in the collateral property to the mortgage lender (or trustee under a DOT) until the loan is satisfied. The document is the lien against the property and is recorded publicly. The document describes the terms and conditions of the loan and specifies where the property is located. It gives the mortgage lender the right to foreclose the loan in the event the borrower fails to repay the debt. The document must contain: -Names of mortgagor and mortgagee -Words of conveyance -Terms of repayment of the note -Description of the real estate -Non-monetary obligations and agreements of the borrowers, including the following: --Property insurance --Rights of lender in the event of default --Riders for ARMs, ballons, condos, PUD

Compare ratio

Is the ratio of a lender's default rate in a specific area compared to area's total default rate. For instance if lender's default rate is 8% and the state of NC default rate is 4%. The lender's compare score would be 200%. The HUD compare risk levels are: 150% - 174% -- Concern 175% - 200% -- Appear on Watch List 200%+ -- Likely to lose FHA DE Compare ratio could be misleading due to a lender that has a low volume of loans for a specific area. For example: Lender originated 10 loans 1 loan goes 90 days PD Lender's default rate is 10%

Finance charge

Is the total amount of interest and loan charges you would pay over the entire life of the loan. This assumes that you keep the loan through the full term until it matures and includes all prepaid loan charges. Loan charges include: -Origination charges -Discount points -Mortgage insurance -Other applicable lender charges

Repayment income (RHS)

Is used by lenders to determine whether applicant(s) have sufficient income to repay the mortgage in addition to recurring debts. It differs from the calculation of annual income and adjusted annual income used to determine if the household is eligible for the single family home program. To compute, the lender must count only the stable and dependable income of persons who will be parties to the note.

Loan origination system

LOS are used for: -Product and pricing -Automated UW -Processing -Document generation and delivery -Post-closing -Third party origination support

Lender paid MI

Lender purchases MI and recoups PMI expenses through a higher interest rate.

HAMP

Low cost refinancing program that allowed borrowers to refinance homes. Eligibility for the program was: -mortgage must be owned or guaranteed by Freddie or Fannie -mortgage must have been sold to Fannie or Freddie on or before 5/31/09 -Cannot have been refinanced under HARP previously unless it is a Fannie loan that was refinanced under HARP from March to May 2009 -Current LTV must be greater than 80% -The borrower must be current on the mortgage at the time of the refinance with a good payment history in the past 12 months Ended 12/31/16

Minimum credit scores (Fannie)

Manual: Fixed 620 ARM 640 DU: Fixed and ARM 620 Government: 620 Master Agreement variance: 620 or the minimum credit score required by the variance

Down payment assistance programs

Provides donated funds to third parties which are then applied toward some or all of the borrower's closing costs for specific transaction. These funds may be used for allowable closing costs, prepaids, and energy related expenses.

Valid deed

Must contain: -Grantor's (seller) name and signature -Grantee's (buyer) name -Words of conveyance indicating intention to convey real estate, using such words as grant, release, and convey. -A legal description of property

Product and Pricing Engine

PPE can: -Receive loan data from another system -Evaluate this data against product and pricing rules -Return eligible products and a calculated price -Allows flexible risk based pricing, which eligibility rules help to optimize loan products for borrowers.

Yield spread premium

Payments from lenders to brokers based on the difference between the interest rate at which a broker originates the loan and the par or market rate offered by a lender. This allows homebuyer to pay some or all upfront settlement costs over the life of the mortgage through a higher interest rate.

Representative credit score (Fannie)

Recommends obtaining at least two credit scores for each borrower. -If 2 chosen, select the lowest score -If 3 chosen, select the middle score

Retail channel

Refers to a lender that directly originates to a consumer. Staff works at branches, call centers, or via internet. The lender originates, processes, underwrites, and closes loans. Compared to correspondent lending, retail production costs more, but results in more income due to mortgage servicing value.

Correspondent

Refers to a mortgage lender that generally originates, processes, underwrites, and close loans using its own funds with intention to sell to another mortgage lender. Compared to the retail channel, correspondent lending cost less but results in less income because usually the mortgage is sold servicing release. Advantage: Lower cost to originate Disadvantage: Lower income potential due to purchaser usually requires correspondent to sell mortgages servicing release.

Brokered channel

Refers to channel where a company solicits and may originate and process mortgage applications with the intent to forward the application to a mortgage lender for them to underwrite and fund. Brokers do not fund the loans at closing, which the actual mortgage lender behind the loan will usually provide table funding. Advantage: -Deal with multiple lenders -Low overhead -Ease of entry into market -Lower origination costs Disadvantage: -Highly dependent on third party funding -Typically limited liquidity and capital and can run into financial problems during prolong recessionary periods.

Wholesale channel

Refers to mortgage lending channel were the lender purchases loans from other mortgage lenders (correspondents) and/or brokers. Wholesale includes correspondent and brokered originations. Advantages: -Ability to generate large volumes of loans quickly -Ability to achieve a geographic diversity in the servicing portfolio -Ability to reduce overall loan origination costs Disadvantages: -Greater risk of losses due to fraud -Price competition due to extremely competitive market -Potential higher prepayment risk resulting from broker churning -No direct interaction with consumer so fallout tends to be higher

HECM financial assessment

Requires lenders to calculate a borrower's ability to pay taxes and insurance each month. If lender determines there is a risk borrower can not pay taxes and insurance each month, the lender can set aside a portion of the HECM funds to cover these costs, which is similar to an escrow account.

QC Plan

Should be based on rules, requirements, and regulations of: -Investors -Government Agencies -Warehouse lines -Regulatory Agencies

Title indemnity

This holdback is held by the title company for the benefit of the buyer and the seller. It covers objections not cleared prior to the closing such as unposted taxes of which the title company is unable to verify payment. The title officer may ask that a title indemnity agreement be prepared and the funds withheld from the seller until the objection is cleared.

HUD Neighborhood Watch

This system is intended to aid HUD/FHA staff in monitoring lenders and programs. The system is designed to highlight exceptions and loan performance by lenders in various geographically locations. Data is based on the first time loans within a 2 year loan origination period were first reported to HUD as 90 days or more delinquent.

Escrow holdback

This type of holdback could cover a number of situations. The funds can be held by the new lender, the closing agent, an attorney, or real estate agent depending on the party requesting the holdback. An agreement is generally prepared at the closing stating the purpose of the holdback and the conditions for the release of funds.

Escrow analysis

The periodic review of escrow accounts to determine whether current monthly deposits will provide sufficient funds to pay taxes, insurance, and related expenses due.

Escrow (impounds, reserves)

The portion of borrower's monthly payments held by the servicer to pay taxes, insurance, mortgage insurance, and other related expenses as they become due.

QC - Discretionary Reviews

The purpose is to focus on areas that may pose elevated risk for errors, misrepresentation, and fraud. Example coverage: -LTVs over 90% -Low FICO -10% of new originators -Investment properties -Cash out refis -Manufactured homes

FHA value

The value established by the FHA as the basis for determining the maximum mortgage amount that may be insured for a particular property. The value is the sum of the appraised value plus the FHA estimate of closing costs.

Deed and money closing

Type of closing that usually does not involve new financing. The procedure is similar to the escrow closing where all parties submit documents to the closing agent separately. After all conditions are met, the closing agent disburses funds.