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| refers to customers' motivation or willingness to make the monthly payments; credit report |
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| refers to the property used to secure the loan |
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| refers to the customers' ability to make monthly housing payments. |
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| refers to the assets customers have to use for the down payment, closing costs, and reserves.; consists of equity and reserves |
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| part of the mortgage qualifaction process; determines the character of the customer; can be no more than 90 days old at the time of closing |
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| 3 Credit Report Companies |
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| Experian, TransUnion, and Equifax |
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| What is an excellent credit score? |
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| Defined as anything on the customer's credit that has a negative impact on the customer's qualifaction for financing |
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| Money owed to someone as a result of a court order |
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| "Highest and best use" of subject property has to be residential; cannot be a "working farm" |
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| Must be common to market area; Geodesic dome, earth berm, log cabin, A-frame |
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| Customers must demonstrate a two-year employment and/or income history to qualify for a loan. |
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| (Bi-weekly amount x 26)/12 |
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| Payed on the same day each month (ex. On the 1st and 15th); (Semi-monthly amound *24)/12 |
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| Must be likely to continue (and remain untaxed) for the next 3 years. To gross up non-taxable income multiply by 1.25 |
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| Examples of Non-taxable income |
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| Social security, child support, foster care, military allowances, disability, and retirement |
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| To determine rental income/loss we review Schedule E on the last two years personal tax returns and the current 12 month lease agreement. When using a lease take 75% of gross monthly. Positive result, add to monthly income, negative result, add to monthly debt. |
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| Considered self-employed if they have 25% or more ownership in a company. We need verification that borrower has been self-employed for at least two years. PHH uses SAM to calculate useable income. |
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| A business owned by 1 person; Need 2 years personal tax returns 1040's including schedule C and signed and dated IRS form 4506-T |
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| A business jointly owned by two or more individuals; Need two years personal tax returns 1040's including Schdule E; 2 years partnership returns 1065's, two years K-1, signed and dated IRS form 4506-T |
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| An entity incorporated with 100 stockholders or less; resembles a limited partnership; liabillity is limited only by the amount invested; Two years personal tax returns 1040's including Schedule E, two years S-Corporation returns 1120S's, 2 years K-1, signed and dated IRS form 4506-T |
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| each partner has unlimited personal liability for partnership debts and losses. |
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| The partners' liability is limited to the amount they have invested in the business. Must have at least 1 general partner. |
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| A state chartered business owned by stockholders. Personal liability is limited to only the amount invested. Need: 2 years personal tax returns 1040's, 2 years W-2's (if applicable), 2 years corporate returns 1120's, signed and dated IRS form 4506-T |
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| In a purchase transaction, the down payment is considered the equity; The difference between the market value of the property and the mortgage amount. |
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| What is the max Investor contribution? |
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| Unacceptable Sources of Funds |
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| Cash on hand, sweat equity, gift swap, and unverifiable assets |
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| Money left in the bank after closing costs that can be used towards mortgage payments. |
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| When stating interest rates what 3 things do you need to include? |
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| Interest rate, APR, and Points |
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| One-time expense paid at closing by customers to lower an interest rate |
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| Paying points to obtain a lower interest rate |
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| Customer pays a higher interest rate but will be given credit to help offset some of the closing costs. |
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| Does not secure the interest rate used to qualify the customer; not available for refinance. |
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| A sales contract and a specific closing date are required to lock an interest rate for purchase transaction. Rate locks are specific to the number of days required to meet their closing date. Not re-negotiable, property specific |
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| Allows customers to establish a maximum interest rate, or capped rate, for closing with the ability to float down once. |
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| Gives PHH the opportunity to meet the competition when a customer is offered a lower rate and point combination from another lender. |
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| Annual Percentage Rate; the cost of credit expressed as an annual rate. Includes points, loan processing fee, underwriting fee, document preparation fee, PMI, appraisal fee, credit report fee, and loan application free. |
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| The Mortgage Disclosure Improvement Act |
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| States that if a fee change causes APR to change more than .125%, a new Truth-in-Lending Disclosure Statement. |
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| Regulation X; The Real Estate Settlement Procedures Act allows customers to obtain information on the costs associated with closing a home. Requires a good faith estimate |
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| GFE; must be provided to customers within three business days of the application. Must be a reasonable estimate of the charges that are due at the time of closing; not required until the subject property is identified |
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| Shows the actual costs of the settlement for a transaction involving a customer and seller in an itemized form |
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| Equal Credit Opportunity Act; enacted to eliminate discriminatory treatment of credit applicants. Promotes the availability of financing to all creditworthy applicants regardless of race, color, religion, national origin, sex, marital status, and age. |
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| ECOA Required Disclosures |
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Definition
| Notice of Action Taken, Incomplete Application, Right to Receive Appraisal Report, and Disclosures Regarding Monitoring Programs |
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| If a creditor declines a customer a notice must be provided within 30 days of receipt of the application stating the reasons for the decision. |
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| Truth-in-Lending Act (Regulation Z); Promotes the informed use of credit by consumers; Applied to situations in which credit is regularly offered to consumers for personal, family, and household purposes. Requires that loan originators provide the TIL Disclosure Statement to applicants within three business days from receipt of application. Gives customer's the right to rescind on certain transactions. Requires that we disclose APR |
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| Home Mortgage Disclosure Act: Regulation C; Requires lenders to compile and disclose data annually about loan applications and home purchases, refinances, and home improvement loans. Takes information on Race, ethnicity, and gender information |
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| Homeowner's Protection Act; Helps facilitate the removal of PMI; Notice of the customers termination date of PMI and that it will occur automatically at 78% LTV. |
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| Fair Credit Reporting Act; Ensures the accuracy, fairness, and privacy of consumer's personal information. Applies to any transaction that involves the use of a credit report. |
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| Gramm-Leach-Bliley is a federal law which states that companies must protect sensitive customer data and tell their customers how the data is collected and shared. AKA the Privacy Law |
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| Fair and Accurate Credit Transactions Act; Helps address the problem of identity theft, facilitate consumers' access to information retained by CRAs and increase the accuracy of consumer reports. |
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| Mortgage lending services provider offering appraisal, credit, flood, default, and tax services. |
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| Fraud for Property or Profit |
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| Examples of Potential Fraud |
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Definition
| Income, Credit, Property, Value, Funds, Occupancy |
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