Term
| When an underwriter comes back with conditions, what does it mean when they're PTD? |
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Definition
| Prior to doc. A genuine concern that loan closing is hinged upon. |
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Term
| When an underwriter comes back with conditions, what does it mean when they're PTF? |
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Definition
| Prior to funding. Underwriter senses everything's ok but needs documentation. |
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Term
| When an underwriter comes back with conditions, what does it mean when they're PTA? |
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Definition
| Prior to approval. Underwriter thinks there's enough reason to not approve the loan immediately. |
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Term
| What's required for salaried borrowers to verify income? |
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Definition
| Last 2 paystubs, most recent W-2's. |
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Term
| How do you qualify bonus or commission income? |
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Definition
2 most recent pay stubs, 2 most recent W-2s.
Borrower must have 24 month history of commission/bonus income. |
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Term
| What's needed to document commission-only income? |
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Definition
2 years of tax forms, all schedules
Tax form 2016
Enough pay stubs to verify income |
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Term
| For commission only income, what is important about written off expenses? |
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Definition
| Must be deducted from income |
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Term
| What's needed to document dividends interest income? |
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Definition
Verification letter stating income will continue after loan closing, incl. interest rate & amt of dividends each quarter
Tax returns
NOTE: If dividends are used for down payment, it must be deducted from income. |
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Term
| What's needed to document retirement income & SS? |
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Definition
3 months' bank statements showing income deposits
1099 from prev. year
verification from agency proving retirement or SS income
NOTE: award letter should specify type & amt of income and duration |
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Term
| What's needed to document child support income? |
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Definition
12 month record of direct deposit or cancelled checks, or letter from child support agency
Legal papers such as divorce decree that confirm payments to continue for 3 more years
If child will be in college, letter to confirm payments will continue until after college |
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Term
| How many years of child support must be left in order to use it for income? |
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Definition
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Term
| What's needed to document alimony income? |
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Definition
Papers stating payments will go on at least 3 more yrs
12 months prior alimony is req'd |
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Term
| When can alimony be used as income for a loan? |
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Definition
| When it's not used for car payments, household expenses or tuition. |
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Term
| What's needed to document workmen's comp/disability income? |
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Definition
Verification letter from employee guaranteeing:
1- the borrower's job is guaranteed when he/she is healed
2- rate of pay is guaranteed
3- doctor's note verifying worker can return to work, incl. date |
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Term
| What if employer will not guarantee job & rate of pay? |
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Definition
| Only disability benefit can be used as income. |
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Term
| What if a doctor will not give a back-to-work date? |
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Definition
| Only disability benefit can be used as income. |
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Term
| What's the most important section of credit history? What percentage does it account for? |
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Definition
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Term
| What's the 2nd most important section of credit history? What percentage does it account for? |
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Definition
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Term
| What's the 3rd most important section of credit history? What percentage does it account for? |
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Definition
| Length of credit history, 15% |
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Term
| What's the 3rd most important section of credit history? What percentage does it account for? |
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Definition
| Length of credit history, 15% |
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Term
| What's the 4th most important section of credit history? What percentage does it account for? |
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Definition
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Term
| What's the 5th most important section of credit history? What percentage does it account for? |
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Definition
| Types of credit in use, 10%. |
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Term
| What are the 3 ratios underwriters look at when evaluating a loan package? |
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Definition
| LTV, DTI, and Debt Service Coverage (for commercial only). |
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Term
| Define Debt Service Coverage. |
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Definition
Net Operating Income/Debt Service.
Net Operating Income is income after paying out all expenses, and subtracting vacancy or collection losses. |
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Term
| If a lender wants to sell the loan to Fannie Mae or Freddie Mac, what 3 criteria must he/she satisfy? |
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Definition
Borrower has ability to pay debt
Borrower is willing to pay debt
Property is sufficient security for the mtg |
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Term
| What two underwriting methods can be used in making a decision about whether to approve or decline a mortgage application? |
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Definition
Automated underwriting thru Desktop Underwriter
Manual underwriting |
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Term
| FNMA accepts what types of documentation to support employment history? |
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Definition
Tax returns (lender must get permission from borrower to contact the IRS directly for verification)
Pay stubs or payroll earnings statements for 30 days + W2 for 2 years, pay stubs must show YTD earnings and 30 day earnings
Request for a VOE sent to 3rd party empl. verification vendor, with borrower's permission |
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Term
| For what type of borrower does FNMA require 2 yrs of tax returns, in addition to employment verification? |
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Definition
-employed by family member
-employed by interested party to sale transaction
-received income from partnerships in which he/she has less than 25% ownership interest
-receives income from capital gains, royalties, real estate or other non-employment income |
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Term
| When are BUSINESS tax returns not req'd for self-employed borrowers? |
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Definition
-Borrower is paying down pmt & closing costs with his/her own money, not using business acct
-has been self-employed at least 5 yrs AND individual tax returns show increase over last 2 yrs |
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Term
| When does a lender require a balance sheet for self-employed borrower? |
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Definition
If borrower's app is 120 days or more past the end of the prev. tax year
If lender believes it's needed to prove earnings stability |
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Term
| If a salaried borrower and self-employed borrower are jointly applying, what is req'd, if the self-employed borrower won't be using income for qualifying purposes? |
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Definition
| Copy of 1st page of latest fed tax return, to show there wasn't significant loss in the business |
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Term
| For nonpermanent-resident alien borrower, what are the income verification requirements? |
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Definition
For those employed by a US company or US individual, it's the same as a citizen.
For foreign-employed, signed tax returns for 2 yr pd., or by VOE, with the income translated into US $'s.
Note: borrowers employed in an official capacity are exempt. |
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Term
What is needed to prove the borrower has sufficient funds for closing?
How recent must the docs be? |
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Definition
Form 1006, Verification of Deposit, must be signed by the institution and sent directly to lender.
Or, last 2 months of statements from bank, or if applicable, last 2 months of statements from retirement acct (incl. vested amt, conditions for withdrawal)
Most recent acct statement must be 45 days or newer. |
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Term
| What's the FNMA benchmark DTI? |
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Definition
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Term
| What debts must be paid off prior to closing, if loan is to be sold to FNMA? (6) |
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Definition
30-day charge accts don't have to be paid off, unless there's a question about the borrower's ability to pay them off when due
Collections
Charge-offs
Judgments
Garnishments
Liens |
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Term
| Does a cosigned loan pose a problem to FNMA? |
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Definition
It's a contingent liability
Doesn't have to be paid off if borrower can show the principal person for that loan has been consistent with payments for 12 months
otherwise, it's counted in DTI. |
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Term
| Does a property buyout, such as in a divorce, pose a problem to FNMA? |
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Definition
| Contingent liability, not counted if lender can produce proof of xfer of title |
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Term
| Does mtg assumption pose a problem to FNMA? |
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Definition
Property purchaser must have 12 months of consistent payments.
Otherwise, it's included in DTI. |
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Term
| Does a court assignment of debt pose a problem to FNMA? |
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Definition
It's contingent liability, if debt was xferred but creditor didn't release the borrower from liability
FNMA doesn't require lender to evaluate the payment history for this |
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Term
| Does a bridge loan (to use equity from old house, for new house) pose a problem to FNMA? |
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Definition
Contingent liability
Borrower must have sales contract for old property
Must have 6 months' reserves to pay any outstanding liens against the property |
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Term
| Does a loan secured by financial assets pose a problem to FNMA? |
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Definition
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Term
| What must lender consider about revolving charge accounts, regarding selling the loan to FNMA? Monthly payment amt? |
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Definition
If it looks like 10 or more payments remain on the account, it must be considered as recurring monthly debt. Also considered if it significantly affects borrower's ability to pay.
If no monthly minimum is given, lender must consider it 5%. |
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Term
| What must lender consider about installment debt, regarding selling the loan to FNMA? Monthly payment amt? |
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Definition
| Same as revolving - to be considered recurring debt if 10 or more pmts remain. Also considered if it significantly affects borrower's ability to pay. |
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Term
| Deferred Installment Debt - how is it considered by FNMA? |
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Definition
| As part of recurring monthly debt. |
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Term
| How are lease payments regarded by FNMA? |
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Definition
| As part of recurring monthly debt. |
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Term
| Which types of R.E. mortgages are considered recurring monthly debt |
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Definition
| All except for investment mtgs., since those are factored into monthly income or loss. |
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Term
| How does FNMA consider non-reimbursed business expenses? |
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Definition
Must develop 24 month ave., using Schedule A (item. deduct) from tax return, net out any car depreciation
Annualized, if there isn't 24 month history |
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Term
| How does FNMA consider alimony, child support, maint pmts? |
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Definition
| Part of recurring monthly debt if to be continued more than 10 months |
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Term
| How does FNMA considered business debts in borrower's name? |
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Definition
| Lender needs to confirm this by analyzing cash flow. |
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Term
| What's a lock with a float down option? |
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Definition
If rates fall, you get the rate + 1/8%.
Pay refundable fee of 1/2% of borrower's loan, credited toward borrower's costs at closing |
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Term
| What does it mean to "float the borrower's interest rate"? |
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Definition
| Can lock anytime, must lock at least 5 days prior to closing. |
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Term
| Which types of mtg loans usu. carry prepayment penalties? Which do not? Which are prohibited from chg'ing prepayment penalties? |
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Definition
Fixed int. rates usually have penalties, ARMs don't.
FHA, VA & fed. charted credit union loans are prohibited from chg'ing prepayment penalties |
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Term
| How is the closing atty or title company chosen for a loan? |
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Definition
| RESPA allows borrower to make the choice, but most allow their L.O. to do this for them |
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Term
| What kind of ins. is req'd of the borrower at closing? |
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Definition
| Hazard, and sometimes flood. |
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Term
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Definition
Signed by borrower at closing
Pledges real property as security for the loan |
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Term
| What's a promissory note? |
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Definition
Signed by borrower at closing
Written promise by the borrower to pay a debt owed to the lender under mutually agreed conditions.
One of the functions of a promissory note is to establish the debt that validates the lien
make the borrower personally liable for the payment of the mortgage debt, important if foreclosure happens & proceeds don't cover the loan |
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Term
| What does loan servicing include? |
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Definition
| all activities that occur from the time a loan is closed until the time it is repaid |
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Term
| Why must loan servicers be concerned with taxes? |
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Definition
| Gov't can require property to be sold for taxes; this takes precedence over lender's claim |
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Term
| What's the normal fee for servicing a loan? |
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Definition
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Term
| Are the handling of client servicing funds covered by state or federal law? |
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Definition
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Term
| What are "prior to closing conditions"? Who takes care of them? |
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Definition
these conditions relate to the Homeowners Insurance adequacy of coverage and the loss-payee clause and any documents required by the Title search findings
Taken care of by the originator & processor |
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Term
| What are "prior to funding conditions"? Who takes care of them? |
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Definition
Things agreed upon that need to be fixed prior to funding (previous flash cards)
Met by the settlement office |
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Term
| What's the name of the doc used for all closing info/costs? |
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Definition
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Term
| What are the 8 items on the HUD that are lender fees? |
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Definition
Origination fee
Discount fee
Appraisal fee
Credit Report fee
Lender's Inspection fee
Mtg Ins. App Fee
Assumption Fee
Mtg broker fee |
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Term
| What are the 4 items on the HUD that are to be paid in advance? |
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Definition
Interest (settlement to 1st monthly pmt)
Mtg Ins Premium
Hazard Ins Premium
Flood Ins |
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Term
| If a borrower defaults early in the life of the loan, what can happen to the L.O.? (4) |
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Definition
Refund of YSP
Be investigated for fraud
May have to assume loan liability
May be req'd to stop all current & future loan submissions |
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Term
| What can the lender arrange for the borrower, to try to avoid foreclosure? |
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Definition
Special forbearance - payments reduced or suspended, or pmt plan
Mtg Modification - Refi or extend term
Pre-foreclosure sale
Deed-in-lieu of foreclosure - borrower "gives back" property |
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