Processing The Loan
Types Of Properties We Lend On
Regulatory Requirements for Disclosure of Conventional Loans
Basic Mortgage Formulas
Our Loan Categories
The primary source of information
that is used to process the loan and ultimately approve it comes
from the Uniform Residential Loan Application (URLA) also commonly
referred to as Fannie Mae form 1003. The latest version of this
form in use is dated 5/91. The form is the same for Fannie Mae,
Freddie Mac, VA, FHA and almost all other private or conduit loan
programs. It is truly a universal document in the mortgage business.
Before we can process a loan application this form must be completed
in its entirely. Each borrower on the loan application must complete
the form. If there is not enough room on the application for all
the borrower's. Information an addendum to the application form
is used. All information must be included. Only a husband and
wife can share one URLA. If two unmarried persons are obtaining
financing then each needs to complete a different URLA. Because
of the importance of this form virtually all loans are taken with
the assistance either in person or over the phone of a loan officer.
At the time of application a variety of other forms must be completed
and executed at the same time. These may include but are not limited
to:
OCCUPANCY CERTIFICATION:
This certification states who the borrower will use the property
that is being financed. There are usually three forms of occupancy;
primary residence, vacation home or investment. The rate and other
loan parameters can be affected by the occupancy status of the
property.
BORROWER AUTHORIZATION AND CONSENT:
This form is the borrower's written consent authorizing the lender
to obtain credit information, verify employment and banking information.
Signed borrower's consent forms are sometimes required by credit
reporting companies.
NOTICE OF TRANSFER:
This form is written notification to the borrower that the loan
will probably be sold in the secondary market and that the lender
that made the loan will probably not be the lender that the borrower
will make the payments to.
APPLICATION DISCLOSURE:
This form explains and acts as a receipt for any fees paid upon
application. It further explains how and when the fees are refundable
and the estimated time it will take to make a decision to approve
or deny the loan application.
LOCK-IN AGREEMENT:
This form explains the lock-in procedures and gives a written
disclosure of the period of time the rate is locked-in and protected.
Depending on the loan program selected rate are locked in from
time of application up to five days before the closing date.
PROCESSING THE LOAN
The objective of loan processing is to verify a two year work
history for the borrower, verify they have sufficient experience
in managing their credit an verify they have sufficient funds
for the down payment closing costs and any reserves if the program
requires it. And to also verify the property is sufficient collateral
for the loan.
Upon receiving the loan application package directly from the
borrower or a loan officer the loan is Opened. Opening a file
includes having all documents reviewed for proper dated signatures
completeness, accuracy, and legibility. This includes sending
out by mail Verification of Employment (VOE) verification of Deposit
(VOD). Credit reports and a property appraisal are ordered by
fax from outside companies.
The processor will request any missing documents and necessary
credit explanations. The processor uses a processing control sheet
to check when information is requested and when documents are
received. Any telephone conversations are logged on the control
sheet. Verification forms are sent directly to the depositories
and employers by mail or over night carrier and are not permitted
to pass through the hands of the applicant or any other person.
When the documents are received in the file complete the loan
is reviewed again, copied and set to underwriting for a decision.
Underwriting decisions take from 24 hours up to four days depending
on volume and even weather conditions.
A written commitment is faxed or mailed to the borrower and ca
copy sent to their attorney.
TYPES OF PROPERTIES WE LEND ON
SINGLE FAMILY RESIDENCE (SFR)
This property type is typically one home on its own lot.
It will not have any adjoining walls to any other type of homes.
It may or may not have the garage attached. Its amenities are
located within the property boundaries dictated on the survey map.
PLANNED UNIT DEVELOPMENT (PUD)
This property is typically one home on its own lot in a large community
development.Homeowners own their own homes and lots. Amenities are part of the value of the
home but will not be on individual homeowners lot. The amenities will be such things as one
pool for every ten homes or a clubhouse and community tennis court. Some PUD's are even
gated with a 24 hour guard on duty. Each homeowner owns an undivided interest in the
common grounds and amenities. There is a monthly fee due from each homeowner that covers
the maintenance of the common grounds and amenities.
CONDOMINIUM OR TOWNHOUSE
This property is typically one unit attached to several units in a large or small community
development. This attached unit might be side by side or stacked on top of each other.
Homeowners within a development own their own lots, but have only an undivided interest in the
common grounds and amenities. There is a monthly fee due from each homeowner that covers the
maintenance of the common grounds and amenities.
TWO TO FOUR UNITS
This property type is a duplex, triplex, or a fourplex. These units may or may not be attached
to each other; they are however, all acceptable fore financing. If there are more than four units,
it would be a multifamily and would most likely be financed through a commercial program with very
different loan parameters.
MIXED USE COMMERCIAL
As the name implies this type of property contains both commercial and residential space. Typically
it is a building located in a urban area with one or more store front rental spaces and one or more
apartments.
REGULATORY REQUIREMENTS FOR
DISCLOSURE OF CONVENTIONAL LOANS
THE EQUAL CREDIT OPPORTUNITY ACT (ECOA)
This Act ensures that all persons have the same chance to obtain credit. Under this provision, a creditor cannot
discriminate against an applicant on the basis of race, color, religion, national origin, sex, marital status,
familiar status, handicapped status, age, receipt of public assistance or exercise of consumer civil rights.
GOOD FAITH ESTIMATE
Lenders are required to provide a clear and concise estimate of the dollar amount or range for each settlement
charge the borrower is likely to incur no later than three business days after the written application is received
by the lender. The changes are only estimates are reflected on the Good Faith Estimate but should be as precise as possible.
The Good Faith Estimate is required under RESPA.
TRUTH-IN LENDING (TIL)
This disclosure allows the borrower to see what charges will be paid over the life of the loan. The annual percentage rate
(APR) is disclosed, which tells the cost of the credit expressed as a yearly rate. The disclosure must be given to the
borrower within three business days of the application date.
CONSUMER HANDBOOK ON ADJUSTABLE RATE MORTGAGES
This booklet is commonly known as CHARM booklet and discloses the terms of the adjustable rate loan.
It informs the borrower of the interest rate cap, interest rate floor, index rate margin, when the
payment changes, when the rate changes, and how much it can change each time. This disclosure must be
given to the borrower within three business days of the application date.
TRANSFER OF SERVING DISCLOSURES
There are two disclosures involved. One is given to the borrower at the loan application, which details
the percentage of loans made in the prior 36 months wherein servicing has been transferred. It also
discloses how the borrower will be notified should the servicing be transferred. The second form is the
Notice that servicing has actually been transferred.
BASIC MORTGAGE FORMULAS
LTV (LOAN TO VALUE):
Loan amount divided by the lesser of the sales price or appraised value.
|
EXAMPLE: |
Loan Amount: |
$160,000.00 |
| Sale Price: |
$200,000.00 |
| LTV: |
80%
|
DOWN PAYMENT/EQUITY:
Sales Price or appraised value (refinance) less the loan amount.
|
|
EXAMPLE: |
Sales Price or appraised value: |
$185,000.00 |
| Loan Amount: |
$125,000.00 |
| Down Payment/Equity: |
$50,000.00
|
POINTS:
An up front charge usually paid at the closing. A point is
short for percentage point.
|
|
EXAMPLE: |
Loan Amount is $130,000.00 |
1 point is 1% or $1,300.00
|
DSR (DEBT SERVICE RATIO)
1st ratio: Mortgage payment (PITI) DIVIDED BY GROSS MONTHLY INCOME. 2nd ratio: PITI plus
reoccuring debts divided by gross monthly income.
|
EXAMPLE:
1st ratio |
Mortgage Payment (PIT) |
$1400.00 |
| Gross Monthly Income |
$5,500.00 |
| DSR |
25% |
EXAMPLE:
2st ratio |
PITI |
$1,400.00 |
| Monthly car payment |
$300.00 |
| Gross monthly income |
$5,500.00 |
| DSR (2nd) |
31%
|
OUR LOAN CATEGORIES
CONVENTIONAL
Two kinds conforming and Jumbo.
The most popular conforming types of financing available for residential properties
(one to four) are Fannie Mae Freddie Mac and private conduits A tremendous variety
of loan programs are available for purchase or refinance transactions. There is a
maximum loan limit established by each of these investors. FNMA and FHLMC allow
for conforming loan limits only.
As of January 1st, 2002: Conforming loan limits
- 1 family - $300,700
- 2 family - $384,900
- 3 family - $465,200
- 4 family - $578,150
A non-conforming loan amount is the dollar figure which exceeds the conforming limits
as stated above.
GOVERNMENT
There are two general types: FHA (Federal Housing
Authority), and VA (Veterans Administration) loans.
NoDoc or Low Doc refer to the
NoDoc page.
|
