Effective Application Interviewing and Review with New URLA...–Are there other income types or...
Transcript of Effective Application Interviewing and Review with New URLA...–Are there other income types or...
Genworth Mortgage Insurance Corporation ©2018 Genworth Financial, Inc. All rights reserved.
Effective Loan Application Interviewing and Review - Using the New URLA
December 2018
Effective Loan Application InterviewingObjective
– Provide Originators and Processors with best practices for taking and reviewing quality loan applications and supporting documentation
Agenda– Questions to Ask– Purpose of Loan Fields – 1003 Starting with Property Section – Contract Review– IPC, Sales and Financing Concessions– Employment and Income– Assets– Liabilities– Declarations– REO Section– Genworth Website– Questions
Effectively Reviewing the New URLA 2
Uniform Residential Loan Application (URLA) Timeline UpdateSeptember 26, 2017
– Finalized Demographic Information Addendum
– URLA Effective Dates– Desktop Underwriter® (DU®)
Specification Timeline
Effectively Reviewing the New URLA 3
Uniform Mortgage Data Program® (UMDP ®)
Effectively Reviewing the New URLA 4
Fannie Mae’s URLA Page
Effectively Reviewing the New URLA 5
https://www.fanniemae.com/singlefamily/uniform-residential-loan-application?utm_source=fanniemae&utm_campaign=best_match
Freddie Mac’s URLA Page
6Effectively Reviewing the New URLA
http://www.freddiemac.com/singlefamily/sell/ulad.html
•Effectively Reviewing the New URLA 7
Same Look and Feel
•Effectively Reviewing the New URLA 8
https://www.fanniemae.com/singlefamily/uniform-residential-loan-application
•Effectively Reviewing the New URLA 9
*New
*
Reg B Prohibits asking for additional info
*
Previously in liability section and easily missed
Previously in the Declarations section
*
Loan detail has been moved onto the new URLA throughout the forms -Loan amount, interest rate, loan type…
•Effectively Reviewing the New URLA 10
Questions to Ask From the BeginningPre-Loan Application Questions
– Did you freeze your Credit?– Credit Score – Mortgage Model vs Consumer Model– Serious derogatory events - Waiting Period - Re-established credit, we will talk
about
Effectively Reviewing the New URLA
Discuss With Borrower And Be Clear About Any Changes To Income, Employment, Changes In Liabilities, Down Payment Sources
Need To Be Disclosed To You As Soon As Possible!!
11
Credit Freeze FAQ’s
Effectively Reviewing the New URLA
https://www.consumer.ftc.gov/articles/0497-credit-freeze-faqs
12
Credit Freeze
13Effectively Reviewing the New URLA
If consumers ask for a freeze online or by phone, the credit reportingagency must have the freeze in place within one business day. And when consumers want to lift the freeze, the credit reporting agencies have to make that happen within one hour. (If consumers make the request by mail, the agency must place or lift the freeze within three business days.)
New September 21,
2018
:Make Sure When You Order Any Type of Credit Report You– Get the complete legal name of the borrower– Use the correct spelling of both the first and last name– Identify any alternate names the borrower may use– Confirm whether the borrower uses any generation suffix (Jr., III…)– Obtain a previous address, if the borrower has been at the current address for
less than 2 years
Only businesses or individuals with a “permissible purpose” can access aconsumer’s credit report. Consumers must be fully aware that their credit will be accessed and have granted permission to do so.
Any person who knowingly or willfully obtains a consumer report from a consumer reporting agency underfalse pretenses, or any officer or employee who knowingly or willfully provides information concerning an individual from the agency’s files to a person not authorized to receive that information, shall be fined or imprisoned not more than 2 years, or both.
Follow your company’s policies and procedures on requesting a consumer’s permission and accessing their credit
Requesting The Credit Report
Effectively Reviewing the New URLA 14
Non–U.S. Citizen Borrower Eligibility
Effectively Reviewing the New URLA 15
Marital Status
Effectively Reviewing the New URLA
Civil Union is a legally recognized union of a same-sex couple, with rightssimilar to those of marriage. Domestic Partnership is a legal or personal relationship between twoindividuals who live together and share a common domestic life, but are neither joined by marriage nor a civil union. A Reciprocal Beneficiary Relationship is a legal relationship createdwhen two consenting adults, who are prohibited from marriage, declare their intent to enter a reciprocal beneficiary relationship. Neither of the parties may be married or a party to another reciprocal beneficiary relationship.
See Unmarried Addendum
16
*
*NEW
•Effectively Reviewing the New URLA
No Primary Housing Expense– Caution on loans with no traditional credit. To receive an Approve/Eligible or
Accept/Eligible recommendation, the borrower must have a housing reference
17
*
*NEW
•Effectively Reviewing the New URLA
Military Service– The length of service or service commitment, duty status and character of
service determine the eligibility for specific home loan benefits.
18
Military Service
Effectively Reviewing the New URLA
https://www.benefits.va.gov/homeloans/
19
Language Preference
Effectively Reviewing the New URLA 20
*NEW
*New
**
Enter the Employer’s main number. Do NOT list the borrower’s personal work phone number that was collected in Section 1a.
Employment/Income
•Effectively Reviewing the New URLA
.Spell out the full, complete business name and address– Does the borrower work from home and has a corporate office somewhere else?
• Use conversation log in your LOS/loan file to keep a written record of this information.• Employment information should be compared to credit report • Full two year history should be completed
:Correctly identify self employment– If the borrower owns 25% or more of the business, they are considered self-employed for loan
qualification purposes– A borrower may be self-employed and get a W2 from that business– Borrowers typically must be self-employed for two years, although documentation allows for only one
year to be documented
21
Effectively Reviewing the New URLA
Employment/Income:Ask Questions to Determine if You Will Need Tax Returns
– Does your borrower own 25% or more of a business?– *Does your borrower receive commission as 25% or more of the income?– Does your borrower work for a relative?– Are there other income types or situations that may be best documented by the
tax returns:• Interest or Dividend• Capital Gain/Loss• Unreimbursed Employment Expenses• Rental or Other Property Income, Loss or Expenses• Farm Income/Loss
– On job full two years? Any gaps? Any time off? Any pay change? Remember, Some Professions May or May Not Indicate SelfEmployment:
– Realtors, Loan Originators, Consultants, etc.
Does Your Policy Require You Always Obtain Tax Returns?Does Your Policy Allow You To Document To The AUS Results?
22
*New
*
Employment/Income
•Effectively Reviewing the New URLA
Income From Other Sources - Reminders:– Income must be broken down by specific type– “Other” is a last resort in income identification– Income trends must be stable or increasing and likely to continue in the future
for you to use as a qualifying source of income
23
*New
Employment/Income
•Effectively Reviewing the New URLA 24
Steady, Stable, Likely to Continue– Two Year History– Guideline exceptions for some income types– Examples: Alimony, Survivor Benefits, Retirement
• Three Year Continuance from application dateDocumentation
– Check guidelines for minimum documentation requirement– Seek additional documentation if:
• Inconsistent• Discrepancies• Possible misrepresentation
Capacity
25Effectively Reviewing the New URLA
26
Fannie Mae Single Family Selling Guide§B3-3.1-01, Employment and Other Sources of Income
Capacity: Fannie Mae
Effectively Reviewing the New URLA
Capacity: Fannie Mae
27Effectively Reviewing the New URLA
https://www.fanniemae.com/content/guide/selling/b/index.html
Capacity: Freddie Mac
28Effectively Reviewing the New URLA
Capacity: Freddie MacIncome Continuance Charts Were Added to Topic 5301.1– Income and earnings types typically without documentable continuance– Income types with documentable continuance– Other income types that may or may not have documentable continuance
29Effectively Reviewing the New URLA
Freddie Mac’s Single-Family Seller/Servicer Guide Series 5000: Origination and UnderwritingTopic 5300: Stable Monthly Income and Asset Qualification SourcesChapter 5301: General Requirements for All Stable Monthly Income and Asset Qualification Sources
Capacity: Freddie MacEmployed Income TypesPrimary
– Borrower’s primary source of employed incomeSecondary
– Second job, part-time job or multiple jobsAdditional
– Commissions– Bonus– Overtime– Tips– Auto allowance– Mortgage differential– Military entitlements– Military Reserves & National Guard– Unemployment with seasonal employment
30Effectively Reviewing the New URLA
Primary
SecondaryAdditional
Freddie Mac’s Single-Family Seller/Servicer Guide Topic 5300
Freddie Mac Documentation Matrix Documentation Matrix
– Assists in properly underwriting and documenting the loan file for Freddie Mac Eligible loans only
– Lenders may have overlays so always check specific program requirements
– Updated September 2018
31Effectively Reviewing the New URLA
http://freddiemac.com/learn
Capacity
37
Show Your Income Calculation Work– Agencies/Investors require calculations– Self-Employed Borrowers
• Written analysis• Available worksheets
– Fannie Mae Cash Flow Analysis (Form 1084)– Freddie Mac Income Analysis (Form 91)– Schedule Analysis Method– Specific Lender/Investor Forms
• Genworth calculators can be found at https://new.mi.genworth.com/training
Effectively Reviewing the New URLA
Assets and Liabilities
Effectively Reviewing the New URLA
Do not enter gift funds in Section 2. Gifts are entered in Section 4.
**New
List Assets– Breakdown by type of asset– Ask applicant which account or accounts or “source” of funds will be used for the transaction– Collect two months assets statement– Know what is considered a large deposit– Explain any change source of funds must be communicated to you (i.e. borrower was to get a
gift but now liquidating their 401k)– Does borrower have access to retirement accounts without restriction?– Proof of liquidation?
43
Assets and Liabilities
Effectively Reviewing the New URLA
Do not enter gift funds in Section 2. Gifts are entered in Section 4.
*
*New
Gifts must be evidenced by a letter signed by the donor, called a giftletter. The gift letter 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, and relationship to the borrower
Documentation of donor ability/transfer and proof of receipt of the giftwill be required prior (prior to for Freddie Mac) or at closing.
53
Gift FundsGift Funds
– Enter into AUS correctly– Must come from acceptable source– A gift can be provided by:
• A relative, defined as the borrower’s spouse, child, or other dependent, or by any other individual who is related to the borrower by blood, marriage, adoption, or legal guardianship; or
• A fiancé, fiancée, or domestic partner– Document correctly– *Verify donor availability
• Funds transfer per investor guidelines– Fannie Mae prior to, or at closing– Freddie Mac prior to closing
– Other restrictions• Investment properties, gifts are not allowed
Effectively Reviewing the New URLA
*The donor may not be, or have any affiliation with, the builder, the developer, the real estate agent, or any other interested party to the transaction.
54
Assets and Liabilities
Effectively Reviewing the New URLA
- Other Assets These asset types are the less common – Verify acceptability of the assets type and check to see if any program
restrictions apply
55
Sweat Equity- Fannie Mae
56Effectively Reviewing the New URLA
Sweat Equity- Freddie Mac
57Effectively Reviewing the New URLA
http://www.freddiemac.com/learn/pdfs/mp/sweat_equity_reminders.pdf
Real Estate liabilities are NOT entered in Section 2 they will be entered in Section 3.
Liabilities
58•Effectively Reviewing the New URLA
*New
*:Liability Section Tips
– Not all liabilities appear on a credit report – Installment debts with 10 or fewer remaining payments:
• Typically not included in debt ratio, but should be listed as a liability– Any known liability not showing on the credit report, must still be listed on the application
• Examples: Child Support, Tax Repayment, Alimony, Employer Loan
LiabilitiesMinimum Payments
– Usually on credit report– If not on credit report
• Creditor supplied documentation• Revolving, DU and Loan Product Advisor® allow using the greater of:
– 5% of outstanding balance, or– $10
Open Ended Accounts (O-J or O-I under MOP on Credit Report)– Sufficient funds for repayment, plus funds to close and reserves
• Yes– Inclusion not required
• No– Inclusion of 5% outstanding balance required for Freddie Mac, if no payment listed– Cannot close loan for Fannie Mae
– Third party responsibility• Example: employer reimbursement• Document with letter from employer/responsible party
Effectively Reviewing the New URLA 59
LiabilitiesStudent Loans
– Fannie Mae
Effectively Reviewing the New URLA
Guidelines Stated Are Generic Fannie Mae Policy
*See Fannie Mae SEL 2017-04 for guidance on student loan debts when calculating a borrower’s DTI Ratio
60
LiabilitiesStudent Loans
– Freddie Mac • For loans in repayment, forbearance or deferment:
– If the monthly payment amount is greater than zero, use the monthly payment reported on the credit report, or other file documentation, or
– If the monthly payment amount is zero, use.5% of the outstanding balance, as reported on the credit report,
Effectively Reviewing the New URLA 61
Liabilities– Excluding Debts Contingent Liabilities or Not
– Fannie Mae• Allows for any type debt (revolving, leases, student loans)
– Must document 12 month payment history, with no delinquencies– Evidence payments made by someone other than borrower(s)
– Freddie Mac same as above. See Freddie Mac Bulletin 2017-23.– To exclude mortgage debt, in addition to the above, you must also verify the
person making the payments is obligated on the note (Fannie Mae and Freddie Mac Guidelines)
– Situations requiring inclusion in debt ratio• Obligator’s payment not documented• Sufficient history (12 months) not established• History of Delinquency• Business debt not paid from separate business account
– Cannot be borrower’s personal account– Cannot be business account, from which personal debts are paid
Effectively Reviewing the New URLA 62
Real Estate liabilities are NOT entered in Section 2, they will be entered in Section 3.
Other Liabilities and Expenses
63•Effectively Reviewing the New URLA
*New *
:Other Liability Section Tips– Not all liabilities appear on a credit report – Installment debts with 10 or fewer remaining payments:
• Typically not be included in debt ratio, but should be listed as a liability– Any known liability not showing on the credit report, must still be listed on the
application• Examples: Child Support, Tax Repayment, Alimony, Employer Loan
– Fannie Mae Announcement 2017-06 allows for Alimony to be deducted from monthly income or considered in the DTI
– Fannie Mae Announcement 2018-09 As a result of the tax law changes that will prevent lenders from being able to identify unreimbursed business expenses, we are removing the requirements for IRS Form 2106, and changing the automobile allowance policy. The full amount of an automobile allowance may now be included as income and the lease or financing expenditure must be included as a debt in the calculation of the debt-to-income (DTI) ratio. (Note that a history of receipt of this income continues to be required.)
*New
*** *
*
Previously listed in liability section
Real Estate Owned (REO) Section
•Effectively Reviewing the New URLA 64
Real Estate Owned (REO) Section
Effectively Reviewing the New URLA
A Mortgage Trade Line Needs Additional Caution Taken WhenReviewing. The payment on the report typically represents the payment based on repaying the note. Itdoes not include escrows of taxes and insurances that the mortgage servicer may be collecting.– Verify the complete obligation through:
• Copies of the mortgage servicing monthly statement• Verify what, if any, escrows are being collected. Based on recent changes, Home Owners/Hazard policies may
no longer be collected.• If mortgage loan is non escrowed or non-impounded, verification of current taxes and hazard insurance amounts
are required• If property is a coop, condo or PUD, association dues must also be documented and verified
If an Automated Underwriting Service (AUS) is being used, verify that any reported latepayments have been disclosed to the AUS.
65
Real Estate Owned (REO) SectionRental Income Guidelines and Rental Income Forms
• Fannie Mae Forms 1037, 1038 and 1039– Genworth has calculators on website
• Genworth Rental Income Calculator is an option• Freddie Mac Update - Rental Form 92
– Genworth has posted Form 92 calculator on our website– Overview
• Leases may be used if property recently acquired or acquired subsequent to the filing of tax returns, but additional guidelines may apply
• Fannie Mae: Clarification on calculating when a Partnership or S-Corp owns the property– Form 1039 can be used to determine if PITIA can be excluded from the borrower’s debt ratio– The 1039 does not allow use of net positive cash flow as qualifying income
– Genworth offers a Rental Income webinar, which includes recent Freddie Mac Bulletin 2017-12 changes. These have been delayed until March 2019, but
• Lenders may choose to implement all or NONE of the changes prior to November so, check each investors policy…what are they following
Effectively Reviewing the New URLA
Include Taxes, Insurance, HOA Dues In The Monthly Payment, Even If The Investment Property Is Owned Free And Clear
66
Previously the first section of the application
*New
**
Loan and Property Information
•Effectively Reviewing the New URLA
All Data Fields Should be Correctly Completed– Show correct USPS address; Legal address should be listed on page 5 of
1003– Occupancy must make sense
• Fannie Mae and Freddie Mac continue to see occupancy misrepresentations– Do they own other properties and what is the status of other properties– Distance from employer– To be considered, owner occupied - one of the applicant’s must occupy the subject property
within 60 days of closing
67
*New *
*
*
Loan and Property Information
•Effectively Reviewing the New URLA
All Data Fields Should be Correctly Completed– Refinance: Does address match up to W-2/bank statement mailing address?– Refinance: How long have they owned property? Complete year acquired,
original cost, existing liens, purpose of refinance. – Is there an existing HELOC with no balance to be released or re-subordinated?– Currently offered or listed for sale in most recent six months and want cash
out?
68
Interested Party ContributionsIPCs Are Either Financing or Sales Concessions
– Financing concessions are allowed, but have restrictions on the amounts that can be applied to the transaction
– Sales concessions are amounts that exceed the allowable financing concessions (or are non-realty items) and the value must be subtracted from the sales price when calculating LTV
– IPCs cannot be used to make the borrower’s down payment, meet financial reserve requirements, or meet minimum borrower contributions
Effectively Reviewing the New URLA 72
IPC’s - Fannie Mae
73Avoiding Common Underwriting Errors
IPC’s - Freddie Mac
74Avoiding Common Underwriting Errors
Declarations
Effectively Reviewing the New URLA
*New
*
***
:Other Common Issues– Be sure to go through the declarations carefully with your borrowers– Have any “yes” answers explained completely– Remember, guidelines concerning previous bankruptcy and/or foreclosure require
waiting periods and re-establishment of credit• Each Lender, Investor and MI Company may have rules that are stricter than the GSE guidelines
(i.e. NO extenuating circumstances allowed)
75
Declarations
76Effectively Reviewing the New URLA
*New
**
*:Other Common Issues
– Be sure to go through the declarations carefully with your borrowers– Have any “yes” answers explained completely– Remember guidelines concerning previous bankruptcy and/or foreclosure requires
waiting periods and re-establishment of credit• Each Lender, Investor and MI Company may have rules that are stricter than the GSE guidelines
(i.e. NO extenuating circumstances allowed)
Acknowledgements and Agreements
Effectively Reviewing the New URLA
*New *
Disclosure of the use of appraisal and use of electronic records and signaturesReporting of late payments to credit reporting agencies
Use and sharing of a borrower’s personal information disclosed on the URLA
77
Demographic Information Addendum
Effectively Reviewing the New URLA
*New
**
*
*
78
*New
***
Loan Originator Information
•Effectively Reviewing the New URLA 79
Continuation Sheet
Effectively Reviewing the New URLA 80
New Form
URLA - Additional Borrower
•Effectively Reviewing the New URLA
If the borrowers have separate financial information, a unique URLA.
Note: Join assets, liabilities, and real estate should be listed on only one application and not duplicated on more than one application.
81
The Lender Loan Information now has some of the loan information fields
New Form
Lender Loan Information
82•Effectively Reviewing the New URLA
*New
**
*
*
Lender Loan Information
83•Effectively Reviewing the New URLA
All data fields should be correctly completed– Refinance: Does address match up to W-2/bank statement mailing address?– Refinance: How long have they owned property? Complete year acquired,
original cost, existing liens, purpose of refinance. – Is there an existing HELOC with no balance to be released or re-subordinated?– Currently offered or listed for sale in most recent six months and want cash
out?
*
Community Property States Community Property Refers to Joint Ownership of Property WhereMultiple People, Such as a Married Couple, Can Simultaneously Own a Single Piece of Property.
Here is a list of the Community Property states which recognize this property regime:
– Arizona– California– Idaho– Nevada– New Mexico– Texas– Washington– Wisconsin
Effectively Reviewing the New URLA 84
*New
**
**
*
•Effectively Reviewing the New URLA
Lender Loan Information
Tenancy in Common is different than Joint Tenancy, because the transfer of the property to a beneficiary in the event of an owner's death, is different. In a Joint Tenancy agreement, the title of the property is passed to the surviving owner, while in a Tenancy in Common agreement, the title can be passed to a beneficiary of the owner's choosing.A Tenancy by the Entirety can be created only by married persons. A married couple may choose to create a Joint Tenancy or a Tenancy in Common.
**These title options should be referred to the borrower’s legal counsel and/or Financial Planner
*
85
*New
*
•Effectively Reviewing the New URLA
Lender Loan Information
Confirm Qualifying Rate vs. Note Rate on Adjustable Rate Programs
86
Effectively Reviewing the New URLA
*New
**Sub-totaled
Lender Loan Information - DOT
87
New Information Data Set
•Effectively Reviewing the New URLA
Lender Loan Information
88
New FormUnmarried Addendum
•Effectively Reviewing the New URLA89
Please reference your internal policies & procedures.
New Form
Instructions
•Effectively Reviewing the New URLA
Written for the consumer
90
Updates
Effectively Reviewing the New URLA 91
FAQ’s
Effectively Reviewing the New URLA
https://www.fanniemae.com/content/faq/urla-ulad-faqs.pdf
92
Genworth Underwriting Guidelines
Effectively Reviewing the New URLA 93
Genworth Rate Express®
Effectively Reviewing the New URLA 94
LOS Connections
Effectively Reviewing the New URLA 95
Training Tools and Information
96Effectively Reviewing the New URLA
Training Tools and Information
97Effectively Reviewing the New URLA 97
Effectively Reviewing the New URLA
ActionCenter®: 800 444.5664 Your Local Genworth
Regional Underwriter Your Genworth Sales
Representative
Your Genworth Resources
98
Effectively Reviewing the New URLA
Legal Disclaimer Genworth Mortgage Insurance is happy to provide you with these training materials. While we strive foraccuracy, we also know that any discussion of laws and their application to particular facts is subject to individual interpretation, change, and other uncertainties. Our training is not intended as legal advice, and is not a substitute for advice of counsel. You should always check with your own legal advisors for interpretations of legal and compliance principles applicable to your business.
,GENWORTH EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIEDINCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THESE MATERIALS AND THE RELATED TRAINING. IN NO EVENT SHALL GENWORTH BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER WITH RESPECT TO THE TRAINING AND THE MATERIALS.
Genworth Mortgage Insurance Offers A Comprehensive Suite Of Training Opportunities To Boost Your Know-How, Benefit Your Bottom Line, And Serve Your
Borrowers Better. Visit new.mi.genworth.com To Learn More.
Desktop Underwriter® and DU® are registered trademarks of Fannie MaeLoan Product Advisor® is a registered trademark of Freddie MacActionCenter® and Rate Express® are registered trademarks of Genworth Mortgage Insurance
99