MORTGAGE LOAN ORIGINATION

What are the 3 steps of the loan process?

1. Origination

2. Processing

3. Underwriting

What is the origination step? And who does this?

process of making or initiating a new loan (gathering information)

loan originators (do not call it a loan officer)

What is the processing step?And who does this?

verify data in loan file; coordinating loan process 

loan processors 

What is the underwriting step?  And who does this?

the bank/creditor evaluate and decide whether to make a new loan 

Is the servicing step a part of the process?

No, it is the result of the loan process if the loan gets approved

What is the servicing step?

continued maintenance of a loan after close

What are the two types of loan applications?

Form 1003 (URLA: Uniform Residential Loan Application) and Form 65

Which loan application does Fannie Mae use?

Form 1003

Which loan application does Freddie Mac use?

Form 65

What is another name for Form1003?

Uniform Residential Loan Application (URLA/URL)

What is the job of an underwriter?

evaluates the documentation, borrower information, and various risk factors to make a decision

What are the two ways that underwriting happens?

Automated and Manual

What is Manual Underwriting?

done by individual who works for lender (calc and pencil)

What does automated underwriting use?

automated underwriting system (AUS)

information is fed into AUS

What are the two main types of automated underwriting systems?

Desktop Underwriter (DU) and Loan Prospector (LP)

What type of automated underwriting system (AUS) does Fannie Mae use?

Desktop Underwriter (DU)

What type of automated underwriting system (AUS) does Freddie Mac use?

Loan Prospector (LP)

What is another name for conventional loans?

conforming loans

Convention loans are not _or _ by a government entity?

Conventional loans are not insured (FHA) or guaranteed (VA) by a government entity.

What are the qualifying ratios of a conventional loan?

28/36

housing expense ratio (front end ratio): 28% 

total debt to income ratio (DTI) (back end ratio): 36%

When is PMI required for a conventional loan?

If the borrower puts less than 20% down/LTV (loan to value ratio) is greater than 80%

What is the late fee for a conventional loan and what is it calculated on? 

A. 5% principle and interest

B. 3% principle, interest, taxes and insurance

C. 5% principle, interest, taxes and insurance

D. 3% principle and interest

A. 5% principle and interest

principle and interest ONLY 

What is the downpayment for a FHA loan?

3.5% if 580 or higher

i believe 10 % if 500-579

What is FHA’s (federal housing administration) role in FHA loans?

to insure the mortgage loan that is made by approved lenders 

(it does not lend the money)

What are the qualifying ratios of a FHA insured loan?

31/43

housing expense ratio (front end ratio): 31% 

total debt to income ratio (DTI) (back end ratio): 43%

For FHA loans, what percentage can sellers contribute of the lesser of the sales price or the appraised value toward closing cost?

up to 6%

What are the occupancy requirements for an FHA loan?

has to occupy as principal residence within 60 days of closing loan for at least 12 months

What does MIP and UFMIP stand for?

mortgage insurance premium and upfront mortgage insurance premium

What type of loans require MIP?

FHA loans require MIP regardless of downpayment

What type of loans require UFMIP? Is it a one time fee?

FHA loans, Yes

What type of loans require PMI?

Conventional/conforming loans

What is the prepayment penalty fee for a FHA loan?

there is NO prepayment penalty fee

What is the late fee for a FHA loan and what is it calculated on? 

A. 5% principle and interest

B. 4% principle, interest, taxes and insurance

C. 5% principle, interest, taxes and insurance

D. 4% principle and interest

D. 4% principle and interest

Who guarantees VA loans?

Veterans Benefits Administration

The U.S Department of Veteran’s Affairs

What is the max guaranty, no matter how long a VA was in service, as part of a VA loan

the max guaranty is 25% of the purchase price or appraised value (whichever is lower)

What are two documents needed for VA loan eligibility (veteran eligibility based on length of service)?

DD-214 discharge papers and COE-certificate of eligibility 

What does the COE say in a VA loan?

the max amount of guarantee by the VA that they qualify for

What is the qualifying ratio of a VA loan?

41%; back-end ratio; DTI ratio

What is the downpayment and prepayment penalty fee for a VA loan?

there is none

What kind of loan has a non-refundable variable funding fee?

VA loan

For who is the variable funding fee waved for (VA)?

waived for disabled vets and surviving spouses 

What are the occupancy requirements of a VA loan?

must occupy as principal residence within 60 days of closing loan, for at least 12 months

What kind of loan requires residual income?

VA loan

On a VA loan, how much can lenders charge?

lenders can charge a flat fee of up to 1% to cover lender costs

What is the late fee for a VA loan and what is it calculated on? 

A. 4% principle and interest

B. 3% principle, interest, taxes and insurance

C. 4% principle, interest, taxes and insurance

D. 5% principle and interest

A. 4% principle and interest

What is another name for a USDA loan?

Section 502 loan

What is a USDA loan used for and how much financing can you get?

100% financing to buy or build property in a rural development /farm communities

provides financial support to low-income homebuyers in rural communities or farm communities

How many people can “rural” include?

small towns up to 35,000 people

Where does the money come from in a Section 502 loan?

Department of Agriculture

What is the max loan amount of a USDA loan?

No max loan amount

What is the prepayment penalty fee for a Section 502 loan?

No prepayment penalty fee

What is the late fee for a USDA loan and what is it calculated on? 

A. 5% principle, interest, taxes and insurance

B. 4% principle and interest

C. 4% principle, interest, taxes and insurance

D. 5% principle and interest

B. 4% principle and interest

What are the three types of appraisal approaches?

1. Sales Comparison/Market Approach 

2. Cost Approach/Replacement Cost Approach

3. Income Approach (Capitalization approach)

What is another name for sales comparison approach?

Market Approach  

everyday approach

What is another name for cost approach?

replacement cost approach

What is another name for income approach?

capitalization approach

What type of appraisal approach requires a minimum of 3 comparables by most secodnary market lenders to ensure an accurate appraisal from sufficient data?

Sales comparison

What is a Market Appraisal Approach?

compares property being appraised with other similar properties (comparables or comps) sold recently in the same market area; best for residential properties

What appraisal approach is used for relatively new construction, vacant land, and unusual or special purpose properties?

Cost Approach

What appraisal approach is used when evaluating the cost to replace property that was damaged due to natural disasters?

Replacement cost/cost approach

What are examples of special purpose properties under the cost appraisal approach?

hospital, school, church (1 purpose)

What are examples of unusual properties under the cost appraisal approach?

wacky architecture/geometrical where you cannot compare the property to others

What is the income appraisal approach used for?

if the purpose of the property is to generate income for the borrower (store, laundry mat, auto lot)

commercial or investment properties

What does the cost appraisal approach do?

calculates the cost of the land, site improvements, and to build the structure, any depreciation 

What does the income appraisal approach do?

estimates the value by analyzing current or potential revenue compared to other similar properties 

If the borrower is self-employed, the lender will want to see a min of how many years of tax returns (corporate and personal)?

min of 2 years

What is another name for not being self-employed/working for someone else?

Wage-Earner

If you are a wage-earner, how many years of continuous employment in the same field, will the lender want to see? If you do not have this, what will the lender want to see?

at least 2 years

certificate/education-changes for advancement or special education and training are acceptable

What law says that you have to accept alimony, child support as income?

ECOA

What type of income is optional, as in the borrower does not need to list this income as a source of income for consideration?

alimony, child support

If the borrower does want alimony or child support to be considered as income, how many years must this income continue for?

must continue 3 years

John gets $1000 per month of social security income, how much is the underwriter going to count?

$1250 

tax free/public assistance income may be grossed up/increased by 25%

If Sue gets $1000 per month of income from renting out one of her rooms, how much is the underwriter going to count?

$750 

rental income is calculated at 75% to allow for vacancy loss of 25%

What is the _% used for when considering rental income?

25% 

vacancy factor 

What is the document called that the lender uses to get a transcript or summary of borrower’s tax return?

4506T

What is the document called that the lender uses to get a full copy of borrower’s tax return?

8821

What is the term that they are going to use on the test for front-end ratio?

HER: Housing expense ratio

How is HER calculated?

PITI/Gross monthly income= Ratio %

What is the term that they are going to use on the test for back-end ratio?

TOR: total obligations ratio

How is TOR calculated?

PITI + Debt/ Gross monthly income= Ratio %

When calculating TOR what does not count as debt and what is?

10 payments or less does not count

leases count as debt no matter the amount of payments 

(pay attention if they say auto lease or auto loan with 6 payments left)

wages to month

Wage= Hourly Wage X Hours worked per_ X_ (weeks per year)/_

week, 52, 12

bi-weekly salary to monthly

Bi-weekly salary= Bi-Weekly Pay X _ (# of paydays per year)/_

26, 12

Semi monthly or bi monthly to monthly 

Semi-monthly Salary= Pay X _  (#paydays per year)/_

24, 12 

How do you calculate the LTV?

1st loan amount/lesser of the sale price or appraised value= LTV %

How do you calculate CLTV?

1st loan amount+ 2nd loan amount/lesser of the sale price or appraised value= LTV%

1st trust deed (TD)

What is CLTV?

combined loan to value

If you have a home that has an appraised value of $120,000, a sales price of $125,000 and the loan amount on the 1st TD of that home is $90,000 and the loan amount on the 2nd TD is $10,000. 

1. What is the LTV?

2. What is the CLTV?

1. 75% (90k/120k=0.75)

2. 83% (90k=10k/120k-0.83)

Smith’s annual income is $60,000. The expected PITI is $1,550 and monthly recurring debt payments are $450. What is the borrower’s HER and TOR?

1. 60k/12=15k monthly income 

2. $1,550/$5,000=0.31=31% HER or front end ratio

3. ($1,550+ $450)/$5,000=0.4=40% TOR or back end ratio

A borrower has a stable monthly income of $4,000 and recurring debts of $600.  If he is getting an FHA loan, what is the maximum monthly payment for which he would qualify?

A. $1054

B. $1120 

C. 1240

D. 1462

B. $1120

1. $4k x0.31=$1240

2. $4k x 0.43-$600= $1120

What is the HER and TOR of a conventional loan?

28/36

HER=28%

TOR or total DTI=36%

What is the HER and TOR of a FHA loan?

31/43

HER=31%

TOR or total DTI=43%

What is the HER and TOR of a VA loan?

no HER

TOR or total DTI=41%