Written By: Stacey Sprain

Much has been published lately about FHA streamline refinances particularly because of the recent drop to MIP rates for certain FHA to FHA streamline refinances but there’s one important topic I haven’t seen much if any press about and it’s an important one when we’re talking streamline refinances- important in particular for non-credit qualifying streamline refinances. Various state “ability to repay” regulations and statutes need to be considered when originating and underwriting streamline refinances.

Need FHA Training? CLICK HERE: http://www.FHA-Classes.org

What is “ability to repay” and why should you care about it?
If you aren’t familiar with the term “ability to repay” you may want to become familiar with it because it’s on the table right now with the Consumer Financial Protection Bureau. See http://www.consumerfinance.gov/pressreleases/consumer-financial-protecti.... As of March 30, 2012 there are fifteen states that require mortgage lenders to make a determination of the borrower's ability to repay for certain mortgages. Generally “ability to repay” is directly connected with requirements to determine that a borrower has the means and ability to repay the mortgage loan for which he or she has applied. It falls to lenders to be aware of the various state to state regulations and minimum documentation requirements when it comes down to documenting the borrower’s specific “ability to repay.”

If you haven’t had the “pleasure” of sorting through various state laws and regulations, I can tell you first hand that it’s no picnic. There is no consistency. Overall each state has the ability to write laws and regulations that in many cases trump the guidelines and requirements that GSEs and lenders put out there. Often when trying to find a particular answer to a question it’s like trying to find a needle in a haystack. Actually, finding a needle in a haystack might actually prove to be easier, believe it or not. Each state lists their state laws and regulations differently and you may find the strangest things buried in the strangest chapters. Overall it’s just not an easy task, let’s put it that way.

The key with the various state “ability to repay” requirements is to determine whether or not one can actually offer a non-credit qualifying streamline in a particular state without violating that state’s “ability to repay” requirements. There are a number of states that require the collection of necessary documentation in order to prove the borrower’s income, assets and/or financial status is considered in the loan decision thereby eliminating the option for standard non-credit qualifying streamline refinances which do not require verification of employment, income or debts and liabilities.

To help make it easier for you to determine whether or not typical non-credit qualifying streamlines are eligible, below is a list of state requirements and each state’s “ability to repay” rules:

• Alaska- Ok for non-credit qualifying streamlines
• Alabama- Ok for non-credit qualifying streamlines
• Arkansas- Ok for non-credit qualifying streamlines
• Arizona- Ok for non-credit qualifying streamlines
• California- Ok for non-credit qualifying streamlines
• Colorado: Mortgage Loan Originator Licensing and Mortgage Company Registration Act - A mortgage loan originator must make a reasonable inquiry concerning the borrower's current and prospective income, existing debts and other obligations, and any other relevant information. A reasonable inquiry requires the mortgage loan originator to interview and discuss current and prospective income with borrowers, including the income's source and likely continuance.
• Connecticut: Non-depository Mortgage Lenders and Brokers Act - A mortgage loan originator's duty to make a "reasonable inquiry" requires the mortgage loan originator to recommend appropriate mortgage products. Mortgage loan originators may only recommend appropriate mortgage products after a reasonable inquiry has been made in order to understand the borrower's current and prospective financial status. A reasonable inquiry requires the mortgage loan originator to interview and discuss current and prospective income with borrowers, including the income's source and likely continuance, and may not require the mortgage loan originator to verify such income. Mortgage loan originators have a duty to recommend mortgage products based on the information provided by the borrower.

Need FHA Training? CLICK HERE: http://www.FHA-Classes.org

• Delaware: Ok for non-credit qualifying streamlines
• District of Columbia: Mortgage Lenders and Brokers Act- The current income, current debt, currents assets, current liabilities, employment, and other sources of revenue of each borrower must be verified and documented in order to determine the borrower's ability to repay a loan secured by a residential lien instrument.
• Florida: Ok for non-credit qualifying streamlines
• Georgia: Ok for non-credit qualifying streamlines
• Hawaii: Secure and Fair Enforcement for Mortgage Licensing Act - A mortgage loan Originator Company and mortgage loan originator may not originate a residential mortgage loan without regard to the borrower's ability to repay the loan according to its terms. The borrower's ability to pay may not be based on the current market value of the borrower's collateral
• Iowa: Ok for non-credit qualifying streamlines
• Idaho: Ok for non-credit qualifying streamlines
• Illinois: Residential Mortgage License Act of 1987 - A mortgage lender, broker and loan originator must determine a borrower's reasonable ability to pay:
1. Principal and interest;
2. Real estate taxes;
3. homeowner's insurance;
4. Assessments; and
5. Mortgage insurance premiums, if applicable.

Mortgage Loan Originator Law - The determination of a borrower's ability to repay a loan must take into account:
1. the borrower's ability to repay at the fully indexed rate, assuming a fully amortizing repayment schedule, and the resulting scheduled payments that may be charged under the loan accounting for interest rates, financial terms or scheduled payments that may adjust upward; and
2. Property taxes and reasonably anticipated insurance costs (regardless whether the lender or broker will collect an escrow for taxes or insurance).

It is an unfair or deceptive act or practice for a mortgage lender to make or mortgage broker to arrange a mortgage loan unless the mortgage lender or broker, based on information known at the time the loan is made, reasonably believes at the time the loan is expected to be made that the borrower will be able to repay the loan based upon a consideration of the borrower's income, assets, obligations, employment status, credit history, and financial resources, not limited to the borrower's equity in the dwelling which secures repayment of the loan.

• Maryland: Ok for non-credit qualifying streamlines
• Maine: Ok for non-credit qualifying streamlines
• Michigan: Ok for non-credit qualifying streamlines
• Minnesota: Minnesota Residential Mortgage Originator and Servicer Licensing Act- A residential mortgage originator and a person exempt from licensing may not make, provide, or arrange for a residential mortgage loan without verifying the borrower's reasonable ability to pay the scheduled payments of principal, interest, real estate taxes, homeowner's insurance, assessments, and mortgage insurance premiums. The analysis of a borrower's reasonable ability to repay the loan may include consideration of the following (if verified):

1. Current and expected income;
2. Current and expected cash flow;
3. Net worth and other financial resources (other than the consumer's equity in the dwelling that secures the loan);
4. Current financial obligations;
5. Property taxes and insurance;
6. Assessments on the property;
7. Employment status;
8. Credit history;
9. debt-to-income ratio;
10. Credit scores;
11. Tax returns;
12. Pension statements; and
13. Employment payment records.
• Missouri: Ok for non-credit qualifying streamlines
• Mississippi: Ok for non-credit qualifying streamlines
• Montana: Ok for non-credit qualifying streamlines
• North Carolina: Ok for non-credit qualifying streamlines

Need FHA Training? CLICK HERE: http://www.FHA-Classes.org

• North Dakota: Ok for non-credit qualifying streamlines
• Nebraska: Ok for non-credit qualifying streamlines
• New Hampshire: Non-depository Mortgage Bankers and Brokers Act - A mortgage banker, broker, and loan originator may not offer or extend a mortgage loan to a borrower unless a reasonable lender would believe at the time the loan is made that the borrower will be able to make the scheduled payments associated with the loan.

The loan file kept by the mortgage banker, broker, and loan originator must document the analysis used to arrive at this conclusion. Mortgage bankers and brokers must have a documented methodology that enables the banker or broker's employees, agents, and originators to make a reasonable determination that the borrower can repay a mortgage loan. The documented methodology must be approved by a senior manager. The methodology must reflect all relevant factors that have a bearing on the present and future capacity of the borrower to adequately service the debt.
• New Jersey: Mortgage Loan Company Act - Mortgage bankers and brokers must have a documented methodology that enables the banker or broker's employees, agents, and originators to make a reasonable determination that the borrower can repay a mortgage loan.

The documented methodology must be approved by a senior manager. The methodology must reflect all relevant factors that have a bearing on the present and future capacity of the borrower to adequately service the debt.
• New Mexico: New Mexico Mortgage Loan Originator Act - A mortgage loan originator must determine a borrower's reasonable ability to pay:

1. Principal;
2. Interest;
3. Real estate taxes;
4. Property insurance;
5. Property assessments;
6. Mortgage insurance premiums; and
7. Other scheduled long-term monthly debt payments.

A mortgage loan originator may not originate a residential mortgage loan that does not require documentation and consideration of the borrower's reasonable ability to repay that loan pursuant to its terms. The borrower's ability to repay must be demonstrated through reasonably reliable documentation that may include payroll receipts, tax returns, bank records, asset and credit evaluations, mortgage payment history or other similar reliable documentation. The above provisions do not apply to the following so long as each of the following, as applicable, provides the borrower with a reasonable, tangible net benefit:

(1) A residential mortgage loan originated pursuant to a government streamline program;
(2) A reverse mortgage insured as part of a government program; or
(3) To loss mitigation activities of a mortgage loan servicer or lender with which the borrower has a current relationship.
• Nevada: Mortgage Broker Act -- A lender may use any commercially reasonable means or mechanism in determining a borrower's ability to repay a home loan. A lender's duty to use any "commercially reasonable means or mechanism" to determine a borrower's repayment ability means that lenders must inquire into a borrower's current and future income and financial status (but does not dictate what specific methods must be utilized as long as they are reasonable and frequently used within the lending community). A lender may not knowingly or intentionally make a home loan, other than a reverse mortgage, to a borrower, including without limitation, a low-document home loan, no-document home loan or stated-document home loan, without determining (using any commercially reasonable means or mechanism), that the borrower has the ability to repay the loan.
• New York: Ok for non-credit qualifying streamlines
• Ohio: Mortgage Broker Act - Mortgage Loan Act - On 3/30/12 the Ohio Office of Attorney General issued additional regulations regarding a consumer's ability to repay. The added provision is that a consumer shall be considered to have an ability to repay if the lender is offering a fully-amortizing fixed-rate refinance loan that has the same or lesser interest rate as the consumer's current loan, the same or lesser principal amount as the consumer's current loan, and does not extend the payoff date of the consumer's current loan. If the consumer currently has an adjustable rate mortgage, the interest rate of the consumer's current loan is the interest rate the consumer is paying as of the date of the refinance.
• Oklahoma: Ok for non-credit qualifying streamlines
• Oregon: Oregon Mortgage Lender Law - A mortgage banker, broker or loan originator may not negotiate or make a negative amortization loan without regard to the borrower's repayment ability at the time the loan is made, including the borrower's current and reasonably expected income, employment, assets other than the collateral, current obligations and mortgage related obligations.
• Pennsylvania: Ok for non-credit qualifying streamlines.

Need FHA Training? CLICK HERE: http://www.FHA-Classes.org

Mortgage Licensing Act An applicant may be presumed to have the ability to repay an offered loan if the offered loan has 1 of the following characteristics:

(1) Is insured by the Federal Housing Administration;
(2) Is guaranteed by the United States Department of Veterans Affairs;
(3) is originated or approved for purchase by the Pennsylvania Housing Finance Agency; or (4) is the subject of a written finding by a United States Department of Housing and Urban Development approved counseling agency that there is a reasonable expectation that the borrower will be able to repay the offered loan.
• Rhode Island: Ok for non-credit qualifying streamlines
• South Carolina: Ok for non-credit qualifying streamlines
• South Dakota: Ok for non-credit qualifying streamlines
• Tennessee: Ok for non-credit qualifying streamlines
• Texas: Ok for non-credit qualifying streamlines
• Utah: Ok for non-credit qualifying streamlines
• Virginia: Ok for non-credit qualifying streamlines
• Vermont: Ok for non-credit qualifying streamlines
• Washington: Ok for non-credit qualifying streamlines
• West Virginia: West Virginia Residential Mortgage Lender, Broker and Servicer Act - A lender must consider the borrower's:
1. Income;
2. Current debt;
3. Employment status and history; and
4. Other financial resources (other than equity in the dwelling that will secure the loan).

Need FHA Training? CLICK HERE: http://www.FHA-Classes.org

If a borrower's household debt-to-income ratio will exceed 50% (as determined from a credit report, credit application, financial statement) then the broker and initial lender must document in writing and maintain an assessment of the borrower's ability to repay the loan according to its terms. The assessment must be signed by the lender and the borrower and must consider:

1. The household's current debt obligations;
2. The term of the loan; and
3. The borrower's circumstances along with their current and projected income and assets (other than a security interest in the real estate taken to secure the loan).

The West Virginia Safe Mortgage Licensing Act does not contain provisions regarding borrower repayment ability.
• Wisconsin: Ok for non-credit qualifying streamlines
• Wyoming: Ok for non-credit qualifying streamlines

Do you know if your state allows you to originate non-credit qualifying streamlines without regard to your borrower’s “ability to repay?”

About The Author

Stacey Sprain - As an NAMP® staff writer, Ms. Stacey Sprain is currently a NAMP® member in good standing, and is a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution. If you would like to become a volunteer writer for us, please email us at: contact@mortgageprocessor.org.

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Oct 24, 2014

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It’s Out!

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May 9, 2014

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Apr 27, 2014

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Apr 10, 2014

The Ability to Repay (ATR) for Non – QM Loans

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Mar 22, 2014

Changes coming to FHA

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Mar 8, 2014

HUD Releases Qualified Mortgage Definition

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Feb 22, 2014

Annual Percentage Rate

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Feb 7, 2014

Mortgage Fraud – How to Avoid Mortgage Fraud

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Jan 10, 2014

Getting a mortgage for the Self – employed!

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Dec 27, 2013

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Dec 24, 2013

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Nov 2, 2012

FAQ: Natural Disaster Protocols

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What measures should lenders take prior to loan closing or endorsement when a property is located within a FEMA designated disaster area?

Aug 17, 2012

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Credit Scores

When I hear those words, they immediately evoke images of a world in which mortgage underwriting decisions are determined by AUS systems that have no capacity to either employ common sense underwriting principals or fairly or adequately assess overall risk.

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Like myself, I am sure many underwriters in this fine nation of ours spend a fair amount of their time on conference calls or web based training with new investors that their employers have recently became associated.

Apr 6, 2012

Business Practices and Borrower Rights

I am going to share a story of very recent origin which involves someone quite close to me and unfortunately is entirely true. I am hoping that by sharing this, it will bring light to some of the seedier business practices occurring today while also making people aware that there is recourse against lenders who consistently leave behind ethical practices in favor for business practices that violate not only the law but also their client’s personal rights.

Feb 24, 2012

Reduction in Seller Contribution towards Closing

We all knew it was coming and it looks like it is here and that being the announcement in the Federal Register that HUD intends to reduce the amount a seller can contribute towards borrowers closing costs from the current 6% to 3% as indicated previously in a Federal Register publication in July, 2010.

Jan 26, 2012

Reducing Risk and Opportunity

In press release 12-010 dated Friday, January 20, 2012 FHA announced their intention to take additional steps to limit risk and strengthen the finances of the agency. These changes, it was stated, would help FHA better manage risk while maintaining support for the housing market and access for qualified borrowers. Included in these changes would be new regulations which strengthen the process by which FHA requires certain lenders to indemnify the U.S. Department of Housing and Urban development for insurance claims pain on mortgages that are found to be deficient where meeting the departments guidelines or contain misrepresentation and fraudulent documentation.

Jan 13, 2012

The G-fee Hit

As if we didn’t already pay enough in the way of taxes, beginning January 16, 2012 we will have another to contend with, that being the G-fee hit ordered by Congress and the FHFA with respect to pricing adjustments.

Dec 30, 2011

Professionalism

It wasn’t long ago, or at least it doesn’t seem so, that people employed in the mortgage industry were considered mortgage bankers or mortgage professionals who possessed a certain skill set where banking and finance were concerned that labeled these individuals as professionals.

Dec 22, 2011

Repurchase Request

In a new twist to the never ending saga of new things to watch for in the mortgage industry is investor audits of older loans that have now gone into default. That’s right forget reps and warranties, it seems that every investor is now auditing any older loans that have since gone into default and to some degree inventing reasons why the loan should be repurchased my the original lender.

Dec 9, 2011

Shelving Broken Concepts

Once upon a time there lived young women who, during a down turn in employment, embarked upon a career adventure that would ultimately become a life changing event. Having limited job skills, she accepted employment as a loan processor for a small Savings & Loan in Maryland.

Nov 14, 2011

Just the Truth Please

Does it ever cease to amaze you how people can twist the facts with regards to almost any situation in order to achieve the results that would most satisfy them even if those results achieve no end. In this day of mass media and the information highway, articles and blogs can be placed on the internet in a matter of minutes and unfortunately, many of the authors of this information have no real experience or responsibility where the content of their article is concerned and articles relating to the mortgage industry are no exception regardless of the type of media by which they conveyed.

Nov 11, 2011

Personal Responsibility

I have had it, really. Yesterday I read the tweet from Chef Mario Batali regarding the banking industry which compared bankers to Hitler and Stalin. As one that would consider themselves a banker, credit officer and underwriter, I take extreme offense to the comment particularly when it comes from someone who during the normal course business, charges $300.00 for a truffle tasting menu at his own establishment Babbo.

Oct 29, 2011

Getting Files Closed

Ok, so I have been in the mortgage industry for 25 years and I have to say, this end of the month has been the worst ever. Well maybe not the worst but it ran a very close second. More frightening is the fact that we didn’t close near the volume that we have closed in past months.

Sep 16, 2011

A Few Changes for VA Loan Types

These days it seems as though the rules never stop changes where the preeminent mortgage programs are concerned, those of course being Conventional, FHA and VA, but it’s always nice when the change is something for the better and today I have the pleasure of delivering the good news. Recent VA circular’s issued on September 8, 2011, more specifically Circular 26-11-12 are indicating a reduction in the VA funding fee for loans closed on or after October 1, 2011.

Aug 19, 2011

Rural Development Loans

When we think about government loan programs, most often the FHA and VA programs come to mind however there is another one, that being Rural Development. I know you have all heard of them but for some reason they seem to be a loan type that very few know anything about, so being in good form as I sometimes am, I thought I would share the specifics because these days, any program that a lender can offer with a maximum 100% LTV that will allow one to roll in closing costs, is a good one.

Jul 15, 2011

Something to Believe In

Pretty recently I was having a conversation regarding homeownership opportunities for low to moderate income borrowers with an employee of a department of housing and community development agency within the city that I live. The conversation had begun during a discussion with respect to city owned properties and the liquidation of the same.

Jul 1, 2011

The 203k within the Public Sector

Ok, so as I am sure most of you can imagine, I lay awake at night and think about mortgage programs, more particularly government lending programs because, quite simply put, they are the most useful.

Jun 24, 2011

Handling HUD REO Sales

Handling purchase transactions which involve bank owned foreclosure sales are not limited to merely standard bank owned properties, and as I am sure you will all agree, each of us have handled our fair share of FHA property disposition cases.

The Plot Thickens

I have decided that it just does not pay to be nosy. As you can imagine, by that statement alone, I do have a tendency to stick my nose in places it really doesn’t belong simply because it’s interesting and of course, because it doesn’t belong there (call it my rebellious streak).

Jun 6, 2011

The 203k Underwriting Checklist

The 203k is a great program for any individual who wants to buy a handy man special or property being sold at foreclosure and fix it up, or a current homeowner who would like to complete some updates to their existing home however many lenders are still unwilling to offer the program.

May 30, 2011

The Spirit of Underwriting

I was in the kitchen this morning having a conversation with a coworker. We were reminiscing about the good old days of HUD field offices, case number assignment lines and of course processing and underwriting without the benefit of fax machines, AUS or even the internet for that matter. Those were the days when a final typed 1003 was exactly that, a document that you rolled into the typewriter and typed and carbon paper was an office necessity.

May 23, 2011

FHA Then and Now

Very recently, while teaching an FHA Underwriting class for FHA Online University, the history segment of the training made me stop and think. It was unusual really, because I have taught this particular class at least once a month for the past four years and honestly, other than an occasional joke as to how students need to take notes because the historic information pertaining to the agency was on the “big” test, I never really thought much about it.

Grim

Yes, it is, grim that is, and I am not referring to Wilhelm & Jacob Grimm. But just as they composed those fairy tales in the 1800’s, representing what might have been described as the capricious and cruel reality of daily life for most Europeans of that time, we to continue to face a housing and mortgage market that can also be described capricious.

Apr 18, 2011

The “Safe” Mortgage

As if there are not enough acronyms in the mortgage industry, the federal government has moved forward in coining a new one, QRM, this being the acronym for the newly defined Qualified Residential Mortgage. Ok, I know that everyone is thinking that all mortgages are QRM’s if they meet guidelines but in this case, the guidelines or standards which will eventually define what a QRM or “Safe” mortgage is, will differ vastly from what defined a qualifying mortgage of the past.

Apr 2, 2011

Considerations While Underwriting The Low to Moderate Income Borrower

The most recent past has seen the mortgage industry struggle with developing sound underwriting practices that serve to not only protect lenders against default, but to also promote affordable home ownership for all types of borrowers.

Mar 11, 2011

Privatizing FNMA and FHLMC

Earlier this week, someone asked my opinion as to if I thought there was any benefit in privatizing the GSE’s. Unfortunately, I was a little short on time and couldn’t go into a great length as to if I thought it desirable or not and honestly up until the conversation occurred, I hadn’t really given it a lot of thought.

Mar 4, 2011

Processing Due Diligence

These days, underwriters constantly stress the importance of collecting the appropriate documentation in order to complete acceptable due diligence on the cases intended for underwriting. Often times, these requests appear to be the result of ultra conservative underwriting practices and the documentation required nothing less than excessive particularly if the request for additional items is being made a few days prior to closing.

Feb 18, 2011

When Costs of Repairs Can Be Rolled Into the Loan

In today’s real estate environment, Purchase transactions that involve bank owned properties are pretty common. Often these cases are originated under the FHA 203k mortgage insurance program due to the overall condition of the property and the need for the completion of certain repairs which are required for the property to meet HUD minimum property standards.

Jan 14, 2011

New Quality Control Measures

HUD has recently announced new lender requirements where quality control is concerned. These requirements have been set forth in ML2011-02 and outlines for lenders what new provisions need to be added to their current QC plan.

Jan 30, 2015

Maximizing the Slow Season

Written By: Frankie Lacy

Typically the mortgage industry slows down after we move out of the holiday season and into the first few months of the year. Business may not start to pick up until mid-spring or early summer. We can utilize this time to clean house and sharpen our skills in preparation for the next busy season.

Jan 16, 2015

Verifying Borrower Identity

There are many reasons each borrower’s identity must be verified. First, lenders must verify data integrity on the loan application, disclosures, credit, and automated underwriting findings.

Jan 2, 2015

What Kind of Asset Is This Anyway?

Often, asset review is a straightforward piece of the loan analysis process. Borrowers submit recent checking and savings account statements to verify funds to close. The underwriter will review the statements for large deposits and insure the most recent balance is used to qualify.

Oct 3, 2014

The Mortgage Industry: What’s In It For Me?

The mortgage industry has been through quite a few ups and downs since 2007. We have experienced layoffs, sweeping regulatory changes and fluctuations in business. The press and public opinion on the mortgage industry has largely been negative due to mortgage fraud and the bursting of the housing bubble.

Sep 19, 2014

File Notation Best Practices

When underwriting a file, there are several ways to make loan notations:
-The comments section on the underwriting transmittal (1008)
-The loan origination system (LOS) notes
-A separate underwriter rationale write up

Aug 21, 2014

USDA New Regulations: 7 CFR 3555

Effective September 1, 2014, USDA will replace the 7 CFR 1980-D regulations with the 7 CFR 3555 regulations for its guaranteed rural housing program. The new handbook will house all previous administrative notices (AN’s) and the existing rules in one comprehensive document. The new handbook will also include all rule changes based on regulation 7 CFR 3555.

Aug 8, 2014

Underwriting Remotely: What are the Pros and Cons?

Employing remote underwriters is a cost effective measure for many mortgage lenders that is also beneficial for the underwriter. Many correspondent lenders have slowly expanded their licensed territory to include multiple states in various time zones. Employing remote underwriters in these states creates a seamless interface with underwriting regardless of branch location.

Jul 11, 2014

Do You Have Enough Information to Calculate Income?

Before an underwriter can determine the correct calculation for computing income, she/he must determine if there is sufficient data within the documentation submitted. The first place to reference when trying to determine whether you have the correct documents is your AUS findings. However, some findings reports give vague messages such as “refer to Fannie Mae Selling Guide”.

Jun 27, 2014

Underwriter’s Toolbox: A List of Must-Have Resources

Underwriters are required to juggle new production, condition review, emails, and phone inquiries each day. In addition, managers, processors, and sales professionals may approach underwriters throughout the work day for assistance on a variety of issues. As a result, underwriters must streamline their process flow as much as possible.

May 30, 2014

May 16, 2014

Career Progression in the Mortgage Industry

So you've taken classes, shown initiative, and communicated your desire to progress into higher positions. You want to expand your knowledge levels within your company’s organization. However, it seems like you have waited forever to get the green light and your manager keeps giving you the brush-off. What should you do next?

May 2, 2014

Income Analysis Forms and Formulas

By now, many of us already know the basic formulas for calculating income. We also know that, in addition to executing formulas, underwriters are called to perform an analysis of the stability and continuance of qualifying income. This can be a daunting task when analyzing multiple business structures over two years.

Mar 29, 2014

Underwriting Rental Income

Calculating qualifying rental income is one of the more complex income calculations an underwriter can perform. This is particularly true when the borrower owns multiple investment properties. The challenge is determining when rental income can be used to qualify and, once income is calculated, reconciling the total debt ratio.

Mar 15, 2014

Property Condition Considerations

As many of us around the country desperately cling to the hope that spring will come sometime this year, we can also stop to think how the long, harsh winter may affect property conditions. Roof, gutter, and foundation damage from prolonged snow pile up, ice damming, and flooding is a very real possibility for homeowners in 2014.

Mar 1, 2014

Feb 14, 2014

Freddie Mac Updates

As of January 12, 2014 Freddie Mac Loan Prospector will issue new recommendations in response to the final CFPB’s Ability to Repay and Qualified Mortgage rules. The feedback messages will address the following loan types:

Jan 31, 2014

Jan 3, 2014

2013 Wrap-Up: Looking Forward into 2014

2013 brought major changes to mortgage lending with the introduction of new regulations, the end of the mini-refinance boom, and an intensified focus on quality. As we prepare to conduct business in the new year, we can reflect on how those changes will impact us as mortgage processors and underwriters.

Dec 20, 2013

Refinance vs. Purchase Transactions

2013 saw the end of the mini-refinance boom as interest rates increased in late summer to early fall. As a result, it is important for mortgage processors and underwriters to reacclimatize themselves with executing purchase transactions. For those who have been underwriting and processing refinances for some time, there are some key differences to identify.

Dec 6, 2013

Preparing a File for Clear to Close

Once a file has been fully underwritten and all conditions are satisfactorily met, it is ready to be cleared to close (CTC). Underwriting and processing must perform a final quality control check prior to releasing the loan to the closing department. This process will prevent errors at the closing table and delays in the post-closing process of selling the loan.

Nov 22, 2013

Longevity in the Mortgage Industry: What does it Take?

The mortgage industry is faced-paced, constantly changing, and sometimes uncertain. There are cycles of “feast or famine” where we experience excessive loan volume, followed by a sudden and steep drop in loan volume.

Nov 9, 2013

DU & LP Changes

In response to policy changes relating to the Ability to Repay and Qualified Mortgage regulations, Freddie Mac (LP) and Fannie Mae (DU) have made updates to their AUS systems. LP’s changes were made effective October 27, 2013 and DU’s changes will be effective November 16, 2013.

Oct 25, 2013

Reviewing Purchase Agreements

A thorough review of the purchase agreement (P/A) or sales contract is critical to the accuracy of your loan package. Some of the initial points of review are the property description, parcel identification numbers, and the seller and buyer names. The property description and parcel ID numbers on the contract should match the title report and the appraisal report.

Oct 11, 2013

Networking in the Mortgage Industry

Recently several mortgage lenders across the U.S. have laid off staff or restructured in response to the end of the “mini-refi boom”. As a result, many of us are left wondering what we can do to create opportunities for ourselves despite a job market that is flooded with talent.

Sep 13, 2013

Debt to Income Ratios

There are two debt-to-income (DTI) ratios on every loan: housing or front-end ratio and total or back-end ratio. The housing ratio tells us what percentage of the borrower’s monthly gross income is allocated toward the monthly principal, interest, tax, and insurance (PITI) payment. The total ratio includes the monthly PITI and all other monthly debts including auto loans, credit cards, child support expenses, student loans and more.

Aug 23, 2013

What Are the Characteristics of a Good Underwriter?

I am often asked this question by processors or other mortgage professionals that are looking to transition into underwriting. Underwriting can seem mysterious and out of reach to some as they try to understand the duties and responsibilities associated with the title.

Jul 26, 2013

The Value of Mortgage Education

Mortgage education has become a vital tool for residential and commercial lending professionals in the current environment. Right now, there is a heightened emphasis on compliance with lending regulations and underwriting guidelines.

Jul 12, 2013

The Perils of Piece-Mailing

Are you ever tempted to place a loan back into the underwriting queue before all conditions are in? Do you believe that submitting a “deal breaker” condition for underwriting review without all the other conditions will speed up the approval process? If so, this article is for you!

Jun 14, 2013

Best Practices: Letters of Explanation

Letters of Explanation (sometimes abbreviated to LOX or LOE) are a common condition on loan files. Underwriters request them to explain large deposits, residence histories, derogatory credit, credit inquiries, and much more. However, it is important to understand that in most cases, the LOX is just the beginning.

Apr 13, 2012

From Fax to Facebook

Written By: Theresa Furzland

My son and I have recently been having a recurring conversation regarding the benefits and down sides of technology. He is a music/computer science major and I find it interesting how it is a natural inclination for him to combine these two subjects.

A Hidden Gem

Are you aware that there is a zero down program available? And no, it isn’t VA.
The USDA offers the Rural Housing Loan Program that is available to mid and low income persons in rural area.

Jul 8, 2011

Paperless Power – Pros and Cons

Our company, LendSmart Mortgage, is currently undergoing a software change that will allow us to be virtually paperless. I am of course an old dog, but in this business you have to be used to learning new tricks on a daily basis so I’m not really flustered.

Shortcuts

I sat down at my computer tonight and thought I’d see how many acronyms I could rattle off the top of my head. Here is my 10 minute effort: (and if you know what they all stand for – you’ve been in this business too long!)

Looking Around

I’ve been writing about the different perspectives of the mortgage industry and it has really been an interesting mental activity for me. Not only did I get the opportunity to appreciate the wide variety of experience I have had the fortune to acquire over the years, it also makes me feel old.

May 20, 2011

Refi whys?

Yes, I’m still receiving the rare refinance inquiry from my loyal past clients and referrals. These calls generally start like this – Hi Theresa, I’ve been seeing ads everywhere that interest rates are at record lows and I should refinance my mortgage now...or...I got a phone call saying I could get a great refinance deal and it won’t cost me anything and will lower my rate as low as 3.5%.

Perspectives – Origination

This week I’m looking through my originator eyes. I tend to think of myself more as a Mortgage Loan Advisor than a Loan Officer. As I have already mentioned, probably more than once, I never set out to be a loan originator and I am the first to admit that I am not a “salesman”. I do love this part of the process however and for one reason.

Apr 26, 2011

Perspectives – Homeowner

I really thought this would be the easiest of these views to write, and as I get down to it I realize that it is actually the hardest. Maybe this is because it is really impossible for me to separate myself from my lifetime in this business. I have been a mortgage professional longer than I’ve been a homeowner.

Signs of Spring

It’s the time of year when we all start watching for those long awaited signs of spring, especially here in Northern Minnesota, where I live. It almost seems to be a sport, or at least a lively competition. We are currently enjoying my favorite...the maple sap is flowing. It means more work for us, and busy days and some late nights for the next few weeks as we will be making two trips into the woods daily to gather, then the process of “boiling” down.

Jan 31, 2011

Roll with the changes....

The New Year brings new challenges to our industry. Good, bad or just plain frustrating we all know that to work in this business is to continually adjust to changes and 2011 looks to be no different in this aspect.

Dec 26, 2010

The benefits, Importance and Necessity of Cross Training

With the additional demands and ever changing rules and regulations that we are dealing with these days it is more important than ever to be as knowledgeable as possible in all aspects of our industry.

Dec 3, 2010

Beating the Basics

I know I’ve brought this subject up before, but as we come to the end of another year and look back over the fiascos of 2010, it just seems to me that now more than ever we need to revisit the basics.