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


Uniform Mortgage Data Program® (UMDP ®)


Fannie Mae’s URLA Page


https://www.fanniemae.com/singlefamily/uniform-residential-loan-application?utm_source=fanniemae&utm_campaign=best_match

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

http://www.freddiemac.com/singlefamily/sell/ulad.html

•Effectively Reviewing the New URLA 7

Same Look and Feel


https://www.fanniemae.com/singlefamily/uniform-residential-loan-application


https://www.fanniemae.com/singlefamily/uniform-residential-loan-application

*New

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Reg B Prohibits asking for additional info

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Previously in liability section and easily missed

Previously in the Declarations section

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Loan detail has been moved onto the new URLA throughout the forms -Loan amount, interest rate, loan type…


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!!

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Credit Freeze FAQ’s


https://www.consumer.ftc.gov/articles/0497-credit-freeze-faqs

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https://www.consumer.ftc.gov/articles/0497-credit-freeze-faqs

Credit Freeze


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


Non–U.S. Citizen Borrower Eligibility


Marital Status


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

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*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

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*NEW


Military Service‏– The length of service or service commitment, duty status and character of

service determine the eligibility for specific home loan benefits.

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Military Service


https://www.benefits.va.gov/homeloans/

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https://www.benefits.va.gov/homeloans/

Language Preference


*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


.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

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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?

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*New

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Employment/Income


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

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*New

Employment/Income


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


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Fannie Mae Single Family Selling Guide§B3-3.1-01, Employment and Other Sources of Income

Capacity: Fannie Mae


Capacity: Fannie Mae


https://www.fanniemae.com/content/guide/selling/b/index.html

https://www.fanniemae.com/content/guide/selling/b/index.html

Capacity: Freddie Mac


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


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


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


http://freddiemac.com/learn

http://freddiemac.com/learn/qr.html

Capacity

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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


https://new.mi.genworth.com/training

Assets and Liabilities


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?

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Do not enter gift funds in Section 2. Gifts are entered in Section 4.

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*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.

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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


*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.

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- Other Assets‏ These asset types are the less common – Verify acceptability of the assets type and check to see if any program

restrictions apply

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Sweat Equity- Fannie Mae


Sweat Equity- Freddie Mac


http://www.freddiemac.com/learn/pdfs/mp/sweat_equity_reminders.pdf

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


LiabilitiesStudent Loans‏

– Fannie Mae


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

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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,


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


Real Estate liabilities are NOT entered in Section 2, they will be entered in Section 3.

Other Liabilities and Expenses


*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

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Previously listed in liability section

Real Estate Owned (REO) Section


Real Estate Owned (REO) Section


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.

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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


Include Taxes, Insurance, HOA Dues In The Monthly Payment, Even If The Investment Property Is Owned Free And Clear

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Previously the first section of the application

*New

**

Loan and Property Information


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

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*New *

*

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Loan and Property Information


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?

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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


IPC’s - Fannie Mae

73Avoiding Common Underwriting Errors

IPC’s - Freddie Mac

74Avoiding Common Underwriting Errors

Declarations


*New

*

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: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)

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Declarations


*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


*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

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Demographic Information Addendum


*New

**

*

*

78

*New

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Loan Originator Information


Continuation Sheet


New Form

URLA - Additional Borrower


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.

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The Lender Loan Information now has some of the loan information fields

New Form

Lender Loan Information


*New

**

*

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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


*New

**

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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

*

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*New

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Confirm Qualifying Rate vs. Note Rate on Adjustable Rate Programs

86


*New

**Sub-totaled

Lender Loan Information - DOT

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New Information Data Set



88

New FormUnmarried Addendum

•Effectively Reviewing the New URLA89

Please reference your internal policies & procedures.

New Form

Instructions


Written for the consumer

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Updates


FAQ’s


https://www.fanniemae.com/content/faq/urla-ulad-faqs.pdf

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https://www.fanniemae.com/content/faq/urla-ulad-faqs.pdf

Genworth Underwriting Guidelines


Genworth Rate Express®


LOS Connections


Training Tools and Information


Training Tools and Information

97Effectively Reviewing the New URLA 97


ActionCenter®: 800 444.5664 Your Local Genworth

Regional Underwriter Your Genworth Sales

Representative

Your Genworth Resources

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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

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