“Mortgage 101 – Acronyms to Reg Z,

“Mortgage 101 – Acronyms to Reg Z,

and Underwriting in between”Wednesday, March 22, 2017

10:00 a.m. – 11:00 a.m.

finance.car.org(213) 739-8383

Today’s #FinanceB2B Speakers

Marc Farfel

Lender Liaison – Finance Helpline

California Association of

REALTORS®

Chris Chudacoff

Sr. VP / Regional Manager

Guaranteed Rate Mortgage

Abel Fregoso Jr.

AVP / Mortgage Consultant

Union Bank5

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For a full recording of webinar

Speaker slide deck

Speaker bios

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Mortgage 101 – Acronyms to Reg Z, and Underwriting in Between

(with Renovation, & Reverse Mortgage)

Presented by: Chris Chudacoff, SVP & Regional Manager

Mortgage 101 – Regulations• Reg X - Implements the Real Estate Settlement Procedures Act (RESPA). The TRID rule provides for the new Loan Estimate and

Closing Disclosure for most closed-end mortgages secured by the borrower’s dwelling.

• RESPA – Real Estate Settlement Procedures Act- Borrower/Consumer Protection Act 1974

• TILA – Truth in Lending Act – 1968 Federal Law to standardize and disclosures and costs to standardized the manner in

• TRID – TILA RESPA Integrated Disclosures – 2015 Update and consolidation of Lender & Settlement procedures Disclosure & Timing – Set up to provided New LE & CD for most Closed & Consumer Mortgage

• QM (Qualifying Mortgage) A mortgage in which the lender has analyzed the borrower’s ability to repay based on income, assets and debts; has not allowed the borrower to take on monthly debt payments not to exceed 43% of pre-tax income; has not charged more than 3% in points and origination fees; and has not issued a risky or overpriced loan like negative-amortization, balloon, 40 year or interest-only mortgage. (created by Dodd Frank)

• Reg Z - - Regulation Z: the main component of the Truth in Lending Act that was implemented to provide the trust cost and term of the loan to the consumer. Purpose is to promote the informed use of consumer credit by requiring disclosures about its terms and cost. The regulation also gives consumers the right to cancel certain credit transactions that involve a lien on any dwelling of a consumer—even second home. In 2008 Reg Z was amended by the Mortgage Disclosure Improvement Act (MDIA). The purpose of the MDIA is to ensure that consumers receive disclosures earlier in the mortgage process and clarify the mandatory waiting periods.

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Mortgage 101 – Origination Arenas• Loan Origination - The process by which a borrower applies for a new loan, and a lender processes that application. Origination

generally includes all the steps from taking a loan application through disbursal of funds (or declining the application).

• Retail Lender – A lender who initiates the transaction, takes the borrower’s application, and processes the loan through funding.

• Wholesale Lender – A lender who purchases loans from mortgage brokers or correspondents. The mortgage broker or correspondent initiates the transaction, takes the borrower’s application, and processes the loan.

• Correspondent Lender – A lender who delivers loans to a (usually larger) lender against prior price commitments. Unlike a broker, the correspondent lender funds the loans with its own money.

• Mortgage Consultant / Loan Officer – Your loan contact, usually the Officer, that originates loans for any of the three (3) main loan sources (Retail, Wholesale or Correspondent) Lenders.

• Mortgage Broker – A firm or individual that originates and processes loans for a number of lenders for a fee or on a compensation (Mortgage Brokers many times work with a number of Wholesale Lenders.

• Private Investor – Any person or institution that invests in Mortgages. By buying mortgage loans from lenders, the mortgage investor gives the lender funds that can be used for more lending.

• Portfolio Lender – A lender who makes loans to keep in its portfolio and does not sell to investors in the secondary market.

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Mortgage 101 – Loan Programs• GSE – Government Sponsored Enterprise – Privately owned organizations with government charters and backing. The housing

GSEs are Freddie Mac, Fannie Mae and the Federal Home Loan Banks.??

– FNMA – Federal National Mortgage Association (Fannie Mae)

– FHLMC – Federal Home Loan Mortgage Corporation (Freddie Mac)

• HUD – Department of Housing and Urban Development – Government entity responsible for the implementation and administration of housing and urban development programs. Established 1965.s.

– GNMA – Government National Mortgage Association (Ginnie Mae) – A government-owned corporation overseen by the U.S. Department of Housing and Urban Development, Ginnie Mae guarantees securities backed by FHA-insured and VA-guaranteed loans.

• VA – Veterans Administration- The oversite entity of the issuance of VA Loans to veterans and in some cases, their surviving spouses.

• FHA – Federal Housing Administration () – a US government agency created by the National Housing Act of 1934 that sets standards for construction, underwriting, and insures loans made by banks.

• USDA – United States Department of Agriculture – Rural Area Loan Program?

• LMI - Low-to-Moderate Income Loan (LMI)

• Direct Endorsement lender- A mechanism that allows HUD or VA approved lending institutions to approve FHA or VA mortgage insurance themselves, without having to submit paperwork to HUD or the VA to wait for approvals. – Delegated underwriting.

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Mortgage 101 – Loan Programs (Cont’d)

• Upfront MIP- Mortgage Insurance Premium: an upfront “insurance” premium paid on FHA and VA loans as set by FHA and VA

• MIP- Mortgage Insurance Premium: on-going monthly “insurance” premium paid on FHA

• VA Funding Fee- an upfront “premium” paid on VA loans, based on down payment as by VA

• VA Guarantee - Entitlement as prescribed by VA

• PMI- Private Mortgage Insurance –a monthly insurance premium to protect the lender against default on High LTV Loans.

• Mortgage Insurance Companies – There are 7 Mortgage Insurance Companies (Radian, MGIC, UGI, Genworth, Essent, Arch, National) that supply the Mortgage Insurance Coverage for <20% Down Loans.

• LPMI – Lender Paid Mortgage Insurance

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Introduction to Renovation

• A renovation loan allows a buyer to purchase a home that requires or can

benefit from home improvements.

• The cost of the improvements can typically be included in the sales price.

• FNMA Home Style is “Fannie Mae” conventional loan.

• FHA 203(K) is an government insured product.

• Both are renovation loans with slight variations in guidelines and borrower

qualifications.

• Both can be used to acquire and renovate existing properties, or refinance

and renovate currently owned properties.

• Work is started once the file is closed and permits are obtained.

• Mortgage payments may be financed while property cannot be occupied.


FHA 203k Fannie Mae HomeStyle

3.5% down SFH, condo, townhome 5% down

2 – 4 unit 3.5% down

Owner Occupied

SFH, condo, townhome 5% down

2 unit 15% down

3 – 4 unit 25% down

For Conforming loan limits only

2nd home not allowed Second home allowed – 1 unit only

90% LTV

Investor not allowed Investor allowed – 1 unit only

85% LTV

Non-owner occupied co-borrower allowed Non-owner occupied co-borrower allowed

No max DTI

>50% DTI with 2 comp factors, Requires DU approval

45% DTI no exceptions

UMIP 1.75% No UMIP

Monthly PMI .85% typically Monthly PMI .50% typically

HUD Minimum Property Standards required No HUD Minimum Property Standards

FHA consultant required on Full 203k write ups Requires HUD consultant for any structural

project or repairs over $50,000

3-4 unit properties must pass self-sufficiency test No self-sufficiency test required

Mixed Use Properties allowed Mixed Use Properties NOT allowed


Introduction to Reverse Mortgage for Purchase

• A Reverse Mortgage is a loan product available for anyone over the age of 62.

• The loans are insured by HUD (Housing Urban Development).

• The loan allows a Senior to purchase a home, use financing, along with a down payment BUT

never make a mortgage payment.

• How does a reverse mortgage work:

– A reverse mortgage is calculated by evaluating the borrowers age or life expectancy, equity

in the home and living expenses.

– Unlike a normal mortgage, you don’t have to make any regular monthly payments. With a

reverse mortgage, the interest accumulates and combined with “not making” any mortgage

payments, the principal balance grows and reduces the equity you have in the home.

– As long as you use the home as your primary residence AND keep the property taxes and

insurance current, you will not have to make a mortgage payment.

– You can sell the home or refinance at anytime. YOU own the home!


Chris ChudacoffSVP/Regional ManagerP: (949) 430-0822

C: (949) 633-2919

[email protected]

www.rate.com/ChrisChudacoffNMLS ID: 287900 CA - CA-DOC287900 - 413 0699

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Rate, Inc. - 14811 N. Kierland Blvd., Ste. 100, Scottsdale, AZ, 85254 Mortgage Banker License # BK-0907078 CA - Licensed by the Department of Business Oversight, Division of Corporations under the

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Department of Financial & Professional Regulation, 3940 N Ravenswood Ave, Chicago, IL 60613 MB.0005932 IN - Lic #11060 & #10332 IA - Lic #MBK-2005-0132 KS - Licensed Mortgage Company -

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Broker License MC 2611 MI - Lic #FR0018846 & SR0018847 MN - Lic #MO 20526478 MS - Guaranteed Rate, Inc. 3940 N. Ravenswood Ave., Chicago, IL 60613 - Mississippi Licensed Mortgage Company, Lic #

2611 MO - Guaranteed Rate Lic # 10-1744 MT - Lic# 2611 Licensed in NJ: Licensed Mortgage Banker - NJ Department of Banking & Insurance NE - Lic #1811 NV - Lic #3162 & 3161 NH - Guaranteed Rate,

Inc. dba Guaranteed Rate of Delaware, licensed by the New Hampshire Banking Department - Lic # 13931-MB NM - Lic #01995 NY - Licensed Mortgage Banker - NYS Department of Financial Services- 3940

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MB001713 OR - Lic #ML-3836 - 3940 N. Ravenswood Ave., Chicago, IL 60613 PA - Licensed by the Pennsylvania Department of Banking and Securities Lic #20371 RI - Rhode Island Licensed Lender Lic #

20102682LL, RI - Rhode Island Licensed Loan Broker Lic # 20102681LB SC - Lic #-2611 SD - Lic# ML.04997 TN - Lic #109179 TX - Lic # 50426 & Lic # 47207 UT - Lic #7495184 VT - Lic #LL6100 & MB930 VA

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mailto:[email protected]

http://www.rate.com/ChrisChudacoff

Back to Basics: Mortgage 101 – “Acronyms to Reg Z and Underwriting in Between”

Presented by

Abel Fregoso Jr.

Union Bank

Mortgage 101 – Loan Products• Government Loans – Loans insured or guaranteed by the government (VA/FHA).

• Conventional Loan – (Conforming Loan) – A loan which meets the requirements to be eligible for purchase or securitization by Fannie Mae and Freddie Mac. These limits have temporarily been increased for 2017 from $417,000 to $424,100.

• High Balance Conventional Loan (Super Conforming) – in between loan of 424,100 – 636,150 A mortgage that is not insured or guaranteed by the federal government (FHA/VA).

• Jumbo Mortgage – A mortgage larger than the maximum eligible for purchase by the two GSEs, Fannie Mae and Freddie Mac, not including Alt A or subprime loans. (See Non-Conforming Loan.)

• Amortized Mortgage Loans – Loans that automatically pay a portion of each monthly payment to the principal balance with the rest being paid as interest.

• FRM – Fixed Rate Mortgage – A mortgage loan in which the interest rate does not change during the entire term of the loan.

• ARM - Adjustable Rate Mortgage – A mortgage with an interest rate & payment that changes periodically over the life of the loan based on changes in a specified index.

• Interest-Only Mortgages (IOs) – Mortgages on which for some period the monthly mortgage payment consists of interest only. During that period, the loan balance remains unchanged. These loans are also called deferred amortization mortgages. After the interest-only period ends, the payment jumps to cover both the interest owned and the principal and the interest rate may adjust based on a particular index, if it is an ARM. (normally a portfolio loan)

• 40-Year Mortgages – These mortgages have payments calculated on a 40-year term, but most of them must be paid off in 30 years. Lengthening the term cuts the monthly payment, but the loan carries a slightly higher interest rate than a 30-year loan. (normally a portfolio loan)

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Monthly Mortgage Payment

What Will Happen When or If Mortgage Rates Increase?

$0

$400

$800

$1,200

$1,600

3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%

$1,012$1,078

$1,146 $1,216$1,288

$1,363$1,439 $1,517

INTEREST RATE

MONTHLY MORTGAGE$240,000 Loan – Based on 80% of

Home Purchase Price $300,000

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Fixed Rate Mortgage – Advantages and Disadvantages


Advantages

➢ Rates and payments

remain consistent

➢ Budgeting is easier

➢ Simple to understand

➢ Good for first-time buyers

Disadvantages

➢ Have to refinance to get

a lower rate

➢ Can be more expensive for

some borrowers

➢ Cannot be customized for

individual borrowers

A mortgage that has a fixed interest rate for the entire term of the loan.

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Adjustable Rate Mortgage – Advantages and Disadvantages

What Will Happen When or If Mortgage Rates Increase?A loan where the interest rate changes periodically, usually in relation to

an index, and payments may go up or down accordingly.

Advantages

➢ Lower rates and payments

early in the loan term

➢ Can take advantage of falling

rates without refinancing

➢ Offers a cheap way for

borrowers who don’t plan on

staying in one place for very long

Disadvantages

➢ Rates and payments

can rise significantly

➢ Difficult to understand

➢ Uncertainty of

market conditions

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Mortgage 101 – Loan Products (Cont’d)

• Basis Point (often denoted as bp, bps or 1/100) – A unit that is equal to 1/100th of 1%. It is commonly used to denote the change in a financial instrument, or the difference (spread) between two interest rates. Although it may be used in any case where percentages are used, for convenience, it is most often used when quantities in percentage points are small. It avoids the ambiguity between relative and absolute discussions about rates.

• Caps – A set percentage amount by which an adjustable rate mortgage may adjust each adjustment period. Caps are usually quoted as two numbers, as in 2/6. The first number indicates how much a loan may adjust at each period, while the second number indicates how much a loan may adjust over its lifetime. Loans like the 3/1 and 5/1 adjustable which have an initial fixed period are quoted with 3 numbers, as in 2/6/3, which means that the first adjustment may be as much as 3%, subsequent adjustments are capped at 2% each and the lifetime cap is 6%. Two-step loans are quoted with a single cap, which is the amount by which the loan may adjust in its single adjustment date.

• Index – A published interest rate not controlled by the lender to which the interest rate on an adjustable rate mortgage (ARM) is tied. The index and the interest rate linked to it may increase or decrease. (LIBOR, Treasury Constant Maturity (TCM), 11th District)

• Interest Rate - a unit used to calculate the portion of the loan payment, not being returned or paying down the principal balance owed.

• APR-Annual Percentage Rate - a broader measure of the cost of your mortgage including monthly payment, closing costs, and loan terms. The APR on a mortgage is not typically the interest rate the borrower will pay.

• Allowable & Non-Allowable fees or Costs (FHA or VA lists).

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Mortgage 101 – Loan Products (Cont’d)

• Alt A (Alternative A) Loans – loans to prime-credit borrowers that have some combination of nontraditional documentation, non-standard product structure, or more liberal underwriting. Alt-A pools generally have higher proportions of investor loans and lower average credit scores (690 to 715) than conventional conforming or prime jumbo pools.

• Second Mortgage -Typically refers to a secured loan (or mortgage) that is subordinate to another loan against the same property.

• HELOC (Home Equity Line of Credit) – A mortgage loan, usually in second position, that allows the borrower to obtain cash drawn against the equity of his home, up to a predetermined amount

• FTHB - First Time Home Buyer – EOM, or Home Ready, etc.

• Refinance Loan – The process of paying off one loan with the proceeds from a new loan using the same property as security.

• Not Prevalent

– Stated Income Loan – A mortgage where the lender does not verify the borrower's income but it is taken at their word. These loans are sometimes called "liar loans." Stated income loans have been extended to customers with a wide range of credit histories, including subprime borrowers. The lack of verification makes these loans particularly simple targets for fraud.

– Subprime Loans – Loans made to those who have impaired credit. Generally have higher interest rates than prime loans. Such loans are tied to borrowers’ credit ratings, expressed as letter grades, such as A-, B, D. Prime loans’ credit is most often A.

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Mortgage 101 – Loan Guidelines• Loan-to-Value (LTV) Ratio – A mathematical calculation which expresses the amount of a first mortgage

lien as a percentage of the total appraised value of real property. For instance, if a borrower wants $130,000 to purchase a house worth $150,000, the LTV ratio is $130,000/$150,000 or 87%. LTV is one of the key risk factors that lenders assess when qualifying borrowers for a mortgage.

• Combined Loan-to-Value (ratio) (CLTV) – The proportion of loans (secured by a property) in relation to its value. When "Combined" is added, it indicates that all loans – first and second lien – on the property have been considered in the calculation of the percentage ratio. (See Loan-to-Value Ratio.)

• PITI- Principal, Interest, Taxes (Property), Insurance (Homeowners): this is the total monthly housing expense for a home buyer and is used in total qualifying debt.

• DTI-Debt to Income Ratio: this is the main “income qualification” to determine a borrower’s ability to repay the loan.

– FER – Front End Ratio- the calculation of PITI & A / (over) Gross Income.

– BER – Back End Ratio - the calculation of PITI & A (HOA fees) & Installment Loans (Car, other loans (student, personal), etc.) / (over) Gross Income.

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Underwriting: The process

• What Lender Generally Reviews in Underwriting:– The Borrower Supplied Documents

– The 3 C’s (Capacity, Collateral & Credit)

– Down Payment

– Reserves

– Mortgage Estimates

– Confirmation of Information:

• Income (w2 or 1099)

• Verification of Assets (VOA)

• Verification of Employment (VOE)

• Credit History

• Debt to Income (DTI)

• Loan to Value (LTV)

The 3 C’s of Underwriting(Capacity, Collateral, & Credit)

• Capacity

– Debt to Income Ratio

• Front End Ratio - Total monthly housing expenses divided by the total monthly income

• Back End Ratio - Combine housing expense & other debts divided by the total monthly income

– Requirements

– 1099 vs W2

– Reserves?


• Collateral

– Appraisal - What happens if higher or lower than purchase price?

– Loan to Value

• What is it and how is it calculated

• what is included in the figures?

• Is there a difference if you are 1099 vs. w2 employee?

• What is a CLTV, when is it used how does it effect the loan process


• Credit

– There is the FICOTM

Score, what does the number mean or range? How might things differ?

– We hear about 3 Bureaus, what score is used?

– We hear a lot about re-entry after a life or loan event (how does that effect underwriting?

– What is the effect of a co-borrower? (Lowest Credit, & Debt)?

Mortgage 101 – Loan Process• Application Process – Overview

– Items Needed to Identify a Complete Application1. Borrowers Name2. Property Address3. Social Security Number4. Income5. Loan Amount6. Estimated Value

• LE- Loan Estimate: the initial loan disclosure provided to the buyer within 3 business days of loan application that “estimates” all charges from the escrow, title, lender, third party, etc.

• Underwriting (3 C’s – Collateral, Capacity, Credit)

• ORIGINATION (LENDER) SYSTEMS - Loan Systems– DU-Desk top underwriting: Provides a comprehensive credit risk assessment that will determine whether a loan

meets Fannie Mae requirements

– LP- Loan Prospector: Provides a comprehensive credit risk assessment that will determine whether a loan meets Freddie Mac requirements

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Loan Estimate – Page 1

What Will Happen When or If Mortgage Rates Increase?• Transaction Information

• Loan Terms

• Projected Payments

• Costs at Closing

29


What Will Happen When or If Mortgage Rates Increase?• Loan Costs

• Other Costs

• Calculating Cash-to-Close

30



31

• Loan Calculations

• Other Disclosures

• Contact Information

• Confirmation of Receipt

Application Checklist – Needed for a Pre-Approval

What Will Happen When or If Mortgage Rates Increase?Complete the Online Application, Borrower’s Authorization Form,

Credit Card Authorization Form and provide the following documentation:

Income➢ Provide last two paystubs

covering a one month period

➢ W2s and Federal Tax

Returns for the last two years

(including all pages)

➢ Bonus/Commission

income: additional

documentation required

➢ Self-employed: additional

documentation required

Assets➢ Provide two months of most recent bank/asset statements

➢ Large deposits will need additional documentation

Current Housing➢ Renters: provide 12 months of cancelled checks

➢ Currently own and selling: provide a copy of the HUD-1

➢ Currently own and not selling: need to qualify for both

homes or meet requirements for renting the property

➢ Most recent mortgage statement and insurance statement

What you need to buy a home: employment and verifiable income

• You must be able to prove you have the resources to repay the loan

• A lender will verify a borrower’s:

- Current income or assets

- Employment status

- Credit history

- Monthly mortgage payment and any other mortgage-related obligations and loans associated with the property

- Other debt

- Monthly debt-to-income (DTI) ratio

What you need to buy a home: money for upfront costs

• Down payment

– The required amount depends on the mortgage loan program

– It can range from 3.5% to 20% (or more if you prefer) of the purchase price

– If your down payment is less than 20% you may be required to purchase private mortgage insurance, typically 0.15% to 2.5% of the loan amount

• Closing costs and other fees

– Including upfront fees, origination fee, third-party closing fee, initial escrow deposits

– Typically 3% to 7% of the loan amount

Debt to Income Ratios – Loan Program Parameters

What Will Happen When or If Mortgage Rates Increase?Each loan program has certain requirements – a maximum DTI is one of them.

Keep in mind there is a front end and back end ratio that needs to be calculated.

What does this mean… let’s get educated on DTIR (Debt to Income Ratio).

The buyer’s monthly

housing expenses

are added together.

➢ Principal

➢ Interest

➢ Taxes

➢ Insurance

Combine these expenses

with the regular monthly

debt payments (credit

cards, car loans, etc).

The DTIR is the percentage of the gross

monthly income represented by the total of

expenses. In most cases, the debt to income back

end ratio should not exceed 43%. However,

Freddie Mac loans have been approved with up

to 49% and even 56% for FHA.

The front end ratio is the total monthly housing

expenses divided by the total monthly income.

The back end ratio combines of housing expense

and other debts divided by the total monthly income.

Debt to Income Ratios – at a Glance

What Will Happen When or If Mortgage Rates Increase?Joe and Shirley pay $1,500 a month for their mortgage, in which $800 goes to the principal and $700 goes to the interest of the loan. They pay $300 in taxes each month, along with $100 for

insurance each month. Their total PITI is $1,900.$1,500 (PI) + $300 (T) + $100 (I) = $1,900 (PITI)

In addition to these monthly housing expenses, Shirley has a student loan in which she pays $250 a month. Shirley also likes to shop, so her credit card debt requires payments of $150 a month. Joe

has an auto loan of $400 a month. These additional monthly debt payments add up to $800.

Joe and Shirley’s combined monthly income is $5,900.

$1,900 (PITI) / $5,900 (monthly income) = 32% (front end ratio)

$1,900 (PITI) + $800 (other debt) = $2,700$2,700 (total monthly debt) / $5,900 (monthly income) = 46% (back end ratio)

Mortgage 101 – Loan Process (Cont’d)

• Conditional Approval – Appraisal * Collect Conditions

• Subject to Conditions

– Pre Doc – Missing items or Letters of Explanation & Corrections, etc.

– Pre Funding – Title & Escrow items

• CD- Closing Disclosure: this is the final document a buyer will approve before signing closing documents (3 days for review prior to Docs drawn)

• Loan Docs – (Reviewed, Signed, Returned) only Significant Adjustments need Redrawing

• Refi only 3 Day right of Rescission (after documents signed)

• Loan Funding – May or May not be allowed to Record, Same Day. Times May Vary

37

Closing Disclosure – Page 1


38

• Closing Information

• Transaction Information

• Loan Information

• Loan Terms

• Projected Payments

• Costs at Closing



39

• Loan Costs

• Other Costs

• Total Costs



40

• Cash-to-Close Calculations

• Transaction Summaries



41

• Loan Disclosures

• Escrow Account



42

• Loan Calculations

• Other Disclosures

• Questions

• Contact Information

• Confirmation of Receipt

Mortgage 101 – Loan Servicing• Loan Servicing – Generally covers everything after disbursing the funds until the loan is fully paid off, and is the process by which a

mortgage servicer or subservicing firm collects payments from borrowers. The level of service varies depending on the type loan and the terms negotiated between the firm and the investor seeking its services

• Service Release - Loan Sale – Acquisition Loan – All are descriptions of the Buying and selling of Servicing Rights to the Mortgages

• Assumption – generally on FHA Loans

• Mortgage underwater: Owes more than the property is worth

• Charge Off – Internal term of a Mortgage Servicer (usually when a loan is moved to another area, or company) for account recovery.

• 3rd Party Authorization – Authorization provided to the Lender from the borrower for confidential information, allowed to be shared about their Loan. We encourage the use of the Authorization to Release and Convey (ARC) inside of Zipform , if the Lender does not have such a specific form on their system.

• Loss Mitigation – Activities designed to reduce the likelihood of a mortgage investor or insurer suffering financial losses on a mortgage, or the final dollar value of those losses in the event of a borrower defaulting.

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Mortgage 101 – Loan Servicing (Cont’d)

• Waterfall – of Loss Mitigation Options – Progression of Default Options, based on Individual’s Hardship and Loan Status

• Loan Modification – A modification to an existing loan made by a lender in response to a borrower's inability to repay the loan. Loan modifications can involve a reduction in the interest rate on the loan, an extension of the length of the term of the loan, a different type of loan or any combination of the three. A lender might be open to modifying a loan because the cost of doing so is less than the cost of default.

• Short Sale – When a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of a borrower. When, the homeowner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt.

• DIL - Deed in Lieu of Foreclosure – The Legal process of the borrower turning the deed over to the lender/ Servicer, in Lieu of having a foreclosure.

• Foreclosure – The legal proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property due to the owner's failure to comply with the terms of his or her mortgage.

• TS - Trustee sale – The legal proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property due to the owner's failure to comply with the terms of his or her mortgage.- Used primarily here in CA.

• Real Estate Owned (REO) – a class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction. This is common because most of the properties up for sale at these auctions are worth less than the total amount owed to the bank.

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Mortgage 101 – Loan Servicing (Cont’d)• Escrow Account –Escrow Impounds –• Insurance –• Taxes –•

• PTD – Paid Through Date

• NOD – Notice of Default – Generally filed after at least 90 days of delinquency, and is the required precursor to the final publishing and NTS.

• NTS - Notice of Trustee Sale (NTS).

• Trustee Sale– 3rd Party Sale– Reverts to Bank

•

• Terms used with Escrow and Mortgagor during Short Sale Process:• HUD1 – Estimated Net Proceeds form used during Escrow

• PCOE – Planned Close of Escrow date

• COE – Close of Escrow

•

• Programs that have a Sunset plan in place: • MHA – Making Home Affordable – a partnership with HUD & Fannie Mae

• HAMP –Home Affordable Modification Program (However, Fannie & Freddie, still have their own version)

• HAFA –Home Affordable Foreclosure Alternative• HARP – –Home Affordable Refinance Program

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Mortgage 101 – Communication• REALTOR® with Borrower

– Buying Power

• Not skipping the Mortgage Qualification early in decision to buy

• Knowing what the buyer can afford and explaining or having a Lender explain

– Activities during the process

• Organize and Collect Necessary Documents (Financials, Monthly Statements)

– Loan Programs Available

• Checking on available Down Payment Programs in advance

– Financial Planning

• Ensure the Buyer considers additional expenses

• To insure a smooth transaction, have Buyer’s aware of the following actions:– Don’t apply for new credit

– Don’t close any credit accounts

– Don’t move your money around without a paper trail

– Don’t increase your debts

– Don’t skip a payment or make a late payment

– Don’t buy a car

– Don’t change jobs if you can help it

– Don’t spend your savings

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Do not print and distribute

February 2017

©2016 MUFG Union Bank, N.A. All rights reserved.

Member FDIC

Union Bank NMLS ID #539249

Abel Fregoso Jr

Assistant Vice President

Mortgage Consultant

[email protected]

Tel: 619-572-3316

Fax: 858-435-1629

NMLS # 1567894

Residential Lending Department

669 South Rancho Santa Fe Road

San Marcos, CA 92069

unionbank.com/afregoso

Loans subject to credit and collateral approval. Financing available for collateral located in CA, OR, or WA. Restrictions may apply. Terms and conditions subject to change.

Thank You!

mailto:[email protected]

Find Down Payment Programs

CAR Members:

DownPayment.CAR.org

Consumers:

FindDownPayment.CAR.org

http://www.car.org/tools/downpaymentresource/

Questions?Webinar recording and slides will be posted on

www.car.org/knowledge/webinars/financehelplinefinanceworkshops.car.org

If your question did not get answered, email [email protected]

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http://www.car.org/knowledge/webinars/financehelpline

Save the Date!

Upcoming Finance Helpline B2B Webinars

Monday, April 4th 10am-11am – Down Payment Assistance and using DownPayment.car.org

Wednesday, April 19th 10am-11am – Loan Servicing (Payoffs, Modifications, Short Sales, REOs) TBD

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Thank you!

(213)[email protected]

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“Mortgage 101 – Acronyms to Reg Z,

Documents

Transcript of “Mortgage 101 – Acronyms to Reg Z,