When can rental income from the subject property be included in agency loans and what is required to document the income?

When can rental income from the subject property be included in agency loans and what is required to document the income?



DISCLAIMER: The views and opinions expressed in this video are those of the presenter and do not necessarily reflect any official CampusMortgage® policy or position. Examples of analysis performed within the video are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of CampusMortgage®. Nothing contained in this video should be considered legal advice. Due to ongoing changes to mortgage regulations and guidelines, the information presented in this video is time sensitive and subject to change, without notice. Although every effort has been made to ensure accuracy, CampusMortgage does not guarantee the accuracy of any information contained herein. This video is for informational purposes only and not intended to be used in place of any official government guideline or regulation. Each Investor and/or Lender may have additional overlays, which you need to be aware of.

© 2024 CampusMortgage®. All Rights Reserved. Without the prior written permission of Mortgage University, Inc. (DBA CampusMortgage), no part of this video/content may be used, reproduced or transmitted in any form.

 
 
 
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With the new year a few weeks away, industry experts are forecasting increased volume and profitability for mortgage lenders in 2025. Last month, Fitch Ratings published an outlook for non-bank mortgage companies. The ratings agency noted that consolidation in this market has strengthened the largest companies in this sector.

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Fannie Announces New Version of Desktop Underwriter

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Fannie Mae announced the latest version of its Desktop Underwriter (DU) software last week, but the enterprise isn’t treating this like the usual release. For starters, Fannie has announced version 12.0 nearly two months before it’s released. The enterprise is also using multiple channels to promote the new version, including a promotional video, a white paper, and a Perspectives Blog, in addition to the software release notes.

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Rural Home Buying Outpacing Urban Sales Since Pandemic

Written By: Joel Palmer, Op-Ed Writer

The housing and mortgage industries have seen a surge in demand for rural homes since the COVID pandemic, according to Fannie Mae research. The main factor helping increase rural housing demand was the opportunity many were given to work remotely. Demand for space and low mortgage rates also contributed, though those trends bolstered home buying in all areas in the immediate aftermath of the pandemic.

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Lenders See Opportunity in Standardizing Closing Cost Structure

Written By: Joel Palmer, Op-Ed Writer

A Fannie Mae survey of mortgage executives shows wide support for standardizing and simplifying the language around closing costs and fees. The survey of senior mortgage executives, conducted in July, found that 60 percent of respondents said closing costs are easy to estimate, and 50 percent said they are easy to explain.

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Market Data Shows Influx of Recent Refinance Volume

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GSEs Announce New Policies for PMI and Multifamily Loans

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Housing Affordability is Improving, but Buyer Sentiment is Not

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The latest data shows that housing affordability may be slightly improving, but consumer sentiment about the housing market continues to be pessimistic. Fannie Mae reported earlier this month that its monthly Home Purchase Sentiment Index® (HPSI) decreased in July, with only 17 percent of consumers believing it's a good time to buy a home and 65 percent saying it’s a good time to sell.

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Fannie, Freddie Report Steady Second-quarter Financial Results

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Agencies Issue Final Rule on AI Appraisal Usage

Written By: Joel Palmer, Op-Ed Writer

The final step toward the passing of a new rule regulating artificial intelligence models for real estate valuations and appraisals was completed earlier this month, coinciding with a report that home appraisals are higher than sales prices in half of home sales. Corporate Settlement Solutions (CSS), which provides commercial and real estate settlement solutions, recently released a report that shows home appraisals were higher than sale prices 51 percent of the time in the first half of 2024.

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FHFA, CFPB Release Updated Mortgage Data

Written By: Joel Palmer, Op-Ed Writer

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FHFA Approves ‘Limited Pilot’ for Freddie Mac Second Mortgage Product

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Homebuying Attitudes Hit Record Low as Affordability Becomes Leading Campaign Issue Among Young Voters

Written By: Joel Palmer, Op-Ed Writer

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Several Organizations, Members of Congress Voice Concern with Freddie Mac Second Mortgage Proposal

Written By: Joel Palmer, Op-Ed Writer

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Fannie Responding to Lender Concerns About Replacement Cost Property Insurance

Written By: Joel Palmer, Op-Ed Writer

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FHFA Director’s Senate Testimony Points to Indefinite Conservatorship of Enterprises

Written By: Joel Palmer, Op-Ed Writer

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Homebuyers Coping With Higher Mortgage Rates in Various Ways

Written By: Joel Palmer, Op-Ed Writer

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Latest Statistics from Redfin Demonstrates Affordability Challenges

Written By: Joel Palmer, Op-Ed Writer

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Industry Contracts as Housing Inventory Expands

Written By: Joel Palmer, Op-Ed Writer

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FHFA Delays Credit Score and Reporting Transition to End of 2025

Written By: Joel Palmer, Op-Ed Writer

The Federal Housing Finance Agency (FHFA) expects to transition to new crediting reporting requirements and new credit score models in the fourth quarter of 2025. “Following extensive stakeholder engagement and input, FHFA is aligning the implementation date of the bi-merge credit reporting requirement with the transition from the Classic FICO credit score model,” the agency said in a statement.

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GSEs Report Solid 2023 Financial Results

Written By: Joel Palmer, Op-Ed Writer

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HUD Removes Registration Requirement for Lender Branch Offices to Provide FHA Loans

Written By: Joel Palmer, Op-Ed Writer

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Economists More Optimistic About Single-Family Market; Pessimistic in Commercial

Written By: Joel Palmer, Op-Ed Writer

Late-year 2023 developments in the housing market has prompted Fannie Mae to deliver a more optimistic forecast for 2024. “Overall, we expect 2024 to be a better year than 2023 for homebuyer affordability and the mortgage industry,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.

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2024 Will be Mixed for Industry Volume, Job Prospects

Written By: Joel Palmer, Op-Ed Writer

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Fannie Forecasts Slight Increase in Mortgage Apps Next Year

Written By: Joel Palmer, Op-Ed Writer

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Freddie Mac Streamlines Origination Process for Condo Units

Written By: Joel Palmer, Op-Ed Writer

Freddie Mac has announced a change to its Condo Project Advisor program to help streamline mortgage originations involving condominium loans. Freddie said with this enhancement, mortgage underwriters and processors can determine “in just minutes” whether a loan to finance the purchase of a condo unit meet’s the GSE’s guidelines.

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FHFA Publishes Final Rule for Amended Capital Framework

Written By: Joel Palmer, Op-Ed Writer

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GSEs Complete Latest Phase on UCD Critical Edits

Written By: Joel Palmer, Op-Ed Writer

Fannie Mae and Freddie Mac have moved into the next phase of critical edits for the Uniform Closing Dataset (UCD). Phase 3B, completed on November 6, transitioned the UCD critical edits from “warning” to “critical/fatal.” Fannie and Freddie published revised UCD FAQs to help with questions regarding UCD. The transition to 3B means lenders must address quality issues for “fatal data points” before delivering loans to Fannie or Freddie.

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Fannie, HUD Promote Initiatives to Create More Housing Units and Home Financing Opportunities

Written By: Joel Palmer, Op-Ed Writer

Fannie Mae released a white paper last week providing details on why it made a pair of key underwriting changes. Meanwhile the U.S. Department of Housing and Urban Development (HUD) announced an initiative it hopes will lead to more conversions of commercial properties into residential uses and mixed-use development. Both announcements continue a trend of agencies and policymakers working to solve an ongoing issue of housing and home financing availability.

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written by: bonnie wilt-hild, fha de underwriter
In Front of the Eight Ball

Written By: Bonnie Wildt

I have said it before and I will say it again and that is, do not believe everything you hear or read for that matter. In this particular instance I am referring to AUS Findings. I have had countless conversations with processors and loan officer who want to know why I am asking for documentation that the AUS findings have clearly stated wasn’t needed or worse, they can’t believe I am turning a loan down that has an Approve/Eligible. So here it is again and pay particular attention to the details because just because you have an Approve/Eligible or Accept doesn’t necessarily mean you have a done deal.

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The Determining Factor

Written By: Bonnie Wildt, Op-Ed Writer

From a mortgage approval standpoint I still find that most mortgage professionals are  still stuck in the wonderful world of AUS. As in bygone days, they believe that if a case receives an automated underwriting approval then the case will be approved, no questions asked, no additional documentation required. Well, I am here to tell you, that’s just not the case. 

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Meatball Processing

Written By: Bonnie Wilt-Hild

I know, it doesn’t sound like something that any self respecting processor would engage in but it is happening all around us, it being meatball processing. Defining it is easy enough as well, just think processing on the fly and the end results as you can well imagine is a loan approval or more often, suspense, that resembles the collective works of Shakespeare, at least in page length and as we get busier, the items overlooked during processing continues to grow.

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Further Due Diligence

Written By: Bonnie Wilt-Hild

As underwriters, many of us spend our days reviewing guidelines, interpreting guidelines, answering questions with regard to guidelines and applying the now never ending overlays from our investors with regard to guidelines. Underwriting guidelines apply to every loan product and differ depending on which type of product you are underwriting however there are many common sense areas that apply to underwriting that are not addressed in handbooks.

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The Truth about Underwriters

Written By: Bonnie Wilt-Hild

A few days ago a friend and I were laughing over the fact that most people, including mortgage industry professionals, wonder if underwriters really exist. I myself have had staff from various brokers offices (which I do visit from time to time) say to me, “We have heard about underwriters but have never really seen one.

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Total Scorecard, Credit Docs and Appraisal Dates

Written By: Bonnie Wilt-Hild

Seems there have been a few issues lately with regard to Total Scorecard findings and validity as well as misconceptions with validity periods for both appraisals and credit documents (credit reports) on FHA insured mortgage types so I thought it not a bad idea to clear a couple of things up.

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Streamline Refinance Transactions

Written By: Bonnie Wilt-Hild

Call it portfolio retention or risk management, but as of Wednesday, I had several of my investors pull out of the market where non-credit qualifying (streamline’s without appraisal) FHA streamline refinance transactions were concerned. Several have said they would only purchase them if they were currently servicing the loan and I now have one other who has changed guidelines on credit qualifying streamline refinance transaction to require a minimum median credit score of 700 for loan amounts less than 417,000 and 720 for loan amounts greater than 417. All of this just as everyone rev’s up for the reduction in UFMIP to .01%.

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Further Analysis

Written By: Bonnie Wilt-Hild

Residential mortgage underwriting is defined as the overall credit and valuation analysis of a particular borrower or borrowers with regard to overall financial health as well as the evaluation of collateral that might be used to secure the mortgage and as underwriters we relate this particular evaluation to calculation of housing to income and debt to income ratio’s, the evaluation of a borrower’s credit history as well as the review of a property appraisal. 

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We Used To Call It Home

Written By: Bonnie Wilt-Hild

Over the past 5 years I have had many conversations with people regarding the housing market which invariably becomes a discussion as to who is at fault for the collapse in 2007. Depending on who you are talking too, the blame is laid at the feet of big banks or mortgage brokers, Wall Street, FNMA or FHLMC and of course the diagnosis is generally that one or all of the aforementioned groups did it out of greed.

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How Do You Underwrite That?

Written By: Bonnie Wilt-Hild

FHA issued a bulletin on April 18, 2012 informing the industry about HUD approved nonprofit participation in FHA loan financing. Basically HUD allows approved nonprofit agencies to act as a mortgagor utilizing FHA insured financing to purchase homes which will be designated for resale to low to moderate income families or in some instances rented to low moderate income families and as you can imagine where the affordable housing program concerned as it pertains to the rental units, the nonprofits may actually have more than one FHA insured mortgage.

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Mutual Interest Management Style

Written By: Bonnie Wilt-Hild

Every lender operation is different. Some are operations friendly and others sales friendly and fortunately some are in between. As an industry educator as well as underwriter, I have many opportunities to talk to be originators and underwriters and as you can well imagine, many of those conversations end up being discussions about unreasonable underwriters asking for unnecessary file documentation and if I am speaking with underwriters, they always go in the direction of how management does not support them as underwriters and that they 

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HARP 2.0

Written By: Bonnie Wilt-Hild

I could be wrong but I don’t think I am when I say this program is a bad idea. To substantiate that statement I will quote one that I read on a LinkedIn post a couple days whereas one blogger posted the question “Is HARP 2.0 real, is anyone really closing them?” just to be answered by another blogger who posted, “yes, laughing all the way to the bank”. The sad truth is that I am sure that he is, unfortunately.

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Why We Underwrite Loans

Written By: Bonnie Wilt-Hild

I know, it sound pretty elementary, we underwrite to see if the borrower qualifies, it’s that simple right? Actually it’s not that simple nor is the task of underwriting a basic exercise in calculating ratio’s, cash to close and making sure the borrower’s credit score is sufficient to meet investor criteria.

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A Return to Policy

Written By: Bonnie Wilt-Hild

I know this statement will be relatively unpopular but I am going to say it anyway, thank goodness for the return of the FHA mortgage insurance program” In a HUD Public Affairs publication, No. 12-037, issued on February 27, 2012, HUD announced its intentions of again raising the UFMIP and MMI premiums to not only protect their capital reserves but also to encourage the return of private capital into the residential mortgage market.

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Providing Qualify Service

Written By: Bonnie Wilt-Hild

The past few weeks have been quite interesting around the office for me, not because I have had opportunity to learn new things or underwriting interesting cases, but because I have had to endure a whole new level of customer complaints. It seems like more and more these days, when I pick up the phone it’s my boss saying to bring some loan officer to her office because again, she had just gotten chewed by another customer or real estate agent and in a time of dwindling business not to mention fees, this is never a good thing.

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Credit Scores

Written By: Bonnie Wilt-Hild

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. They are simply three more numerical values used by a computer model to “recommend” if a loan should be approved and just like its partner, the AUS, I think credit scoring as rule has outlived its usefulness.

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Credit Qualifying Streamline Refinance Transactions

Written By: Bonnie Wilt-Hild

I know what you’re thinking already, “Really Bonnie, we know all about them”, but I say untrue, this based on a conversation I had yesterday with an underwriter friend at Philadelphia HOC. It is always nice to talk to her, catching up with friends is always a good thing and as you can image, she will sometimes share with me some of the most common disastrous mistakes lenders make where various loan types are concerned. 

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Closings by Homeownership Counseling

Written By: Bonnie Wilt-Hild

When we say homeownership counseling, many of think of traditional counseling that a borrower might receive prior to the purchase of a new home, in many instances to receive grant funds, or perhaps homeownership retention counseling that a homeowner might seek should they be facing foreclosure but very seldom do loan originators consider homeownership or “credit counseling” as a means to generate new business.

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Oil and Water

Written By: Bonnie Wilt-Hild

Oil and water, two things that we all know do not mix well do to incompatible molecular structures, have become the poster child for underwriting with AUS. That’s correct, Oil (AUS) and water (manual underwriting). “How so”, you ask and the answer is a very simple one. We are still required to utilize automated underwriting on all cases that we underwrite however the findings don’t mean a thing where documentation waivers or loan approval is concerned.

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Knowing the Guidelines

Written By: Bonnie Wilt-Hild

Yes, it is important to know the guidelines and I am sure many of you who are underwriters are thinking that you do or you know them at least sufficiently to underwrite a case with the assistance or guidance from your AUS. We I am here to tell you that these days it’s a little trickier than that and I can prove that statement by way of buy backs just last month.

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Loss Mitigation

Written By: Bonnie Wilt-Hild

The use of the FHA and VA mortgage insurance programs has been on the rise since the great implosion of 2007 and most recent us several lenders embracing Rural Housing programs as well. As a mortgage underwriting employed on a full time basis by a bank as well as an industry educator who teaches program guidelines for these products for FHA Online University, I have seen literally thousands of people, industry professionals, government agencies and lender groups sign up for and participate in training for these programs in order to become proficient with the government lending product types.

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Employment Opportunities in the Mortgage Industry

Written By: Bonnie Wilt-Hild

I have been working in the mortgage industry for the past 25 years and have seen a lot of highs and lows. When I began, the GSE’s were just gearing up and the secondary market as we know it today was still in its infancy.

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Making Homeownership Possible

Written By: Bonnie Wilt-Hild

I know everyone has read an article or two in which I have stated the importance of the social aspect of why we underwriters do what we do. Homeownership or the preverbal roof over our heads is one of the most important aspects of human civilization and over the past couple of weeks I learned from a personal standpoint just how much this and a few other things that we often seem to take for granted mean to us as people and to our families.

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Streamline Refinance Transactions

Written By: Bonnie Wilt-Hild

Wow, talk about an increase in volume. With interest rates down there seems to be a renewal of interest in the FHA Streamline refinance program. It actually makes sense really, considering that many mortgages were refinanced into FHA mortgage types during 2008 and 2009 to relieve borrowers who had previously been placed in subprime mortgage types, the burden of excessive interest rates or adjustable rate features.

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203k: Make Special Note

Written By: Bonnie Wilt-Hild

As volume continues to grow where overall originations of the FHA 203k program is concerned, so of course do errors. I realize that many of the lenders currently underwriting the program are proficient where policy and procedure for this program is concerned, however there are those lenders that are still somewhat new to the program and I thought I would share a little insight as to a few things to keep in mind while underwriting and servicing the program which hopefully spare some of you later issues with both HUD and your investors.

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Real Estate Owned

Written By: Bonnie Wilt-Hild

Before I begin, I just want to say that I left my flying monkeys home this morning so for those of you that enjoy my occasional black rant, you will be disappointed. However I will say overall sarcasm is not out of the question because here of lately whenever a discussion takes place that includes the federal government, excluding HUD of course, that relates to the real estate market, well it’s just impossible to not be sarcastic, they make it too easy.

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The 203k Underwriting Checklist

Written By: Bonnie Wilt-Hild

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.

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The Spirit of Underwriting

Written By: Bonnie Wilt-Hild

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. 

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The 203K for Investors

Written By: Bonnie Wilt-Hild

We have been listening to the gossip (most of which I started), since November, 2010 about how HUD has discussed lifting the moratorium on the 203k program designed for investors. Believe it not, the program actually did exist at one point and was quite successful from a utilization standpoint, but do to program abuse which included mass property flip schemes in the 1990’s, HUD was forced to eliminate the program for use in 1996.

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Grim

Written By: Bonnie Wilt-Hild

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. Unlike the tales of Brothers Grimm however, the ails of the current housing market do not seem to be getting softer or sweeter with time.

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written by: stacey sprain, senior loan processor
Understanding HUD REO-Part Two: The REO Appraisal

Written By: Stacey Sprain

Understanding HUD REO- Part One: Overview of the REO Process. Last week, I presented Part One in a series of articles to help expand your knowledge and understanding of HUD REO (Real Estate Owned) Sales for purposes of FHA lending. This week, in part two of the series, you’ll find further explanation of the appraiser’s responsibilities in regards to the HUD REO appraisal requirements.

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Disaster Area Inspection and Repair Requirements for Closing, Endoring/Insuring FHA Loans

Written By: Stacey Sprain

FHA recently released Mortgagee Letter 2012-13 which clarifies disaster area inspection requirements for determining whether or not the loan is eligible to close as well as if the loan qualifies for endorsement/insuring. Be sure to read these requirements if you lend in East Coast areas recently affected by Hurricane Sandy.

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Private Mortgage Insurance Cancellation-Part Three

Written By: Stacey Sprain

For the past two weeks, I have offered a series on private mortgage insurance cancellation, have explained the regulations involved and have offered some tips and tools to help consumers understand their rights regarding cancelling private mortgage insurance coverage for conventional loans.

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Private Mortgage Insurance Cancellation-Part One

Written By: Stacey Sprain

I was asked recently to speak about private mortgage insurance cancellation so I thought this would be a good topic to cover this week. Below is part one of a three part series on this topic.

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Documenting Disability Earnings as Stable Income

Written By: Stacey Sprain

You may have noticed in the past several months that the agencies have been updating long-known employment and income documentation requirements. These recent guideline updates and changes are likely in response to a discrimination lawsuit that was waged against Bank of America earlier this year claiming that Bank of America imposed ”unnecessary and burdensome requirements” on borrowers who received income because of a disability.

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FHA Appraisal & Valuation Part 3- New Construction & Cost Approach FAQs

Written By: Stacey Sprain

This is part 3 of a multi-part series that provides helpful questions and answers about FHA appraisals, properties and valuations. I recently ran across this list as I was actually searching for something on a completely different topic. I found these FAQs so helpful and informative I felt the need to pass them on in hopes they will be useful to you as well!

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FHA Appraisal & Valuation FAQs-Part 1

Written By: Stacey Sprain

I recently ran across a list of FHA appraisal and valuation questions and answers from HUD as I was actually searching for something on a completely different topic. I found these FAQs so helpful and informative I feel the need to pass them on in hopes they will be useful to you as well!

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Underwriters Prefer Cover Letters

Written By: Stacey Sprain

This week I asked a few underwriters what their top gripes are lately with the files they receive for underwriting. Based on the underwriter responses, I was able to establish a few items worth mentioning.

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Clarifications for Recently Issued Mortgagee Letter Content

Written By: Stacey Sprain

There seems to be confusion out there in regards to a few of the recent changes announced by FHA in Mortgagee Letters 2012-3 and Mortgagee Letter 2012-4. The purpose of this week’s article is to provide you with further clarity on a few of the recent changes here.

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Rural Development’s Refinance Pilot Program

Written By: Stacey Sprain

I don’t know about anyone else but I can honestly say this is the absolute busiest and most overwhelmed I’ve personally felt in the near 25 years I’ve been in this crazy business of ours! I’ve never seen so many products changing and being added, so many differences between lender product overlays, so many crackdowns on compliance or so many major regulatory changes as we’ve been experiencing recently.

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Changes to FHA Mortgage Insurance Announced

Written By: Stacey Sprain

Last week I outlined upcoming changes to FHA’s mortgage insurance premium structure based on preliminary communication from HUD but subject to the release of an official Mortgagee Letter. Since then Mortgagee Letter 2012-4 has been issued which communicates the finalized changes to FHA’s mortgage insurance premium structure.

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Fannie Mae Learning Plans for Training Purposes

Written By: Stacey Sprain

Anyone who is familiar with my article writing over the past several years probably knows I am a huge advocate for training and education in our industry whether it be for those coming in to the lending environment fresh with no prior experience or for the most seasoned veteran such as myself who have been working in the lending environment for well over 20 years or more.

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New from FHA- Updated TOTAL Scorecard User Guide!

Written By: Stacey Sprain

At the end of 2011, HUD finally released a long-awaited current version of the TOTAL Scorecard User Guide. The prior version had not been updated since 2004. FHA requires that all loans be scored through TOTAL except for those transactions involving borrower’s with no traditional credit scores and streamline refinance transactions. 

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Part 4 of Annual “Freebies” – FTC Resources

Written By: Stacey Sprain

The Federal Trade Commission website is a resource I refer people to fairly often because of the informative and educational materials available for consumer distribution. The FTC offers a lot of great information available in web format, PDF format and some materials are even available to order in bulk quantities for free which makes this a great resource for seminar materials and overall distribution to homebuyers and homeowners.

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Part 2 of Annual “Freebies” - VA Resources

Written By: Stacey Sprain

One of the things I like to do at the start of each New Year is provide what I refer to as my lists of “freebies.” These are lists of websites and resources that have helped me over the years in one way or another and that often provide ongoing information that is helpful and informative on an ongoing basis.

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The Scoop on MIP Refunds

Written By: Stacey Sprain

I had a loan officer ask me this week “how does a borrower check the status on her MIP refund?” I informed the loan that HUD no longer automatically issues a refund check to borrowers whose FHA loans are paid off with non-FHA refinances. I was actually quite surprised the loan officer wasn’t aware that HUD’s prior stance regarding MIP refunds had gone by the wayside years ago.

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Finally-Major Changes Effective October 1st!

Written By: Stacey Sprain

If you’re like me, you can’t wait to be done with September and into October so that we can implement all of the major changes we’ve known have been coming for quite some time. In case you’ve forgotten or misplaced your list, here are some reminders:

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The Changes & Updates Keep Coming- This time- VA Funding Fees Changing October 1!

Written By: Stacey Sprain

As anticipated for quite some time, VA finally formally announced changes to VA funding fee structure that will be effective for VA loans not closed on and after 10/01/2011-See VA Circular 26-11-12. On the positive side is that the funding fees are decreasing which is great news for our U.S. veterans! 

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Disaster Declarations & Re-Inspection Policies

Written By: Stacey Sprain

For those of us in the upper Midwest, we are fortunate not to deal much with Mother Nature’s unpredictable hiccups. We get occasional tornado outbreaks, some nasty thunderstorms, we deal with wind damage, hail damage and occasional flooding in low lying areas but for the most part, aside from our sometimes unbearable winters, we’re pretty fortunate up in these parts.

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Important Tips and Reminders for the Refinance Boom

Written By: Stacey Sprain

Right now we all have much to be grateful for. Record low interest rates have brought us record numbers of refinances which are boosting business for all of us in the industry. But while business is plentiful, so also can be the frustrations that come along with it. 

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How Credit Inquiries Lead to Competitor Marketing Calls

Written By: Stacey Sprain

This week I thought I’d take a break from the ongoing condominium articles that summarize HUD’s recently issued 95 page condominium processing guide and cover another topic that came up this week. I had a situation come up this week from a loan officer that I feel is relevant for many in out industry because it’s something that can commonly occur. 

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Repurchase Request

Written By: Bonnie Wilt-Hild

It is pretty common in my office to hear me say to one of my underwriters, “That is why you should always look for a way to turn it down first, it saves time and you won’t be force to have ridiculous conversations over conditions”, and needless to say I’m generally joking when I throw it out there.

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Part 2-FHA Updates to Condominium Approval Qualification Requirements and Process

Written By: Stacey Sprain

Mortgagee Letter 2011-22 dated 6/30/2011 clarifies, expands, consolidates, and updates existing condominium approval guidance while also replacing Mortgagee Letters 2009-46b, 2009-46a and 2011-03. Included with the new Mortgagee Letter are an attached Condominium Approval Implementation Schedule and 95 page Condominium Project Approval & Processing Guide. 

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OFAC Searches for Loan Applicants

Written By: Stacey Sprain

"OFAC" is the abbreviation for Office of Foreign Assets Control. It is the specific branch of the United States Department of the Treasury that administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States.

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Consumer Fraud Alerts

Written By: Stacey Sprain

With so many credit-related businesses springing up everywhere, consumers are becoming more educated about the importance of maintaining good credit. They’re also becoming more educated about their rights as consumers.

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Ethics when Consumer Credit is Involved

Written By: Stacey Sprain

Appraiser regulations keep evolving, RESPA keeps reinventing itself, loan officer compensation is bringing forth major changes, FACTA has added what I consider to be ridiculous new disclosure requirements nobody really seems to fully grasp, licensing requirements continue expanding and evolving, credit rules continue to tighten, … when does it all end? 

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Authorized User Credit

Written By: Stacey Sprain

When a credit account owner permits another person, typically a family member who is managing credit for the first time, to have access to and use of an account, the user is referred to as an authorized user of the account. This practice is intended to assist related individuals in legitimately establishing a credit history and credit score based on the account and payment history of the account owner, even though the authorized user is not the account owner.

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Reading and Answering Consumer Questions about Mortgages

Written By: Stacey Sprain

I ran across a blog while I was I was doing some research on a regulatory interpretation this evening and it really got me fired up. It never ceases to amaze me how badly some of the people in our industry answer questions for people who wouldn’t be asking if they truly knew anything about mortgages.

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Fannie Mae’s Delivery Data Check System

Written By: Stacey Sprain

We’re all familiar with many of the components of LQI because most of them have been effective for quite some time now. We’ve become accustomed to checking interested parties against various exclusionary lists, validating each borrower’s social security number, assuring we’re including unit numbers in property addresses for condominium units, rounding the LTV calculations properly, following policies to detect and uncover undisclosed debts etc.

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FHA Then and Now

Written By: Bonnie Wilt-Hild

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.

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written by: Joan Ewing, FHA DE underwriter
What will 2009 Bring in the Housing Industry?

Written By: Joan Ewing 

Hello – I hope everyone had a very nice holiday and let us all look forward to the New Year with a positive attitude that it will be a GOOD YEAR!!!! Let’s all Toast to 2009! Before, we can look forward to the New Year; I think we need to look back one more time – then LET IT GO. 

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FHA/HUD Engineering Certificates for Manufactured Housing

Written By: Joan Ewing 

I initially titled this article, “HUD Sues Lenders over Omission of Manufactured Housing Engineering Certificates,” but I decided that it might be a little over the top. But, the facts are this. A letter issued by the HUD Inspector General (MEMORANDUM NO: 2007-KC-0801) dated September 2007 recommended just that.

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Who is FHA? When and Why Did They Get Into Mortgage Insurance?

Written By: Joan Ewing 

Hello Everybody – Another week in the mortgage industry is here and I am sure everyone uses the acronym FHA quite a few times a week. However, do we really know anything about FHA, when they were created, why they were created and what they really do? Who is FHA?

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Streamline Modification Program

Written By: Joan Ewing 

Everyone is getting back to their normal routine – it is important that we work together this year to help homeowners save their home, if possible. Fannie Mae has announced a program, which I feel is exciting and hopefully will help borrowers save their home.

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Who Can Certify a Permanent Foundation on Manufactured Homes?

Written By: Joan Ewing 

There is confusion over just who can certify that a manufactured home foundation is permanent per HUD requirements. The simple answer is this. Only a professional engineer or registered architect can certify permanent foundations on existing manufactured homes whether under the September 1996 Permanent Foundation Guide for Manufactured Homes or the newer HUD Model Installation Rules.

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Reforms For American Homeowners and Consumers

Written By: Joan Ewing 

Hello Everybody – Hope you are keeping busy. With interest rates up and down, depending on the day and hour of the week – refinances have been fluctuating as often. However, there seems to be a trend that home sales are on the rise and many lenders are keeping busy.

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Getting the Latest News from HUD

Written By: Joan Ewing 

Hello Everyone - Are you currently processing loans for a small broker, processing loans on a contract basis, or perhaps working for a direct lender - Do you feel you are always one step behind the latest FHA Updates? While you believe you are processing your loans correctly – only after submission to underwriting you learn that FHA has changed the guidelines and you were not aware.

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Home Inspection vs. Appraisal

Written By: Joan Ewing 

Hello Everybody – I feel the housing market is finally going to take a turn for the better. Although I have no crystal ball – I feel the questions, I have been fielding and the number of underwriting and processing jobs posted on CareerBuilder has soared. 

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Underwriting Training : Becoming an Underwriter

Written By: Joan Ewing 

Hello everybody – hope you are keeping busy. I see business definitely picking up and some processors and underwriters are getting swamped with new job offers. Recently I have received several e-mails from the readers of NAMP Blogs about how to get into underwriting.

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FHA Streamline Refinances

Written By: Joan Ewing 

Hello – There may be a glimmer of light for loan processors and underwriters as FHA rates and conventional rates, as well, continue to drop. The spark of increased could be FHA Streamline Refinances – which is what we will write about today.

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How to Try and Avoid Foreclosure

Written By: Joan Ewing 

Hello everybody – Keeping busy? I feel the market is definitely picking up; however, there are still many people out of work and needing help to avoid foreclosure on their home. So this week, we are going to go through the process of how to try and avoid foreclosure.

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Basic Mortgage Application Data

Written By: Joan Ewing

Hello Everybody – Hope everyone is staying busy. In my hunt for a topic every week, sometimes it is easy and other times, I haven’t a clue what I will write about until the last minute. This week was one of those last minute thoughts – so I hope this blog is helpful.

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FHA News : FHA Refunds Are Still Available

Written By: Joan Ewing 

Hello Everybody – Hope everyone is doing well and staying busy. In my quest to find a topic for this week’s blog and in the interest of the economy and everyone looking for extra money – I have an idea – Look on the FHA Refunds web site.

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Who is FHA? When and Why Did They Get Into Mortgage Insurance?

Written By: Joan Ewing 

Hello Everybody – Another week in the mortgage industry is here and I am sure everyone uses the acronym FHA quite a few times a week. However, do we really know anything about FHA, when they were created, why they were created and what they really do? Who is FHA?

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Underwriting Training : Back to Understanding Basics – Part 1 of 3

Written By: Joan Ewing 

Hello Everybody – I hope everybody is keeping busy these days. The refi market is definitely picking up and I see many more processor and underwriting jobs on CareerBuilder and Monster. In fact, I received calls from four headhunters in the past week asking if I were interested in a FHA Underwriting job; however, since I am currently employed and I am currently happy in my job, I decided to pass; however, I asked they please keep me in mind – because you never know. 

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Loan Processor Training :: Self-Employment Made Easy – Part 2 of 2

Written By: Joan Ewing

Corporate Tax Returns seem to be the most frightening to everyone. I do not know one processor or underwriter who likes Corporate Tax Returns. Many borrowers set up a Corporation to protect their personal assets in case of bankruptcy or lawsuits. A Corporation is a state-chartered business that is owned by the shareholders. The shareholders could be as few as 1 or as many as millions. Compensations to the officers of the corporation are based on the percentage of ownership and are reflected on the shareholder’s personal tax return. If the percentage of ownership of is not shown on the tax returns, this information must be obtained from the corporation’s accountant. After the adjusted business income is obtained, it should be multiplied by the borrower’s percentage of ownership.

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FHA Training : FHA’S Reverse Mortgages for Seniors – Part 1 of 2

Written By: Joan Ewing

Hello All – I am sure that once President Obama has had time to digest all his duties, there will be changes in the mortgage industry; however, until then everything is pretty much status quo.

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FHA Training : FHA’S Reverse Mortgages for Seniors – Part 2 of 2

Written By: Joan Ewing 

Hello All – Last week I covered the basic guidelines for the HECMs (Home Equity Conversion Mortgage). As outlined the guidelines are very basic since there is no credit qualifying; and could make an excellent source of additional income for seniors on fixed income. However, there are many questions that seniors as well as their heirs need answered before deciding to commit to the HECM.

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Mortgage Fraud Awareness - Part 1 of 5

Written By: Joan Ewing 

Hello Readers! I would like to say that I am most anxious to share with you some of my experiences in the real estate industry. As an FHA DE Underwriter for the past 15 years, there has been instances when an initial 1003 and the final 1003 had so many discrepancies, I was not sure it was the same person. As the loan processor, you are the first person after the loan officer to review the 1003. Review the information to verify it makes sense.

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Mortgage Fraud Awareness - Part 2 of 5

Written By: Joan Ewing 

Hello – This is the 2nd part of a series of 5 that will alert all loan processors, as well as loan officers and underwriters to “RED FLAGS” on the original application (1003). This week we will cover the income/employment section of the 1003.

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Mortgage Fraud Awareness - Part 3 of 5

Written By: Joan Ewing 

Hello – I hope everyone is holding on to their job. In this economy it is frightening to say the least with the downturn of the real estate market. As the market gets tighter and banks are again tightening guidelines, it is important that good quality loans be submitted for underwriting and even more important that the borrowers are qualified to purchase and given instructions not to make any changes in their job or credit report prior to closing.

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Mortgage Fraud Awareness – Part 4 OF 5

Written By: Joan Ewing 

to its “slow” time of the year!! In my opinion if this entire year would have been any slower there would virtually be no one left in the industry. As it is – the downturn of the market has caused brokers and lenders to flea in massive numbers. Those remaining are the die hards and they are working hard for their deals; which is all the more reason to do our due diligence prior to sending a package to the investor.

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Mortgage Fraud Awareness - Part 5 of 5

Written By: Joan Ewing

Hello to everybody and sorry for the mix-up of last week’s blog, I missed the deadline because my mind was still on a holiday mode. Well this will be the final blog for this series on Mortgage Fraud and Red Flags.

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Underwriter Training : Self-Employment Made Easy – Part 1 of 2

Written By: Joan Ewing 

Hello- I hope everyone is getting ready for the volcanoes of refinances when the new guidelines are finalized. I am actually looking forward to being busy, busy, busy – I will begin to feel hopeful.

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Loan Processor Training : Self-Employment Made Easy – Part 2 of 2

Written By: Joan Ewing 

Hello All – I hope the blog on Self-Employment is informative and it is helping to answer questions you may have. This week we will discuss Corporate Tax Returns, “S” Corp Tax Returns and Partnerships.

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Mortgage Training : Summary of H.R. 1728 - Part 1 of 2

Written By: Joan Ewing 

Hello Everybody - What is this Blog title you ask - Well it got your attention, now I will explain. The Blog Title is referring to the Summary of House of Representatives Bill Number 1728, which was introduced on March 26, 2009 by House Financial Services Committee Chairman Barney Frank, Rep. Brad Miller (D-NC) and Rep. Mel Watt - (D-NC). This House Bill, if passed, will change the mortgage industry as we know it today.

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Mortgage Training : Summary of H.R. 1728 - Part 2 of 2

Written By: Joan Ewing 

Hello Everybody - I hope everyone found the information contained in Part 1 of HR 1728 as interesting as I did. As I stated I cannot image all the changes in the House Bill actually becoming law; I feel by the time it is chopped up and amended, we probably will not recognize it as it reads today.

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Reforms For American Homeowners and Consumers

Written By: Joan Ewing 

Hello Everybody - Hope you are keeping busy. With interest rates up and down, depending on the day and hour of the week - refinances have been fluctuating as often. However, there seems to be a trend that home sales are on the rise and many lenders are keeping busy.

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HOPE for Homeowners

Written By: Joan Ewing 

Hello All - I understand that most persons who read this blog are loan processors, loan originators and others in the mortgage industry. This blog is not necessarily directed to loan processors or originators but rather to those who might know someone who may be facing foreclosure. The HUD.gov site is just a wealth of information.

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Shipping Containers Used for Housing

Written By: Joan Ewing 

Hello everybody - This week’s blog is going to be a little different, while it is very interesting, it is not exactly relating to FHA financing - although perhaps we will see FHA finance these types of housing someday. I found a very interesting article regarding shipping containers on the USA Today website.

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Written By: glenn michaels, fha de underwriter
FHA Underwriters, Remember the Two Year Rule

Written By: Glenn Michaels

When underwriting FHA mortgage loans you must first determine what “effective” income is.  FHA requires all borrowers to show a minimum of two years of employment. There are exceptions to the rule.

 

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Sandy was a nasty lady (storm)

Written By: Glenn Michaels

Living on an island, long but still an island, there are still restorations of various types going on. If you lived in the New York Tri – state metropolitan area there is a good chance that you are restoring your property and/or infrastructure near you.

 

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Taxes Interpreted Easier

Written By: Glenn Michaels

Last week I received a file to underwrite where the borrower’s tax return indicated that he earned more than 1.6 million in income. The Mortgage Loan Officer and the mortgage loan processor calculated the ratios based on the same income. The ratios were 2% over 4% and it was a slam dunk deal.as far as they were concerned.

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Mortgage Industry Forms Changes – Are You Up with the Changes

Written By: Glenn Michaels, Op-Ed Writer

Periodically forms utilized by lenders are revised or added for everyday use by mortgage lenders. On March 16, 2016, the United States Department of Housing and Urban Development’s FHA and the United States Veterans Administration (VA) have revised a joint form. The FHA form number is HUD – 92900 – A and the VA uses form number 26 – 1802 – A. All FHA and VA lenders must begin using the revised form beginning August 1, 2016. 

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Underwriting and Tax Returns

Written By: Glenn Michaels

All mortgage loan programs except for Streamline Refinance Programs require the borrower’s Internal Revenue Service (IRS) tax forms that were filed for at least the last or the last two years. If a borrower was self – employed we not only need the borrower’s personal tax returns we also need the most recent two years of business returns.

 

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Underwriters make sure you have the allowable repairs for a 203(k) limited.

Written By: Glenn Michaels, Op-Ed Writer

The Single Family Handbook 4000.1 changed the name of the Streamline 203(k) program to the “limited program. Properties being reviewed for the 203(k) program that have commercial influences as contained in a Mixed-Use property, One unit must be owner occupied primary unit and the non residential portion of the property cannot exceed 49% of the square footage. The health and safety of the residential units and residents must be of primary concern. If there is a question of the health and safety contact HUD as you would be surprised of the properties HUD has rejected for health and safety concerns.

 

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Underwriting non-traditional income

Written By: Glenn Michaels

Borrowers have all kinds of income. Most have traditional income with a periodic pay stub and a W – 2 a long with a IRS form 1040 in order to determine the income and to verify the income. The self – employed borrowers have the appropriate tax documents to determine and verify their income.

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Fannie Mae’s Home Ready Program vs. FHA

Written By: Glenn Michaels

Fannie Mae has announced the launch of their Home Ready Program which is the replacement product of the Community Home Buyer Program.

 

 

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Underwriters, do you know the “Q” codes?

Written By: Glenn Michaels

Appraiser’s when completing an appraisal report now place on every appraisal report the “Quality Ratings” on every appraisal report. These ratings are numbered after the “Q”. They can be from Q1 through Q6. The underwriter should make notice of the Quality Rating as well as the Condition Rating (C1 – C6)

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Do You Know the Codes in the Appraisal Report?

Written By: Glenn Michaels

All underwriters must review the appraisal report for each and every transaction that is being underwritten. The underwriter’s must take notice of the rating codes found in the Marketing Approach of each appraisal report. Failure to make notice of the code could result in a mortgage loan file not being purchases.

 

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You should Not have Any Indemnifications Due To Gift Transactions

Written By: Glenn Michaels

Over the years many FHA lenders have completed FHA deals with a gift incorrectly resulting in an indemnification. For those not familiar with the term “indemnification” it means that the FHA is removing the FHA insurance for a specific mortgage loan. If that loan defaults the lender would have to make good on the loan or have to buy the loan back since the FHA loan has lost their FHA insurance.  The new Single Family Handbook 4000.1 spells out how to underwrite deals with a gift.

 

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The SFH – 4000.1 and Taxes Continues

Written By: Glenn Michaels

My previous article explained how HUD (FHA) wanted underwriters to review and to come up with an income trend using the borrower’s personal tax returns.  There are many borrowers that self-employed and these borrowers use other forms to demonstrate their income trend.

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The Bigger The Tax Return The Easier It IS to Analyze

Written By: Glenn Michaels

Underwriters from time to time have difficulty in determining the income to use when they receive a complicated or very involved tax return.

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If Your Company Accepts Private Savings Club Money, do you know how to handle it?

Written By: Glenn Michaels

Living and working in the New York Metropolitan area we often come in contact numerous religions, numerous ethnic groups and numerous traditions. In the New York area we have many orthodox Jewish people who do not believe in paying or receive interest from another. This group has GMACH which is one of the largest interest free bank staffed by volunteers. 

 

 

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FHA Loans are assumable DO you know how to work with the assumptor?

Written By: Glenn Michaels

All FHA mortgage loans are assumable.. All underwriters must know the rules to either approve or deny the assumptor of the mortgage loan being assumed.

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FHA Underwriters are you up to speed with the exceptions for a Second FHA loan

Written By: Glenn Michaels

The FHA permits only one FHA mortgage at a time for a borrower except for four (4) exceptions.

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If You are New to the FHA 203(K) Program or Experienced

Written By: Glenn Michaels, Op-Ed Writer

The new Single Family Handbook (SFH) 4000.1 has attempted to simplify the program for everyone. 

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Presidentially Declared Federal Disaster Areas

Written By: Glenn Michaels

Periodically somewhere in the United States a natural disaster occurs that impacts an area of the United States. When the President of the United States declares a county of a state a “federal disaster area” then borrowers may qualify for HUD’s 203(h) program.

 

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FHA Announces a Ratio Stretcher Program

Written By: Glenn Michaels

The FHA has announced new standards for Energy Efficient Homes (EEH) with stretched ratios. This is in conjunction with the Department of Energy’s Home Energy Score. 

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Single Family Handbook 4000.1 and the 203(K) Program

Written By: Glenn Michaels

The more I read the new Single Family Handbook (SFH) 4000.1  versus the old handbook HUD – 4155.1 and previous Mortgagee Letters there are changes made and numerous clarifications made. The changes and clarifications make it an easier program to utilize. The FHA 203(K) program always had a regular program and then the FHA added a Streamline 203(K) program.  Now FHA has changed the names to the program. They are now referred to the “standard” and “limited” 203(K) program.

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HUD/FHA Changes HUD REO Underwriting Guidelines Effective September 14, 2015

Written By: Glenn Michaels

On September 14, 2015 the Single Family Handbook (SFH) 4000.1 becomes effective.
A change that most will not pick up is the underwriting of HUD REO’s. For those that are not familiar, a HUD REO is a property that was foreclosed by HUD approved mortgage servicer and the property is now owned by HUD. The term REO means Real Estate Owned. These properties are usually sold at auction.
 

 

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Case Binder Stacking Order Review

 

Written By: Glenn Michaels

Buried in the new HUD – Single Family Handbook (SFH) – 4000.1 is the requirement for cases on or after September 14, 2015 to contain in each FHA case binder a “Pre – endorsement Review of Uniform Case Binder Stacking Order.”The review cannot be performed by the mortgage loan originator (MLO), the mortgage loan processor and by the Direct Endorsed Underwriter.

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Are You Ready to Underwrite Energy Efficient Mortgages (EEM)?

Written By: Glenn Michaels

In order to underwrite an Energy Efficient Mortgage (EEM) you must make certain the borrower will demonstrate an energy savings and an energy improvement with the mortgage loan under the FHA 203(K) mortgage loan program.

 

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New FHA Changes can Work Out Better in Some Cases


Written By: Glenn Michaels, Op-Ed Writer

Over four weeks I gave everyone the FHA changes effective September 14, 2015 unless HUD delays the implementation of the changes again. These changes were originally set to take place on June 15, 2015 but HUD issued a delay to September 14, 2015. HUD has taken away the discretionary methodology in calculating a borrower’s income for a wage earner and/or hourly wage earner. Under the new guidelines an wage earner that is earning a specific income consistently that is the borrower’s income. The underwriter must use the actual income. Borrowers being paid an hourly wage underwriters can use the income shown as long as it is being is being paid consistently. If not consistent then the income must be averaged over a twenty four month (24) month period.

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New Proposed HUD Rule

Written By: Glenn Michaels

On August 5, 2015, The United States Department of Housing Development (HUD) announced a proposed rule change to amend its existing regulations regarding the equal participation of faith – based (religious) organizations in HUD programs.

 

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Some more changes to FHA

Written By: Glenn Michaels

If there is no delay, the new Single Family Handbook (SFH) – 4000.1 is fully in effect with cases taken on or after September 14, 2015. I have already written three articles full of changes that are effective September 14, 2015. 

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Additional FHA Changes effective 9/14/15 Unless HUD delays the implementation of SFH – 4000.1

Written By: Glenn Michaels

Over the previous three weeks I have written about the numerous changes coming to FHA with the new Single Family Handbook (SFH) 4000.1. Some changes are minimal and some are not. Some changes enhance the program.

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More Changes to FHA effective 9/14/15 Unless HUD Delays it again.

Written by : Glenn Michaels

My previous two articles were about the changes taking place at the FHA with the replacement of HUD – 4155.1 and HUD – 4155.2 and numerous Mortgagee Letters with the Single Family Handbook (SFH) 4000.1 below are additional changes that everyone needs to be aware of.

 

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FHA Changes effective 9/14/15

Written By: Glenn Michaels

Last week’s article was a glimpse of over 100 changes to the underwriting guidelines. In 2002 HUD – 4155.1 was written and now it is being replaced by the Single Family Handbook (SFH) 4000.1. The SFH -4000.1 contains a section pertaining to e – signatures. Tis technology did not exist when HUD – 4155.1 came out. HUD allows e – signatures. This section gives all the rules behind e – signatures such as identification, verifying the individual(s) involved and how to work with e – signatures.

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Unless HUD Delays it, the SFH 4000.1 is effective September 14, 2015. Do You Know Any of the Changes?

Written By: Glenn Michaels

I have spent a lot of time reading the new Single Family Handbook (SFH) 4000.1 over the last several weeks to primarily pick up the changes from the HUD – 4155.1 and HUD – 4155.2 and the many mortgagee letters (ML) in use. In my opinion there are about one hundred (100) changes going to take place and effective September 14, 2015. All Mortgage Loan Originators (MLOS), mortgage processors and Direct Endorsed underwriters need to know the changes.

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written by: Carlette Emperator, Senior DE/SAR Underwriter
Part II: Calculating Student Loan Payments for USDA, FHA & VA

Written By: NAMP® Staff Writer

2016 has seen numerous changes in guidelines for reviewing student loan qualifying payments. In this two part series, N.A.M.P. and N.A.M.U. will provide tools for processors and underwriters to use when determining which calculation should be used for qualifying student loan payments. Part I reviewed Fannie Mae and Freddie Mac’s guidelines. We continue this series by exploring USDA, FHA and VA rules. 

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Part I: Calculating Student Loan Payments for Fannie Mae & Freddie Mac

Written By: NAMP® Op-Ed Ghost Writer

2016 has seen numerous changes in guidelines for reviewing student loan qualifying payments. In this two part series, N.A.M.P. and N.A.M.U. will provide tools for processors and underwriters to use when determining which calculation should be used for qualifying student loan payments. We will begin with Fannie Mae and Freddie Mac’s rules on this topic. Part II will explore USDA, FHA, and VA rules. 

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When Un-reimbursement Expenses are an Issue?

Written By: Carlette Emperator

There’s been several times that reimbursement from employee business expenses have been used against the borrower for mortgage qualification. This has caused the borrowers monthly income to be reduced based on the information noted in the two most current tax returns on schedule A or form 2106. 

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How Student Loans affect Approval Process

Written By: Carlotta Emperator, Op-Ed Writer

Many borrowers have deferred student loans. A deferment, like forbearance is a temporary suspension of the obligation to repay a federal student or parent education loan. In order to qualify for a home mortgage, these obligations were being “omitted” or calculated incorrectly. Therefore, the borrower’s ratio would be affected based on the mortgage product.

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Reverse / HECM Financial Assessment

Written By: Carlotta Emperator, Op-Ed Writer

In recent year, FHA has published updates to the rules that affect how to process a FHA Reverse Mortgage or Home Equity Conversation Mortgage.  This process is completed through what is a “Financial Assessment” that was added to the Reverse Mortgage effective date April 27, 2015.   FHA required each lender to process a prospective mortgagor on all HECM transaction type.

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Fannie Mae’s DU 10.0 Update on Multiple Financed Properties Explained

Written By: Angelique Jackson, Op-Ed Ghost Writer

On March 29, 2016 Fannie Mae issued an updated regarding DU 10.0 and Multiple Financed Properties. Previously, we lenders had to manually calculate the reserve requirements because DU did not provide that information. Well, that will all change the weekend of June 25, 2016. DU will now calculate the number of financed properties the borrower has and calculate the reserves for both the subject property and the “Other financed properties.” But before we get into the calculations for the total number of financed properties and reserves, let’s talk about the multiple finance property rule and when it applies.

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Back to Basics: Utilizing Underwriting Guidelines

Written By: NAMP® Op-Ed Ghost Writer

Although the automated underwriting system provides guidance on loan analysis, it is critical to hone your guideline reviewing skills. Underwriting guidelines contain critical definitions, clarifications, and rules that must be applied on all loans. In some cases, the AUS will refer to the guidelines for the full list of requirements to address a particular loan characteristic. As a result, let’s review some best practices for using guidelines. 

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Solar Panels Requirements -- Part I

Written By: NAMP® Op-Ed Writer

In the age of green technology the mortgage industry is beginning to see more properties with Solar Photovoltaic (SPV) systems, more commonly known as Solar Panels. In this 2-part article we will cover what solar energy is, how it works, the types of financing available and the documentation requirements. What are some of the benefits of using solar energy? It helps conserve our fossil fuel resources and reduces our reliance on imported fuels. 

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Solar Panel Requirements –- Part II

Written By: Angelique Jackson, Op-Ed Writer

Last week we covered the different types of financing available for solar panels such as a Solar Lease, Power Purchase Agreement (PPA), a Solar Loan and the Property Assessed Clean Energy (PACE) program. With a Solar Lease or Solar Loan, the lease/loan payments are included in the DTI (a solar loan payment is added to the PITI as subordinate financing),while payments for a PPA are excluded from the DTI since the homeowner only pays for the energy that was produced.

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Loan Packaging Techniques

Written By: NAMP® SOp-Ed Ghost Writer

Underwriters and processors that work for non-delegated lenders must submit loan packages for review. Those packages are subsequently reviewed by the MI or investor underwriting team. These packages may also be reviewed by management, sales professionals, and auditors. As a result, it is important to put your best foot forward and present as clean and transparent a package as possible.

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Calculating Student Loan Payments

Written By: NAMP® Op-Ed Ghost Writer

We have seen frequent changes in the requirements for including student loans over the last year. There was a time where student loans could be excluded from the qualifying ratios if the borrower was able to verify certain terms of deferment. In addition, income-based repayment plans and other temporary reduction plans were permitted. However, the agencies have recently released lender updates that are changing the student loan game.

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Tips for Underwriting USDA Files with GUS

SOURCE: Mortgage News Feed

GUS, or Guaranteed Underwriting System, is USDA’s automated underwriting engine. GUS can take some getting used to if you are most familiar with Desktop Underwriter or Loan Prospector. Here are some tips to help you navigate GUS and get the most accurate findings for submission to USDA.

 

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Validating the Final AUS

Written By: NAMP® Op-Ed Ghost Writer

As the weather warms and the housing market gains steam, volume will increase. Production standards will be revisited by management and rush requests will become the new normal. The pressure to get loans out of the underwriting queue will increase. As a result, we must tighten up our process flow and put some best practices in place. One of the most fundamentally important best practices is the validation of the findings. 

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USDA 3555 Handbook Updates

Written By: Angelique Jackson

On March 9, 2016 the final rule published in the Federal Register in February is now in effect. We have been working under the interim final rule since December 1, 2014.  There are a few new items in the handbook along with the restructuring of the handbook similar to FHA’s 4000.1 where all information is gathered in one single source and divided in sections for Manual Underwriting and GUS Accept.  Chapters 5-16 were updated with new guidance and/or clarifications to old guidance. I am not going to go over all of the changes but I will talk about some of the more pertinent changes and clarifications that were done. 

 

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USDA Final 3555 Rules and Handbook Updates

Written By: NAMP® Op-Ed Ghost Writer

USDA introduced several changes on December 1, 2014. These were the interim rules that became effective with the introduction of the new guaranteed loan program regulations 7 CFR Part 3555. Since then, USDA has finalized these rules. Those final changes became effective March 9, 2016.The first highly anticipated change is that discount points may now be financed for all applicants. 

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Fannie Mae Updates

Written By: NAMP® Op-Ed Ghost Writer

Recently Fannie Mae has issued communication regarding some upcoming changes with Desktop Underwriter (DU), the Single Family Selling Guide, and Collateral Underwriter (CU). 

 

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Time Management Tips

Written By: NAMP® Op-Ed Ghost Writer

The busy season in the mortgage industry is fast approaching! Soon, the weather will break and homebuyers will come out of hibernation to begin searching for their next home. As a result, this is a good time to think about some best practices for maximizing productivity and efficiency. Time management is one of the most critical of these practices. 

 

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The Benefits of Using an Income Calculation Worksheet

Written By: NAMP® Op-Ed Ghost Writer

Most underwriters and processors have the basics of calculating income down to a science. The hourly, bi-weekly, semi-monthly, and annual calculations are second nature to those of us who calculate income every day. As a result, many processors and underwriters will manually execute their calculations on an underwriting or processing worksheet. Many underwriters will also type their calculation on their underwriting transmittal. However, there are some drawbacks to manual calculations that an income calculation worksheet can overcome. 

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Integrating Industry Changes into Your Process Flow

Written By: NAMP® Op-Ed Ghost Writer

The past year has seen sweeping changes in almost every area of loan origination, underwriting guidelines, and loan disclosures. USDA and FHA have both created new handbooks that came with completely new guidelines. The CFPB introduced the Loan Estimate and Closing Disclosures which replaced the Good Faith Estimate, TIL, and HUD-1. Fannie Mae and Freddie Mac introduced new guidelines for many topics including review of Schedule-A Unreimbursed Expenses and required reserves for borrowers retaining their home as a secondary or rental property.

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Written by: Frankie Lacy, FHA DE Underwriter
Commission Income Examined

Written By: Frankie Lacy

Commission income is income that varies and fluctuates. Commission income can vary each month based on the amount of sales the borrower has completed. Tax returns are required on commission income if the commission earnings are > than 25% of total earnings. Variable sources of income are subject to external influences. These types of income sources need to be analyzed carefully.

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USDA: Understanding the New 7 CFR Part 3555 Guidelines

Written By: Frankie Lacy

USDA’s new 7 CFR Part 3555 program became effective December 1, 2014. As a result, all lenders have begun to “re-learn” USDA loan origination and processing. There is a new guideline hand book, along with fillable pdf documents posted on the USDA LINC website: https://usdalinc.sc.egov.usda.gov/USDALincTrainingResourceLib.do

https://usdalinc.sc.egov.usda.gov/USDALincTrainingResourceLib.do

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Hidden Income Sources

Written By: Frankie Lacy

In the days of CFPB debt ratio thresholds and tighter lending restrictions, every underwriter needs to have a few tricks up their sleeve for saving debt ratios. Usually we try to use the more conservative income calculation to avoid investor push-back. However, there are a few perfectly provable income sources that we can use to support a lower debt ratio and return an approve/eligible or accept finding

.

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Underwriting Rental Income

Written By: Frankie Lacy

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.

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Property Condition Considerations

Written By: Frankie Lacy

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. As a result, we may have some underwriting considerations to address as we prepare for spring and summer business.

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Credit Documentation

Written By: Frankie Lacy

There are several forms of credit documentation that underwriters examine to determine creditworthiness of the applicant. The most frequently discussed is the credit report. However, supplementary documentation can be just as illuminating as the primary report when reviewing the borrower’s credit profile.

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Underwriting to the Findings

Written By: Frankie Lacy

Fannie Mae, Freddie Mac, and USDA Rural Housing have all made extensive strides in 2014 to update and strengthen their automated underwriting engines. Much of this was in response to the finalized Ability to Repay and Qualified Mortgage rules from the CFPB (Consumer Financial Protection Bureau). 

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DU Version 9.1 Updates

Written By: Frankie Lacy

Effective August 16, 2014 Fannie Mae will make several changes to Desktop Underwriter version 9.1. The changes are applicable to all loans submitted or resubmitted on or after August 16th. The changes are as follows:

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Quality Vs. Production

Written By: Frankie Lacy

Most lenders are in full swing of the busy summer season. Many of us have seen an uptick in submissions as families purchase new homes and few seek to refinance their existing home. With this increase in business comes an increased demand on underwriters to decision loans as quickly as possible. 

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Packaging a Loan for Non-Delegated PMI Review

Written By: Frankie Lacy

Underwriters that work for mortgage shops that are non-delegated with private mortgage insurance (PMI) vendors must submit loan packages for review. Those packages are subsequently reviewed by the PMI company’s underwriting team. These packages may also be reviewed by PMI management, sales professionals, and auditors. 

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Using Non-Taxable Income to Qualify

Written By: Frankie Lacy

There are many income types that may be non-taxable income earned by the borrower. Some examples are:

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Appraisal Rebuttals

Written By: Frankie Lacy

Appraisal rebuttals occur when the appraised value comes in lower than expected. The low appraised value has a negative impact on the LTV causing the loan to require mortgage insurance, or the loan becomes a decline. In an effort to avoid this, loan originators will often seek out additional comparable sales data from realtors and the Multiple Listing Service (MLS). 

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What’s in a Signature?

Written By: Frankie Lacy

When reviewing loan documentation, we often focus on the big things; making sure the debt ratio and LTV are correct, validating loan terms, and matching up names and addresses. Signatures are an equally important and often overlooked area in documentation review. They are required on a variety of documents from borrowers, loan originators, and third parties.

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An Introduction to Rural Housing Development’s Guaranteed Rural Housing Program

Written By: Frankie Lacy

The Rural Housing Development’s (RHD) Guaranteed Rural Housing Program (GRH) is designed to assist borrowers in obtaining safe, sanitary, and adequate housing in rural areas. RHD applies income limitations to designated counties in each state to determine eligibility. The GRH program is similar to a mortgage insurance program. The borrower may purchase a home at 100% LTV based on the appraised value on a 30 year fixed rate loan.

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Making the Most of Underwriting Guidelines

Written By: Frankie Lacy

Automated Underwriting System (AUS) findings have become more sophisticated as the mortgage industry has turned its focus to lending quality, transparency, and regulatory compliance. As a result, some are left wondering, do I still need to look things up in my guidelines? The answer is, YES!

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Interviewing Techniques for Mortgage Professionals

Written By: Frankie Lacy

We all know that the mortgage industry is an ever-evolving, constantly changing business. Many mortgage lenders adjusted and restructured in 2013 as the refi boom wound down and volume was low. As a result, there is a bounty of mortgage talent available on the market. How can you prepare to be competitive in this employers’ market?

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Show Your Work!

Written By: Frankie Lacy

In response to the CFPB’s Ability to Repay (ATR) and Qualified Mortgage (QM) rules, leading investors have instituted a Debt, Income, and Asset Verification Worksheet. This worksheet was created to provide consistency and uniformity in the reporting of underwriter rationale in determining the borrower’s ability to repay. Some lenders are adding this form (or a screen) into their loan origination system.

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Distressed Asset Stabilization Program

Written By: Glenn Michaels

The United States Department of Housing and Urban Development (HUD) has and is addressing the housing market’s “shadow inventory” and to target relief to communities experiencing high foreclosure activity. HUD announced that in the first quarter of 2013 10,000 to 15,000 distressed homes were sold by HUD through the DASP.

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Re-defining the Underwriting Role

Written By: Frankie Lacy

What are some things that come to mind when we think about the underwriting role? Do you think of the mysterious department in the back where everyone speaks in hushed tones? Do you picture a big, red denial stamp and a person with a maniacal gleam in their eye? If you do, then it’s time to examine the underwriting role more closely.

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The Consumer Financial Protection Bureau’s New Rules

Written By: Frankie Lacy

One of the hottest topics in the mortgage industry today is the Consumer Protection Financial Bureau’s (CFPB) sweeping regulatory reforms. Many are questioning how the new rules will impact the industry and whether the reforms are positive or negative. Some have concerns for our ability to remain productive and profitable with so many new restrictions.

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Tips for an Organized Work-Space

Written By: Frankie Lacy

Maintaining an organized workspace is essential for loan processing and underwriting efficiency. Underwriters and processors may encounter a wide variety of loan scenarios in their day to day work life, some of which are unfamiliar. When we keep tools, resources, and contact information on hand, we can cut down on the time it takes to look up guidelines and find the answers we need. 

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Subordinate Financing Tips

Written By: Frankie Lacy

Subordinate financing refers to liens that are secondary to a first lien or mortgage. They are often used in purchase transactions to assist a customer whose purchase price exceeds conforming loan amounts ($417,000) and wish to avoid jumbo pricing. Subordinate liens may also be obtained independently of a purchase transaction for a variety of purposes including home improvements, cash out, and debt consolidation.

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Calculating Wage-Earner Income - Part 2

Written By: Frankie Lacy

In the first part of this series we discussed the calculations for hourly wage-earners. Now let’s review salaried borrowers and the correct calculations for the various pay periods. Salaried borrowers have an annual salary that is disbursed throughout the year in structured pay periods. The most common pay periods are bi-weekly and semi-monthly. However, it is important to recognize all the pay-period types and know the correct calculations.

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Calculating Wage-Earner Income - Part 1

Written By: Frankie Lacy

Wage-earner income can be complicated when trying to determine the correct income calculation method. There are so many terms we hear in conjunction with income calculation such as: bi-weekly, semi-monthly, wage earner, base salary, and hourly wage. But what do these terms really mean and how do we apply them when calculating income?

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Credit Review Helpful Hints

Written By: Frankie Lacy

Most loan processors and underwriters are familiar with the general rules of credit report review. We double check for mortgage lates and we compare our liabilities to the information disclosed on the 1003. However, there are more details to consider within the credit report.

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Best Practices: Written Verifications of Employment

Written By: Frankie Lacy

The Written Verification of Employment (WVOE) is a tool commonly used to verify income. It provides critical information for borrowers who have multiple sources of income. Overtime, bonus, and commission can be broken out from the base salary to help the underwriter accurately calculate the qualifying monthly income. However, WVOE’s should not be taken at face value. A proper analysis of these forms can help you correctly calculate income and mititgate risk on the loan.

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Best Practices: Data Integrity & AUS Findings

Written By: Frankie Lacy

When underwriting and processing a loan file, we look to the AUS (automated underwriting system) findings to determine what documentation is required. The recommendations on the report help us package a strong loan that will perform profitably. Although DU, LP, GUS, and Total Scorecard findings are strong tools in risk management, their one weak spot is data integrity.

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Best Practices: Reviewing Guidelines

Written By: Frankie Lacy

In the correspondent/broker world, where we do not have the benefit of servicing our own loans, it is critical to hone your guideline reviewing skills. Correspondent and broker lenders have up to three sets of guidelines that should be reviewed when underwriting and processing a loan: Agency, Investor, and Insurer / Guarantor. As a result, when underwriting a file, I take the following steps:

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written by: Theresa Furzland, mortgage specialist
Harping on Harp, among other things

Written By: Theresa Furzland

In December I promised to be giving updates on the new HARP refinance programs as details emerge, and so being good to my word I am returning to the subject. Unfortunately there are not many details to talk about, and what there is to say is almost guaranteed to give you a headache.

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So here we are, 2012

Written By: Theresa Furzland

So here we are, 2012 is underway. Speculation about what this year is going to bring is of course a popular subject these days and the doomsday crowd is getting ready for a party. I hope they are all around to suffer the “hangover” in 2013 since that would mean they are wrong again.

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Are you ready for the New Year?

Written By: Theresa Furzland

2012 is here. A year of promises to be made and a year of prophecies. Promises of positive change and prophecies of imminent doom. Whichever it may be I think we can be assured that it is going to be yet another year of change in our industry. So in other words…the same old thing.

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I am one of the 99%, therefore I am the 1%

Written By: Theresa Furzland

It would feel redundant right now to talk about the mortgage crisis, the financial meltdown, the homeless or really any subject that deals with the issues being discussed by the “Occupy” movements that highlight the controversy of the 99% versus the 1%. We need to talk about solutions.

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Is it working

 

Written By: Theresa Furzland

With the interagency review requiring reform, review of loan files and now the media attention brought by the Occupancy protests are all putting pressure on the large servicers to “clean up their acts”. It seems we may be seeing some positive progress in the form or realistic reform.

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The Underwriting Scales of Justice

Written By: Theresa Furzland

As I was going through some of my old paperwork the other day, getting ready to move my office, I came across this old gem. Dating before credit scores, these Scales of Justice are just as important today and so I thought I’d share them with you.

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Complete 1003

Written By: Theresa Furzland

The completion of the loan application form can make the loan process smooth or a nightmare. A complete application with the proper supporting documentation versus an inaccurate application can make all the difference in the world. We all know this, it is mortgage 101, however to this date it is one of the biggest concerns/problems in the system. The problem I think is that often times the completion of the loan application is looked at as a “starting point...to be completed later”. 

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Are You Tired Of Hearing The Word Change?

Written By: Theresa Furzland

Well...I’m going to start with a short background of my career and a hint about the future subject matter you are likely to see from me. I have worked in the mortgage industry for 25 years now and you could really say I’m a “lifer” as my father’s family was also in the industry as realtors, lenders and appraisers.

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Shortcuts

Written By: Theresa Furzland

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!)

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Foreclosure Fiasco – Let it serve as a reminder to us all

Written By: Theresa Furzland

The recent mess with the foreclosure paperwork (or lack thereof) can serve as a reminder to all of us about the importance of due diligence and complete and accurate loan files and not to let automation make us complacent.

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Refi whys?

Written By: Theresa Furzland

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%.

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Perspectives – Origination

Written By: Theresa Furzland

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. 

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