Transcript Training Presentation - First Mortgage Corporation

JUMBO PROGRAM
Training
Offered by…
FIRST MORTGAGE CORPORATION
AUGUST 22, 2013
Desktop Underwriter is a registered trademark of Fannie Mae. Loan Prospector is a registered trademark of Freddie Mac. This presentation is
a summary and is not complete. This information is for mortgage professionals only and should not be distributed to or used by consumers or
other third-parties. Information is accurate as of the date shown below and is subject to change without notice. 8/22/2013
AGENDA


Jumbo Program

Eligibility Guidelines

Program Guidelines

Program Matrix

Underwriting Guidelines

Pricing and Fees
FMC Resources and Support
FMC Jumbo Program
Eligibility Guidelines
Program Guidelines
Jumbo Matrix
ELIGIBILITY GUIDELINES
FMC Jumbo Program
Borrower Eligibility
U.S. Citizens /
Non U.S.
Citizens
 Must have valid SS Number – ITIN not allowed
Non-Permanent
Resident Alien
 Provide evidence of an acceptable visa
 Permanent Resident Aliens - Must have evidence of valid
permanent residency status
 Valid SS number and proof of eligibility to work in the U.S.
 Minimum 2-yr history of credit and employment in the US or
another country
 Non-Permanent Resident aliens who meet at least one of the
following requirements are generally eligible for the same
financing terms as a U.S. Citizen:
1. Minimum 2-yr history of residence, employment and credit
in the US., or
2. Borrowing with a U.S. Citizen or permanent resident alien
FMC Jumbo Program
Borrower Eligibility
Foreign
Nationals
 Not allowed
# of financed
properties to
one borrower
 Max: Four (4)
 ALL borrowers on the loan (not just the primary borrower) cannot
own more than four (4) financed properties
 When aggregate financing for all properties owned by borrower(s)
exceeds $3 Million, one of the following is required:
 Max PCL is 36 mos PITI or
 Max 50% LTV/CLTV
FMC Jumbo Program
Eligible Property Types
Eligible
Properties




Single family detached or attached dwellings
PUD’s
Condominiums – Fannie Approved with Investor review
Factory built except manufactured homes
• May not be part of a PUD or condo project
Ineligible
Properties








2-4 units
Manufactured/Mobile homes
Time-share projects
Unimproved land
Condotels/Resort Condominiums/Hotel Condominiums
New construction homes purchased through auction
Log, earth or dome homes
Hobby farm
Property Flips
 Not allowed
Resale/Deed
restrictions
 Not allowed
FMC Jumbo Program
Program Highlights
Topic
Description
Program Types
 30-yr Fixed – J30F0012
 15-yr Fixed – J15F0012
 5/1 ARM – J30AQ812 – see next slide for details
Maximum loan
amount
 Up to $1 Million – See Jumbo matrix
 Over $1 Million – requires Corporate approval
Loan Purpose
 Purchase Transactions
 Rate & Term Refinances
 Cash Out – NOT ALLOWED
Occupancy Type
Primary Residence Only
FMC Jumbo Program
Program Highlights
Topic
Description
ARM Eligibility
 5/1 Libor Index
 Margin: 2.25%
 Caps: 2/2/5
 Qualify: The higher of :
 Fully Indexed rate (Index plus margin), OR
 Initial Note rate plus 2%
 Conversion: Not allowed
FMC Jumbo Program
JUMBO Matrix
Median Home Prices
Link:
•
Go to FMC website
•
Go to “My Learning
Center”
•
Click on Training
Materials
•
Click on Jumbo
Program
FMC Jumbo Program
JUMBO Matrix
FMC Jumbo Program
JUMBO Matrix (Reserves)
Median Home Prices Link: Go to FMC website, click on Training Materials, Jumbo Program
FMC Jumbo Program
Credit
Income
Assets
Other UW
Guidelines
Guidelines
Guidelines
Guidelines
UNDERWRITING GUIDELINES
FMC Jumbo Program
UW: Underwriting Method
Underwriting
Method
 Investor prior approval required
Investor Prior
Approval Process
 Register the loan with the Secondary Marketing Department (Use online
lock system)
 DU Approve/Eligible required to submit file to FMC underwriting
 DU Approve/Ineligible allowed if reason for ineligibility is due to
loan size only
 Submit file to FMC underwriting department as usual
 Copy of Registration must be in file upon submission
 FMC underwriter submits file directly to investor for prior approval
 Investor’s current turn times (please note these are in addition to FMC
turn times):
 Investor Underwriting: 7 business days
 Investor UW Conditions: 3 business days
Manual
underwriting
Not allowed
FMC Jumbo Program
UW: Credit
Minimum Loan
Fico Score
720
Non-Traditional
Credit
Not allowed
Qualifying Ratios  36/40
 Occupant Borrower’s Ratios with Non-occupant Co-borrower:
36/45
Reserves
See Jumbo Matrix for reserve requirements
FMC Jumbo Program
UW: Credit
Major
Borrowers with a Bankruptcy, Foreclosure, Deed-in-Lieu, Short Sale,
Derogatory Repossession, or Loan Modification is subject to the following:
Credit
 LTV/CLTV greater than 70%: NOT ALLOWED
 LTV/CLTV less than or equal to 70%: Allowed when:
• Adverse Credit was due to extenuating circumstances, and a
minimum of 60 months re-establishment of credit since the
discharged/dismissal/completion date, or
• The adverse Credit was due to financial mismanagement, and 84
months re-establishment of credit since the
discharged/dismissal/completion date
Charge-Off
 Individual, unpaid charge-off less than or equal to $500 is allowed
with no requirement to pay off
 Individual, unpaid charge-off more than $500 is not allowed
FMC Jumbo Program
UW: Credit cont’d…
Payoff vs.
Paydown
 Accounts may not be “paid down” to less than 10 months to qualify
 Installment or Mortgage accounts must be paid in full
 Payoff of revolving accounts to qualify is not allowed
Co-signed
loans
 The monthly payment on a co-signed loan with 10 or more payments
remaining may be excluded if there’s documentation (12-mos
cancelled checks or statement from the creditor) the primary obligor
has been making the payments during the previous 12 months with
no history of delinquency
 Applies to:
o Car loan
o Student loan
o Mortgage
o Any other obligation
FMC Jumbo Program
UW: Credit cont’d…
Buydowns
 2/1 Buydowns allowed
 Qualify using fully indexed /fully amortized – greater of Note Rate or Index
plus Margin
Interested Party
Contribution
6%
MCC
Not allowed
Properties listed
for Sale
 Cannot be currently listed for sale
 Cannot be listed for sale within the six months prior to the loan application
Age of
documents
 Credit documents: 120 days
 Appraisal documents: 120 days
 If appraisal is older than 120 days at closing but less than 1 yr old,
obtain an update from appraiser indicating that the property value
has not declined since the original appraisal
FMC Jumbo Program
UW: Income
Qualifying
Income
 Follows standard conventional income guidelines
 Follow DU findings with regards to documenting income
Employment
Gaps
 Provide detailed 2-yr employment history
 Written explanation for any gaps in employment one or more
months
• Gaps for schooling/training for specific profession ok requires diploma or transcripts to verify
Self Employed
Borrowers
 Provide previous 2-yrs copies of signed individual (and business
if appropriate) tax returns including all applicable schedules
• Loans with extensions on tax returns is not eligible
FMC Jumbo Program
UW: Rental Income
Rental Income
from 1-4 unit
properties
 When the rental property has been owned for at least 12 months:
•
Prior year’s Individual Tax Return with Schedule E
 When the rental property has been owned less than 12 months, and is
not reflected on borrower’s most recent filed individual tax returns:
Personally held,
commercial
properties
•
Copies of present signed lease(s) may be used only if borrower has
a 2-yr history of property management experience evidenced by
most current two years tax returns (IRS 1040), and
•
3-months cancelled checks or bank statements verifying receipt of
rental income
 Rental income must be documented if used to qualify, as follows:
 Most current 2-yrs filed and signed Individual Tax Returns including
Schedule E evidencing a 2-yr history of receipt of rental income
FMC Jumbo Program
UW: Income cont’d…
Other income
sources/unearned
income
 Five (5) years of continuation is required for income types with finite
period of receipt. Eg.,
 Child Support
 Alimony or separate maintenance payments
 Note Income
 Trust Income
 IRA/401k/Keogh Income
 Certain types of retirement income, such as annuities (excluding
SSI)
 Social Security survivor benefits for children
 Foreign Income
 Certain types of benefit income, such as worker’s compensation
 Public assistance income
 Royalty income
 Mortgage differential
 Relocation compensation
 Continuance requirement may be reduced to 3 yrs if income source
contributes to less than 25% of total qualifying income
FMC Jumbo Program
UW: Income cont’d…
Note Receivable,
Installment sales,
Land Contracts
(Secured or
Unsecured)
 Copy of Note is required to establish payment amount and length of
payment
 5-yr continuance beyond date of mortgage application
 May be reduced to 3-yrs if less than 25% of total qualifying income
 Evidence payments have been received consistently for the last 12months verified through one of the following:
• Bank deposits slips or deposit receipts
• Cancelled checks
• Bank or other account statements
• Tax returns
Unacceptable
Income
The following types of income or compensation cannot be included in
borrower’s qualifying income:
 Expense account payments
 Automobile allowances
 VA education benefits; education benefits used to offset education
expenses are not acceptable
 Retained earnings in a company
 Boarder Income from Primary residence or 2nd home
 Proceeds from a reverse mortgage or other financing
FMC Jumbo Program
UW: Reserves…
Liquidity
(Reserve)
requirements
 See matrix for reserve requirements
 Liquid assets verified to meet the reserve requirements may be in the form
of:
•
Cash equivalents (checking, savings, MMA)
•
100% of vested value of publicly traded Stocks, Mutual Funds,
Government securities
•
Cash surrender value of life insurance (less outstanding loans, if
repayment not included in debt ratio calculation)
•
For borrowers eligible to make penalty-free withdrawals:
o 70% of vested pension, profit sharing, 401k, or traditional IRA (less
outstanding loans)
o 100% of Roth IRA (less outstanding loans)
•
Equity proceeds from sale of a residence
•
Funds held in business accounts if the requirements under “use of
business funds” are met (see next slide for details)
FMC Jumbo Program
UW: Assets
Use of Business
Funds
Borrowers with insufficient personal liquid assets to qualify or close, but has
sufficient verified funds in a 100% owned business, may use business funds for
down payment and reserves if both of the following conditions are met:
1. Business average annual cash flow is greater than the amount to be
withdrawn/reserves
2. Cash on company year-end balance sheet for previous 3-yrs is greater than
the amount to be withdrawn/reserves.
• See Line 1 of Sch. L for the Partnership, S-Corp, and Corp
• 3-yr history of a balance greater than or equal to DP/reserves is
required
• 2-yrs of the Sch. L will show 3-yrs of cash on hand for the company
Full analysis of the business must consider the effect of the withdrawal and
how it will impact the strength and viability of the business in the future
Consider the following questions:
• What is the pattern of company cash flows? Do we have declining gross or
net income?
• Do we have concerns about the type of business? Is the business
experiencing a downturn?
FMC Jumbo Program
UW: Assets
Minimum down
payment
•
•
See Matrix for max LTV to determine down payment
For LTV 80% or less, full down payment may be gifted
Gift funds
•
•
Allowed
Full down payment may be from a gift when the LTV/CLTV is 80% or less
Cash Assets for
Down Payment &
Closing Costs
In addition to standard liquid assets, the following are considered cash
assets at 100% of the verified amounts:
•
Gift or grant from a municipality, nonprofit religious or community
organization, or the borrower’s employer
•
Group savings
•
Pooled funds
•
Savings cash to close
•
Proceeds from the sale of personal property
FMC Jumbo Program
UW: Assets
Ineligible assets for
reserves
The following assets are ineligible for reserve requirement:
• Borrower’s not eligible for penalty-free withdrawals: Retirement funds
including but not limited to vested pension, profit sharing, 401k, or IRA.
• Retirement funds may not be liquidated in order to be used to
meet reserve (post-closing liquidity) requirements
• Gift funds
• Borrowed funds
• Stock in a closely held corporation
• Proceeds from sale of assets other than sale of a residence
• Proceeds from cash-out refinances
Credit Card for
payment of fees
Acceptable fees allowed with credit card payments for the mortgage:
 Appraisal
 Credit Report
 Origination Fee
 Commitment, Lock-In, Extended lock-in fees
Acceptable credit cards include:
 Visa, Mastercard, Discover
FMC Jumbo Program
UW: Appraisal
Required
Appraisal
Total loan amount less than or equal to $1 Million:
 One Full Appraisal required
• Form 1004/70, 2090 or 1073
• A PIA/PIW, 2055, 1075 or 2095 Summary report is not acceptable
 Must be ordered from RESdirect only (will be ordered by FMC)
Median Home
Price
When the aggregate loan amount exceeds ten times (10x) the subject
property’s county-level MHP, the max LTV/CLTV is capped at:
•
70% LTV/CLTV, or
•
If the transaction’s maximum LTV/CLTV is less than the ratios above, the
lower LTV ratios apply
FMC Jumbo Program
UW: Departing Residence
Departure Residence for Conversion of Principal Residence to
2nd Home or Investment Property
Current Principal residence is pending sale but will not be sold (closed) prior to the new loan:
 Both the current and the proposed PITI must be used to qualify the borrower for the new
transaction, AND
 Reserve requirements are the greater of 6-mos PITI or the standard post-closing/reserve
requirements
When the departure residence will not be sold at closing and is in a negative equity position,
the following is required to reduce overall risk:
 Additional reserves to cover the negative equity of the departure residence, OR
 Pay down the lien on the departing residence to eliminate the negative equity
Existing Property Converting to 2nd Home:
 Both the current and the proposed PITI must be used to qualify the borrower, AND
 Reserve requirements are the greater of 6-mos PITI or the standard post-closing/reserve
requirement
FMC Jumbo Program
UW: Departing residence cont’d…
Departure Residence for Conversion of Principal Residence to
2nd Home or Investment Property
Cont’d…
Existing Property Converting to Investment Property:
 If there’s documented evidence of at least 30% in the departing residence, 75% of rental
income may be used to offset the mortgage PITI in qualifying when:
•
Reserve requirements are the greater of 6-mos PITI for both properties, or the
standard post-close liquidity, and
•
Rental income is documented with a fully executed lease agreement when the
borrower’s tax returns reflect a 2-yr history of managing investment properties, as
evidenced by the most current 2-yrs filed ta returns, and
•
Proof is provided that a security deposit was received from the tenant and deposited
into the borrower’s account
FMC Jumbo Program
UW: Departing residence cont’d…
Departure Residence for Conversion of Principal Residence to
2nd Home or Investment Property
Cont’d…
If rental income will not be used to offset the payment to qualify, the following reserve
requirements must be met:
•
The greater of 6-mos PITI or the standard post-closing/reserve requirements.
If 30% equity cannot be documented, or the borrower doesn’t have the 2-yr managing
properties, rental income may not be used to offset the PITI and:
•
Both the current and proposed PITI must be used to qualify borrower for new transaction;
AND
•
Reserve requirements are the greater of 6-mos PITI or the standard post-closing/reserve
requirements
FMC Jumbo Program
UW: Departing residence cont’d…
Departure
Residence for
Relocation
Borrowers
The monthly PITI on the property pending sale does not need to be included
in the DTI calculation when the file contains ALL of the following
documentation:
1. Borrower’s executed non-contingent sales contract for the previous
residence, and
2. Lender’s Commitment to the buyer of the previous residence if the
executed sales contract includes a financing contingency, and
3. Reserve requirements are the greater of 6-months PITI, or the standard
post-closing reserve requirement
Exception: Employer relocation plan where the employer/relocation company
takes responsibility for the outstanding mortgage(s).
FMC Jumbo Program
UW: Miscellaneous
Subordinate
Financing
Trade Equity
Subordinate financing, CES or HELOC, is allowed
•
Maximum CLTV must not exceed guideline limits
•
Subordinate financing must be recorded and clearly subordinate our 1st
•
When subordinating a HELOC, the credit line limit is used to calculate
CLTV rather than the amount of the HELOC in use
•
•
Acceptable after the borrower has made a 5% cash down payment
Subtract the outstanding balance of the property being traded, plus any
transfer costs from the lesser of the property’s appraised value or its
trade-in value
A separate written appraisal for the property that is being traded is
required
A search of the land records to verify ownership and to document any
existing liens on the property is also required
•
•
Sweat Equity
Not allowed
FMC Jumbo Program
Sample Rate Sheet
Rates / Fees / Incentives
FMC Support
JUMBO – RATES/FEES
FMC Jumbo Program
Sample
JUMBO Rates
FMC Jumbo Program
Pricing Incentives
Price
Improvement
 -0.625 price improvement
 Applies to all purchase transactions
 .250% interest rate reduction
 Available with Preferred Payment Plan with Wells
Fargo
Rate Reduction
 Automatic mortgage payment (ACH) from a Wells
Fargo checking or savings account
 Borrower set up with Wells Fargo direct – account
information required prior to closing
FMC Jumbo Program
Jumbo Rates & Fees
Topic
Guidelines
Interest Rates



Interest Rates available on the FMC Rate Sheet – last page
For Retail – Contact Secondary Marketing
For WS Brokers/Correspondent Lenders – Contact your FMC
Account Executive
Origination Fees

No max required - Follow new HUD RESPA rules
Discount Fees

Buyer or Seller Discounts allowed subject to consumer laws
– Discount Points allowed only for loan level price adjustments
(subject to FMC’s discretion)
Rebate/Discount
Pricing

See FMC rate sheet
Allowable Fees


Must be reasonable and customary and fully disclosed to the
borrower in accordance with all agencies, federal, state and local laws
See FMC fee sheet for our lender fees
FMC Jumbo Program
FMC SUPPORT
WEB SITE
TRAININGS
Go to FMC websites for:
•
First Mortgage offers FREE
Weekly ONLINE Trainings
1.
RATE SHEET
•
2.
TRAINING MATERIALS
3.
GUIDELINES
See September Training
schedule for upcoming
trainings
4.
FORMS
•
Trainings for August 2013:
5.
CALCULATORS
•
8/2: Product Overview
6.
TOOLS
•
8/13: NHF ACCESS
7.
MARKETING
•
8/20: Manufactured
Homes Training
•
8/22: Jumbo Product
Training
FMC Jumbo Program
SUPPORT
Retail:
Contact Loan Help
Wholesale/Correspondent:
Contact your FMC A/E
For help with your:
•
Scenarios
•
Pricing / Fees
•
Guidelines
•
Loan
Submissions
•
Trainings
THANK YOU FOR YOUR BUSINESS…
On behalf of First Mortgage, thank you for joining
today’s training and we hope the information
provided will help you build your business!
The main purpose of First Mortgage Corporation’s (FMC) training documents is to assist real estate and mortgage
professionals in developing entry-level competence with loan programs.
While FMC staff, employees, contractors and contributors take care to ensure the accuracy of the content of training
documents, FMC makes no warranties as to the accuracy of the information contained within these materials. Furthermore,
every user of this material uses it understanding that he or she must still conduct his or her own original legal research, analysis
and drafting. In addition, every user must refer to the relevant legislation, case law, administrative guidelines, rules and other
primary sources.
FMC specifically disclaims any liability for any loss or damage any user may suffer as a result of information contained within this
training material.
While the information contained in FMC’s training material addresses guidelines and issues surrounding mortgage programs,
these materials do not constitute legal advice.All non-legal professionals are urged to seek legal advice from a lawyer.
FMC Jumbo Program