©2011 Cengage Learning Chapter 8: Processing: Verifications and Stacking Order By Dr. D. Grogan M.C. “Buzz” Chambers.

©2011 Cengage Learning

Chapter 8:

Processing: Verifications and

Stacking Order

By Dr. D. Grogan

M.C. “Buzz” Chambers


PREVIEW The mortgage loan broker brings the borrower and lender together.

The loan broker fulfills the lender’s requirements and aids the borrower by performing duties and obtaining documents that result in close the loan.

The loan broker often utilizes a trained loan processor to accompany the details entailed in moving the loan application to submission of the loan package to the underwriter for approval.

The loan processing would include verifying the information contained on the application, clarification on any questionable items that surface about either the borrower or the property.

The purpose of this unit is to show the flow of work to move towards loan approval.


STUDENT LEARNING OUTCOMES

1. Determine the tools a processor needs.

2. List the items the processor would have to obtain to complete a loan file.

3. Outline the guidelines used for a complete loan package, including borrower documentation and verifications.

4. Describe the criteria list that a lender requires in order to accept a loan package.


The Loan Processor The individual who:

Prepares a loan file for submission to an underwriter Informs their employer of discrepancies found Coordinates information about the property Verifies information about the borrower

Duties: Verify data from all sources and notifies others of problems

Responsibilities: Mail verifications, assemble appraisal property data & coordinate paperwork such as credit report and certified escrow instructions for borrower.


8.1 Processing ToolsBasic tools to begin work: Computer Computer software Internet connection Laser printer/scanner Fax machine E-mail address Web page Copy machine Telephone Calculator

Dictionary & thesaurus Desk calendar Self-stick and

removable note pads Over-size Rolodex Highlighter pens Pens, pencils, staple

remover, tape, scissors, glue stick, stapler, etc


External materials for the processor Lane Guide or Map Quest via Internet FNMA Selling Guide FHLMC underwriting guidelines Underwriting guidelines from your private

investors Legal forms:

www.efanniemae.com/sf/formsdocs/forms/index.jsp FNMA 1003 (loan application) FNMA 1004 (appraisal) FNMA 1005 (VOE-Verification of Employment) FNMA 1006 (VOD-Verification of Deposit)


8.2 The Processor’s FileReasons for delays in funding:

1. The borrower may be slow to return or complete all of the 1003 loan application form.

2. The borrower does not give a check to start the loan process

3. Creditors will not respond in a timely manner.

4. Creditors do not respond correctly.

5. Employers will not respond in a timely manner.

6. Employers do not complete the verification form properly.

7. An explanation is needed for any late payment.

8. Bad credit complicates the transaction and delays loan approval.

9. Income is less than what the prospective borrower reported on the application.


Reasons for delays in funding:

10. Additional creditors show up that were not reported on the loan application.

11. Appraisal value is lower than the sales price.

12. Property is unacceptable to the underwriter for the lender.

13. Inspections or repairs must be completed prior to the funding of the loan.

14. The file must be restructured because of a change in the loan type applied for.

15. Closing documents are incorrectly signed.

16. Closing requirements are not satisfied.

17. Workload backup, because of the market conditions, by the appraiser, underwriter, or lender.


8.2 Conversation sheetBorrower: _______ Loan #: ___________ Date Spoke With Remarks Employee’s Name

__________________________________________________________

__________________________________________________________

__________________________________________________________

All information that might have any bearing on the loan, the property, or the borrower, whether it be phone call,

information received through other channels, or just knowledge, should be written down here.

WRITE IT DOWN NOW!!


Verifications Personal identification Employment and income verification (VOE)

1099’s or W 2’s Self employment for 2 years include tax returns Last two pay stubs Sources for wages, salary, pension, commission

Bank verification (VOD) Checking and savings accounts Past 3 months bank statements Credit union, retirement fund & investment accounts


Verifications Address verification: landlord or lender Credit verification:

from independent reporting company debts including student loans may use 3 month’s utility bills

Property verification: rental agreements & appraisal report with appraiser signature

Disposition of work requirements by review appraiser and Association data (CC&R’s)


Lane Guide http://www.laneguide.com

Provides correct lender mailing address for: Reconveyance deed, payoff quotes and documents Assignee & Assumption Payoff documents Foreclosure documents & REO Fax, 800 numbers and email contact Wholesale lending Account rating and verifications of deposit Rates and fees, hours & location of loan accounts

Contains a master list of thousands of closed lenders for locating the originator of a document for subsequent trustee needs.


Figure 8.7: IRS Form 4506-T

Request for Transcript of Tax Return Transmitted for fax or mail Contains

1040 and W-2 information Attachments for various schedules Instructions if copy must be certified for court or

administrative proceeding


8.3 Income and Guidelines for Processing

Loan broker’s key responsibility: to make the job of the underwriter as ease as possible and get the loan approved. Figure 8.3. File checklist Figure 8.4 Verification of social security number Figure 8.5 DMV consent form Figure 8.6 Loan processor document certification

Four basic forms of loan files are: 1. Full documentation file

2. Time Saver Documentation file

3. Streamline Documentation file

4. Sub Prime loan file


Income Military Income Commission Income Overtime & Bonus Income Part-time or Second-job Income Retirement Income Social Security Income Alimony or Child Support Notes Receivable Interest Income & Dividends


Net Rental Income GSI Gross scheduled income

- Vac/BD Vacancy & bad debt

= EGI Effective gross income

- OE Operating Expenses (TIMMUR)*

= NOI Net operating income

OE = T Taxes (property)I Insurance (property, flood, earthquake)M Maintenance & repairsM Management (property)U UtilitiesR Reserves for replacement


Loan Package

Credit data, gift letter, child support Cover letter & transmittal summary Underwriting guidelines & quality control Association information Broker fee Rental agreements & Purchase agreement Work completion and pest control


8.4 Borrower Documentation

Self-Employment Minimum two years (24 months) documented

income. Copy of business card Copy of business license Bank statements for the past six months Quarterly tax estimates payment records Profit & Loss (P&L)


Borrower Documentation Gift letter Undisclosed debt written explanation Revolving debt: 5% of outstanding balance Judgments, garnishments or Liens Bankruptcy Cosigned Student loans Cosigner documentation For cash out, include a statement of loan purpose.


8.5 Sample Loan File1. Credit authorization

Figure 7.2

2. Gift letter Figure 8.11

3. Purpose of the loan letterFigure 8.12

4. Child care statementFigure 8.13

5. Cover letter

Figure 8.14

6. Underwriting “red flags” (Chapter 10)

7. Homeowner association

http://www.hoa-sites.com/homeowners_association_website.php?gclid=COGWy8byi6CFctx5QodNw0xOA

5. File orderFigure 8.16

Figure 8.17


8.6 Stacking Order The file content of materials must be

placed in an exact, particular order when submitted to the lender.

The lender’s underwriter reviews the documents in the order that is unique to that company, firm or individual investor.

Each loan type has separate criteria. Different lenders use different file formats. The processor needs to know the order.


File Loan Compliance documents HUD/RESPA good faith estimates Disclosures: lead-based paint, earthquake Equal Opportunity (ECOA) notice Adjustable interest rate (ARM) disclosure Mortgage insurance (MIP) letter FHA/VA assumption letter Loan servicing agreement


Title Document Clearance

Disposition of liens Documentation of bankruptcy, divorce,

judgments Preliminary title report

©2011 Cengage Learning Chapter 8: Processing: Verifications and Stacking Order By Dr. D. Grogan M.C. “Buzz” Chambers.

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