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Book 3 Processing the Loan

THE FUNDAMENTALS OF THE MORTGAGE PROCESS

IntroductionIt all starts with the dream of owning a home. To turn that dream into reality, a consumer will usually turn first to a loan originator or real estate agent for help.

As a member of the mortgage industry, consumers look to you for expertise and guidance as they navigate the home-buying process. But where can you go for guidance?

At MGIC, we know how many steps, people, processes and rules are involved in the whole mortgage cycle. And we know that in today’s constantly evolving and heavily regulated market, it’s more important than ever to stay on top of changes. That’s why we prepared this program: The Fundamentals of the Mortgage Process.

The Fundamentals of the Mortgage Process breaks down the main components of the home-buying process, and explores and explains each piece. We’ll walk you through everything from closing a loan to servicing and selling it. You’ll also learn how The 4 Cs of the mortgage industry — Credit, Capacity, Capital and Collateral — can help determine whether a consumer will be a successful homeowner.

Once you have completed this course, you can better position yourself as an expert to your customers. You’ll have the preparation and confidence to successfully:

• Prequalify consumers

• Determine what consumers can afford

• Guide consumers through the current real estate market

• Target homes in the appropriate price ranges

• Explain to consumers how The Four Cs will affect their ability to purchase and own a home

The mortgage business is a risk-based business. But the more you know and understand about the process, the more you can help minimize that risk for your company and your customers — and the more it will increase your success as a mortgage professional. We’ve put all the information you need in a convenient, easy-to-read package.

If you have questions about any of the information presented in The Fundamentals of the Mortgage Process, please contact your Account Manager, mgic.com/contact.

Symbol KeyWe use the following icons throughout The Fundamentals of the Mortgage Process program to highlight details, tips and shortcuts that will help you better understand the Mortgage Cycle.

Dictionary: Industry jargon and acronyms explained in straightforward language

File It: Important documents you must include in the loan file

Take Note: Information, shortcuts or exercises that can make your job easier

Checkpoint: Helpful review points to help you ensure that you’ve got everything needed to complete the loan file

Check This Out: Information about MGIC resources relative to the topic at hand

Book 3 Processing the Loan

Book 1Understanding the Mortgage Cycle

Book 2Taking the Loan Application

Book 4 Evaluating Credit, Capacity, Capital and Collateral

Book 5 Understanding How Mortgage Insurance Works

BOOK 3

Processing the Loan

Table of Contents

PROCESSING THE LOAN 2

Processing Responsibilities 2

Why All the Documentation? 3

AUTOMATED UNDERWRITING 4

Efficiencies of Automated Underwriting 4

THE UNIFORM UNDERWRITING AND TRANSMITTAL SUMMARY (1008)

6

Section I. Borrower and Property Information

7

Section II. Mortgage Information 8

Section III. Underwriting Information 9

Section IV. Seller, Contract and Contact Information

14

The materials included in this publication are intended for general information only. This publication is not intended to be complete or all-inclusive regarding the matters discussed herein, and nothing contained in this publication is intended, or should be relied upon, as legal, accounting, compliance or other professional advice. Consequently, this publication should not be used as the basis for specific action without obtaining the advice of knowledgeable and experienced professionals.

Although MGIC believes the information set forth in this publication is generally accurate, the information may be outdated due to the rapidly changing nature of the residential mortgage industry, and MGIC does not warrant the accuracy, reliability or completeness of any information contained in this publication.

The information in this publication is culled from a variety of business and mortgage industry sources. Attribution is given where deemed necessary. Opinions and insights expressed herein do not necessarily represent the views of MGIC.

This publication is intended for the sole internal use of the recipient and may not be reproduced, in whole or in part, or stored in any electronic or retrieval system, or transmitted in any form or by any means, without the prior written consent of MGIC.

© 2016 Mortgage Guaranty Insurance Corporation. All Rights Reserved.

Desktop Underwriter® and DU® are registered trademarks of Fannie Mae; Loan Product AdvisorSM is a Freddie Mac service mark.

THOROUGH PROCESSING PAVES THE WAY FOR A SOUND UNDERWRITING DECISION

15

APPENDICES 15

Appendix A: Desktop Underwriter® (DU®) Findings Report

16

Appendix B: Collateral Underwriter® (CU™) Findings Report

19

Appendix C: Loan Product AdvisorSM Feedback Certificate

20

Appendix D: Uniform Residential Loan Application (1003)

26

Appendix E: The Loan File Checklist 30

Appendix F: The 8 Stages of the Mortgage Cycle

31

2

PROCESSING THE LOANIn The Fundamentals of the Mortgage Process Book 2: Taking the Loan Application, we gathered information about the borrowers through the 1003. But before we can make an educated, prudent decision about their loan, we need to do some prep work, that is, substantiate borrower information through processing and documentation.

Documentation rests largely on the shoulders of the processor. The extent of documentation required depends on:• Whether the loan is being

underwritten by an automated underwriting (AU) system or underwritten manually

• The complexity of the file• The level of risk

At the end of this section, you will be able to:• Understand the role of the

processor in the mortgage process• Differentiate the type of

documentation

Throughout this book: • The role of the processor will be

played by you• “Borrowers” refers to both multiple

borrowers or a single borrower

Processing ResponsibilitiesOnce the loan application has been taken, we move from origination into the processing stage of the Mortgage Cycle (see page 31). Processing involves various responsibilities:

Data integrity: Providing accurate and complete information for the loan file

Communication among parties involved in the transaction: Staying in constant contact with borrowers regarding the status of their mortgage, to request documentation or clarify questions; following up with underwriters and originators; contacting resources for documentation; scheduling the closing date with the borrowers, sellers, the lender and their representatives, etc.

Gathering and verifying documentation: Discovering the necessary documentation and obtaining it from credit providers, employers, banking institutions, etc.; and noting any inconsistencies among and between the documents and the 1003 (pronounced ten-oh-three)

Preparing and submitting the loan file to underwriting: Handing off a thorough, accurate loan file to the underwriter

Satisfying the underwriting conditions: Gathering all of the documents necessary to make an informed underwriting decision

3

Why All the Documentation?Documentation validates the information the borrowers provided in the 1003, including:

• The value of the property

• The source of the down payment

• The borrowers’ employment history

• Their income, assets and liabilities

• Their present and proposed housing expense

It’s documentation that will guide the underwriter’s evaluation of how well the borrowers measure up against specific characteristics of risk, known in the mortgage industry as The 4 Cs:

Credit: The borrowers’ willingness to repay the loan based on their prior use of credit

Capacity: The borrowers’ ability to repay based on the amount and stability of income

Capital: The borrowers’ investment in the property from savings and other sources

Collateral: Whether the property’s value and marketability provide adequate security for the loan

The presence of individual risk factors in any one of these areas doesn’t necessarily threaten the borrowers’ ability to maintain homeownership. But, when layers of risk — a number of interrelated high-risk characteristics — are present without sufficient offsets or compensating factors, their cumulative effect dramatically increases the likelihood of default.

Ultimately, it’s documentation that will support the decision whether to approve the borrowers’ mortgage.

By making sure each loan package contains the appropriate information, you can expedite the mortgage process. Our Loan File Checklist on page 30 is a handy guide for assembling loan packages for submission to underwriters and investors.

Loan DocumentationSeveral factors influence the amount of documentation required for a loan, including its risk assessment and if an automated underwriting system is used. A lower-risk loan requires less documentation, whereas a higher-risk loan requires more (although still less than required by manual underwriting methods).

The particular documents you may need to gather to validate the information in the 1003 are determined by your company’s internal processes, AUS Findings/Feedback reports, investor requirements and the information presented in the loan application itself.

Acceptable methods used to obtain documentation are:

Standard verification Verification of Employment (VOE), Verification of Deposit (VOD) and Verification of Mortgage/Rent (VOM/R) are sent directly to, and completed by, the verifying entity.

Electronic verification W-2s, paystubs and bank statements are computer-generated. The borrower may provide these directly, or the originator may obtain them directly from the borrower’s employer, depository or other institution.

Third-party verification Verification must be received directly from the third-party service verifying employment, income and/or assets.

4

AUTOMATED UNDERWRITINGTechnology defines how we originate, process and underwrite mortgages. We have grown dependent on it in terms of speed, ease and consistent risk decisions.

In this section, we’ll discuss automated underwriting — Fannie and Freddie’s systems in particular — and the reports generated by them.

At the end of this section, you will be able to:• Understand the advantages of

using automated underwriting systems (AUS)

• Understand how AUS work• Appreciate the importance of

complete and accurate data when using AUS

Efficiencies of Automated UnderwritingIn the automated underwriting world, each loan is considered unique, based on its individual set of risk factors. Automated Underwriting Systems (AUS) pre-underwrite each loan and then provides processing direction according to the system’s result.

Fannie Mae’s Desktop Underwriter (DU) and Freddie Mac’s Loan Product Advisor are automated underwriting systems that take the data we submit and run it through complex models built on years of statistical loan experience. The AUS evaluates the data according to risk inherent in the borrowers’ profile (see The 4 Cs, page 3).

The system then provides a report that identifies each loan’s:

• Risk analysis: Whether the borrowers are an acceptable risk, based on their credit profile and noncredit risk factors (Capacity, Collateral and Capital)

• Eligibility: Whether the program and terms entered into the system are acceptable and the loan is eligible for purchase (by Fannie or Freddie)

• Processing direction: The information required to process and document the loan

In January 2015, Fannie Mae introduced Collateral Underwriter (CU), a new optional risk management tool. CU is a proprietary appraisal risk assessment model built on millions of property valuations. CU compares a loan’s appraisal data to its robust database and assigns a CU risk score (1 = low, 5 = high).

By spending less time on processing and documenting each loan, you can qualify more borrowers, reduce paperwork, submit for underwriting sooner and get your borrowers to the closing table faster. It all comes down to saving time and money and making customers happy.

5

How Does an AUS Work?Loan application data is either entered directly into the AUS or the system is automatically populated by information previously entered into a Loan Origination System (LOS). The AUS pulls credit reports for each borrower.

The system generates a Findings/Feedback report showing credit risk evaluation and documentation requirements.

The processor gathers documents required by the AUS report and compares them with the information in the AUS. The processor then reconciles any differences, updates the AUS accordingly and runs a new Findings/Feedback report.

For a sample and explanation of the DU Findings Report, see Appendix A on page 16; for details about the Loan Product Advisor Feedback Certificate, see Appendix C on page 20.

Garbage In, Garbage OutIt’s good practice to review the information gathered on the 1003 to ensure that you’re starting with complete and accurate data.

Inaccurate or missing data cancels the benefits of using an AUS. Processing to inaccurate or missing data results in more time, work and expense to process the file. It may require that the underwriter request additional documentation about the borrower. You may not receive a report if too much data is missing.

If the data entered from the 1003 is correct and accurate, you will process and document the loan either manually or according to the processing direction from an automated underwriting report.

What key information do you need to cross-reference when you first review AUS results? All of it. But to ensure the information you are looking at pertains to your loan, the best place to start is by comparing the borrower information on the AUS report with the information provided by the borrowers and that on the credit report.

6

THE UNIFORM UNDERWRITING AND TRANSMITTAL SUMMARY (1008)More commonly known as the 1008 (pronounced ten-oh-eight) or Transmittal Summary, this comprehensive form serves many purposes: It houses key information used in the risk assessment of a loan and the decision whether to approve a loan application. For approved loans, information from the 1008 is used to create the loan commitment letter, also known as the approval letter; the final loan application; and the mortgage documents to be signed at closing.

That’s a lot of ground for a single-sided, legal-size sheet of paper to cover. And that’s why thorough and accurate work upfront falls to the processor, whose efforts will expedite the loan’s closing.

In this section, we’ll walk through the 1008, its contents and how the information it contains is calculated.

At the end of this section, you will be able to:• Understand the purpose of the

1008• Define and calculate Qualifying

Ratios• Define and calculate LTV Ratios• Explain the relevance of Qualifying

Ratios and LTV Ratios as they apply to the loan process

Preparing the Loan for UnderwritingMost originators use an Automated Underwriting System to process a loan application, and the resulting DU Findings/Loan Product Advisor Feedback report contains the most important characteristics of the loan. Loans that are manually underwritten will not have a Findings/Feedback report, but the Uniform Underwriting and Transmittal Summary, or 1008 (pronounced ten-oh-eight), displays these same important characteristics.

It is this document in the loan file — the DU Findings, Loan Product Advisor Feedback or 1008 — that contains key data elements and calculates totals and ratios detailing final income and debt figures, loan amount, interest rate and collateral information. This data will help assess risk, as well as determine the underwriting decision.

In this book we will refer to the 1008 and prepare it from scratch. That way, you’ll understand where the data comes from, as well as the how and why behind the calculations. The majority of the information on the 1008 is transferred from the 1003 (see Appendix D, page 26). We will pay particular attention to the areas of the 1008 that differ from the 1003. Additional information is pulled from the appraisal and credit reports. Some information will require calculations on your part.

Preparing the Loan for ClosingGenerally, this is when pay-off statements are ordered and the tax bill and title commitment are reviewed to obtain a clear-to-close.

Also, this is when you should obtain a verbal verification of employment, as it is typically required for employment income within 10 business days prior to the closing date. Verbal verification dates vary for self-employed. Always check investor requirements.

7

1008 Section I. Borrower and Property Information

Section I of the 1008 includes basic information related to the borrower and the property. Refer to the 1003’s Section II, Property Information and Purpose of Loan, for data to complete the Property Address, Property Type and Occupancy Type fields. See Section III of the 1003, Borrower Information, for the borrowers’ names and Social Security Numbers.

To complete the remaining fields of this section of the 1008, enter the following information, as applicable:

Property Type: Check all that apply. For example, if the property is a condominium, check 1 Unit and Condominium.

1 Unit: An individual, single-family home

2- to 4-Units: A detached multifamily property

Condominium: A real estate project in which each unit owner has title to a unit in a building

PUD (Planned Unit Development): A real estate project in which each unit owner has title to a residential lot and building

Co-op (Cooperative): A real estate project in which the right to occupy a unit is obtained through the purchase of stock in the corporation which owns the building

Manufactured Housing: A home built on a steel undercarriage with the wheel assembly necessary for transportation

Project Classification: Indicate the appropriate classification

Project classifications are assigned by Fannie Mae/Freddie Mac, based on the specifics of the project. You may need to refer to the Agencies’ guidelines for details to determine your selection.

Additional Property Information: Refer to the Appraisal Report to complete the actual Number of Units section whether it is a single unit or 2- to 4-units.

Refer to purchase contract for sales price.

Appraised Value: Enter the estimated value of the subject property, as indicated on the Appraisal Report.

Uniform Underwriting and Transmittal SummaryI. Borrower and Property Information

Property Type Project Classification Occupancy Status Additional Property Information

Property Rights

Borrower Name

Co-Borrower Name

Property Address

SSN

SSN

1 unit

2- to 4-units

Condominium

PUD Co-op

Manufactured Housing

Single Wide

Multiwide

Freddie Mac

Streamlined Review

Established Project

New Project

Detached Project

2- to 4-unit Project

Reciprocal Review

Fannie Mae

P Limited Review New Detached

Q Limited Review Established

R Expedited Review New

S Expedited Review Established

T Fannie Mae Review

U FHA-approved

V Refi Plus TM

E PUD

F PUD

T PUD

1 Co-op

2 Co-op

T Co-op

Primary Residence

Second Home

Investment Property

Number of Units

Sales Price $

Appraised Value $

Fee Simple

Leasehold

Project Name CMP Project ID# (if any)

II. Mortgage Information

Loan Type Amortization Type Loan Purpose Lien Position

Note Information Mortgage Originator Buydown If Second Mortgage

Conventional

FHA

VA

USDA/RHS

Fixed-Rate—Monthly Payments

Fixed-Rate—Biweekly Payments

Balloon

ARM (type)

Other (specify)

Purchase

Cash-Out Refinance

Limited Cash-Out Refinance (Fannie)

No Cash-Out Refinance (Freddie)

Home Improvement

Construction to Permanent

First Mortgage

Amount of Subordinate Financing

$

(If HELOC, include balance and credit limit)

Second Mortgage

Original Loan Amount

Initial P&I Payment

Initial Note Rate

Loan Term (in months)

$

$

%

Seller

Broker

Correspondent

Broker/Correspondent Name and Company Name:

Yes

No

Terms

Owner of First Mortgage

Fannie Mae Freddie Mac

Seller/Other

Original Loan Amount of First Mortgage

$

III. Underwriting Information

Stable Monthly IncomePresent Housing Payment:

Proposed Monthly Payments

Qualifying Ratios Loan-to-Value Ratios

Qualifying Rate Level of Property Review

Borrower Funds to Close

Risk Assessment Escrow (T&I)

Representative Credit/Indicator Score

Community Lending/Affordable Housing Initiative

Home Buyers/Homeownership Education Certificate in file

Underwriter Comments

Underwriter’s Name Appraiser’s Name/License # Appraisal Company Name

Base Income

Other Income

Positive Cash Flow(subject property)Total Income

Borrower

$

$

$

$

Co-Borrower

$

$

$

$

Total

$

$

$

$

Primary Housing Expense/Income

Total Obligations/Income

Debt-to-Housing Gap Ratio (Freddie)

%

%

%

LTV

CLTV/TLTV

HCLTV/HTLTV

%

%

%

Note Rate

Above Note Rate

Below Note Rate

Bought-Down Rate

Other

%

%

%

%

%

%

%

Exterior/Interior

Exterior Only

No Appraisal

Form Number:

Manual Underwriting

AUS

DU LP Other

AUS Recommendation

DU Case ID/LP AUS Key#

LP Doc Class (Freddie)

Yes No

Yes No

Yes No

Borrower’s Primary Residence

First Mortgage P&I

Second Mortgage P&I

Hazard Insurance

Taxes

Mortgage Insurance

HOA Fees

Lease/Ground Rent

Other

Total Primary Housing Expense

Other ObligationsNegative Cash Flow(subject property)

All Other Monthly Payments

Total All Monthly Payments

Required

Verified Assets

Source of Funds

No. of Months Reserves

Interested Party Contributions

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

%

IV. Seller, Contract, and Contact Information

Seller Name

Seller Address

Seller No. Investor Loan No.

Seller Loan No.

Contact Name

Contact Title

Contact Phone Number ext.

ContactSignature

Freddie Mac Form 1077 06/09 Fannie Mae Form 1008 06/09Page 1 of 1Calyx Form - Transum_2004.frm (11/09)

Peter Simon

Elizabeth Simon

126 Lake View Lane, Pleasant Valley, XY 99999

xxx-xx-2030

xxx-xx-9652

1

200,000

201,000

180,000

1,137.72

6.500

360

ABC Mortgage Company

John Appraiser/123-0000000 Accurate Appraisal

3,708.00 5,000.00 8,708.00

451.00 451.00

4,159.00 5,000.00 9,159.00

16.056

26.810

90.000

90.000

6.500

Approve/Eligible

1234567899

720

1,162.83

1,137.72

51.00

208.33

73.50

1,470.55

985.00

2,455.55

20,545.78

48,079.00

Sale of Home/Savings

FICO - Borrower/Co-Borrower: Experian - 718/742 TransUnion - 720/733 Equifax - 741/760

ABC Mortgage Company, NMLS# 1234567 | Originator: John Smith, NMLS# 7654321

8

1008 Section II. Mortgage Information

Section II provides detailed information about the terms of the mortgage. Refer to the 1003’s Section I, Type of Mortgage and Terms of Loan, for the Loan Type, Amortization Type and Note Information. To complete the remaining portion of the Mortgage Information section, enter the following information, as applicable:

Loan Purpose: Indicate the purpose of the loan.

Purchase: A loan to finance the acquisition of the subject property.

Cash-Out Refinance: A transaction where the amount of money received by the borrower from the new loan exceeds the total funds needed to repay the existing debt and closing costs. (Also referred to as an equity refinance.)

Limited Cash-Out Refinance (Fannie) No Cash-Out Refinance (Freddie): Used to pay off the first mortgage and any junior liens used to acquire subject property, pay closing costs and disburse cash back to borrower not to exceed 2% of the new refinance mortgage or $2,000, whichever is less.

Home Improvement: Uses some or all of the loan proceeds to repair, remodel, renovate, rehabilitate or otherwise improve the borrowers’ home.

Construction to Permanent: Provides: (1) interim construction financing, allowing loan proceeds to be disbursed over time to pay the builder, contractors, subcontractors, suppliers or other providers of materials or services; and (2) long-term, permanent financing, known as a “permanent” or “end loan,” to replace the interim financing, upon completion of the proposed home’s construction.

Lien Position: Check here to indicate whether the subject loan is a first or second mortgage.

Amount of Subordinate Financing: If the loan has a second mortgage, list its amount, which you can find on the 1003 (Section VII, Details of the Transaction, Line j).

Note Information: Refer to the 1003 Section I, Type of Mortgage and Terms of Loan, for Original Loan Amount, Initial Note Rate and Loan Term; Section V, Monthly Income and Combined Housing Expense Information, for Initial P&I Payment.

Mortgage Originator: Select one of the following:

Seller: Is the lender who will be delivering the loan to Fannie Mae and Freddie Mac.

Broker: Originates mortgage loans for wholesale; loans are closed in wholesaler’s name with the wholesaler’s funds.

Correspondent: An entity for whom mortgages are originated or secured using the correspondent’s funds with intent to sell them to various intermediaries or investors.

Buydown: Indicate whether the loan is a buydown.

If Second Mortgage: Indicate the owner of the first mortgage here along with the Original Loan Amount of First Mortgage.



Property Rights

Borrower Name

Co-Borrower Name

Property Address

SSN

SSN

1 unit

2- to 4-units

Condominium

PUD Co-op


Single Wide

Multiwide

Freddie Mac

Streamlined Review

Established Project

New Project

Detached Project


Reciprocal Review

Fannie Mae





T Fannie Mae Review

U FHA-approved

V Refi Plus TM

E PUD

F PUD

T PUD

1 Co-op

2 Co-op

T Co-op

Primary Residence

Second Home

Investment Property

Number of Units

Sales Price $

Appraised Value $

Fee Simple

Leasehold





Conventional

FHA

VA

USDA/RHS



Balloon

ARM (type)

Other (specify)

Purchase

Cash-Out Refinance



Home Improvement


First Mortgage


$


Second Mortgage


Initial P&I Payment

Initial Note Rate


$

$

%

Seller

Broker

Correspondent


Yes

No

Terms



Seller/Other


$













Base Income

Other Income


Borrower

$

$

$

$

Co-Borrower

$

$

$

$

Total

$

$

$

$




%

%

%

LTV

CLTV/TLTV

HCLTV/HTLTV

%

%

%

Note Rate

Above Note Rate

Below Note Rate

Bought-Down Rate

Other

%

%

%

%

%

%

%

Exterior/Interior

Exterior Only

No Appraisal

Form Number:

Manual Underwriting

AUS

DU LP Other

AUS Recommendation



Yes No

Yes No

Yes No


First Mortgage P&I

Second Mortgage P&I

Hazard Insurance

Taxes

Mortgage Insurance

HOA Fees

Lease/Ground Rent

Other





Required

Verified Assets

Source of Funds



$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

%


Seller Name

Seller Address


Seller Loan No.

Contact Name

Contact Title


ContactSignature


Peter Simon

Elizabeth Simon


xxx-xx-2030

xxx-xx-9652

1

200,000

201,000

180,000

1,137.72

6.500

360



3,708.00 5,000.00 8,708.00

451.00 451.00

4,159.00 5,000.00 9,159.00

16.056

26.810

90.000

90.000

6.500

Approve/Eligible

1234567899

720

1,162.83

1,137.72

51.00

208.33

73.50

1,470.55

985.00

2,455.55

20,545.78

48,079.00




9

1008 Section III. Underwriting Information

This section of the 1008 puts more of the data from the 1003 to work. The borrowers’ income, housing payment and debt obligations will be compared with each other to take another, even more refined measure of their Capacity — their ability to repay the mortgage. These calculations will weigh in heavily during the underwriting process.

To complete this section, provide the following information, as applicable:

Stable Monthly Income: Should reflect the borrowers’ Base Income and Other Income figures, which has been verified as stable monthly income from the 1003’s Section V, Monthly Income and Combined Housing Expense Information.

Positive Cash Flow: Refers to either the net cash flow for an investment property or the monthly income for a 2- to 4-unit property in which the borrowers live, if the value is positive.

Proposed Monthly Payments: Transfer the payment amounts for the applicable items from the 1003, Section V, Monthly Income and Combined Housing Expense Information.

Keep in mind, the expenses listed here relate only to the Borrower’s Primary Residence. For example:

• If the subject property is a 2- to 4-unit property in which the borrowers will live, it qualifies as their primary residence, and you would enter the monthly payments in these fields

• But if the subject property is an investment property or second home, the expense items would not be entered for the subject property; rather, the amounts entered would be for those expenses that relate to the borrower’s primary residence

Total Primary Housing Expense: Will serve as one of the factors in your calculations to determine the borrower’s Capacity.

Negative Cash Flow: Refers to either the net cash flow for an investment property or the monthly income for a 2- to 4-unit property in which the borrowers live, if the value is negative.

Total All Monthly Payments: Is the total of the Primary Housing Expense plus Other Obligations and All Other Monthly Payments (installment debt, lease payments, revolving debt, child support, etc.). This figure is also called the borrowers’ Total Obligations.



Property Rights

Borrower Name

Co-Borrower Name

Property Address

SSN

SSN

1 unit

2- to 4-units

Condominium

PUD Co-op


Single Wide

Multiwide

Freddie Mac

Streamlined Review

Established Project

New Project

Detached Project


Reciprocal Review

Fannie Mae





T Fannie Mae Review

U FHA-approved

V Refi Plus TM

E PUD

F PUD

T PUD

1 Co-op

2 Co-op

T Co-op

Primary Residence

Second Home

Investment Property

Number of Units

Sales Price $

Appraised Value $

Fee Simple

Leasehold





Conventional

FHA

VA

USDA/RHS



Balloon

ARM (type)

Other (specify)

Purchase

Cash-Out Refinance



Home Improvement


First Mortgage


$


Second Mortgage


Initial P&I Payment

Initial Note Rate


$

$

%

Seller

Broker

Correspondent


Yes

No

Terms



Seller/Other


$













Base Income

Other Income


Borrower

$

$

$

$

Co-Borrower

$

$

$

$

Total

$

$

$

$




%

%

%

LTV

CLTV/TLTV

HCLTV/HTLTV

%

%

%

Note Rate

Above Note Rate

Below Note Rate

Bought-Down Rate

Other

%

%

%

%

%

%

%

Exterior/Interior

Exterior Only

No Appraisal

Form Number:

Manual Underwriting

AUS

DU LP Other

AUS Recommendation



Yes No

Yes No

Yes No


First Mortgage P&I

Second Mortgage P&I

Hazard Insurance

Taxes

Mortgage Insurance

HOA Fees

Lease/Ground Rent

Other





Required

Verified Assets

Source of Funds



$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

%


Seller Name

Seller Address


Seller Loan No.

Contact Name

Contact Title


ContactSignature


Peter Simon

Elizabeth Simon


xxx-xx-2030

xxx-xx-9652

1

200,000

201,000

180,000

1,137.72

6.500

360



3,708.00 5,000.00 8,708.00

451.00 451.00

4,159.00 5,000.00 9,159.00

16.056

26.810

90.000

90.000

6.500

Approve/Eligible

1234567899

720

1,162.83

1,137.72

51.00

208.33

73.50

1,470.55

985.00

2,455.55

20,545.78

48,079.00




10

1008 Section III. Underwriting Information (continued)

Qualifying and Loan-to-Value (LTV) Ratios calculated in this section of the 1008 are used by underwriters and investors to quantify the borrowers’ Capacity and Capital and evaluate the degree of risk associated with the loan. The ratios may have been calculated earlier in the process — most likely during the interview, when the loan originator prequalified the borrowers. As the loan moves through the system, the processor then checks and re-checks the ratios as information is provided and verified.

Qualifying Ratios Primary Housing Expense/Income: This ratio compares

the proposed Total Primary Housing Expense (Principal, Interest, Taxes, Insurance and Assessments, or PITIA) with the borrowers’ Total Income. It’s also referred to as the Top Ratio, Front-End Ratio or Housing Ratio. We will use Housing Ratio.

Housing Ratio Formula

Total Primary Housing Expense = Housing Ratio

Total Income

The ratio is expressed as a percentage and tells you what proportion of the borrowers’ total monthly income will be used to make their proposed new house payment.

Example: What’s the Housing Ratio?

Total Primary Housing Expense (PITIA): Total Income:

$1,470.55 $9,159.00

$1,470.55= Housing Ratio

$9,159.00

16.056% = Housing Ratio



Property Rights

Borrower Name

Co-Borrower Name

Property Address

SSN

SSN

1 unit

2- to 4-units

Condominium

PUD Co-op


Single Wide

Multiwide

Freddie Mac

Streamlined Review

Established Project

New Project

Detached Project


Reciprocal Review

Fannie Mae





T Fannie Mae Review

U FHA-approved

V Refi Plus TM

E PUD

F PUD

T PUD

1 Co-op

2 Co-op

T Co-op

Primary Residence

Second Home

Investment Property

Number of Units

Sales Price $

Appraised Value $

Fee Simple

Leasehold





Conventional

FHA

VA

USDA/RHS



Balloon

ARM (type)

Other (specify)

Purchase

Cash-Out Refinance



Home Improvement


First Mortgage


$


Second Mortgage


Initial P&I Payment

Initial Note Rate


$

$

%

Seller

Broker

Correspondent


Yes

No

Terms



Seller/Other


$













Base Income

Other Income


Borrower

$

$

$

$

Co-Borrower

$

$

$

$

Total

$

$

$

$




%

%

%

LTV

CLTV/TLTV

HCLTV/HTLTV

%

%

%

Note Rate

Above Note Rate

Below Note Rate

Bought-Down Rate

Other

%

%

%

%

%

%

%

Exterior/Interior

Exterior Only

No Appraisal

Form Number:

Manual Underwriting

AUS

DU LP Other

AUS Recommendation



Yes No

Yes No

Yes No


First Mortgage P&I

Second Mortgage P&I

Hazard Insurance

Taxes

Mortgage Insurance

HOA Fees

Lease/Ground Rent

Other





Required

Verified Assets

Source of Funds



$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

%


Seller Name

Seller Address


Seller Loan No.

Contact Name

Contact Title


ContactSignature


Peter Simon

Elizabeth Simon


xxx-xx-2030

xxx-xx-9652

1

200,000

201,000

180,000

1,137.72

6.500

360



3,708.00 5,000.00 8,708.00

451.00 451.00

4,159.00 5,000.00 9,159.00

16.056

26.810

90.000

90.000

6.500

Approve/Eligible

1234567899

720

1,162.83

1,137.72

51.00

208.33

73.50

1,470.55

985.00

2,455.55

20,545.78

48,079.00




11

Total Obligations/Income: This ratio compares the Total of All Monthly Payments, which includes monthly debts and the proposed PITIA payment, with the borrowers’ Total Income. It’s also known as the Bottom Ratio, Back-End Ratio, Debt Ratio or Total Debt Ratio. We will use Total Debt Ratio.

Total Debt Ratio Formula

Total All Monthly Payments = Total Debt Ratio Total Income

The Total Debt Ratio, also expressed as a percentage, tells you the proportion of the borrowers’ Total Income that will be used to pay their total monthly debt.

Example: What’s the Total Debt Ratio?

Total All Monthly Payments: Total Income:

$2,455.55 $9,159.00

$2,455.55= Total Debt Ratio

$9,159.00

26.810% = Total Debt Ratio

In today’s lending environment, focus is placed more on borrowers’ maximum Total Debt Ratios than on maximum Housing Ratios. Lenders and investors typically set 45% as the maximum Total Debt Ratio. However, an AUS may consider higher total DTI ratios.

Keep in mind, there are some lenders and investors that remain sensitive to both, the borrower’s maximum Housing Ratio and Total Debt Ratio. Be sure to check the applicable underwriting guidelines.

Loan-to-Value (LTV) RatiosLTV ratios express the percentage of the purchase price or appraised value, whichever is less, that will be lent to the borrower.

LTV ratios also dictate the appropriate processing path to follow. For example, if a loan has an LTV greater than 80% (a down payment of less than 20%), investors often require mortgage insurance in order to meet their requirements.

For detailed information about mortgage insurance, see The Fundamentals of the Mortgage Process Book 5: Understanding How Mortgage Insurance Works, or go to mgic.com/training to sign up for an online webinar.

LTV: This ratio compares the dollar amount of the first mortgage with the property’s appraised value or purchase price, whichever is less.

LTV Ratio FormulaOriginal Loan Amount = LTV Ratio

Lesser of Sales Price or Appraised Value

The figures for Original Loan Amount are located on the 1008 in Section II, under Note Information; and for Lesser of Sales Price or Appraised Value in Section I, under Additional Property Information.

Example: What’s the LTV Ratio?

Sales Price: Appraised Value: Mortgage Amount:

$200,000 $201,000 $180,000

Because the Sales Price is less than the Appraised Value, you will use the Sales Price in your calculation.

$180,000= LTV

$200,000

90% = LTV

CLTV/TLTV: The Combined LTV or Total LTV Ratios are used when a second mortgage and/or drawn balance of a home equity line of credit (HELOC) is used to finance the subject property. CLTV/TLTV compares the total of the first and second mortgages and/or drawn balance of a HELOC with the lesser of the appraised value or sales price.

CLTV/TLTV Ratio FormulaFirst Mortgage + Second Mortgage = CLTV/TLTV

Ratio Lesser of Sales Price or Appraised Value

You can find the values for the first and second mortgages’ Original Loan Amount on their respective 1008s, Section II, under Lien Position and If Second Mortgage; and for Lesser of Sales Price or Appraised Value in Section I, under Additional Property Information.

Example: What’s the CLTV/TLTV Ratio?

Sales Price: Appraised Value: First Mortgage Amount: Second Mortgage Amount:

$200,000 $201,000 $180,000

$10,000

Because the Sales Price is less than the Appraised Value, you will use the Sales Price in your calculation.

$180,000 + $10,000= CLTV/TLTV

$200,000

$190,000= CLTV/TLTV

$200,000

95% = CLTV/TLTV

12

1008 Section III. Underwriting Information (continued)

HCLTV/HTLTV: If a Home Equity Line of Credit (HELOC) is used to finance the subject property, the Home Equity Combined or Home Equity Total LTV ratio is used. The HCLTV/HTLTV is determined by adding together the unpaid principal balance of the first mortgage; the total available line of any HELOC, regardless of the balance of funds drawn; and, if applicable, the principal balance of all other subordinate financing secured by the property; and then dividing that sum by the lesser of the property’s sales price or appraised value.

HCLTV/HTLTV Ratio FormulaFirst Mortgage + HELOC Line of Credit

(+ any additional Subordinate Financing) = HCLTV/HTLTVRatio

Lesser of Sales Price or Appraised Value

The values for the HELOC line of credit are located on the 1008’s Section II, under Lien Position, Amount of Subordinate Financing.

Example: What’s the HCLTV/HTLTV Ratio?

Sales Price: Appraised Value: First Mortgage Amount: HELOC Credit Line: Second Mortgage Amount:

$200,000 $201,000 $180,000

$10,000 $4,000

$180,000 + $10,000 + $4,000= HCLTV/HTLTV

$200,000

$194,000= HCLTV/HTLTV

$200,000

97% = HCLTV/HTLTV



Property Rights

Borrower Name

Co-Borrower Name

Property Address

SSN

SSN

1 unit

2- to 4-units

Condominium

PUD Co-op


Single Wide

Multiwide

Freddie Mac

Streamlined Review

Established Project

New Project

Detached Project


Reciprocal Review

Fannie Mae





T Fannie Mae Review

U FHA-approved

V Refi Plus TM

E PUD

F PUD

T PUD

1 Co-op

2 Co-op

T Co-op

Primary Residence

Second Home

Investment Property

Number of Units

Sales Price $

Appraised Value $

Fee Simple

Leasehold





Conventional

FHA

VA

USDA/RHS



Balloon

ARM (type)

Other (specify)

Purchase

Cash-Out Refinance



Home Improvement


First Mortgage


$


Second Mortgage


Initial P&I Payment

Initial Note Rate


$

$

%

Seller

Broker

Correspondent


Yes

No

Terms



Seller/Other


$













Base Income

Other Income


Borrower

$

$

$

$

Co-Borrower

$

$

$

$

Total

$

$

$

$




%

%

%

LTV

CLTV/TLTV

HCLTV/HTLTV

%

%

%

Note Rate

Above Note Rate

Below Note Rate

Bought-Down Rate

Other

%

%

%

%

%

%

%

Exterior/Interior

Exterior Only

No Appraisal

Form Number:

Manual Underwriting

AUS

DU LP Other

AUS Recommendation



Yes No

Yes No

Yes No


First Mortgage P&I

Second Mortgage P&I

Hazard Insurance

Taxes

Mortgage Insurance

HOA Fees

Lease/Ground Rent

Other





Required

Verified Assets

Source of Funds



$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

%


Seller Name

Seller Address


Seller Loan No.

Contact Name

Contact Title


ContactSignature


Peter Simon

Elizabeth Simon


xxx-xx-2030

xxx-xx-9652

1

200,000

201,000

180,000

1,137.72

6.500

360



3,708.00 5,000.00 8,708.00

451.00 451.00

4,159.00 5,000.00 9,159.00

16.056

26.810

90.000

90.000

6.500

Approve/Eligible

1234567899

720

1,162.83

1,137.72

51.00

208.33

73.50

1,470.55

985.00

2,455.55

20,545.78

48,079.00




13

There is a direct correlation between the amount of the down payment (Capital) that borrowers invest toward their purchase and the amount of risk associated with the loan. The greater their investment, the lower the LTV and risk involved. Conversely, the lower the investment, the higher the LTV and risk.

Qualifying Rate: Identify the note rate used to qualify the borrowers for the mortgage.

Note Rate: If the monthly P & I is based on the note rate, check this box and provide the note interest rate.

% Above Note Rate: For adjustable-rate mortgages, borrowers are sometimes qualified at the maximum second-year rate or a predetermined maximum rate. If applicable, check this box, enter the annual interest rate cap in the first blank and the resulting interest rate in the second blank.

% Below Note Rate: For loans with reduced start rates, P & I is based on a rate that is lower than the note rate. If applicable, check this box, enter the difference between the note rate and the start rate in the first blank and the note rate in the second blank.

Bought-Down Rate: For buydown loans, P & I is based on a rate that is lower than the note rate. If applicable, check the box and enter the Bought-Down Rate.

Other: If the fully indexed rate was used for qualifying the borrower, check this box.

Level of Property Review: Indicate the level of fieldwork performed to support the sales price or market value. Indicate the number of the appraisal form used, based on the type of inspection and the type of property being appraised.

Risk Assessment: Indicate whether the loan was manually underwritten or run through an AUS, such as DU or Loan Product Advisor.

Representative Credit/Indicator Score: Supply the borrower’s credit scores. See how to select the appropriate credit score in the example at right.

Underwriter Comments: Use this section to indicate conditions and/or write comments on the file. For example, you may comment about the liquid assets and reserves yet to be verified along with a note regarding compensating factors for exceeding a guideline.

Which Credit Score to UseExample: 1 borrower / 2 scores

Credit RepositoryBorrower’s

Credit Score

TransUnion 680

Equifax 674

If 2 scores are provided, the indicator score is the lower of the 2 scores — 674 in this case.

Example: 1 borrower / 3 scores

Credit RepositoryBorrower’s

Credit Score

TransUnion 675

Equifax 685

Experian 666

If 3 scores are provided for 1 borrower, drop the highest and lowest scores (685 and 666). The remaining score is the indicator score — 675 in this example.

Example: 2 borrowers / 3 scores each

Credit Repository Credit Score

Borrower A

Borrower B

TransUnion 676 662

Equifax 660 685

Experian 654 690

If 3 scores are provided for each borrower, drop the highest and lowest scores (676 and 654 for Borrower A; 690 and 662 for Borrower B).

Then compare the 2 remaining scores (660 for Borrower A; 685 for Borrower B). The lower of the 2 is the representative score — 660 in this example.

14

1008 Section IV. Seller, Contract and Contact Information

This section of the 1008 includes information about the mortgage seller and the contact person for the mortgage. This information is usually completed after the closing of the loan and before the loan is sold on the secondary market.

Seller Loan No.: This is a number assigned to the mortgage when purchased or securitized by Fannie or Freddie.

Contact Information: Although an official space is not provided for the contact’s email address, you can add it below the Contact Phone Number.



Property Rights

Borrower Name

Co-Borrower Name

Property Address

SSN

SSN

1 unit

2- to 4-units

Condominium

PUD Co-op


Single Wide

Multiwide

Freddie Mac

Streamlined Review

Established Project

New Project

Detached Project


Reciprocal Review

Fannie Mae





T Fannie Mae Review

U FHA-approved

V Refi Plus TM

E PUD

F PUD

T PUD

1 Co-op

2 Co-op

T Co-op

Primary Residence

Second Home

Investment Property

Number of Units

Sales Price $

Appraised Value $

Fee Simple

Leasehold





Conventional

FHA

VA

USDA/RHS



Balloon

ARM (type)

Other (specify)

Purchase

Cash-Out Refinance



Home Improvement


First Mortgage


$


Second Mortgage


Initial P&I Payment

Initial Note Rate


$

$

%

Seller

Broker

Correspondent


Yes

No

Terms



Seller/Other


$













Base Income

Other Income


Borrower

$

$

$

$

Co-Borrower

$

$

$

$

Total

$

$

$

$




%

%

%

LTV

CLTV/TLTV

HCLTV/HTLTV

%

%

%

Note Rate

Above Note Rate

Below Note Rate

Bought-Down Rate

Other

%

%

%

%

%

%

%

Exterior/Interior

Exterior Only

No Appraisal

Form Number:

Manual Underwriting

AUS

DU LP Other

AUS Recommendation



Yes No

Yes No

Yes No


First Mortgage P&I

Second Mortgage P&I

Hazard Insurance

Taxes

Mortgage Insurance

HOA Fees

Lease/Ground Rent

Other





Required

Verified Assets

Source of Funds



$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

%


Seller Name

Seller Address


Seller Loan No.

Contact Name

Contact Title


ContactSignature


Peter Simon

Elizabeth Simon


xxx-xx-2030

xxx-xx-9652

1

200,000

201,000

180,000

1,137.72

6.500

360



3,708.00 5,000.00 8,708.00

451.00 451.00

4,159.00 5,000.00 9,159.00

16.056

26.810

90.000

90.000

6.500

Approve/Eligible

1234567899

720

1,162.83

1,137.72

51.00

208.33

73.50

1,470.55

985.00

2,455.55

20,545.78

48,079.00




15

THOROUGH PROCESSING PAVES THE WAY FOR A SOUND UNDERWRITING DECISIONSo, you’ve finalized the 1008 and documented accordingly. It’s your diligent groundwork that will expedite and ultimately support the decision whether to approve the borrowers’ mortgage. How well they measure up against the risk characteristics of The 4 Cs will be discovered in the next stage of the Mortgage Cycle, underwriting. There, the borrowers’ Credit, Capacity, Capital and Collateral will be evaluated as a whole to come to a sound, informed decision.

Remember, the goal is to qualify as many borrowers as possible without compromising the assets of the lender or the investor — and above all, without compromising the borrowers’ ability to successfully maintain homeownership.

To broaden your understanding of underwriting, refer to The Fundamentals of the Mortgage Process Book 4: Evaluating Credit, Capacity, Capital and Collateral.

APPENDICES

16

Appendix A Desktop Underwriter (DU) Findings Report

The Underwriting Findings Report contains the results of DU’s pre-underwriting evaluation of data, including processing direction.

Summary: The DU Summary provides the risk recommendation, eligibility decision and note rate — key information that will guide your first processing steps.

Recommendation: There are 4 DU recommendations:

• Approve/Eligible: The loan meets DU’s credit-risk standards and is eligible for sale to Fannie Mae

• Approve/Ineligible: The loan meets DU’s credit-risk standards but is ineligible for sale to Fannie Mae. If ineligible, the DU Findings will provide an explanation for ineligibility. An example would be excessive loan amount or LTV.

• Refer with Caution: Ineligible for delivery to Fannie Mae as a DU loan

• Out of Scope: Indicates that DU is unable to analyze the loan

Risk/Eligibility: Look for messages about the loan’s risk assessment and underwriting recommendation in this section. If the loan receives a Refer with Caution, Ineligible or Out of Scope recommendation, DU will identify its reasons.

7

8

9

17

Findings: Loan-level messages identifying risk factors contributing to DU’s recommendation are located in this section. For loans that receive an Approve, DU may identify certain strengths in the file that contributed to the underwriting recommendation.

Verification Messages/Approval Conditions: This section identifies the follow-up processing steps you must complete to comply with Fannie Mae’s requirements for credit and liabilities and employment, income and asset verification, as well as the type of appraisal that must be completed.

Observations: This section highlights factors that will be considered in the underwriting analysis, including the version of DU that was used to analyze the loan, the Casefile ID number, the number of times the loan has been submitted to DU, credit scores, source of income and funds available toward the down payment.

18

Appendix A Desktop Underwriter (DU) Findings Report (continued)

Underwriting Analysis Report: This section of the Findings Report resembles the 1008 (Transmittal Summary) and contains information that summarizes the underwriting analysis.

19

Appendix B Collateral Underwriter (CU) Findings Report

The CU Findings Report contains the results of the collateral underwriter’s evaluation of the appraisal report, including messages which may warrant further attention by the reviewer.

Risk Score: 1 = low risk; 5 = high risk.

Risk flag messages: Identifies potential quality issues with the appraisal.

Comparable messages: Identifies potential comparable selection concerns.

Adjustment messages: Identifies potential concerns with value adjustments.

11003XYYYZ 08/20/2016

20

Appendix C Loan Product Advisor Feedback Certificate

The Feedback Certificate contains the results of Loan Product Advisor’s pre-underwriting evaluation of data, including processing direction.

Evaluation Summary: The opening section of the Feedback Certificate supplies a quick visual of the Purchase Eligibility and Risk Class evaluation results for the loan.

Purchase Eligibility: Identifies whether and under what conditions Freddie Mac will purchase the loan.

Freddie Mac Eligible: The loan is eligible for purchase under standard Freddie Mac Seller/Servicer Guide criteria.

Freddie Mac Ineligible: The loan does not meet Freddie’s program requirements. A message explaining the ineligible results is found in the Purchase Restrictions section of the Feedback Certificate.

21

Risk Class: The Risk Class identifies whether the loan meets Freddie Mac’s credit standards and the level of review required. Loan Product Advisor considers a combination of risk factors, including LTV, qualifying ratios, assets, credit history, employment, property type and loan purpose.

Loan Product Advisor Feedback provides 2 possible Risk Classifications:

Accept: Loan Product Advisor has determined the borrower’s credit worthiness is acceptable.

Caution: Loan Product Advisor has determined that the borrower has a blemished credit reputation and/or the loan has significant layering of risk.

• If the Caution provides an A-minus offering, and the loan complies with specific underwriting criteria, it may be eligible for sale as an A-minus mortgage. However, if A-minus is not offered or if the loan doesn’t comply with the specific A-minus underwriting criteria, the lender must conduct a full underwrite to determine if the loan is an acceptable risk.

Loan Data: This section of the Feedback Certificate supplies the LP AUS Key, property address and level of documentation results.

LP AUS Key: The LP AUS Key is a unique number assigned to a mortgage when it is first submitted. Use the LP AUS Key number to identify your loan when you work with Freddie Mac customer service.

Documentation Level: Loan Product Advisor defines the minimum level of documentation to be obtained to sell the loan to Freddie Mac, which generally corresponds to the Credit Risk Class:

Streamlined Accept: Requires significantly less documentation than a standard documentation mortgage.

Standard: The most comprehensive level of documentation.

22

Appendix C Loan Product Advisor Feedback Certificate (continued)

Results: This section provides status of the certificate, the type of appraisal required and the version of LPA used to analyze the loan’s data. If status is anything other than Complete, the certificate will include a section called Transaction Processing Issues that will identify the reason.

Credit Report Information: You can locate the borrowers’ Indicator Score and the credit agency that provided it. If 2 credit scores are provided, the Indicator Score is the lowest; if 3 scores, it’s the middle one.

Mortgage Information: This section of the Feedback Certificate provides a summary of the loan data — similar to the information on the 1008 — used in the underwriting analysis.

23

Asset Information: This section includes the available assets and assets required to close the loan.

Calculated Values: This section of the Feedback Certificate provides a visual of the Loan-to-Value ratios.

Borrower Information: This section displays the borrower information that was used to determine the qualifying housing and debt ratios.

24

Appendix C Loan Product Advisor Feedback Certificate (continued)

Transaction Information: This section includes Number of Submissions, which identifies the number of times the loan has been submitted to Loan Product Advisor.

Feedback Summary: The top section provides a snapshot of the number of messages that are contained in the feedback report (e.g., Employment/Income 1 message; Asset/Reserves 9 messages). The messages are based on the risk assessment of the loan and will guide processing direction and documentation requirements. See the following page for the various message categories.

26

Appendix D The 1003, Sections I, II & III

Uniform Residential Loan ApplicationThis application is designed to be completed by the applicant(s) with the Lender's assistance. Applicants should complete this form as "Borrower" or "Co-Borrower", as

applicable. Co-Borrower information must also be provided (and the appropriate box checked) when the income or assets of a person other than the "Borrower"

(including the Borrower's spouse) will be used as a basis for loan qualification or the income or assets of the Borrower's spouse or other person who has community

property rights pursuant to state law will not be used as a basis for loan qualification, but his or her liabilities must be considered because the spouse or other person

has community property rights pursuant to applicable law and Borrower resides in a community property state, the security property is located in a community property

state, or the Borrower is relying on other property located in a community property state as a basis for repayment of the loan.

If this is an application for joint credit, Borrower and Co-Borrower each agree that we intend to apply for joint credit (sign below):

Borrower Co-Borrower

VA Conventional Other (explain): Agency Case Number Lender Case Number

FHA USDA/RuralHousing Service

Amount

$ %

Interest Rate No. of Months Fixed Rate Other (explain):

GPM ARM (type):

Subject Property Address (street, city, state, & ZIP) No. of Units

Legal Description of Subject Property (attach description if necessary) Year Built

Purpose of Loan Purchase Construction Other (explain): Property will be:

Refinance Construction-Permanent Primary Residence Secondary Residence Investment

Complete this line if construction or construction-permanent loan.Year LotAcquired

Original Cost

$

Amount Existing Liens

$

(a) Present Value of Lot

$

(b) Cost of Improvements

$

Total (a+b)

$

Complete this line if this is a refinance loan.YearAcquired

Original Cost

$

Amount Existing Liens

$

Purpose of Refinance Describe Improvements made to be made

Cost: $

Title will be held in what Name(s) Manner in which Title will be held Estate will be held in:

Fee SimpleLeasehold (showexpiration date)Source of Down Payment, Settlement Charges and/or Subordinate Financing (explain)

Borrower's Name (include Jr. or Sr. if applicable)

Social Security Number Home Phone (incl. area code) DOB (mm/dd/yyyy) Yrs. School

Married (includes registered domestic partners)

Unmarried (includes single, divorced, widowed)

Separated

Dependents (not listed by Co-Borrower)

No.

Ages

Present Address (street, city, state, ZIP/ country) Own Rent No. Yrs.

Mailing Address, if different from Present Address

If residing at present address for less than two years, complete the following:

Former Address (street, city, state, ZIP) Own Rent No. Yrs.


Co-Borrower's Name (include Jr. or Sr. if applicable)

Social Security Number Home Phone (incl. area code) DOB (mm/dd/yyyy) Yrs. School

Married (includes registered domestic partners)

Unmarried (includes single, divorced, widowed)

Separated

Dependents (not listed by Borrower)

No.

Ages

Present Address (street, city, state, ZIP/ country) Own Rent No. Yrs.

Mailing Address, if different from Present Address



Mortgage

Applied for:

Amortization Type:

I. TYPE OF MORTGAGE AND TERMS OF LOAN

II. PROPERTY INFORMATION AND PURPOSE OF LOAN

III. BORROWER INFORMATIONBorrower Co-Borrower

Borrower

Co-BorrowerUniform Residential Loan ApplicationFreddie Mac Form 65 7/05 (rev. 6/09) Fannie Mae Form 1003 7/05 (rev. 6/09)

Page 1

Calyx Form - Loanapp1.frm (11/09)

12345

180,000 6.500 360

126 Lake View Lane, Pleasant Valley, XY 99999 1

See preliminary title report

2005

Peter Simon & Elizabeth Simon

Elizabeth Simon

Joint tenants

Equity from Pending Sale

Savings

Peter Simon Elizabeth Simon

xxx-xx-2030 713-438-xxxxx 03/06/1970 17 xxx-xx-9652 713-438-xxxx 08/01/1974 18

1

8

1

8

4 4

12 Oakwood Lane

Pleasant Valley, XY 99999 / United States

12 Oakwood Lane

Pleasant Valley, XY 99999 / United States

of 4


27

Sections IV & V

IV. EMPLOYMENT INFORMATIONBorrower Co-Borrower

If employed in current position for less than two years or if currently employed in more than one position, complete the following:

Name & Address of Employer Self Employed Yrs. on this job

Yrs. employed in thisline of work/profession

Position/Title/Type of Business Business Phone (incl. area code)

Name & Address of Employer Self Employed Dates (from-to)

Monthly Income

$



Monthly Income

$



Monthly Income

$



Monthly Income

$


Name & Address of Employer Self Employed Yrs. on this job

Yrs. employed in thisline of work/profession



Monthly Income

$



Monthly Income

$



Monthly Income

$



Monthly Income

$


V. MONTHLY INCOME AND COMBINED HOUSING EXPENSE INFORMATION

Gross Monthly Income Borrower Co-Borrower Total

Combined MonthlyHousing Expense Present Proposed

Total Total

Base Empl. Income*

Overtime

Bonuses

Commissions

Dividends/Interest

Net Rental Income

Other (before completing,see the notice in "describeother income," below)

Rent

First Mortgage (P&I)

Other Financing (P&I)

Hazard Insurance

Real Estate Taxes

Mortgage Insurance

Other:

$ $ $ $

$

$ $ $ $ $

Homeowner Assn. Dues

* Self Employed Borrower(s) may be required to provide additional documentation such as tax returns and financial statements.

Describe Other Income Alimony, child support, or separate maintenance income need not be revealed if theBorrower (B) or Co-Borrower (C) does not choose to have it considered for repaying this loan.

Notice:

B/C Monthly Amount

$

Borrower


Page 2


Franklin Elementary School

17 Barker Rd

Pleasant Valley, XY 99999

5 yr(s) 0 mth(s)

5

Music Teacher 713-497-xxxx

Web Vision Inc.

314 Forest Ave.


10 yr(s) 0 mth(s)

12

Program Designer Technology 713-493-xxxx

Learning Center of America

273 River Road


Teacher 713-483-xxxx

03/21/2006 -PRESENT

451.00

3,708.00

451.00

4,159.00

5,000.00

5,000.00

8,708.00

451.00

9,159.00

931.00

34.00

145.83

52.00

1,162.83

1,137.72

51.00

208.33

73.50

1,470.55

B Learning Center of America 273 River Road, Pleasant Valley, XY 99999 451.00

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28

Appendix D The 1003 (continued), Section VI

VI. ASSETS AND LIABILITIESThis Statement and any applicable supporting schedules may be completed jointly by both married and unmarried Co-borrowers if their assets and liabilities are sufficiently joinedso that the Statement can be meaningfully and fairly presented on a combined basis; otherwise, separate Statements and Schedules are required. If the Co-Borrower sectionwas completed about a non-applicant spouse or other person, this Statement and supporting schedules must be completed by that spouse or other person also.

Completed Jointly Not Jointly

ASSETS Cash or Market ValueDescription

Cash deposit toward purchase held by:

$

List checking and savings accounts below

Name and address of Bank, S&L, or Credit Union

Acct. no. $


Acct. no. $


Acct. no. $

Stocks & Bonds (Companyname/number description)

$

Life insurance net cash value

Face amount: $

$

Subtotal Liquid Assets $

Real estate owned (enter market valuefrom schedule of real estate owned)

$

Vested interest in retirement fund $

Net worth of business(es) owned(attach financial statement)

$

Automobiles owned (make and year) $

Other Assets (itemize) $

Liabilities and Pledged Assets.

Total Assets a. $

LIABILITIES Monthly Payment &Months Left to Pay

Unpaid Balance

List the creditor's name, address and account number for all outstandingdebts, including automobile loans, revolving charge accounts, real estate loans, alimony, child support,stock pledges, etc. Use continuation sheet, if necessary. Indicate by (*) those liabilities which will besatisfied upon sale of real estate owned or upon refinancing of the subject property.

Name and address of Company $ Payment/Months $

Acct. no.


Acct. no.


Acct. no.


Acct. no.


Acct. no.Name and address of Company $ Payment/Months $

Acct. no.

Alimony/Child Support/SeparateMaintenance Payments Owed to:

$

Job-Related Expense (child care, union dues, etc.) $

Total Monthly Payments $

Net Worth(a minus b)

$ Total Liabilities b. $=>

Schedule of Real Estate Owned (if additional properties are owned, use continuation sheet)

Property Address (enter S if sold, PS if pendingsale or R if rental being held for income)

Type ofProperty

PresentMarket Value

Amount ofMortgages & Liens

GrossRental Income

MortgagePayments

Insurance,Maintenance,Taxes & Misc.

NetRental Income

Totals

$ $ $ $ $ $

$ $ $ $ $ $

List any additional names under which credit has previously been received and indicate appropriate creditor name(s) and account number(s):

Alternate Name Creditor Name Account Number

Borrower


Page 3


Home Realty 3,000

Teachers Credit Union

Teachers Credit Union

06083-00

06083-71

25,562

1,367

29,929

150,000

50,000

229,929

American Mortgage Corporation

24789 *

Auto Hub

124578

Autoworld

986532

Discover Card

97531246890

Acme Credit

Gas Card

(931.00)

500.00

368.00

50.00

32.00

35.00

985.00

116,850

10,000

4,789

1,000

121

346

133,10696,823

12 Oakwood Lane Pleasant Valley, XY 99999PS SFR 150,000

150,000

116,850

116,850

931

931

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29

Sections VII, VIII, IX & X

VII. DETAILS OF TRANSACTION VIII. DECLARATIONS

IX. ACKNOWLEDGEMENT AND AGREEMENT

X. INFORMATION FOR GOVERNMENT MONITORING PURPOSES

a. Purchase price $

b. Alterations, improvements, repairs

c. Land (if acquired separately)

d. Refinance (incl. debts to be paid off)

e. Estimated prepaid items

f. Estimated closing costs

g. PMI, MIP, Funding Fee

h. Discount (if Borrower will pay)

i. Total costs (add items a through h)

j. Subordinate financing

k. Borrower's closing costs paid by Seller

l. Other Credits (explain)

m. Loan amount (exclude PMI, MIP,Funding Fee financed)

n. PMI, MIP, Funding Fee financed

o. Loan amount (add m & n)

p. Cash from/to Borrower (subtract j, k, l &o from i)

If you answer "Yes" to any questions a through i, please use continuation sheet for explanation.

Borrower Co-Borrower

Yes No Yes Noa. Are there any outstanding judgments against you?

b. Have you been declared bankrupt within the past 7 years?

c. Have you had property foreclosed upon or given title or deed in lieu thereofin the last 7 years?

d. Are you a party to a lawsuit?

e. Have you directly or indirectly been obligated on any loan which resulted inforeclosure, transfer of title in lieu of foreclosure, or judgment?

(This would include such loans as home mortgage loans, SBA loans, home improvementloans, educational loans, manufactured (mobile) home loans, any mortgage, financialobligation, bond, or loan guarantee. If "Yes," provide details, including date, name, and address of Lender, FHA or VA case number, if any, and reasons for the action.)

f. Are you presently delinquent or in default on any Federal debt or any otherloan, mortgage, financial obligation, bond, or loan guarantee?

If "Yes," give details as described in the preceding question.

g. Are you obligated to pay alimony, child support, or separate maintenance?

h. Is any part of the down payment borrowed?

i. Are you a co-maker or endorser on a note?- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

j. Are you a U. S. citizen?

k. Are you a permanent resident alien?

l. Do you intend to occupy the property as your primary residence?

If "Yes," complete question m below.

m. Have you had an ownership interest in a property in the last three years?

(1) What type of property did you own-principal residence (PR),second home (SH), or investment property (IP)?

(2) How did you hold title to the home-solely by yourself (S),

jointly with your spouse (SP), or jointly with another person (O)?

Each of the undersigned specifically represents to Lender and to Lender's actual or potential agents, brokers, processors, attorneys, insurers, servicers, successors and assigns andagrees and acknowledges that: (1) the information provided in this application is true and correct as of the date set forth opposite my signature and that any intentional or negligent mis-representation of this information contained in this application may result in civil liability, including monetary damages, to any person who may suffer any loss due to reliance upon anymisrepresentation that I have made on this application, and/or in criminal penalties including, but not limited to, fine or imprisonment or both under the provisions of Title 18, United StatesCode, Sec. 1001, et seq.; (2) the loan requested pursuant to this application (the "Loan") will be secured by a mortgage or deed of trust on the property described in this application; (3) theproperty will not be used for any illegal or prohibited purpose or use; (4) all statements made in this application are made for the purpose of obtaining a residential mortgage loan; (5) theproperty will be occupied as indicated in this application; (6) the Lender, its servicers, successors or assigns may retain the original and/or an electronic record of this application, whetheror not the loan is approved; (7) the Lender and its agents, brokers, insurers, servicers, successors and assigns may continuously rely on the information contained in the application, andI am obligated to amend and/or supplement the information provided in this application if any of the material facts that I have represented herein should change prior to closing of theLoan; (8) in the event that my payments on the Loan become delinquent, the Lender, its servicers, successors, or assigns may, in addition to any other rights and remedies that it mayhave relating to such delinquency, report my name and account information to one or more consumer credit reporting agencies; (9) ownership of the Loan and/or administration of the Loanaccount may be transferred with such notice as may be required by law; (10) neither Lender nor its agents, brokers, insurers, servicers, successors or assigns has made any representation or warranty, express or implied, to me regarding the property or the condition or value of the property; and (11) my transmission of this application as an "electronic record" containing my "electronic signature," as those terms are defined in applicable federal and/or state laws (excluding audio and video recordings), or my facsimile transmission of this application containing a facsimile of my signature, shall be as effective, enforceable and valid as if a paper version of this application were delivered containing my original written signature.

Acknowledgement. Each of the undersigned hereby acknowledges that any owner of the Loan, its servicers, successors and assigns, may verify or reverify any informationcontained in this application or obtain any information or data relating to the Loan, for any legitimate purpose through any source, including a source named in this applicationor a consumer reporting agency.

Borrower's Signature Date Co-Borrower's Signature Date

X X

The following information is requested by the Federal Government for certain types of loans related to a dwelling in order to monitor the lender's compliance with equal creditopportunity, fair housing and home mortgage disclosure laws. You are not required to furnish this information, but are encouraged to do so. The law provides that a Lender maynot discriminate either on the basis of this information, or on whether you choose to furnish it. If you furnish the information, please provide both ethnicity and race. For race, youmay check more than one designation. If you do not furnish ethnicity, race, or sex, under Federal regulations, this lender is required to note the information on the basis of visualobservation and surname if you have made this application in person. If you do not wish to furnish the information, please check the box below. (Lender must review the above material to assure that the disclosures satisfy all requirements to which the lender is subject under applicable state law for the particular type of loan applied for.)

BORROWER CO-BORROWER

Ethnicity:

Race:

Sex:

Ethnicity:

Race:

Sex:

I do not wish to furnish this information

Hispanic or Latino Not Hispanic or Latino

American Indian orAlaska Native

Asian Black orAfrican American

Native Hawaiian or Other Pacific Islander White

Female Male

I do not wish to furnish this information

Hispanic or Latino Not Hispanic or Latino

American Indian orAlaska Native

Asian Black orAfrican American

Native Hawaiian or Other Pacific Islander White

Female Male

To be Completed by Loan Originator:This information was provided:

In a face-to-face interview

In a telephone interview

By the applicant and submitted by fax or mail

By the applicant and submitted via e-mail or the internet

Loan Originator's Signature Date

XLoan Originator's Name (print or type)

Loan Origination Company's Name

Loan Originator Identifier

Loan Origination Company Identifier

Loan Originator's Phone Number (including area code)

Loan Origination Company's Address

Uniform Residential Loan ApplicationFreddie Mac Form 65 7/05 (rev. 6/09) Fannie Mae Form 1003 7/05 (rev. 6/09)Page 4


200,000.00

1,281.78

2,458.00

156.00

203,895.78

Cash Deposit on sales contract 3,000.00Borrower Paid Fees 350.00

180,000.00

180,000.00

20,545.78

PR

SP

PR

SP

Right to Receive Copy of Appraisal I/We have the right to a copy of the appraisal report used in connection with this application for credit. To obtain a copy, I/we must sendCreditor a written request at the mailing address Creditor has provided.Creditor must hear from us no later than ____ days after Creditor notifies me/us about the action takenon this application, or I/we withdraw this application.If you would like a copy of the appraisal report, contact:

90

ABC Mortgage Company 1000 Any Street Suite 200, XY 99999

John Smith 7654321 713-000-xxxx

ABC Mortgage Company(P) 713-000-xxxx 1234567

1000 Any StreetSuite 200, XY 99999

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30

Appendix E The Loan File Checklist

This checklist will help you assemble loan packages for submission to underwriters and investors. By making sure each loan package contains the following information, you can expedite the mortgage process. Note that the term “borrowers” refers to both multiple borrowers or a single borrower.

Many investors have their own checklists or submission sheets. Check with your individual investors for their submission and documentation requirements.

Uniform Residential Loan Application (1003) FNMA/FHLMC form or other approved equivalent

Completed in full, including borrowers’ signatures

Occupancy status indicated

Application matches verification documents

Credit Report All supplements, including public records examination

All open credit accounts listed on the loan application

Reflects 2 to 3 credit scores per borrower

AUS Feedback/Findings Report Most recent report and all pages included

Data submitted is accurate

All required documentation obtained

Additional Credit Documentation Direct verification included for any accounts not listed on

the credit report

Letter of explanation included for any adverse items

Verification of Income Pay stub(s) or salary voucher(s) for the most recent 30-day

period with year-to-date earnings indicated, and IRS W-2 forms, or IRS Wage and Income (W-2) Transcripts, for

the previous two years

Third-party vendor employment verification

Documented telephone verification

If borrower has commission income, 2 years’ signed federal income tax returns with schedules, or 2 years’ IRS federal income tax return transcripts (if applicable)

Employment gaps explained

Self-Employed Documentation 2 years’ signed personal federal income tax returns with

schedules, or 2 years’ IRS issued federal income tax return transcripts

2 years’ signed personal federal business tax returns, or 2 years’ IRS issued federal business income tax return transcripts, if ownership is ≥ 25%

Income analysis forms

Verification of Assets Verified funds sufficient for closing and/or reserves

The most recent 2 months’ depository institution statements. Statements must, at a minimum, report the ending balance and all transactions (deposits and withdrawals).

Source of funds: explanations of any significant changes in account balances or any recently opened account

Gift letter and/or written gift information as evidence gift funds have been received

Uniform Residential Appraisal Report FNMA/FHLMC form or other approved equivalent

Photos of subject property, street scene and comparables

Review appraisal included (if available)

All addenda and explanations

Sales Contract and/or Escrow Instructions Document completed in full with all addenda and signed

by all parties

Verified earnest money deposit (cancelled checks, written statement from holder, etc.)

Additional documents that may be required Divorce decree/separation agreement (if applicable)

Verification of child support/alimony if such income is being used to qualify or if borrower is obligated to pay support/alimony

Signed construction cost breakdown (if applicable)

Most recent 12-month payment history on previous mortgages

Rental agreements or leases (if applicable)

Any other clarifying documents

Bankruptcy filing statement, schedule of debts, discharge and explanation (if applicable)

Generally, documents must not be more than 120 days old from the date of the note.

Loan File Checklist provided by Mortgage Guaranty Insurance Corporation.

31

Appendix F The 8 Stages of the Mortgage Cycle

ORIGINATION The loan application

is completed.

LOAN SERVICING Payments to third parties are collected.

PROCESSING The loan file is documented.

SECONDARY MARKET Mortgages are bought and sold by

lenders and investors.

UNDERWRITING The loan file is evaluated.

WAREHOUSING Closed loans are temporarily held.

DELIVERY Loans are packaged and shipped to an investor.

CLOSING Loan documents are signed; title is transferred.

book 3 processing the loan - mortgage insurance | mgic · processing responsibilities once the loan...

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