The interesting thing about "mortgage banking" is that it is not a discipline taught in school to youth. It is not like chemistry or psychology, or animal science, etc., that one can major in. It includes aspects of many different things, like finance, sales, marketing, psychology, accounting, and so forth. The skills and knowledge of a good processor aren't necessarily those of a good CFO of a mortgage company, and an underwriter's skills don't match those of a top loan agent - although both are in the same business. The MBA (Mortgage Bankers Association) has classes in various areas, and many MI companies and investors sometimes offer very specific classes - but it helps to learn a little something about other sides of the biz.
For example, some folks don't know the difference between a "mortgage" versus a "deed of trust"? A mortgage, used in playing Monopoly or in the securities business, is not used in California - but it is used in many other states. California is a "deed of trust" state. Taking a step back, when a borrower signs a promissory note, he is agreeing to pay the lender a specific amount of money according to certain conditions. The borrower will sign either a mortgage or a deed of trust, securing the note and offering protection to the lender. (Remember that a deed conveys title & ownership of the property.) In "title theory" states, a mortgage is used and it conveys ownership to the lender. A clause in the mortgage provides that title reverts back to the borrower when the loan is paid. In "lien theory" states, the mortgage creates a lien only on the property and the title remains with the borrower. The lien is removed when all the payments have been made.
One basic difference between the mortgage and a Deed of Trust is that in doing a mortgage two parties are involved (the lender and the borrower) whereas with a DOT there are three parties involved: the borrower, the lender, and a trustee. In a DOT, the borrower conveys title to a trustee who will hold title to the property for the benefit of the lender. The title remains in trust until the loan is paid off, with a title company, escrow company, or bank usually listed as trustee and issuing a trustee's reconveyance showing that the lender's interest has ended upon pay off.
More pertinent now, unfortunately, is the difference in how foreclosures are handled. Servicing companies know that, although state law will determine the method of foreclosure. The rules when using a DOT allow for a faster foreclosure time than with a judicial foreclosure required with a mortgage. Under a Deed of Trust, when the borrower defaults on the loan, the lender delivers the Deed of Trust to the trustee, who then is instructed to sell the property at a trustee's sale.
Many lenders in and out of Florida have been carefully watching the court opinion of whether or not an underwriter is considered a loan originator, and therefore must be licensed as such starting October 1. They don't: underwriters did not clearly fit the description of a "loan originator" and the OFR provided a legal opinion.
In Florida, the definition of "loan originator" means "An individual who, directly or indirectly, solicits or offers to solicit a mortgage loan, accepts or offers to accept an application for a mortgage loan, negotiates or offers to negotiate the terms or conditions of a new or existing mortgage loan on behalf of a borrower or lender, processes a mortgage loan application, or negotiates or offers to negotiate the sale of an existing mortgage loan to a non-institutional investor for compensation or gain. The term does not include an employee of a mortgage broker or mortgage lender who performs only administrative or clerical tasks, including quoting available interest rates, physically handling a completed application form, or transmitting a completed form to a lender on behalf of a prospective borrower."
And now for some investor-related news.
Chase told its clients that it is basically adopting Fannie Mae's Attached PUD requirements. Namely, a project analysis of Fannie Mae Attached PUDs is required to be done and reviewed, confirming the project, within the three months that preceded the date of the Note and Mortgage for the unit. This is to determine the project meets the required eligibility criteria, and that the correspondent is not aware of any changes in circumstances since the review of the project that would result in the project not satisfying Fannie Mae eligibility criteria. Chase also told its correspondents that for Fannie Mae Detached PUDs, "the Delegated Correspondent is not required to warrant Detached PUDs locked and closed under Fannie Mae Fixed Rate market types and Agency ARMs evaluated through DU. However, a Delegated Correspondent must ensure Detached PUDs meet Fannie Mae insurance and appraisal requirements."
Under Freddie's rules, however, Chase mentions that "Freddie Mac does not require a full project review for PUDS, but does require an analysis of all PUD transactions (both attached and detached) to confirm the project is a PUD as indicated on the appraisal or title, and that the project meets Freddie Mac insurance requirements. "The appraisal of the subject unit contains the following requirements: the PUD legal name, HOA dues and assessments, if applicable, and Property Rights (such as Fee Simple and Leasehold) are indicated for each comparable sale, and a comparison of those rights with the subject PUD.
Bank of America told its correspondents that it is accepting FHA's enhancement of the Energy Efficient Mortgage (EEM) program guidelines with a new calculation method allowing an increase in the amount of effective energy improvements that may be added to the base FHA maximum mortgage amount limit. HUD came out with this in June of last year, but "the maximum amount for the portion of the EEM for energy improvements is the lesser of the actual cost of the improvements, or 5% of the value of the property or 115% of the median area price of a single family dwelling or 150% of the conforming Freddie Mac limit. The EEM program allows a borrower to finance up to 100% of the cost-effective energy package when he/she demonstrates the present value of the energy saved over the useful life of the improvements.
The EEM program may be used for all property types, for purchase and refinance transactions, including streamline refinances, or new and existing construction, and in conjunction with the 203(k) and Streamline 203(k) programs."
Wells Fargo told its brokers that after September 27th, "When a Homeowners' Association (HOA) Certification is required on a Conforming or Non-conforming Conventional loan, the applicable Wells Fargo version of the form must be submitted." So brokers can transfer information from one HOA certification to Wells' form, but from that date forward both forms must be included in the package.
Starting in 6 days, SunTrust will be implementing revised maximum debt-to-income ratio requirements for Agency DU Refi Plus loan transactions. Lock them in before that date to take advantage of current guidelines, because after that date there will be revised debt-to-income ratio requirements. (There will be no debt-to-income ratio requirements for Agency Plus DU Refi Plus loan transactions.) For SunTrust to SunTrust transactions, DTI will be per DU, except "if the borrower's proposed mortgage P&I payment increases by more than 20% of the current mortgage P&I (or Interest Only) payment, then the maximum qualifying ratios are 31/45%." For non-SunTrust to SunTrust transactions, the maximum debt to income ratio is 50.00%. "If the borrower's proposed mortgage P&I payment increases by more than 20% of the current mortgage P&I (or Interest Only) payment, then the maximum qualifying ratios are 31/45%."
Also starting next Monday SunTrust is also implementing the following revisions: a minimum 680 credit score on FHA Jumbo loans, purchase transactions and, no Cash-Out with an appraisal (Rate and Term Refinance) transactions, and a 97.75% maximum TLTV on No Cash-Out with an Appraisal (Rate and Term Refinance) for conforming loan amount transactions. As always, check the actual bulletin for specific information!
Lastly, effective September 1, SunTrust will "require bailee letters be submitted with the original Note from warehouse lenders for all closed loans. Correspondent clients, who are financial institutions (banks, savings and loans, credit unions) or who are wholly owned subsidiaries of a financial institution, are not required to attach bailee letters to the original Note."
Speeding in Oregon:
GOOD: A Bend, Oregon policeman had a perfect spot to watch for speeders, but wasn't getting many. Then he discovered the problem: a 12-year-old boy was standing up the road with a hand painted sign, which read "RADAR TRAP AHEAD". The officer also found the boy had an accomplice who was down the road with a sign reading "TIPS" and a bucket full of money. (And we used to just sell lemonade!)
BETTER: A motorist was mailed a picture of his car speeding through an automated radar post in Pendleton. A $40 speeding ticket was included. Being cute, he sent the police department a picture of $40. The police responded with another mailed photo of handcuffs.
BEST: A young woman was pulled over for speeding. An Oregon State Trooper walked to her car window, flipping open his ticket book.
She said, "I bet you are going to sell me a ticket to the State Trooper's Ball."
He replied, "Oregon State Troopers don't have balls."
There was a moment of silence. He then looked into the distance, closed his book, tipped his hat, got back in his patrol car and left.