loan product advisor - genworth financial · 2019-06-27 · feedback certificate-loan data loan...

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Loan Product Advisor®

Part I, The BasicsJune 2019

Loan Product Advisor®

– What is Loan Product Advisor– What is Risk– Reviewing the Feedback Certificate– Data Integrity Reminders– Resources– Genworth

Agenda

Today’s Session Covers Conventional Loans Only

2Loan Product Advisor

FreddieMac.com


What is Loan Product Advisor?

4

http://www.freddiemac.com/singlefamily/pdf/Loan_Product_Advisor_Fact_Sheet.pdf

Loan Product Advisor

– Loan Product Advisor is Freddie Mac’s automated underwriting system

– It gives users access to Freddie Mac’s credit requirements, allowing you to easily identify the overall underwriting risk

– It replaces Loan Prospector®

http://www.freddiemac.com/singlefamily/pdf/Loan_Product_Advisor_Fact_Sheet.pdf

Loan Product Advisor is Part of the Loan Advisor Suite


6How Loan Risk is Analyzed

What is Risk?:Risk analysis is the backbone of mortgage lending‏

– The lender is deciding whether to give a sizeable loan to the applicant– The lender will make an informed decision based on the risk in the loan– By looking at how loans have performed in the past, lenders are able to identify

factors that appear to increase or decrease the risk in a particular loan:An important point about the information used in the AUS evaluation‏

– The systems can only work if the information entered is:• Accurate• Truthful• Complete• Supportable

An automated system gives you a risk RECOMMENDATION‏– The AUS does not decision a file

What Risk Factors is Loan Product Advisor Looking at?


8Credit Reports & Credit Scoring

Credit ReputationCredit Score‏

Freddie Mac’s Loan Product AdvisorSM‏ (LPA) A tri-merge Credit Report or 3 In-File Reports are required‏FICO scores must be requested for each borrower‏;Identifying the Underwriting Score is achieved by‏

– If the borrower has two scores select the lowest– If three scores have been returned use the middle score– When the file has more than one borrower use the lowest of the individual

underwriting scores– http://www.freddiemac.com/learn/pdfs/uw/credit_scores.pdf

http://www.freddiemac.com/learn/pdfs/uw/credit_scores.pdf


Credit ReputationCredit Score‏ For an Accept Mortgage and an A-minus Mortgage, Loan Product‏Advisor has determined that the Borrower's credit reputation is acceptable

– In all other Mortgages, the Seller must thoroughly evaluate the Borrower's credit reputation in accordance with the requirements set forth in this section and document in the Mortgage file the Seller's conclusion the reputation is acceptable

Credit Reputation

10

Foreclosures, bankruptcies, liens and/or judgements‏


Credit Reputation

11

Mortgage delinquencies‏


Credit Reputation

12

Credit delinquencies, repossessions, collections, or charge-offs‏


Credit Reputation

13

Credit accounts: type, age, limits, usage and status of revolving‏accounts


Credit Reputation

14

Borrower’s request for new credit in last 12 months‏


Inquires‏– Inquires may indicate the borrower has additional debt.

• When the credit report indicates that a creditor has made an inquiry within the previous 90-day period, the Seller must determine whether additional credit was granted. If additional credit was granted, the Seller must obtain verification of the debt and must consider the debt when qualifying the Borrower subject to the requirements in Section 5401.2, Monthly debt payment-to-income ratio.


Credit ReputationAuthorized User Accounts

– The Lender must disregard the FICO scores based on significant inaccuracies which include tradelines for accounts in which the borrower is not the primary account holder, but is listed as the authorized user. The lender does not have to disregard the FICO score if evidence in the file proves

• Another borrower on the file owns the tradeline in question

• The tradeline is owned by the borrower’s spouse, or

• The borrower has been making payments on the account for the past 12 months

16How Loan Risk is Analyzed

Capacity Debt ratios: Qualifying monthly housing expense–to-income ratio‏

• The percent of the borrower’s gross monthly income that will go towards paying housing debt and the borrower’s established long term consumer debt and certain other debt obligations.

– The lower the ratio, the lower the risk– High ratio loans are more adversely impacted when other risk factors are present

Example - Joe has applied for a mortgage loan:His gross monthly income is $5,000Principal and interest payments on the mortgage would be $750Taxes and insurance would be escrowed, and total $250 a monthJoe’s credit report shows he has two credit cards, with minimum monthly payments of $150 and $200, a car lease with a $500 monthly payment, and he is required to pay child support in the amount of $750 a monthJoe’s Housing Ratio is 20% ($1,000 PITI/ $5,000 Monthly Income)Joe’s Debt Ratio is 50% ($2,500 PITI & Consumer Debt/ $5,000 Monthly Income)

Capacity

17

Salaried versus self-employed borrower‏


Capacity

18

Cash reserves‏


Liquid Reserves = The liquid assets remaining after the loan closes‏

– To calculate reserves you typically divide the remaining liquid assets by the proposed PITIA of the subject property

• Based on the use of the subject property, additional reserves may be required on other properties already owned

– The monthly PITIA includes• Principal and Interest• Hazard, flood and/or mortgage insurance premiums (as applicable)• Real Estate Taxes• Ground rent and/or special assessments• Owner’s association dues or monthly coop corporation fees• Any subordinate financing payments

– The lack of any reserves will be considered a risk factor

Capacity

19

Number of Borrowers‏


Co-borrower’s are considered in the evaluation of a mortgage loan‏application.

– Generally, the presence of more than one borrower with good traditional credit helps to reduce risk

– Research has shown that mortgages that have more than one borrower, tend to have lower delinquency rate than mortgages with one borrower

Capacity

20

:Loan Characteristics‏– Product: a 15, 20 and 30-year fixed rate, an adjustable rate– Purpose of Loan: purchase or refinance (cash-out or no cash out)


Why the money is being borrowed can influence the risk‏– Purchase– Refinance

• No cash-out/limited cash-out/rate and term• Cash-out

– Purchase transactions continue to represent less risk than refinances– Limited cash-out refinance transactions represent less risk than cash-out– Cash-out refinance transactions represent higher risk

21

CollateralBorrower’s total equity or down payment‏

– The relationship between:• The amount of money borrowed= Loan Amount• The lesser of the Sales Price or Appraised Value of the property • Refinance the LTV is calculated off the Appraised Value

– Example: • Mortgage: $100,000• Appraised value: $80,000• LTV: 80%

Value $80,000

Mortgage Loan $100,000

- =Negative Equity ($20,000)


Collateral

22

Property Type: a 1-unit or 2 to 4 unit detached property, Condominium‏Unit or Manufactured Home


:The number of units and property type can influence loan risk‏– One-unit properties, not in a co-op nor attached condos, are the benchmark – Two- Three- and Four- unit properties significantly increase risk– Condos, Co-Ops and PUDs must be reviewed for acceptability– Manufactured homes represents the most risk

• Program restrictions may apply

Collateral

23

Property Use: Primary Residence, Second Home or Investment use‏


Loan Product Advisor:”Loan Product Advisor Returns a “Response File‏

– Documentation Checklist: Used to help you process/document your file – Credit report: Loan Product Advisor allows for several options for credit reports.

In-file credit reports or Tri-Merged credit reports (If you opted to order a tri-merged credit report, there is an additional charge).

– Full Feedback Certificate• Provides information used in determining Final Approval Requirements as well as

Documentation Requirements.• Remember: The Feedback Certificate is a “Recommendation” not an Approval!


Be Familiar With Your Loan Origination System And Any Mapping Issues Your Interface May Have With Loan Product Advisor

Loan Product Advisor...The Process Continued

– For validation, you may use in-file credit reports pulled either inside or outside Loan Product Advisor. (In-file credit reports are the default in Loan Product Advisor) Three must be requested for each borrower.

– You may select to order a tri-merged credit report either through Loan Product Advisor or through your LOS or credit vendor.

– For validation, you may use either of these tri-merged credit reports. (verify your investor requirements if it’s other than Freddie Mac). There is an additional charge for merged reports issued through Loan Product Advisor.

– All credit reports must be in the closed loan package, even the Loan Product Advisor in-file reports that may not have been used for underwriting purposes.


Check With Your Investor - Many Require Use Of Tri-Merged Reports Only

Loan Product Advisor Feedback Certificate


Freddie Mac Purchase Eligibility


•Review the Feedback Certificate for Purchase Eligibility Messages – Freddie Mac Eligible– Freddie Mac Ineligible (Not eligible for sale to Freddie Mac/Investor)– Freddie Mac 500 A-minus Offering

Many Lenders Do NOT Allow For A-Minus Loans To Be Delivered Or Insured. Always Check Investor Requirements

Feedback Certificate- “Risk Class”


Risk Classes for:•Conventional / Conforming Loans

– ACCEPT– CAUTION

29

Feedback Certificate-Loan Data


Loan Data Fields– Borrower name – Appraisal Identifier, AUS Key #, Application #– Property Address and Mortgage Type

Documentation Levels for Conventional Conforming Loans– Streamlined Accept (Generally the Rule of One…).– Standard (Generally the Rule of Two) But Investor Product/Program

Requirements may apply

Feedback Certificate-Results

30

http://www.freddiemac.com/help/lpa_tool/feedback_certificate_page.html


Appraisal Type‏


Feedback Certificate- Credit Report Information

Loan Product Advisor 31



Feedback Certificate- Mortgage Information




Required ARM Detail


Feedback Certificate- Asset Information




Feedback Certificate- Calculated Values




Feedback Certificate- Borrower Information



Validate Liabilities From Your LOS To Loan Product Advisor; Do Ratios Match? What Liabilities Must Be Included?


Feedback Certificate- Transaction Information




Feedback Certificate- Feedback Summary




Feedback Certificate- Employment & Income


•Documentation “Level” determines the documentation required – Note: Many messages say “if”, so they apply only “if”….

Feedback Certificate- Asset Information


Feedback Certificate- Asset InformationReserves


•Read All Messages

Feedback Certificate- Credit and Liabilities


Read!! Guidance when no payment is listed or liability is not on the credit report; option to verify funds to pay off open ended accounts;

Feedback Certificate- Property and Appraisal


Feedback Certificate- General Messages


The Checklist - Use It!!



Property Eligibility Requirements

Page 30 and 31 of matrix http://www.freddiemac.com/learn/pdfs/uw/docmatrix.pdf

http://www.freddiemac.com/learn/pdfs/uw/docmatrix.pdf

Common ErrorsDouble Check Your Data‏

– Address information wrong– Property Type entered incorrectly (condo, but entered as single family)– HOA, Condo or PUD dues not included in DTI– Liabilities omitted without supporting documentation– Inquires not cleared as either a new account opened or no credit granted– Credit report or credit documents expired– Funds required for closing/reserves changed, but not resubmitted– MI required but MI guidelines not followed


Data Submitted Must Be True, Correct And Accurate And Supported By Proper Documentation Or Explanations

Always Remember:A Few Reminders‏

– Use FULL vested value of the borrower’s 401k, IRA, KEOGH, 403b or other IRS qualified plan as reserves IF borrower has access to the funds currently without restriction; Ensure loans taken are subtracted from the value of the asset account and that applicant is fully vested.

– Loan Product Advisor does not validate if the maximum seller paid fees have been exceeded. You must validate this based off the TLTV.

– Address items that Loan Product Advisor cannot see, such as missing pages to bank statement or unrealistic commute.

– All assets should be entered based on type i.e. CD, 401k, checking, gifts.– Collections are not required to be paid off by Freddie Mac, but may be a

requirement of the lender.– Tax Liens and judgments must be paid and funds must be verified, in addition to

the funds required to close.


Always Remember:A Few Reminders‏

– If a revolving debt, open-ended accounts or deferred non-student loan do not show a payment on the credit report, you are required to use 5% of the balance, or obtain a copy of a statement evidencing lower payment.

– For open-ended debt (AmEx O type accounts), verify funds to pay the current balance over and above funds needed for closing + reserves, or include the full payment in ratios.• Evidence borrower is reimbursed by employer is also acceptable

– For all properties owned free and clear, evidence of tax and insurance payments and amounts should be included in the DTI ratio.

– Investment transactions/rental income - refer to the Freddie Mac Rental Income guidelines

– Follow the updated student loan policies for payment amounts


See Loan Product Advisor Documentation Matrix Dated September 2018

FAQ’s


http://www.freddiemac.com/loanadvisorsuite/faq/loanproductadvisor.html

http://www.freddiemac.com/loanadvisorsuite/faq/loanproductadvisor.html

Loan Product Advisor Functionality Guide


– Updated June 2019– Assists with data entry– Error messages– Correcting errors– Assigning a loan

https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/fun_guide.pdf

https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/fun_guide.pdf

Freddie Mac Seller/Servicer Guide


Resources & Learning


Freddie Mac Training Resources


https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/lpa_resources.pdf

https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/lpa_resources.pdf

Borrower’s Without Credit Scores


https://sf.freddiemac.com/content/_assets/resources/pdf/requirements/mtges4borr_nocreditscores.pdf

https://sf.freddiemac.com/content/_assets/resources/pdf/requirements/mtges4borr_nocreditscores.pdf

Selection and Use of Credit Scores


https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/credit_scores.pdf

https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/credit_scores.pdf

Feedback Message Cause and Resolution


https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/lpfm_cr.pdf

https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/lpfm_cr.pdf

Determination of Reserve Requirements


https://sf.freddiemac.com/content/_assets/resources/pdf/requirements/reserves.pdf

https://sf.freddiemac.com/content/_assets/resources/pdf/requirements/reserves.pdf

Determination of Total Funds to Be Verified


https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/cashtoclose.pdf

https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/cashtoclose.pdf

Determination of Total Monthly Debt


https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/conv_lp_liabilities.pdf

https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/conv_lp_liabilities.pdf

Loan Product Advisor Documentation Matrix


Tool to help document files‏



Freddie Mac Rental Income MatrixTool to help document files‏

http://www.freddiemac.com/learn/pdfs/uw/rental.pdf


http://www.freddiemac.com/learn/pdfs/uw/rental.pdf

Automated Income Assessment


http://www.freddiemac.com/learn/pdfs/uw/auto_inc_assess_employer.pdf

http://www.freddiemac.com/learn/pdfs/uw/auto_inc_assess_employer.pdf

Automated Asset Assessment


http://www.freddiemac.com/learn/pdfs/uw/auto_asset_assess.pdf

http://www.freddiemac.com/learn/pdfs/uw/auto_asset_assess.pdf

AIM for Self Employment


http://www.freddiemac.com/learn/pdfs/uw/auto_assess_tax_return_data.pdf

http://www.freddiemac.com/learn/pdfs/uw/auto_assess_tax_return_data.pdf

Collateral Representation and Warranty Relief


https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/crwr_prod.pdf

https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/crwr_prod.pdf

Automated Collateral Evaluation (ACE)


– Must receive “feedback message transaction is eligible for appraisal waiver” and be “Accept/Eligible” for LPA

– Transaction must be:– 1 unit primary or second home including

condos– LTV/TLTV 80% or less– No cash-out refinance– Feedback must indicate eligible for

appraisal waiver– Final submission to Selling System® must

indicate collateral representation and warranty relief status is “Y” or “Yes”

– Waiver is good for 120 days– Visit Collateral Representation and

Warranty Relief page on the Freddie Mac Learning Center for resources

Automated Collateral Evaluation


https://sf.freddiemac.com/content/_assets/resources/pdf/requirements/ace.pdf

https://sf.freddiemac.com/content/_assets/resources/pdf/requirements/ace.pdf

Loan Collateral Advisor®


Loan Collateral Advisor®

76

Simplified Risk Scoring System‏– Scale of 1-5 provided in .5

increments, with one representing the lowest valuation risk score. This score is found in Loan Collateral Advisor and does not print on the feedback certificate

– Eligible Mortgages with LTV/TLTV/HTLTV ratios < or = to 95% that have an appraisal with a Loan Collateral Advisor risk score of 2.5 or less will receive representation and warranty relief.

– Review your Loan Product Advisor Feedback certificate for eligibility


HVE Point Value Estimate


http://www.freddiemac.com/hve/hve.html

http://www.freddiemac.com/hve/hve.html

HVE FAQ’s


http://www.freddiemac.com/hve/faq.html

http://www.freddiemac.com/hve/faq.html

Genworth Underwriting Guidelines


Genworth Rate Express®


LOS Connections


Training Tools and Information


Additional MI Site Information


ActionCenter®: 800 444.5664 Your Local Genworth

Regional Underwriter Your Genworth Sales

Representative

Your Genworth Resources


Legal Disclaimer Genworth Mortgage Insurance is happy to provide you with these training materials. While we strive for‏accuracy, we also know that any discussion of laws and their application to particular facts is subject to individual interpretation, change, and other uncertainties. Our training is not intended as legal advice, and is not a substitute for advice of counsel. You should always check with your own legal advisors for interpretations of legal and compliance principles applicable to your business.

,GENWORTH EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED‏INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THESE MATERIALS AND THE RELATED TRAINING. IN NO EVENT SHALL GENWORTH BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER WITH RESPECT TO THE TRAINING AND THE MATERIALS.

Genworth Mortgage Insurance Offers A Comprehensive Suite Of Training Opportunities To Boost Your Know-How, Benefit Your Bottom Line, And Serve Your

Borrowers Better. Visit mi.genworth.com To Learn More.

Collateral Underwriter®, Home Ready® and Desktop Underwriter® or DU® are registered trademarks of Fannie MaeLoan Product Advisor®, Home Possible®, Loan Collateral Advisor® and Home Value Explorer® (HVE®) are registered trademarks of Freddie MacActionCenter®, Homebuyer Privileges® and Rate Express® are registered trademarks of Genworth Mortgage InsuranceSimply UnderwriteSM is a registered service mark of Genworth Mortgage Insurance


loan product advisor - genworth financial · 2019-06-27 · feedback certificate-loan data loan...

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