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FIRST MORTGAGE

Submitting theSubmitting the‘‘Perfect’ Loan PackagePerfect’ Loan Package

Underwriter’s “Underwriter’s “dreamdream” loan package” loan package

Desktop Underwriter is a registered trademark of Fannie Mae. Loan Prospector is a registered trademark of Freddie Mac. This presentation is a summary and is not complete. This information is for mortgage professionals only and should not be distributed to or used by consumers or other third-parties. Information is accurate as of the date shown below and is subject to change without notice. 06/03/2009

Agenda

Company History

Purpose of Training

Packaging the “Perfect” loan package Non Traditional Credit vs. Insufficient Credit New ‘FMC’ FHA overlays Documenting Income

FMC Checklists FHA FHA Streamline Conventional VA VA IRRRL

FIRST MORTGAGE

History of Company• First Mortgage Corporation is an independent residential Mortgage Banking firm with

branch offices located throughout the west.

• Founded in 1975, FMC is a direct-lending mortgage banker approved as a lender and/or loan servicer by the Federal Housing Administration (FHA); the Veterans Administration (VA); the Federal National Mortgage Association (Fannie Mae); the Federal Home Loan Mortgage Corporation (Freddie Mac); the Government National Mortgage Association (Ginnie Mae); the California Housing Finance Agency (CalHFA); the California Public Employees’ Retirement System (CalPERS); the California Teachers’ Retirement System (CalSTRS), the National Homebuyers Fund (NHF); and many other major secondary market institutions.

First Mortgage Corporation is currently rated the #5 FHA Lender in CA!

• Having funded in excess of $12 billion in residential real estate loans, FMC has assisted more than sixty thousand families with their mortgage needs.  FMC enables families to enjoy the American Dream of Homeownership…“it’s the only thing we do.”

• FMC has a longstanding tradition of providing unparalleled customer service and a reputation built on adding value to the home loan process.  That’s why FMC should be considered…“YOUR FIRST LENDING RESOURCE”.

Purpose of Training

Hot Topic at First Mortgage!

Operations: Incomplete ‘packaged’ loan files!

Production: Longer turn times!

SOLUTION?

Deliver the “Perfect” loan package!

THE ‘PERFECT’ LOAN PACKAGE

FIRST MORTGAGE

WHY deliver a “Perfect” loan package?

1. Accelerate the Loan Process Get to Underwriting faster with a fully packaged file Get answers quickly – faster turn times Get clean approvals with reduced document suspense

conditions/items – 80% of conditions lately have been due to missing documentation, letters of explanations, poorly packaged files

Get to docs faster with less “Prior to Doc” conditions Get to funding faster with less “Prior to Funding” conditions

2. Increase Operational Productivity/Efficiency and Reduce Costs Increase Operational Resources (UW, Docs, Funders) – With cleaner

files, the Operations team can handle more volume which means increased productivity, faster turn time, faster service

Improve efficiency and reduce processing costs Eliminate babysitting loan files - focus on bringing in new loans

WHAT is a “Perfect” loan package?

Good Preparation / YOU tell the Story

1. Documentation / Letters of Explanations

2. Back up / Provide samples

NEVER:1. …Use short cuts when it comes to documentation

2. …Let the UW tell/finish your story

*Underwriting always reserves the right to question, request, or add additional documentation requirements.  The more you document and tell the story the less room you leave for an

underwriter to question and finish your story for you*

Non-Traditional Credit

Non Traditional Credit vs. Insufficient Credit

Nontraditional Credit Borrowers Borrowers with insufficient trade lines to merit a fico

score. May also be used to augment “thin-files” or files where a credit score was generated based on just a few tradelines.

Nontraditional credit reports may not be used to enhance any poor credit history on a traditional credit report.

Insufficient Credit Borrowers Borrowers with no credit references, or borrower’s who

only have non-preferred references (see Group 2 references on next slide)

Non-Traditional Credit

Non Traditional Credit - Borrowers w/ No Fico Scores or Limited Tradelines Provide at least three (3) credit references rated at least 12 months. At least 1

reference must be from Group 1 (G1 references should be exhausted before using G2 as G1 is more indicative of a borrower’s future housing payment performance.)

Borrower’s with NO G1 references will be looked at as Insufficient Credit borrowers:

Group 1: Rental Housing Payment or Utilities (Gas, Electricity, Water, Land line home phone, cable TV). If renting from family member , provide cancelled checks for documentation.

Group 2: Insurance coverage (Auto, medical, life, renters), Cell Phone, Internet services, Child Care payments, School Tuition, Retail Stores (Department, Furniture, Appliances, Specialty Stores, Rent-to-Own), 12 month savings by regular deposits with NO NSF’s, Auto leases, Personal loan, Storage Units, etc.

Prefer using verification through Credit Bureaus using Nontraditional Mortgage Credit Report (NTMCR). If NTMCR is impractical or unavailable, obtain independent verification of trade references. Use public records from state, county or city records. Use published address or telephone number for that provider/creditor – don’t rely solely on information provided by the applicants

Provide landlord information such as Name, Phone number to verify rental history. All references from individuals should be backed up with most recent 12 months

cancelled checks.

Non-Traditional Credit cont’d…

Rental references from management companies may be used in lieu of 12 months cancelled checks.

Various service providers now available who develop bill payment history as well as scoring – FHA allows it for borrowers with no or little traditional credit.

Evaluating Non Traditional Credit Borrowers A satisfactory credit history, at least 12 months in duration includes:

No history of delinquency on rental housing payments and other credits in last 12 months No collection accounts / court records reporting (other than medical) filed within the past 12

months

Evaluating Insufficient Credit Borrower’s (Borrower’s w/No Credit References or having only tradelines shown on item #2 from previous slide): No collection accounts / court records reporting (other than medical) filed within the

past 12 months Max DTI of 31/43% from owner occupant borrower’s only – Comp factors are not

applicable for borrowers with insufficient credit - NO EXCEPTION 2 months PITI from own funds after closing – Gift Funds not allowed as reserves

FMC ‘new’ FHA overlays…

FICO'S 'UNDER' 620 Max DTI ratio of 46% - regardless of AUS (DO/LP) approvalHomebuyer education/counseling certificate requiredVerification of rent/cancelled checks/bank statements to verify

current housing payment history (exceptions may be granted for borrowers living with family)

Letters of explanation for all inquiries in the last 90 daysZero late pays in the last 12 months regardless of AUS (DO/LP)

approval

FICO’S ‘OVER’ 620Letters of explanation for all derogatory credit in the last 24

monthsLetters of explanation for all inquiries in the last 90 days

FMC ‘new’ FHA overlays cont’d

'ALL' LOANS WITH AUS (DU/LP) APPPROVAL Declining credit profile in the last 12 months - borrower must provide letter of

explanation on all derogatory credit and a verification of rent/cancelled checks/bank statements to verify current housing payment history

Maximum DTI ratio with DO/LP approval: 50.0% with 3.5% down payment Maximum DTI ratio with DO/LP approval: 55.0% with 5% down payment Comps for property no more than 3 months old maximum (re-statement of

current credit overlay) Compensating factors must be from HUD handbook 4155 (re-statement of

current credit overlay) Max LTV for cash out refinances is capped at 85.0% regardless of the date

of the case number assignment Manual underwriting guidelines of maximum DTI ratio of 46.0% and no

derogatory credit in the last 12 months still in effect (re-statement of current credit overlay) Max DTI of 46% - regardless of AUS (DO/LP) approval

CREDIT

Credit Reports (FHA/VA): For married couples with a non-borrowing spouse situation, make sure to run credit on the non-

borrowing spouse to obtain debts only for DTI calculation (must have written authorization)

Liens, Judgments, Collections: If there are liens, judgments or collections, and they’re suppose to be paid off, document the

source of funds used to pay those off.

Deferred Student Loans (FHA): Provide deferment letter with minimum 12 month forgiveness from date of close of Escrow (FHA

ONLY).

Divorced Borrowers: Provide Divorce Decree with all schedules. DU may ask for less or none so look at the loan

you’re working on – does it make sense to provide everything or just the page that says they’re divorced or not at all?

Bankruptcy: Provide Bankruptcy Petition and all Schedules as applicable (Schedules A & B) Provide the Bankruptcy discharge letter DU may not ask for it. Look at investor guidelines – does it allow DU to UW BK and FC or does

it refer them to a human UW? Every loan/borrower is different and UW will use the ‘make sense’ approach – does it make sense?

Credit Red Flags

Do recent inquiries suggest borrower is having problems finding an originator?

Are there conflicting address references on the credit report, depository statements and/or employment documentation?

Is there a pattern of increasing high balances on mortgage loans suggesting dependence on cash proceeds to subsidize income?

Does the credit report show any recent mortgages which were likely originated as owner occupied?

Does the credit report exclude evidence of undisclosed deed-in-lieu with verbiage such as “P&L loss” or “settled accounts”?

If borrower is qualifying as an individual or married sole and separate, are the majority of the trade-lines individual vs. joint accounts?

Are student loans deferred while the application shows seasoned active employment?

For real estate investors, do the origination dates for the mortgages on the credit report show a history of mortgage activities over the past several years NOT including their primary residence?

ASSETS

Bank Statements: Provide most recent 2 months bank statements with all pages for checking and

savings accounts if applicable. Must be dated within 30 days of initial application. DU may ask for less so make sure you check the guidelines. Some investors now

have overlays on top of DU meaning they require 2 months regardless of what DU asks for.

New Bank Accounts: Provide documentation to support new bank account (opened within last 90 days)

Retirement Accounts: Provide most recent 401K (Qualify @ 60%) or other type of retirement statements

PERS / STRS cannot use PERS/STRS for assets/reserves – cannot draw till retirement

Gift Letters: Provide fully executed Gift Letter signed by donor Provide donor’s source of funds using a VOD, a copy of a bank statement, or copy of

Cashiers check that references the donor Provide a paper trail of funds from donors account to borrower such as a cancelled

check, bank wire transfer, gift check, validated deposit slip, evidence of receipt of funds from Escrow or an Attorney, etc.

ASSETSRed Flags

• Does any depository account have a supporting average balance, but a recent opening date?

• Are liquid assets truly liquid? (Stock in closely-held corporations, partnerships, investments in mortgages or Notes receivable are NOT liquid assets)

• Do withdrawals for rent on the bank statements match the figure on the rental verification and application?

• Is the borrower’s 401K from present employment? (If not, their current ability to save has not been demonstrated)

REFINANCES

Provide copy of any mortgage coupon/s for all existing mortgages on subject property and any rentals

Provide copy of current hazard insurance policy for subject property and any rentals.

Provide copy of last County Tax Statement for subject property and any rentals

Provide copy of rental agreement for subject property and for any properties not listed on schedule “E” of Tax Returns

Do a property file on where they “rent” or property search by borrower to determine if they’re on title. Sometimes they say they rent but they’re really on title. May possibly be explained but try not to disguise it as something it is not.

FHA Streamline Refinances: Provide copy of old loan Note (all pages) Provide copy of old loan Deed of Trust (Page 1 only) Provide Payoff Demand – must show borrower is current VOM if payoff demand doesn’t show the most recent month and show borrower is current

MULTIPLE FHA PROPERTIES

FHA allows applicants to have only one (1) FHA insured residence with the exception:

1. Relocations• Due to work• Moving to an area not within reasonable commuting distance

2. Increase in family size• # of dependants increased and home doesn’t meet the family’s needs –

document increase in household • Loan must be paid down to max 75% LTV

3. Vacating Jointly owned home• Due to divorce, co-borrower is getting married

4. Non-occupying Co-borrower• May buy own property even if they helped another applicant qualify for a

home as a non-occupant co-borrower

*An applicant cannot buy his/her own O/O if he/she owns another FHA property regardless of occupancy (unless it meets one of the above criteria). No

reduction in balance required*

TITLE/OCCUPANCY Red Flags

• Check title for any items such as judgments, delinquent taxes, or support obligations that give evidence of questionable credit worthiness?

• On refinances, was the borrower recently added to title? Is another person going off title? Why?

• Does title show the current lien is owed to several parties with various percentage interests, thus indicating “hard money” financing?

• Did the borrower’s landlord confirm that he/she is moving out?

• Is the borrower’s present residence listed by the MSL?

• Is this considered a “move up” for the borrower?

• Is the subject property appropriate for the borrower in terms of household size and employment location?

• Is it more appropriate than the borrower’s current housing situation?

• On any transaction other than a purchase, is the subject property vacant?

LOE’S

• Derogatory credit:– Explain & provide supporting documentation on all derogatory credit such as collection

accounts, charge offs, slow pays, liens, judgments. Eg., if poor credit can be isolated to a specific period of time, this may be an indication it was one-time occurrence due to a job loss or illness. Provide detailed explanation of the circumstances and third party verification to support the explanation.

– Even if items’ are old, still provide LOE to strengthen your loan.

• Inquiries:– Explain all inquiries appearing on the credit report for the last 90 days– Make sure that there are no new loans in process at the same time as our loan.

Advising the borrower to just write “no new loans resulted from these inquiries” is considered fraud if new loans appear around the same time as ours. Those new obligations could result in higher DTI’s causing the our loan to be non-saleable.

• Multiple jobs:– Explain and provide documentation on work history to clarify income when multiple

jobs appear in the loan file. A resume may be a good source.

• Multiple addresses:– Explain multiple addresses on credit report and on loan documents

LOE’S cont’d…

• Payment shock:– Explain how borrower will budget for the payment when housing will increase more

than 50%

• No bank accounts:– Explain why borrower has chosen not to open any bank accounts– Explain mattress money

• Cash on hand:– Explain how the money was saved for the transaction and how long it took for

them to save it

• Other names on bank account:– Explain who they are. If you have access to 100% of all funds in the account

please have them provide a signed letter to that affect.

• Non-married borrowers– LOE on relationship between co-borrower’s if not married

LOE’S cont’d…

• Large deposits:– Explain and provide supporting documentation on any large deposits made into bank

accounts

• Bankruptcy / Foreclosures:– Explain the cause for the bankruptcy / foreclosure and provide documentation

supporting the cause

• Motivation Letter:– Explain your motivation for purchasing, or refinancing your home

• Commuting:– Explain how the work commute will not be an issue– Explain any unrealistic commuting distance and provide documentation if necessary

*Even if DU doesn’t ask for LOE’s, still provide them to strengthen your file*

APPRAISALRed Flags

• Is the appraisal more than 180 days old? Is the Market Conditions Addendum missing?

• Do the dated comps have higher sales prices than the recent comps? (Comps must be no more than 2-3 months old)

• Do the distant comps have higher sales prices than the closer comps? (Comps must be no more than 2-3 months old)

• Did the appraiser provide current listings or pending sales as comps to support the value?

• Are days on market (DOM) of comps consistent with the appraiser’s range of marketing time?

• Do extended days on market show impaired marketability in the area?

• Has the appraiser addressed whether the subject is located in a neighborhood that has multiple foreclosures? (If so, a purchase price that appears to be below market may not be.)

• If the subject was acquired in the past few years, is appreciation since purchase reasonable? – Formula: Current value LESS acquisition cost DIVIDED by acquisition costs = % of

appreciation since purchase. Divide by years owned for annual appreciation

• Did the LO order the appraisal? Was the appraiser given a target value?

OTHERRed Flags

HUD 1:

• Is the sales price consistent among the purchase contract, the HUD-1, the appraisal, and the loan application?

• Do credits and concessions exceed the maximum allowed?

• If the sales price has increased from the original purchase contract, do amendments confirm legitimate upgrades?

• Are there unusual credits, concessions such as HOA fees, country club or other membership dues, maintenance fees, etc.,?

• Is the Realtors’ commission within industry standards, not higher or lower?

• Does the Realtors’ commission represent an even percentage of the sales price?

OTHERRed Flags

PURCHASES:

• If the project has a website, are there any incentives not disclosed in the sales contract?

• Is the earnest money deposit from the borrower’s account?

• Has the borrower been checked in the MERS system for recent undisclosed transactions?

INVESTMENT PROPERTIES:

• Is there positive or neutral cash flow? If not, is there sufficient equity so the borrower has the incentive to honor the mortgage?

• Were the mortgages secured on the rental properties financed under specialty loan programs (Interest Only, Neg Ams, etc.)?

• If the borrower occupied as a tenant, are funds to close genuine?

EMPLOYMENTRed Flags

• Are telephone calls to the borrower’s place of employment answered on a cell phone instead of a landline?

• Is the business line answered with a business greeting instead of “Hello”? Eg., First Mortgage, how may I help you?

• Did the verbal employment verify job title as well as current employment status (full or PT) and start date?

• Does the verbal VOE confirm the job title shown on the application?

• Do current earnings evidence a declining trend?

OTHER TIPS

Most common conditions:

• 1003’s:– Missing Corrected 1003’s– Missing Signed 1003’s

• Disclosures:– Missing Up-front Disclosures– See new requirements per FMC

Bulletin #09-01 regarding up-front disclosures requirements

• Income/Employment documentation:– YTD income, Missing VOE’s,

current pay stubs, Tax Returns, etc.

• Borrower identification:– Missing Drivers license and SS

cards

Most common conditions:

• AUS (DU/LP)– Provide corrected AUS that

matches 1003, and all docs– Released or assigned to FMC

• Corrected documents– Corrected Purchase Contracts– Corrected bid amounts– Corrected 92900A’s, 1003’s, AUS’s– Escrow Instructions

• Verifications– Missing VOD’s VOR’s, VOM’s

• Miscellaneous– Expired Documents– Missing LOE’s in file– Occupancy Certs– Vesting

DOCUMENTING INCOME

FIRST MORTGAGE

INCOME Doc / Calc

Wage Earners: W2’s for previous 2 years for all jobs Pay stubs covering last 30 days of employment for all jobs (must be dated within 30

days of initial application) DU may ask for less and in most cases we follow DU. However, look at your file – is

there enough income documentation or comp factors for the UW to hang their hat on? Do borrower’s have good stable employment history? If borrower switched jobs, change careers, have 3 jobs, etc., you may still need to follow FHA/Fannie full doc requirements regardless of what DU says.

Overtime/Bonuses OT and Bonus income will be considered effective income if received for 2 years and

continuance can be verified. Calculate: Use the average monthly amount of the two years. If OT or Bonus represents 25% of their overall income, tax returns are required to

determine if there are business expenses.

Federal Tax Returns: If applicable based on program, provide most recent 2-3 years Federal Tax Returns

with all applicable schedules signed in blue ink. When required, provide COMPLETE TAX RETURNS with ALL SCHEDULES!

INCOME cont’d…

Commission Borrowers Commission Income will be considered effective income if received for 2

years and continuance can be verified. Calculation of commission income varies depending on whether the

borrower earns >25% of his/her income from commissions. Calculate: Use the average monthly amount of the two years. The following is the standard documentation requirement; DU may require

less; UW may require more – it all depends on individual scenarios

Documentation requirement for Commission Income < 25%: 1 months’ most recent pay stubs showing YTD commission earnings 2 most recent year’s W-2’s

Documentation requirement for Commission Income > 25%: 2 most recent year’s 1040’s including the following schedules

Schedule A (if the borrower claims un-reimbursed business expenses) Form 2106 (if the borrower claims un-reimbursed business expenses)

2 most recent year’s W-2s (or 1099s) Recent pay stub or VOE reporting YTD earnings

INCOME cont’d…

• Note Income:– Copy of Note to establish the amount and length of payment– Provide evidence these payments have been received consistently for the last 12 months through:

• Tax Returns• Cancelled Checks• Deposit Slips

• Income from Roommates in SFR’s:– Income from roommates in an O/O SFR is not acceptable.– Rental Income from boarders related by blood, marriage or law is acceptable effective income if

shown on the Tax Return. If not on the tax return,• May be considered a compensating factor, and• Must be adequately documented

• Projected Income:– Projected or hypothetical income is not acceptable for qualifying. Exceptions are permitted for

cost of living adjustments, performance raises, bonuses– Must be verified in writing by employer, and scheduled to begin within 60 days after closing

• Projected Income from New Job:– Acceptable if scheduled to start new job within 60 days of loan closing only if there’s a

guaranteed, non-revocable contract for employment

INCOME cont’d…

Child Support: Provide Divorce Decree, Legal Separation Agreement, Voluntary Payment Agreement, Court

Order verifying 3 year continuance Provide copy of the court records (or copies of cancelled checks) showing regular receipt of

payment for at least 12 months

Alimony Provide Divorce Decree verifying 3 year continuance Provide copy of the court records (or copies of cancelled checks) showing regular receipt of

payment for at least 12 months. DU may not ask for it but if you’re using the income to qualify, must be provided

Social Security Income, Disability Income Provide Award letter and evidence of continuance for the next three years Provide 2 months Bank Statements reflecting deposits for the income received. Non-taxable portion of income may be grossed up by 25%

Military Income Military personnel may be entitled to different types of pay in addition to their base pay. Flight or

hazard pay, rations, clothing allowance, quarter’s allowance, and proficiency pay are acceptable sources of stable income, as long as documentation is provided to verify continuance in the future.

Non-taxable portion of income may be grossed up by 25%

INCOME cont’d…

GROSSING UP INCOME: Non-Taxable Income can generally be grossed up by 25% Only the non-taxable portion of the income can be grossed up Examples of non-taxable Income:

Child Support Social Security Income

Retirement Disability Child Benefit

Eg., Social Security Income Sample Calculation:

Line 20a (Tax Form) = $28,000 SS BenefitLine 20b (Tax Form) = $15,000 Taxable Amt

1. Calculate non-taxable amount: $28,000 - $15,000 = $13,000 non-taxable portion

2. Gross up non-taxable portion: $13,000 X 25% = $3,250

3. Determine total income, add non-taxable portion to SSI: $28,000 + $3,250 = $31,250

4. Determine monthly income, divide total by 12: $31,250 / 12 = $2,604.17

INCOME Quiz?

SCENARIO – GROSS UP INCOME:

Mary Doe is widower and has a son John. John is 7 years old and receives a Social Security

benefit due to the death of his father. Mary has a Social Security Award letter which indicates

that John will receive benefits until he is 18 years old.

Can this income be used in qualifying?

YES!!! John will receive the benefits for another 11 years, which exceeds the 3-year requirement. Need Awards

Letter & Birth Certificate to document using this income – and you can gross it up!

RENTAL INCOME

Rental Income: The agencies allow two options to

calculate net rental income. If the income has been received for 2+ years, tax returns should be used.

If tax return information is not available due to length of time the income has been received, lease agreements may be used in lieu of tax returns.

FORMULA IF TAX RETURNS USED

Bottom line from Schedule E (2yrs) $

Plus depreciation expense or depletion $

TOTAL $

Divided by 24 months

Equals qualifying income or loss $

FORMULA IF LEASES ARE USED

Income from Lease Agreement $

Multiplied by x .75

TOTAL $

Minus Mortgage Payment (PITI) ($ )

Equals qualifying income or loss $

SCHEDULE (E) - Simple Calculation

Rents Received $

LESS Total Expenses $

Net Income/Loss

DIVIDED by 12 months $

Monthly Net Income/Loss

*Exps incl mort int, utilities, ins, gardner, depreciation

SELF-EMPLOYEDBORROWER

Basic Business Structures – Documentation Requirements:

1. Sole Proprietorship Previous 2 Years complete 1040’s (filed with IRS and original borrower

signatures) - with Schedule C (P&L from business) YTD Profit & Loss signed by an accountant (audited if the income is declining)

2. Partnership Previous 2 Years complete 1040’s (filed with IRS and original borrower

signatures – with Schedule E (Supplemental Income & Loss) Previous 2 Years complete 1065’s (filed with IRS and original borrower

signatures – with Schedule 4562 (Depreciation & Amortization Schedule) Previous 2 Years complete K-1’s (filed with IRS and original borrower

signatures) YTD Profit & Loss signed by an accountant (audited if the income is declining)

SELF-EMPLOYEDBORROWER cont’d…

Basic Business Structures – Documentation Requirements:

3. S-Corporation Previous 2 Years complete 1040’s (filed with IRS & original borrower signatures –

with Schedule E (Supplemental Income and Loss) Previous 2 Years complete 1120S’s (filed with IRS and original borrower

signatures – with Schedule 4562 (Depreciation & Amortization Schedule) Previous 2 Years complete K-1’s Shareholder’s Share of Income, Credits,

Deductions, etc., (filed with IRS and original borrower signatures) YTD Profit & Loss signed by an accountant (audited if the income is declining)

4. Corporation Previous 2 Years complete 1040’s (filed with IRS & original borrower signatures –

with Schedule E (Supplemental Income and Loss) Previous 2 Years complete 1120’s (filed with IRS and original borrower signatures

– with Schedule 4562 (Depreciation & Amortization Schedule) YTD Profit & Loss signed by an accountant (audited if the income is declining)

Special Income Types

Income with special considerations:

Declining Income: Allowed at the Underwriter’s discretion If acceptable, it will require the most conservative approach Explain and provide supporting documentation on the reason for any current or past decline

in income

Employment Gaps: Allowed on borrowers who have demonstrated the ability to maintain good credit and

restrictions may apply Provide letters of explanation and any supporting documents for extended employment gaps

Non-Computer Generated Pay-stubs with YTD: Allowed on a case by case basis at Underwriter’s discretion Provide letter of explanation as to ‘why not’ computer generated

Employed by a Relative: Provide full documentation with good letters of explanation, length, etc.

Unacceptable Income Types

Unacceptable Income Types:

Gambling Winnings Except lottery winnings that will extend beyond a 5 year

period

Educational Benefits

Refunds of Federal, State, or Local Taxes

Illegal Income

Expense Account Reimbursement

Per Diem Income

Income from Unverified Sources

Income? How?

HELP US HELP YOU!

How did you arrive at your submitted income?

A large amount of time is spent on re-calculating income or trying to match income.

Document how you arrived at your submitted income!

Put a note in the file or a copy of the spreadsheet you used to arrive at the income you’re using.

Save time by explaining instead of us trying to re-create the story of where those numbers came from.

FMC CHECKLISTS

FIRST MORTGAGE

FMC CHECKLISTS

• CONVENTIONAL CHECKLIST

• FHA CHECKLIST

• FHA STREAMLINE CHECKLIST

• VA CHECKLIST

• VA IRRRL CHECKLIST

LOAN HELPHot Topics

1. Conventional Loans and Mortgage Insurance • Radian & PMI – Insure in CA, NV, AZ Conforming Loan Amounts only up to 90%

LTV/CLTV, 41% max DTI, minimum 720 score• MGIC – Insure 1-2 units to 90%, 720 fico, 41% DTI in CA, NV, AZ, and up to $533,850

to 85% 1-2 units w/ 720 fico score, 41% DTI 2. Total number of financed properties

• Fannie Mae (Program 01) now allows 5-10 financed properties per borrower.• Max 70-75% LTV/CLTV, Minimum 720-740 fico score

3. Property Flipping• Rule is properties held by Seller less than 90 days is not eligible for financing

4. Listed Properties• Minimum 180 days seasoning required for cash out refinances

5. Using Rental Income when purchasing new Primary Residence• Conventional requires a minimum 30% equity in current property and up to 6

months PITI reserves required for each property • FHA/VA requires a minimum 25% equity in current property unless it meets

exceptions6. NOO – Conforming loan amounts

• Purchases - 80% LTV; R&T – 75% LTV; 3-4 units is 75% LTV• Cash Out – 75% LTV; 3-4 units is 70% LTV

FMC SUPPORT

WEB SITE

Contact your AE for the FMC website for you to use

to access:

TRAINING MATERIALS

CALCULATORS

TOOLS

FORMS

MARKETING

TRAININGS

First Mortgage offers FREE Weekly ONLINE

Trainings

Available every Friday mornings @ 9:30 am PST

Next week’s Topic: Product Update!

SUPPORT

Contact your FMC Account Executive for help

with your:

Program Guidelines!

Product Information!

Hard to place scenarios!

Training Materials!

Reading the Rate Sheet!

Pricing!

Training sign up!

SUMMARY

On behalf of First Mortgage, we thank you for joining our

training today and we hope the information provided was helpful

and will help you Build your Business!

FIRST MORTGAGE