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  1. Presented by Renee DuvalNMLS#96967 Carol Jordan NMLS#98985 Certified Mortgage Professionals NH Mortgage Bankers & Brokers Association Licensed by the New Hampshire Banking Department Merrimack Mortgage Company - NMLS ID #2561 This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  2. The ABC’sof Mortgage Lending This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  3. Disclaimer • The views expressed in this presentation are those of the presenters, Renee Duval and Carol Jordan and do not reflect those of our employer, colleagues or its clients. • The information provided by us is for informational purposes only and is not intended as legal or tax advice. This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  4. Brief Recent History • 2008 Housing Bubble Burst • Poor Lending Practices contributed to the burst • Rising Home Prices • Inflated Appraisals • Wall Street Greed • No Income Verification Loans • Negative Amortization • Option ARMs • Undisciplined Loan Officers This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  5. Federal Regulations • 2008 & 2009 brought these updates: • HVCC (Home Valuation Code of Conduct) • Mortgage Licensing Act • Mortgage Disclosure Improvement Act • TILA – the Truth in Lending Act • Homeownership and Equity Protection Act (HOEPA) • RESPA (1974) Real Estate Settlement & Procedure Act This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  6. Compliance is Crucial… This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  7. NMLS National Mortgage Licensing System http://www.nmlsconsumeraccess.org/ This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  8. NMLS National Mortgage Licensing System http://www.nmlsconsumeraccess.org/ This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  9. NMLS National Mortgage Licensing System http://www.nmlsconsumeraccess.org/ This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  10. NMLS National Mortgage Licensing System http://www.nmlsconsumeraccess.org/ This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  11. Federal Regulations • Dodd Frank - Consumer Protection Act July 21, 2010 CFPB (Consumer Finance Protection Bureau) created www.consumerfinance.gov This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  12. Federal Regulations • Dodd Frank - Consumer Protection Act July 21, 2010 CFPB (Consumer Finance Protection Bureau) created www.consumerfinance.gov This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  13. Federal Regulations • Dodd Frank - Consumer Protection Act July 21, 2010 CFPB (Consumer Finance Protection Bureau) created www.consumerfinance.gov Rules and regulations are designed to protect consumers This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  14. This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  15. This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  16. This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  17. This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  18. Updates This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  19. Federal Regulations In 2014 mortgage lenders implemented new rules • Qualified Mortgages • Protect Homebuyers • Protect Lenders • Ability to Repay • Follow guidelines already established • May restrict debt ratio to 43% in some cases This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  20. Back to the ABC’s Government Loans VA –(Veterans Administration) RD (USDA Rural Housing) FHA (Federal Housing Administration) NHHFA (New Hampshire Housing Finance Authority) Conventional/ Conforming Fannie Mae & Freddie Mac My Community & Home Possible JUMBO Portfolio or Bank Product This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  21. The ABC’s come down to three C’s • Cash • Credit including capacity to repay • Collateral This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  22. Cash needed to purchase a home Costs Down payment +Closing Costs +Prepaids Total needed Less Seller Concessions Less Lender Credits Less Cash Assistance = Total from Buyer* Cash Flow Deposit + Home Inspection costs + Appraisal + Home Insurance + Cash Due at closing = Total from Buyer* This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval. *other items not disclosed by lender including additional inspection fees, fuel proration, homeowner association fees or buyer broker fees may also be due

  23. Cash needed to purchase a home Closing Costs Prepaid Items Interest At closing, buyer pays interest from day of closing thru the end of the month Taxes Proration per P&S Escrow for lender Insurances Homeowners insurance Flood insurance Mortgage insurance • Credit Report • Appraisal • Transfer Tax • Origination Fee & Points • Flood Cert • Recording Fees • Title & Title Insurance • Other misc fees • Condo docs • Employment verification • Final Inspection fees • other This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  24. Closing Costs & Prepaids$300,000 sales price – 20% down This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval. Closing Costs & Prepaids equal about 3.6% of Sales Price – APR = 5.132%

  25. Closing Costs & Prepaids$150,000 sales price – 20% down This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval. Closing Costs & Prepaids equal about 5.3% of Sales Price – APR = 5.223

  26. Lender Credits lower buyers’ costs • The rate / cost theory • The lower the rate, the higher the cost • The higher the rate, the lower the cost • Pricing example to demonstrate lender credit • Assume current rate is 4.5% with zero points • If borrower takes rate of 4.75% they might get a 1% lender credit • If borrower takes rate of 5% they might get 2% lender credit • Actual #s based on $300,000 sales price / $240,000 loan This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  27. Cash Requirements for owner Occupied Single Family Home Purchases • VA & RD – no down payment required & Seller Can pay all Closing Costs & Prepaids • NH Housing Flex with Cash Assistance- 3.5% down / ½ % net down payment after cash assistance • FHA- Buyer must pay 3.5% of the sales price + home inspection (if seller pays all other closing costs & prepaids) • NH Housing Home Preferred – 3% down & Seller can pay 3% • Conventional – 5% down & Seller can pay 3% 10% down & Seller can pay up to 6% This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  28. Comparison Cash to close –assuming $300K Sales Price max seller concession zero point rate $0 $10,500 $1,500 $9,000 $0 $10,775 $10,775 $10,775 $10,775 $10,775 This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval. $10,775 $10,775 $9,275 $9,000 $10,375 $10,775 $0 $10,900 $3,000 $0 Note: lender credits could be used, with higher corresponding rates, to reduce the closing costs on VA, RD and FHA scenarios above

  29. Credit Scores • Range is 300 – 850 • Each of the 3 major bureaus gives a score • Lenders use the middle score • Actual formulas used are not public This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  30. Credit Scores This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  31. Credit Scores • RD – (Rural Development) • MMC requires 640 - NH Housing Requires 620 • NH Housing -620 Minimum score • FHA- 500 Minimum Score • MMC requires 600 Score • NH Housing requires 620 • Many lenders require 640 • VA – No Minimum Score • MMC requires 640 - NH Housing Requires 620 • Conventional – 620 This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  32. Credit – it’s more than the score The ideal credit report • 3 or more open lines of credit with no late payments in the past 24 months • Balances on credit cards below 50% of limit • No unpaid collection debt This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  33. Credit – it’s more than the score Other considerations • Rental history • payment shock • Checking & Savings history This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  34. Credit – it’s more than the score Automated underwriting LP – loan prospector DU – desktop underwriter DO – desktop originator FHA score card GUS – Guaranteed Underwriting System This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  35. Credit – there’s a lot to look at.. • Are there any accounts that do not belong to the borrower? • •       Are there any duplicate accounts? • •       Are any of the account references outdated? • •       Are any of the account histories inaccurate? • •       Are any monthly payments shown incorrectly? • •       Are there any inquiries within the last six months? • •       Are there any new accounts within the last 60 days? • •       Is the current mortgage reference up to date? This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  36. Fair Credit Act • Errors on the credit report may lower the credit score • Borrowers have the right to dispute information • Removing errors / updating info may result in an increase in the score • Rapid Rescoring available to correctlegitimate errors in the report This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  37. Credit Prequalification Preapproval Borrower signs an application Credit report is obtained automated underwriting is completed Paystubs, W2s & tax returns in the file Bank statements in the file Underwriter reviews Commitment from lender • Loan Officer speaks with borrower about their income, assets & debt • Credit report may be pulled • Automated underwriting may occur • Paystubs, W2s & tax returns may be reviewed • Bank statements may be reviewed • Prequal Letter written • Loan Officer’s opinion This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  38. Collateral - • Collateral is the subject property being financed • The appraisal is the lender’s eyes • Loan officers cannot communicate with the appraiser • Appraisers are chosen on random basis This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  39. Collateral - • If the appraised value is less than the sales price • Buyer Options • Accept value and put more down • Accept value and loan amount is ok • If large down payment • Get mortgage insurance • Pay higher mortgage insurance • Price can be renegotiated • seller comes down to appraised value • Seller comes down some and buyer pays the difference This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  40. Collateral Requirements for Owner Occupied • Water Test required for VA, RD and NH Housing • Minimum property standards apply for all loan types • Safety • Livability • Marketability “Sound, Safe & Sanitary” This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  41. The 3 C’s & Loan Types VA RD FHA Conventional Other Loan Types This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  42. VA – Veteran’s Administration • VA home loan product for eligible Veterans and active duty servicemen and women • Certificate of Eligibility is required • Insured by the VA but originated by banks & mortgage companies • Cleveland, Ohio, is our regional VA offer for mortgage loans This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  43. VA Mortgages- Cash • Low up front cost • 100% Financing – No Down Payment required • Seller can pay all closing costs • VA Funding fee financed in to loan • Veterans who receive disability pay are exempt • Low monthly cost • No monthly Mortgage Insurance • Interest rates tend to be lower than on conventional mortgages • No income limits unless combining with NHHFA This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  44. VA Mortgages- Credit • No monthly Mortgage insurance means no second underwriting required • No foreclosures of short sales in the past 3 years * • No bankruptcies in the past 2 years* • Automated and Manual underwriting available • Debt ratios up to 50% often approved • Residual income analyzed • 2-4 unit purchases may allow use of rental income This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  45. VA Mortgages- Collateral • No geographic restrictions • Water Quality test Required • Termite reports required • Can not be paid for by the Veteran • 1-4 Family dwellings allowed • VA approved condos • Appraisal must be completed by a VA Appraiser This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  46. VA Mortgages- Collateral Existing Housing - Appraisal • Potential Property issues • Running water, heat and electricity must be verified by the appraiser • Safety- Livability- Marketability • Appraisal required repairs • Completed prior to closing • Completed after closing with escrow account at 150% of cost to complete – estimates must be written • No rehab option available This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  47. Rural Development What’s the Big Deal? Lower cash outlay Lower payment Is it a Deal Maker or Breaker? RD underwriting can be more lenient RD underwriting can be more strict This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  48. RD – Rural Housing Guaranteed Direct Obtained directly through RD’s office in Concord No monthly mortg ins Lower Income Limits RD does their own home inspection & appraisal Subsidized rate = lower payment & higher price • Obtained thru a mortgage banker/broker • Has upfront & monthly mortgage insurance • Income Limits apply • Buyer must pay for appraisal upfront This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  49. RD Mortgages - Cash • Low up front cost • 100% Financing – No Down Payment required • Seller can pay all closing costs • Rd Funding Fee financed in to loan • Closing costs can be rolled into the loan • Low monthly cost • Low monthly Mortgage Insurance • Calculated: Loan Amount X .5% /12 months • On a $100K loan, the monthly fee would be $41.67 • Interest rates tend to be lower than on Conventional mortgages • Income limits apply This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.

  50. RD vs FHAComparison Based on $300K sales price; $6000 taxes Rural Development FHA Down Payment $10,500 Est Closing Costs $ 5800 Est Prepaid Items $ 5200 Total Cash Needed $21,500 At a Rate of 4.5% - APR 6.064 P&I = $1492.52 T&I = $ 575 MI = $ 331.39 PITI = $2398.91 Down Payment $ 0 Est Closing Costs $ 5800 Est Prepaid Items $ 5200 Total Cash Needed $11,000 At a Rate of 4.5% - APR 5.143 P&I = $1551.08 T&I = $ 575 MI = $ 125.01 PITI = $2251.09 This is not an offer to extend credit or intended to be distributed to consumers. Program, rates, and terms are subject to change and underwriting approval.