So you want to be a DE underwriter?

Professor’s Answer:For information on becoming a DE Underwriter, the FHA website www.fha.gov has the information. The professor found this link to help you start. Go to the following link to receive the handbook 4000.4 which outlines the DE program. http://portal.hud.gov/portal/page?_pageid=33,716773&_dad=portal&_schema=PORTALNow scroll down the page to the area regarding different Single Family Handbooks (which means guidelines) with their reference numbers to the left. Choose 4000.4 DE Program, and open the manual. Then page down to chapter three which discusses the requirements for an underwriter. The entire manual describes the whole DE program for the lender. This should be the current information as to what is expected, although if you get involved with the program, you’ll need to make sure you get any updates to the manual from FHA.

Your local HOC (Home Ownership Center) office can give you more detail information and would be the best source for information. You can find out your HOC office at www.fha.gov, or in the left margin of the above link. Remember you will need a Mortgage Banker to sponcor your application to FHA.

Thanks for ‘asking the professor’, and we enjoy helping you wade through the mortgage information madness to find your answer!

Avenues for business development

We all remember the “good old days” when if you answered the phone, took an application, got the basics to the processor, and then went on to the next prospect. Let me see, that was 2004 through 2006.  Oh yes those were the days.

Then it was 2007, home values declined and adjustable mortgage rates moved up.  No more easy money as the mortgage industry slowed.

Now it is 2008, a new dawn of opportunity.  Homeowners will want to take advantage of the low fixed rates, and others will take advantage of the low priced housing market. Tap into this refinance market and help the consumer get a fabulous low fixed rate. 

To determine the new payment you will need to know the “margin” and the “index”.  The margin and index is set at the time of closing based on the loan product.    The margin does not change during the loan amortization, but is added to the index to determine the fully indexed rate.

You can find the index and margin on the mortgage note.  The margin will be shown as a percentage and the index will be identified by name. The index is the only variable factor, and the current index factor can be found easily.  Do a search on the internet or look in the financial section of the paper. Common indexes are LIBOR (London Inter Bank Offered Rate), COFI (Cost of Funds Index), COSI (Cost of Savings Index), MTA (Monthly treasury average), or one year CMT (Constant Maturity Treasury) with terms of 1, 3, 6, or 12 months.  Hybrid arms have longer fixed period before adjustments start.  

From your client’s monthly mortgage statement, get the balance of the current mortgage. Add the and the margin to establish the new rate.  Now determine the new payment based on current balance and adjusted interest rate.  Ideally the refinance should lower their payment as the adjustable rate payment should be higher after the adjustment period.

Remember that the current value of your client’s property will need to reflect an equity position of at least 5% for most refinance loan programs.  Some lenders prefer at least 10% equity.  Check with your wholesale representative or guidelines.  The borrower’s repayment pattern will also impact the percentage of equity required and loan program.

With these low rates, now is the time to improve your borrower’s position with a low fixed rate.  Conforming loan programs offer the best rate and terms, and require full documentation of your clients income for proper debt ratios.  When no additional ‘cash out’ is taken on the loan, the automated systems may be lenient with the debt ratios.

Some new mortgage programs are being offered due to the federal government’s intervention.  FHA Secure program with new higher loan limits, and Fannie Mae and Freddie Mac’s revised programs.  Let me emphasize the point of qualifying the client to match his/her real budget with the payments required to sustain the loan.

As a mortgage professional, leaving the borrower in a better position after loan closing is the goal.  It also builds client trust and referrals.  So don’t miss this new year of opportunity.