Underwriting a Georgia Dream Loan

Underwriting a Georgia Dream Loan Hi my name is Ron Ross. I'm with the Georgia Department of Community Affairs representing the Georgia Dream Program, and the following presentation is to cover the basics of underwriting a Georgia Dream loan. If at any time you have any questions, please give a call at ... ... (404) 368-7177. The credit underwrite is 100% on the lender's side of the equation. We have our compliance reviews. We have our overlays that you must consider. But when it comes to underwriting the loan the credit decision is 100% on the lender's side. We do have our overlays prior to closing. Lenders must send us the fully approved loan, and we will review that loan to make sure that the decision was made in accordance with insurer guidelines as well as meeting our overlays and guidelines. Some of the things that hold up our approvals are listed here. And these are just listed to give you an idea of what to double check to make sure that everything is met to our guidelines. And the applicant must be considered a first time homebuyer. That means not owning a primary residence in the prior three years. The household income cannot exceed our requirements as listed in the brochure. The acquisition cost, or purchase price, must be within the limits of the brochure. All our forms must be completed and signed entirely. Many times we receive forms that are not filled out all the way and that just causes a delay because we don't send them back to you. We'll send a condition that says, "please fully complete, 'X, Y, Z' forms." So make sure all forms and DCA disclosures are filled out completely. The loan proceeds are utilized for purchase money only and the rest would be pretty self-explanatory as you read through the guidelines. Again, if you have any questions on our specific overlays and guidelines please give me a call. One thing that is required on our part when we receive the final is that the loan be fully approved by the underwriter. This means sending us a signed underwriting and transmittal summary, a signed conditional commitment, a signed direct endorsement, and should the loan be a USDA or VA loan, the appropriate signed docs there. When it comes to some of our overlays and credit scores, these can be found in the Seller Guide in section 207.6. They're not that many to consider but there are several different possibilities so please look them up in the Seller Guide. As I've said before, please give me a call any time and I'll be happy to go through that. Again, my number is (404) 368-7177. When it comes to automated underwriting, if you're using LP of DU we do accept "approved," "eligible," or "accept" on those two. If it's total scorecard with FHA, we accept that approval as well. Regarding manual underwriting, this is an internal decision. You have to make sure it is within your lender guidelines to approve a loan manually. But it is ok with us. We view a manual underwrite as the equivalent to my guidelines as a 620 score. So if you are going to approve a loan as a manual underwrite is has to meet our requirements as if it were a 620 and those being a max ratios of 35%/35%. A few of these are listed on the Seller Guide as well. On the situation that you might be doing a manual underwrite for My Community or some other conventional product you must meet those guidelines as well as ours. Most of our loan programs are FHA loans, and so when it comes to FHA mortgage insurance all normal calculations are acceptable. Should the loan be VA or USDA loan, the appropriate calculations are applied there as well. Whatever the mortgage product, you do have to meet the down payment requirements for that product. For instance, if it is a FHA loan you still have to meet 3.5% down requirements. If you are using Georgia Dream as a 1st mortgage that down payment can be the borrows' own funds or a gift. If you're going to be using Georgia Dream as a 1st mortgage only or with down payment assistance, this is our rate. This, in many lenders' case, is not a part of your normal rate sheet. We set the rates since we are an investor in the loan. It's a good ideas to sign up for our weekly rate sheets just to make sure that you have the most current information available to you. But keep in mind this is not a rate that is on your normal rate sheet. It is the Georgia Dream rate. Once a loan officer or secondary, whatever your internal policy might be, goes to our web site and reserves the loan that rate is reserved for 75 days. And what's important about that 75 days is that covers the time it takes for us to receive a purchase package. So, most people view the reservation period as a 60 day window to close the loan, giving your post closing department another two weeks to get the loan. If you do not believe that you'll meet that 75 day time frame the rate can be extended. There is a form to fill out to extend it for 30 days. There could be a $75 charge to extend it for 30 days. Depending on the circumstances, you are allowed two 30 day extension if the sale is a foreclosure or short sale. As we know sometimes they can take a little longer. This is the current screen shot of our website, which is GAdream.com. And I mentioned earlier that you can receive our rate sheet. You'll see at the bottom left hand corner there's a section to enter in your email address. Once you do that, every Thursday you will receive our rate sheet via email. One of the most important parts of our rate sheet is to check it for anything announcing a pending change or update to make sure that you're up to date with the current information. From an underwriting standpoint, these forms should already be in your package. But from a Georgia Dream standpoint our forms SF10, SF12, possibly SF15, and SF16 should be included. The SF15 will need to be included if you have an adult household member whose not on the 1003. We have to know that person's income, and they must fill out the SF15. Also, the SF16 is included. In addition, the SF72 OR SF72REO will need to be included in the package. The difference between those two forms is based on the seller. If the seller is a person seller you need the SF72. If it's a foreclosed property you need SF72REO. The SF16 and SF72, whichever 72 it is, must be signed by the seller. We do not need originals. These can be scanned, faxed and sent over to the sellers. The page we get has to have two signatures on it, the buyers and the sellers. But they do not have to be originals. Please be careful to insure that they are legible. Sometimes when you fax things they can condense in size and they're hard to read. The last form is the Household Income Worksheet showing us how you determined their household income met our guidelines. The submission checklist shows the stacking order that the files come to us. The address to send the package to is on the top of that form, and this is a very quick review of the list of things. The first 8 things are covered and highlighted in red. The Georgia Dream documents are just these first couple of things in red. Everything else should really be in your file already. The forms are pretty self-explanatory as what needs to be there from a Georgia Dream standpoint. Number 3, I will point out can be very helpful. In my opinion as an ex-loan officer, I thought it was very helpful to write up a very brief statement about anything unusual about the loan. How you calculated income. What the household size is. What the makeup is: different last names, different living scenarios. Anything that would be unique to the loan, it is very helpful to write it up as a cover letter and include it in the final. Number 9 where it says, "Final 1003," this is the 1003 that you've approved that's going to go to closing. We don't need any extra signature or anything in that regard. Just the 1003 that's going to go to closing is needed. The next couple of things are pretty self-explanatory as far as things that are already in your file. When it comes to verifying income, number 20 is pretty important. We only need the most recent pay stub that goes along with your underwriting decision that's dated within 45 days of that decision. If for some reason you have a file that you've been working with for several months trying to help with the credit or whatever the scenarios might be, at that point you've probably got several months of pay stubs. We do not need that many in or review because, again, we're not credit underwriting the file. We're just looking for income documentation. So please only send us what we're looking for there. When it comes to bank statements, we only want the statements dated within 45 days of your underwriting decision or whatever DU you might require. The same scenario as check stubs applies here. If the DU requires two months of bank statements, we do not need two months. Since you've approved the loan we've assumed you've looked at that, approved it, and you're ok with it. We're just looking primarily for current assets to meet our guidelines. When it comes to federal tax returns, this is one area that we do require something in addition to what your normal package might contain. For starters, we do not need state tax returns. We only need federal tax returns, and we need them for 3 years as well as the most recent W2 to go along with that. If you're going to send me only the tax returns, the returns have to be signed by the borrower. If it is your common practice to get transcripts along with tax returns for your underwriting approval you can send us both and in that case the tax returns themselves don't have to be signed. But it's either or. If it's only tax returns they must be signed by the borrower. If you're going to send me transcripts to cover every year then the tax returns don't have to be signed. One thing that holds up some loans is the contract itself. As you go through the process if there are any addendums to the contract, any extensions to the contract, or any purchase prices, we sometimes tend to be the last ones to get a copy of those. So please make sure that we have the final copies of all parts to the contract. The appraisal comes to us. We review to make sure all FHA guidelines were met in the appraisal. And please double check it as you probably do already. But we receive a great number of appraisals in which the FHA language, "Property meets HUD minimum property standards," is omitted. At that point we require that it be there so you have to contact the appraiser again and they have to edit. So again, that just adds more time. The last couple of things on the checklist are pretty self-explanatory, as many other ones are that are going in your file already. It's the flood cert, homebuyer education cert, if it's a USDA loan then those forms, and any backup documentation required for our 2nd mortgage program. Some of our specialty programs, like Choice or PENS, if you need to add information there. And then last, we need a chain of title as well as the homeowner's insurance by the customer. It is a Georgia Dream requirement that the maximum deductible for the insurance is $1,000. When it comes to underwriting loans, there's probably not a whole lot of need to get involved in the HUD-1. However, for your informational purposes just a quick review of what's going to show up on the HUD-1. All 3rd party fees are going to stay the same. The appraisal costs. The attorney fees, the recording fees, and the intangible tax all stay the same. The maximum origination per Georgia Dream guidelines is 2%. Some internal lender guidelines may say it's a maximum of 1 so double check internally what your lender guidelines require. Should the loan be a 203K, then, whatever the reasonable and customary allowable fees for FHA for those are charged. Regarding additional lender fees, we don't get too worked up regarding what you call them. Whether it's a processing fee, administration fee, underwriting fee, double check to make the sure the customer has at least $1,000 in the transaction. It is acceptable to get some case back at closing as long as the customer nets in $1,000. The tax service fee is max $67 and should you have a need to close the loan as an interest credit that is acceptable. The guidelines for that is Section 312.2. The 2nd mortgage now must be closed with its own HUD, and there are some fees that are going to be charged now. You can charge 1% origination fee on the down payment assistance. That is lender specific. There are some lenders who do not charge that so, again, check internally. Should the attorney charge more for closing a Georgia Dream 2nd mortgage down payment assistance loan, the max additional is $150. If there are going to be filing fees or recording fees, you may charge $35 as that is the amount most counties charge for filing a 10-page deed. The intangible tax is $3 per $1,000. And the $10 GRMA fee should be considered as well. Once we received the loan package, again it has to be a fully underwritten fully approved ...package before it comes to us. Once we review the file, it is our standard protocol to try to review all loans coming into us with 2 days. If we have any conditions prior to approval we will send that over as a "prior to condition." But once you get the approval from us you'll be sent a congratulatory letter stating whet you need to do at closing. Your closers need to receive that approval so make sure that in addition to your normal closing package they're following our closing procedures as well. The number at the top is the phone number to reach our main office. And as I said, my name is Ron Ross and you can certainly give me a call if you like ... ... at (404) 368-7177. We thank you so much for your interest in Georgia Dream lending and let us know if we can help you.