Loan- Policy Flashcards
A persons fixed, permanent, ad principal home for legal purposes and dictates the in-state or out-of-state classification of a borrower.
Domicile
Appendix that defines citizenship and non-citizenship and provides various residency and employment statuses along with the applicable documentation requirements and loan to value/ loan to cost adjustments for residential mortgage, construction, and home equity products.
Appendix O
Where to find guidance on how to handle tax identification number or information discrepancies
Loan Policy - Chapter V Section B
How old must an applicant be to apply for a loan?
18 years old
Should offficers recommend the use of a co-signer?
No
What relationship should a co-signer have with the bank?
They should be a customer
Pre Tax Debt Servicing Ratio is calculated by
Dividing the applicants total cash available for debts (TCA) by the total cash required to service debts (TCR)
Residual Income =
TCR - TCA
DSR Requirements
Residual Income. Minimum DSR < $30,000. 2.50 $30k- $50k. 2.00 $50k- $90k. 1.70 > $90,000. 1.50
Where is the minimum standard of documentation information found?
Documentation Requirements Section of Loan Policy (Chapter V, Section D)
What should be the minimum credit score for someone with established credit?
620-659
Loan to value
Ratio of a loan to the value of an asset purchased.
Loan to Value Calculation
LTV = loan amount on property1/ property1 worth
Higher Loan to Value =
More Risk
List of acceptable alternative payments
Rent, utility, private car loan, etc.
What are tradelines?
Credit Accounts: credit cards, car loans, mortgages, etc.
What are derogatory factors on credit?
Bankruptcy, collection, and excessive late payments
How long should an applicant be employed prior to their application?
6-12 months
How long should the applicant have resided at their present residence before application?
1 year
An encouraged approach to documenting the risk analysis of a loan is to address the __________ .
CAMELS
CAMELS
Capital Asset Management Earnings Liability Summary
Two mitigating factors of DSR deficiencies:
Liquidity
Low Loan to Value
Up to what % should officers consider LTV/ LTC exceptions
5%
What are some mitigating factors?
Stability of Income, employment, and residence
banking relationship
DSR - at least 1.0 greater than what is required by policy
Net Worth - 2 times the loan amount
Rental or Mortgage Repayment History
Completion of a homebuyer education course or credit repair counseling
Low loan to value
Tools to assess real estate values
ValueCheck, comparable sales, Net Operating Income(NOI) analysis
What assets should be discounted during valuation of assets and liabilities?
Artwork, collectibles, personal furnishings, etc.
Are retirement funds protected in bankruptcy?
Yes
An agreement state in the borrower or guarantor will not encumber any of his assets during the life of the loan
Negative pledge agreement
An agreement stating the borrower or guarantor will not transfer any of his assets during the life of the loan
Non-transfer agreement
An agreement stating the borrower or guarantor will maintain a specified level of liquidity during the life of the loan
Minimum liquidity requirement
What three loan types does Ability to Repay (ATR) exclude?
Temporary financing, HELOC’s, and investment properties
4 Types of Borrowers
Salaried Borrowers
Non-Salaried Borrowers
Commercial Borrowers
Non-U.S. Citizen Borrowers
What does ‘loan servicing’ include?
Bank collecting interest, principal, and escrow payments.
What does Chapter 12 in loan policy cover?
Real Estate Lending
In regards to taxes, what must be obtained prior to closing a new loan?
Verification that taxes are current
What is considered adequate insurance coverage?
A policy covering 100% of the value of the improvements (total value less land value)
A financial instrument or asset held by a third party on behalf of two other parties that are in the process of completing a transaction.
Escrow
What appendix has would give more details on flood insurance?
Appendix L
What subject is Appendix A?
Maximum Loan to Value
What is Appendix B?
Unique Property Deductions
What is covered in Appendix C?
Water Policy
FIRREA requires a current appraisal which is no more than how many months old?
12 months
What loan amount threshold does not, under FIRREA, require a current appraisal?
$250,000 or less
If the following credit conditions exist (the loan will be presented to the Loan Committee, the officer has elected to exceed loan to value guidelines outlined in Appendix A, sale of the subject collateral is the primary source of repayment with little or no secondary sources available, or the loan amount exceeds $150,000 except for loans secured by 1-4 family residential properties where an appraiser has completed an interior inspection) what must the officer do?
Visually inspect the property prior to approving a loan
Nonrecourse Loan A secured loan that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable.
Nonrecourse Loan
For all non-recourse loan requests what must the officer do?
Conduct an exterior and interior inspection of the property and document with pictures
What is the standard interest rate lock?
60 Days
When the loan shall immediately become payable in full upon sale or transfer of the property
Due on sale clause
When collateral securing a loan is sold, the bank should require what?
Net proceeds from the sale to release the property
What is generally involved in loan servicing?
Collect interest
Collect principal
Collect escrow payments
Insurance that protects the bank. A form of insurance to provide security or protection against a loss in relation to property.
Title insurance
Tells who owns the property legally and allows the bank to go take the property if necessary.
Deed of Trust
What must be obtained prior to closing any new mortgage?
Real Estate Taxes
What is considered adequate insurance?
100% of the value of the improvements or property
What is an unsecured loan?
A loan with no collateral
What common finance calculation is DSR flipped?
Debt to Income
Who is responsible for establishing and maintaining loan policy?
Board of Directors
Committee responsible for giving feedback and guidance to the lending officer prior to issuance of a “Term Sheet” or “Letter of Interest” on loans greater than or equal to $5 million.
Conceptual Review Committee (CRC)
Generate loans and customer relationships consistent with FirstBank philosophy.
primary responsibility of loan officers
Credit card applications received at the market level and pre-selected applications generated through New Accounts should typically be forwarded to _____________.
CAL department for underwriting and processing
Why is there a fee when the customer denies escrowing for taxes and insurance?
Because we have to go into the account each year and make sure they paid.
What should you obtain EARLY in the mortgage application process?
Evidence of Insurance (EOI)
What unsecured consumer loan is submitted through Centralized Accounts and Loans (CAL) and is a good alternative for “personal loans?”
Cash Reserve
Where are Mitigating Factors Guidance located?
Loan Policy
Where are Credit Denial Reasons located?
ECOA and Reg B Manuals
Where are Loan Purpose Guidance located?
Loan Procedures Manual
Where are Consumer Lending Pricing Concessions located?
Loan Procedures Manual
Where are LMI Determination and Second Look Program located?
HMDA Manual
Where are Providing Appraisal Reports to Customers located?
Appraisal Policy
How many denial reasons can you cite?
4
If there are more than 4 denial reasons, which ones should I cite?
Most applicable
Where can you find more information and denial reasons?
Adverse Action Form on the Intranet
How many denial reasons are required to deny an application?
1
What acronym is helpful to see if a loan is HMDA covered?
R - Refinance
I - Improve
P - Purchase
Do we underwrite secondary market mortgages?
No
For a secondary market mortgage what must be ordered every time?
An appraisal
What time must a secondary market mortgage rate be locked?
2:30pm
If the closing date is unknown what date is generally placed?
12/31/2020
What is a PCR?
Property Condition Report
Where do you get a PCR from?
Value Check - must be ordered
Loan number on line of credits cannot be given out, therefore what must be placed as “loan number” when ordering PCR’s?
Branch # followed by property address
