(go to previous page) (go to beginning)
Selecting the right documentation
Brokers need to evaluate all options and select the most appropriate documentation type for their borrowers. For instance, if borrowers don't think their incomes are enough to qualify, a good originator will identify that a bank-statement program showing deposits trending upward will help. It may be more prudent to use six months of bank statements to get a higher average deposit and qualify borrowers at more-realistic current terms, rather than a 12-month-average program.
In many nonprime programs, stated-income loans for salaried borrowers are held to different standards than for self-employed borrowers. This might include higher FICO scores, lower LTVs or lower DTIs. With Alt-A stated-income loans, there are no distinctions regarding FICO, LTV and DTI between wage-earner and self-employed borrowers. Using Alt-A stated-income loans is appropriate for borrowers who want to avoid stated wage-earner restrictions.
A new offering, the NINA loan is a widely misunderstood product. Still, it is a valuable option for borrowers with less than two years of self-employment or with other employment issues. The NINA loan has a reputation of lightning-quick approval time. Although this is convenient, it requires lenders to scrutinize borrowers in ways other than verification of income, assets or employment.
Exceptional credit and collateral are a must. Payment shock is carefully considered; a monthly housing payment that goes from $800 per month to $3,200 per month is weighed in the evaluation of the loan. Although NINA lenders will not need to verify income, assets or employment, they will scrutinize the credit report for extensive and excellent tradelines, as well as the collateral or appraisal of the property for strong supporting value. Lenders are more willing to take certain risks on loans with full documentation. But with NINA loans, exceptions are rarely, if ever, granted.
* * *
Alternative-documentation programs exist because of borrowers' unique situations. Combined with shifting market conditions and industry changes, brokers must be aware of these programs and the availability of different document types. With a comprehensive understanding of the ways loans can be packaged, brokers can provide borrowers with a full scope of alternative documentation that will help them qualify for loans.
Being able to identify, understand and relate options to borrowers not only increases qualification status but also ensures that inefficiencies are eliminated between brokers and lenders.
Jay Jang is the executive vice president of secondary marketing for Timonium, Md.-based CoreStar Financial Group (www.corestar.com). With more than 16 years of mortgage-banking-industry experience, he oversees interest-rate hedging activities for the company, including market and interest-rate analysis, investor relations, product development and daily pricing determinations and distributions. He can be reached at email@example.com or (877) 560-SAVE (7283).
Page: 1 2 3 Previous