Chapter 8 - Files in Suspense / Purchasing the Loan
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Chapter 8 – Files in Suspense / Purchasing the Loan ................................................................................... 3 Legal Name on Documents ........................................................................................................................... 3 Closed Packages ........................................................................................................................................... 3 Files in Suspense .......................................................................................................................................... 4 Note ............................................................................................................................................................... 6 Endorsement of Note ................................................................................................................................ 6 Allonge........................................................................................................................................................... 6 Subject Property Address Requirements ....................................................................................................... 7 FKA / AKA Language..................................................................................................................................... 7 Mortgage ....................................................................................................................................................... 7 Mortgage Riders ............................................................................................................................................ 8 Loan Modifications ......................................................................................................................................... 8 Assignment .................................................................................................................................................... 9 Hazard Insurance Requirements ................................................................................................................... 9 Deductibles ............................................................................................................................................. 10 Flood Insurance Requirements .................................................................................................................... 10 Freddie Mac and Fannie Mae Flood Insurance Deductible ................................................................. 11 FHA Deductible ................................................................................................................................... 11 Definitions ........................................................................................................................................... 11 Condominium Associations ................................................................................................................. 12 Cooperative Associations.................................................................................................................... 14 Timeshares ......................................................................................................................................... 14 Rural Development Loans ........................................................................................................................... 15 First Payment / Goodbye Letter ................................................................................................................... 15 Notice of Servicing Transfer form ................................................................................................................ 16 Application ................................................................................................................................................... 16 Flood Certification ........................................................................................................................................ 16 Good Faith Estimate .................................................................................................................................... 16 HUD Settlement Statement ......................................................................................................................... 17 Escrow Holdback Agreement ...................................................................................................................... 17 Shared Well / Shared Driveway Agreements ............................................................................................... 17 SSA-89 Form ............................................................................................................................................... 17 SSA-3288 Social Security Consent For Release Form................................................................................ 20 Real Estate Tax and Hazard Insurance Payments ...................................................................................... 22 Name Affidavit ............................................................................................................................................. 22 Power of Attorney ........................................................................................................................................ 22 Title Commitments ....................................................................................................................................... 23 Right of First Refusal (Title Defects and Impediments)................................................................................ 23 W9 Form ...................................................................................................................................................... 24 Right to Cancel/Right of Rescission............................................................................................................. 24 Security Instrument ...................................................................................................................................... 24 Loan Modification Lender’s Signature Paragraph ........................................................................................ 25 Instruments – who must sign?? ................................................................................................................... 25 Subordination Agreement ............................................................................................................................ 26 Mortgage Insurance Certificate .................................................................................................................... 26 Single Pay MI .......................................................................................................................................... 27 Initial Escrow Account Statement ................................................................................................................ 27 Escrow Waiver............................................................................................................................................. 28 Amount Due Correspondent ........................................................................................................................ 28 Disbursing of Funds ..................................................................................................................................... 28 Purchasing the Loan-Files in Suspense 12/10/2014 1 Automatic Payment Authorization ................................................................................................................ 29 Truth in Lending ........................................................................................................................................... 29 Manufactured Homes .................................................................................................................................. 29 IRS Form 4506-T ......................................................................................................................................... 29 Instructions for Completing Form 4506-T ................................................................................................ 30 Revocable Trusts ......................................................................................................................................... 30 Signatures for Notes and Mortgages with Revocable Trusts ................................................................... 31 Life Estates .................................................................................................................................................. 32 Proper Correction of Signed Original Documents ........................................................................................ 33 Forms that CANNOT be altered................................................................................................................... 33 Forms that CAN be altered .......................................................................................................................... 33 Certification and Authorization Form (Required with initial applications taken on or after 7/15/13 – bulletin #2013-5) ...................................................................................................................................................... 33 Miscellaneous Hints & Tips From the Purchasing Department .................................................................... 34 Requirements for Verbal Verifications of Employment ................................................................................. 34 Completion of Self-Employed Verifications of Employment ......................................................................... 34 Purchasing the Loan-Files in Suspense 12/10/2014 2 Chapter 8 – Files in Suspense / Purchasing the Loan Legal Name on Documents The legal name of our institution is Merchants Bank, National Association. Please do not add an apostrophe between the t and the s. We will not accept NA as the abbreviation of National Association. Any documents received in our purchasing department with these variations will be returned for correction. Examples of such documents include the mortgage, assignment, subordination agreements, endorsements, etc. Closed Packages The following address is used to submit the original note and allonge to Merchants Bank for purchase: Merchants Financial Group Operations Center ATTN: Correspondent Purchasing 62 West Third St Plaza Square, Suite 90 Winona, MN 55987 Paper loan files will no longer be accepted in the purchasing department on or after 10/14/13. All closed loan packages will need to be electronic submissions to the Calyx Path loan system. The original note and allonge are required and should be forwarded to the purchasing department prior to lock expiration to avoid re-price. The closed loan will be considered complete and ”Ready for Purchase” when the closed loan package has been uploaded to the Calyx Path loan system and, in addition, the original note and allonge are received in the purchasing department. Check with your IT department for specific requirements needed to scan your closed loan packages and make sure that any two-sided documents are being captured. Label all uploaded packages in the Calyx Path loan system as “Closing Package”. If the full closed loan package has not been uploaded in the correct stacking order, the purchasing department will contact you to make the correction. The loan status will not be considered complete or as “Ready for Purchase” until this has been completed. If you have sent original documents and uploaded an electronic closed loan package but your loan status has not been updated to “Ready for Purchase”, please check your mail carrier tracking receipt to verify delivery of the original documents. If the original documents have been delivered, please contact the purchasing help desk for further assistance. A completed Closed Loan File Order Checklist must be included in each file. This checklist is used to submit the closed files in the proper document stacking order. The checklist may be found in the Documents section of the Landing Page. Purchasing the Loan-Files in Suspense 12/10/2014 3 A completed New Loan Setup Sheet is required in each file. This form may be found in the Documents section of the Landing Page. The information listed on this form is used to set up the loan in Merchants Bank servicing system once the loan is purchased. An incomplete New Loan Setup Sheet may result in your loan being suspended for purchase until such time that the missing information is received. Note: Final documents (original recorded mortgage, original recorded assignment, final title policy) should be sent to the attention of our Trailing Documents Department along with a Trailing Final Documents Transmittal (available in the Documents section of the Landing Page) to ensure proper tracking by Trailing Documents. Files in Suspense Documentation that is missing and/or incorrect is identified during the pre-purchase review process conducted by our correspondent purchasing area. If your file has any deficiencies, the purchasing area will create a Suspense Status Sheet containing what items/issues need to be addressed and automatic notification will be sent to you indicating it has been uploaded to the Calyx Path loan system.. If a correspondent has any questions, they should contact the purchasing help desk via email or phone. If a correspondent does not receive a Suspense Status Sheet within 72 hours of delivering the closed package to Merchants Bank, the system pipeline will indicate the current status. Ready for Purchase / Pricing Review Complete – The closing package has been received by Merchants Bank, however it has not yet been reviewed by the Purchasing Department. Ready for Purchase / Conditions Issued – The closing package has been reviewed by the Purchasing Department, and a Suspense Status Sheet is available for the correspondent to review. Ready for Purchase / Conditions In – The closing package has been sent back to the Purchaser with suspense item documentation for review. Purchased – No further items are required from the correspondent, and a Purchase Advice has been uploaded for the correspondent to review. Merchants Bank lists all conditions, including documents that are missing, incomplete or in need of correction on the Suspense Status Sheet. Any unsatisfied at-close underwriting conditions are listed as well. All conditions must be satisfied before Merchants Bank will purchase the loan. If an original document, or a document with an original signature, is required, in most cases a facsimile is not acceptable to clear the suspense condition. Any issues appearing on the Suspense Status Sheet will need to be resolved by the deficiency cure deadline date to avoid extension fees or repricing. The lender will have until the later of the lock-in expiration date OR seven (7) days from the date Merchants Bank issues a suspense notice to satisfy any conditions prior to purchase. ~If the deficiency is not cured after 7 calendar days from the date of suspension, the loan will be net funded a discount of twelve and a half (.125%) basis points at the time of purchase. ~If the deficiency is not cured prior to 14 calendar days from the date of the suspension, the loan will be net funded twenty-five (.250%) basis points at the time of purchase. Purchasing the Loan-Files in Suspense 12/10/2014 4 ~If the deficiency is not cured prior to 21 calendar days from the date of the suspension, the loan will be net funded fifty (.500%) basis points at the time of purchase. ~If the deficiency is not cured within thirty (30) calendar days from the date of the suspension, the loan is no longer eligible for purchase and Merchants Bank will begin the process for Closed Loans Ineligible for Sale. Closed Loans Ineligible for Sale (Non-Purchasable) If a closed loan has been submitted to Merchants Bank for purchase and it is found to be ineligible for sale, the correspondent will be responsible for any fees incurred due to the cancellation of the loan. Applicable fees would be the pair off fee, extension fees, previous pair-off fees, over/under-delivery fees and underwriting fees. The original note will be held until all fees have been remitted by the correspondent. Once all fees have been received you may choose to re-lock and refinance the borrower at current rates with no additional pricing penalties. The new loan will need to be submitted to underwriting for another full review and new documents must be drafted. A closed loan is considered ineligible due to any of the following, but is not limited to: • Loan is not eligible for MI due to credit, DTI, product type, etc. • Expired credit documents • Credit is not sufficient • Excessive DTI • Short funds to close, not enough assets verified • Borrower not contributing minimum down payment requirement from their own funds • Not eligible as structured, i.e. cash-out where borrower has not owned property for at least 6 months prior to application date • Property currently listed for sale or listed in the past 90 days • Social Security number does not match from 1003 to credit bureau • Tri -merged credit report is showing an error reported by one for the bureaus • Limited cash-out where previous loan is not at least 6 months as of time of application, where subordinate financing was paid • HCLTV/CLTV exceeds guidelines • New subordinate financing with a balloon payment less than 5 years • Gift funds from an ineligible source, i.e. family friend, girl-friends family member when the girl-friend is not on the loan • Borrower requiring more cash to close than what was approved • Seller paid concessions exceeding guidelines • Refusal to sign a Holds Harmless • Excessive Allowable Closing Costs (5% calculation) • Escrows waived on loans over 80% loan to value ratio Please remit all fees for Non-Purchasable Loans to: Merchants Bank, National Association Attn: Pricing Desk 62 W. Third Street, Suite 90 Winona, MN 55987 Purchasing the Loan-Files in Suspense 12/10/2014 5 Note Purchasing will require an original note to be forwarded to the purchasing department and a copy uploaded to the Calyx Path loan system. Below is a list of items the Purchasing Department will review on the note: The city and state above the subject property address are listed at the top of the note. The closing date and first payment date are correct. The late fee section reflects 5% late fee after 15 days, and no other late fee information is included. The payment address matches the originating bank’s address. Borrowers’ names are signed as typed, and borrowers’ names are typed the same on the note, mortgage preamble, mortgage signature line, mortgage notary section, signature line of any applicable riders, and assignment of mortgage. A Fannie Mae / Freddie Mac Uniform Instrument was used. The P&I amount matches the feedback o The note may be .01 less than the findings or up to $1.00 over for Fannie Mae. o There is no tolerance for Freddie Mac and exceptions are not allowed by the investor. The loan closed prior to the feedback expiration date. Loan origination organization (initial applications taken on or after 1/10/14) NMLS ID for the organization (initial applications taken on or after 1/10/14) Loan originator (initial applications taken on or after 1/10/14) NMLS for the originator (initial applications taken on or after 1/10/14) Endorsement of Note The note endorsement should read: PAY TO THE ORDER OF MERCHANTS BANK, NATIONAL ASSOCIATION WITHOUT RECOURSE CORRESPONDENT BANK NAME (exactly as it appears on page 1 of the note) (Authorized Signature) TYPED NAME OF AUTHORIZED SIGNER TYPED TITLE OF AUTHORIZED SIGNER If the endorsement of the note does not appear as stated above, an original Allonge will be required before the loan will be purchased. An example of an Allonge may be found in the Document section of the Landing Page. Allonge The Purchasing Department will review the Allonge to ensure the following criteria have been met: The allonge may only be 1 page or must clearly indicate “Page 1” and “Page 2” or “Continued”. The borrower’s name must appear exactly as it does on the signature line of the note, including any FKA, AKA POA, or trust language). o If there are two borrowers the allonge must read “Borrower 1 AND Borrower 2” (not “OR”). Property address is completed and matches the note. Loan amount is completed and matches the note. Note date is completed and matches the note. Pay to the order of Merchants Bank National Association without recourse. Purchasing the Loan-Files in Suspense 12/10/2014 6 Lender’s signature, title, typed name, and bank location as it appears on page 1 of the note are all completed. Subject Property Address Requirements Please review the submitted address and the standardized address for discrepancies. o If there are no discrepancies, the loan documents should match both addresses. o If the submitted and standardized addresses do not match, the first page of the appraisal must match the standardized address and there must be an addendum to the 1004 showing the submitted address and language stating the two addresses are one in the same. The LPS flood certificate must show a determination address that matches the standardized address. The hazard insurance must match the submitted address. The note, mortgage, and all remaining closing documents must match the submitted address. FKA / AKA Language FKA or AKA language is not required to be used if an Affidavit of Same Name / Common Identity is provided for minor name variations; however, FKA / AKA language must be used if the name is completely different on the closing documents vs. how title is held and is not just a variation. A Quit Claim Deed may also be executed in lieu of the FKA / AKA language. If the FKA or AKA language is used, it must be used on the signature lines of the note and mortgage, the preamble to the mortgage, the notary section of the mortgage, and the assignment of mortgage. Mortgage A signed certified copy of the mortgage must be included in the uploaded closing package. The following items are reviewed for by the purchasing department: (Please note this list is not all inclusive) Closing date matches the date on the note. All pages of the mortgage must be included. The marital status of the borrowers must appear in the preamble (section B). Mortgage is on the correct form (Fannie / Freddie Uniform Instrument) for the correct state (state in which the subject property is located) Correct box is checked for any applicable rider. Names are typed consistent throughout the mortgage, and match how they were typed on the note. State and county in the notary section must be completed. The notary section is signed and dated. Loan origination organization (initial applications taken on or after 1/10/14) NMLS ID for the organization (initial applications taken on or after 1/10/14) Loan originator (initial applications taken on or after 1/10/14) NMLS for the originator (initial applications taken on or after 1/10/14) Purchasing the Loan-Files in Suspense 12/10/2014 7 Mortgage Riders The signature lines must include the typed name of the borrower(s) as they appear on the signature lines for the mortgage and the address of the subject property must match how it appears on the note. A sample of each Rider is available in the Document section of the Landing Page. You may also visit www.efanniemae.com. Condominium Rider A Condominium Rider is part of the Security Instrument detailing the additional terms of a mortgage secured by a condominium. The Condominium Rider is required for all condominiums. Please note the name of the Condominium Association must be included on this form. 1-4 Unit Rider A 1-4 Unit Rider gives a lender the rights to all rents collected on the property if the borrower defaults on the loan. A 1-4 Unit Rider is required on all investment and 2-4 unit properties. PUD Rider A PUD Rider is part of the Security Instrument detailing the additional terms of a mortgage secured by a Planned Unit Development (PUD). A PUD Rider is required for all Planned Unit Developments. Please note the name of the PUD project must be completed on this form. Second Home Rider A Second Home Rider is part of the Security Instrument detailing the additional terms of a mortgage secured by a second home. This rider is required on all second homes. ARM Rider An ARM Rider is a required part of the Security Instrument for all ARM products. Leasehold Rider For properties secured by a leasehold property, a Leasehold Rider is required that is in compliance with Fannie Mae requirements for leasehold estates. Balloon/Reset A Balloon Rider is a required part of the Security Instrument for all Balloon products including second mortgages. Loan Modifications A signed certified copy of the loan modification must be included in the uploaded closing package, as well as a copy of the recorded original mortgage and all recorded interim modifications. The final loan modification must be on FNMA form 3179 Providing for Fixed Rate, and it must include the recording Purchasing the Loan-Files in Suspense 12/10/2014 8 information from the original mortgage as well as all interim modifications. The borrowers’ names must be typed exactly as they appear on the original mortgage. Assignment A signed certified copy of the assignment must be included in the uploaded closing package. The assignment should be transferable to: Merchants Bank, National Association, 102 East Third Street, Winona, MN 55987 or PO Box 248, Winona, MN 55987. The date on the assignment and the loan amount must match the note and mortgage, and the name of the borrower(s) must also match the note and mortgage. In the event that a loan modification was utilized, the assignment must include the recording information from the original mortgage, all interim modifications, and the final modification. Hazard Insurance Requirements Hazard insurance protects against loss cause by fire, vandalism and some natural causes depending on the terms of the policy. Merchants Bank requires that all borrowers have hazard insurance coverage from a reputable carrier. Every file must have evidence of hazard insurance. 1. Either the Homeowners’ Association or at least one of the borrowers must be listed as the insured. 2. The property address must match the appraisal and automated underwriting findings, including the unit number of the condominium. 3. The estimate for the annual premium and deductible amount must be shown on the declaration page. 4. The insurance must be in place on or before the date of closing. Hazard insurance coverage must fit the following guidelines based on the “replacement value” as determined by the property insurer: Step 1 1A 1B 2 2A 2B Description Compare the insurable value of the improvements as established by the property insurer to the unpaid principle balance of the mortgage loan If the insurable value of the improvements is less than the unpaid principal balance, the insurable value is the amount of coverage required. If the unpaid principal balance of the mortgage loan is less than the insurable value of the improvements, go to Step 2. Calculate 80% of the insurable value of the improvements. If the result of this calculation is equal to or less than the unpaid principal balance of the mortgage, the unpaid principal balance is the amount of coverage required. If the result of this calculation is greater than the unpaid principal balance of the mortgage, this calculated figure is the amount of coverage required. The lender must provide the declaration page and a paid receipt for one year on a purchase transaction, or show the annual premium being paid at closing on the HUD. The first year’s premium is required to be paid in full regardless of whether or not the borrower chooses to escrow. Loans that are currently serviced by Merchants Bank are reviewed by the Purchasing Department in the same manner as loans that are not currently serviced by Merchants Bank. Please note the closing package must contain the hazard insurance binder or declarations page showing the policy was in effect at the time of closing and include the required ISAOA language. Purchasing the Loan-Files in Suspense 12/10/2014 9 A condominium or attached PUD requires a copy of the master hazard insurance policy. The mortgagee must be listed as the originating bank’s name plus the necessary ISAOA language or Merchants Bank plus the necessary ISAOA language. Please use our bank address of PO Box 248 Winona, MN 55987 if our bank name is listed as mortgagee. If the master or blanket policy of a Homeowner’s Association policy does not cover the unit’s interior, the borrower must obtain a “walls-in” policy, commonly known as an HO-6 policy. The HO-6 insurance policy must provide coverage in an amount that is no less than 20% of the condo unit’s appraised value. Deductibles Fannie Mae and Freddie Mac allow the borrower’s deductible to be up to 5% of the face amount of the insurance policy. This is for all property types. Flood Insurance Requirements A current flood insurance policy, or an application with a paid receipt for 1 year, is required on all loans if the property is located in zones “A” or “V” per the Flood Certification Letter (preliminary document) or appraisal (secondary document). Files with a LTV of greater than 80% must escrow, regardless of the type of loan program used. Flood insurance must always be escrowed regardless of LTV. The flood zone code appearing on the flood insurance policy must match the flood zone code appearing on the LPS flood certificate, and the annual premium amount must appear on the flood insurance policy or application. The initial premium must be paid prior to closing, due to the thirty (30) day waiting period. On conventional loans, the flood insurance limits must equal the lower of: The Unpaid Principal Balance of the loan; 100% of replacement cost of the insurable improvements; or The maximum amount allowed under NFIP. When the unpaid principal balance of the mortgage represents the lowest option, the unpaid principal balance must be at least 80% of the replacement cost of the structure. However, if the unpaid principal balance is less than 80% of the replacement cost of the structure, then the required insurance coverage amount must be at least 80% of the replacement cost or the building value, whichever is higher. The insurance limit cannot exceed the maximum amount of insurance currently sold under the National Flood Insurance Program (NFIP), present set at $250,000. Purchasing the Loan-Files in Suspense 12/10/2014 10 Freddie Mac and Fannie Mae Flood Insurance Deductible The deductible may be a maximum of $5,000. FHA Deductible The deductible may be a maximum of $1000. Flood Insurance Requirements for Condominiums and Townhomes/Rowhomes (PUD) Definitions Condominium: A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas. Fannie does not purchase or securitize mortgages secured by condominium projects—they do purchase or securitize mortgages on individual units in the project (FNMA Servicing Guide). Condominium Unit: One-unit dwelling located in a Condominium Project (Freddie Servicing Guide). Condominium Project: Real estate that includes the separate ownership in fee (or on an acceptable leasehold estate) of a specified residential unit with an undivided interest in the real estate designated for common ownership solely by unit owners (Freddie Servicing Guide). Row House: A house that is one of a row of houses, often of similar or identical design, situated side by side and sharing common walls. A townhouse is defined as an especially fashionable row house (Dictionary). Per Freddie Mac, flood insurance requirements for townhouses and rowhouses are those applicable to 1-4 unit properties. Flood insurance is not required for individual units within a high-rise or vertical condominium. Condominium Owners Associations, however, are required to carry flood insurance. Per the Fannie Mae Servicing Guide, the minimum amount of flood insurance required for most first mortgages secured by one- to four-family properties, individual PUD units, and individual condominium units (such as those in detached condominiums, townhouses, or rowhouses) is the lower of the minimum amount required, under the terms of the coverage, to compensate for any damage or loss on a replacement cost basis (or the unpaid balance of the mortgage if replacement cost coverage is not available for the type of building insured); or the maximum insurance available under the appropriate National Flood Insurance Program, which is currently $250,000 per dwelling. We generally do not require separate flood insurance policies for the individual units in a condominium project. Instead, we require the owners' association to obtain a Residential Condominium Building Association Policy for each building that is located in a Special Flood Hazard Area. If an owners' association refuses to obtain the required coverage, we require the unit owner to obtain a separate policy to cover his or her individual unit. We do not require the owners of cooperative units to obtain individual flood insurance policies. Purchasing the Loan-Files in Suspense 12/10/2014 11 Per FEMA, the mandatory purchase requirements apply with equal force to condominium, cooperative, and timeshare units. Placing and monitoring coverage on units within a multi-unit building present special circumstances to lenders and merit particular treatment. Generally, the applicability of the mandatory purchase law can be explained through a review of how the various NFIP policies correspond to the forms of ownership of common interest community organizations, as follows: The Residential Condominium Building Association Policy (RCBAP) applies to all high-rise and low-rise residential condominium buildings and some timeshares in the Regular Program. The General Property Policy applies to cooperatives and some timeshares and condominium buildings not eligible for the RCBAP. The Dwelling Policy may be issued on an individual unit. Condominium Associations Condominium Association board members have a fiduciary responsibility to unit owners to protect the common property by assuring that appropriate insurance coverage is in place. This responsibility often includes providing adequate flood insurance to protect buildings located in SFHAs. A Residential Condominium Association may purchase NFIP insurance coverage on a residential building under the RCBAP. The premium for the policy is usually assessed as part of the unit owner’s association dues. A condominium association may opt to purchase flood coverage under the RCBAP, even though individual owners may not have mortgages on their units. a. Residential Condominium Building Association Policy (RCBAP) The RCBAP is the policy specifically designed for condominium associations to insure residential condominium buildings. Under the RCBAP, the association is able to manage flood insurance needs and by-law requirements without relying on the actions of the unit owners. The valuation of the property subject to coverage is determined in accordance with Section C.2 of these guidelines. The Federal mandatory purchase laws apply with equal force to condominium unit owners and their lenders, but the practice of the lending industry, as followed under the RCBAP, is to defer to the association to ensure compliance. A properly placed RCBAP is deemed to satisfy the Reform Act’s escrow requirement. Although the association does not bear mortgage responsibility on the individual units, its interest springs from the obligation to maintain and repair the premises for the community benefit and unit owners as tenants in common. A key feature of the condominium insurance format is the separate ownership and mortgaging of individual units, yet the insuring of the building as a whole is with a policy issued to the association only. Because the RCBAP provides flood insurance coverage protection for both the unit and the common elements of common buildings, the security interests of individual unit owner mortgagees should be protected, so long as coverage amounts reflect insurance to value, as with other forms of property insurance. A unit owner’s mortgage lender has no direct interest in an RCBAP and is not to be named an additional insured. Purchasing the Loan-Files in Suspense 12/10/2014 12 (1) Evidence of Compliance Upon the making, increasing, extending, or renewing of a loan on the unit and as frequently as required, a unit owner and the insurance agent should advise the unit’s mortgagee of the RCBAP’s existence to ensure that a mortgagee is aware that the mandated insurance requirement is being met. The unit owner or the producer may provide the mortgagee evidence of the RCBAP by supplying a copy of the declarations page documenting the specific dollar amount of coverage. If a unit owner’s mortgagee determines that the coverage purchased under the RCBAP is insufficient to meet the mandatory purchase requirements, it can request the borrower to ask the association to carry adequate limits, or require purchase of a separate unit owner's building coverage policy. The assessment coverage under the Dwelling Policy form will respond when there is no RCBAP, or when the building insured by the RCBAP is insured to 80 percent of the replacement cost and when a loss exceeds this amount. (2) Coverage Under an RCBAP, the entire building is covered under one policy, including both common and individually owned building elements within the unit, improvements within the unit, and personal property owned in common if contents coverage is carried. The RCBAP does not protect the individual owner from loss to personal property owned exclusively by the unit owner. The NFIP prohibits duplication of NFIP policies on the same risk. As described below, both an association and a unit owner may obtain NFIP coverage, but the unit owner's coverage is proscribed in that it is in excess of the association policy. The RCBAP is primary in relation to the unit owner’s policy. (3) Policy Limits The maximum amount of building coverage that can be purchased on a high-rise or lowrise condominium under the RCBAP is the replacement cost value of the building or the total number of units in the condominium building times $250,000, whichever is less. The maximum allowable contents coverage is the actual cash value of the commonly owned contents up to a maximum of $100,000 per building. (4) Coinsurance Provision The RCBAP encourages an association to purchase coverage in an amount equal to at least 80 percent of the replacement cost of the building or to the maximum amount of coverage available under the NFIP, in order to avoid the coinsurance penalty. If that threshold is met, the NFIP agrees to pay 100 percent of all compensable partial losses up to the limits of the policy minus any deductible. When an association carries limits to full replacement cost value, the unit owner does not need to obtain supplemental building coverage to cover a potential assessment in a total loss situation. The RCBAP’s coinsurance provision requires a condominium association to carry NFIP coverage exclusively to comply with the insurance-to-value provisions. Lenders must be aware of the coinsurance clause that applies if the association has not obtained appropriate coverage. To the extent the association has not purchased NFIP coverage in an amount equal to the lesser of 80 percent or more of the full replacement cost of the building at the time of loss, or the maximum amount of insurance available under the NFIP, the insured will not be reimbursed fully for a loss. Purchasing the Loan-Files in Suspense 12/10/2014 13 Building coverage purchased under individual dwelling policies cannot be added to RCBAP coverage in order to realize the 80- percent requirement. The amount of loss in such a situation will be determined in accordance with the policy’s coinsurance formula. b. Dwelling Policy A unit owner can acquire supplemental building coverage to the RCBAP by purchasing a unit policy under a Dwelling Policy form that is written in excess of the association policy. The policies are coordinated such that the Dwelling Policy purchased by the unit owner responds to shortfalls on building coverages pertaining either to improvements owned by the insured or to assessments. Assessment coverage, which is available under the unit Dwelling Policy, applies when the building covered by the RCBAP is insured to 80 percent of replacement cost. The assessment coverage under the Dwelling Policy form will respond only to that part of a loss that exceeds 80 percent of replacement cost. This assessment coverage also applies to common elements of any other insured building of the condominium association that is insured under the NFIP in an amount equal to the actual cash value of the other insured building. Loss payments, including assessment coverage, cannot exceed the maximum building coverage permitted for the building under the 1994 Reform Act. Assessment coverage also applies, up to the building coverage limits of the Dwelling Policy purchased, when there is no association policy (RCBAP). Personal property owned by individual unit owners must be insured under an individual unit owner’s Dwelling Policy. c. General Property Policy To purchase coverage under the NFIP on a nonresidential condominium building, a condominium association must use the General Property Policy form. Both building and contents coverages are available separately, in amounts up to $500,000 per nonresidential building. The nonresidential unit owner also may purchase contents coverage using this policy. In addition, a condominium association must use the General Property Policy form to purchase coverage on a residential building located in a participating Emergency Program community. Cooperative Associations The NFIP offers coverage for cooperatives through the General Property Policy form, with a maximum amount of building coverage up to $250,000 available to a residential cooperative. The entity that owns the cooperative, not the various unit members, is the named insured. A cooperative cannot be insured under the RCBAP. Timeshares NFIP coverage of timeshares is directly related to the jurisdiction’s property ownership rights, as influenced by state law. The jurisdictions generally can be divided into two categories: Fee or real-estate ownership Non-fee interest, such as right-to-use. States with fee ownership number slightly more than half of the jurisdictions. In a fee-ownership jurisdiction, a timeshare is considered similar to a condominium. Purchasing the Loan-Files in Suspense 12/10/2014 14 Therefore, the RCBAP is the required policy form for residential timeshares if the risk otherwise meets the underwriting requirements. That is, a timeshare unit owner must hold an interest similar to that of a condominium unit owner to be eligible for coverage under the RCBAP. If a timeshare is eligible for an RCBAP, it is precluded from being insured under a General Property Policy. A fee ownership timeshare requires coverage placed through the timeshare’s association on the RCBAP form. As with a condominium, lenders may consider the RCBAP policy, with the association as the named insured, as complying with the mandatory purchase requirements. In a non-fee jurisdiction, the title remains with the building owner who has the full insurable interest in the real property, not with the unit occupants. In this situation, a General Property Policy form must be used for the building. The non-fee simple form of ownership is very similar to a cooperative, where no deed is held by the unit owner. Rural Development Loans The purchasing department will review the uploaded closed loan package to insure all necessary Rural Development forms are included and completed correctly. Below are items reviewed for by the purchasing department: 1. 2. 3. 4. 5. 6. 7. 8. Late fee information section on the note must reflect 4% / 15 days. The loan amount on the note must match the amount on the Conditional Commitment. The interest rate on the note must match or be less than the rate on the Conditional Commitment. The RD premium must appear on the Initial Escrow and match the Conditional Commitment, and this may show as being paid monthly or annually. i. If this is shown as paid annually the fee must be disbursed 12 months from the date of the loan at the beginning of the following month. 1. Example: Loan closed 7/24/13, the fee will be due 8/1/14 Proof of the Guarantee Fee payable to RD – HUD or cancelled check. RD form 1980-18 Conditional Commitment (Revision 02/12 or newer), fully completed and signed by RD Agent. i. The Lender Certification for SFH Guaranteed Loan (incorporated into RD form 1980-18 and replacing RD form 1980-11) signed and dated by the lender. ii. “Retained” box has been checked Form 1980-19 Loan Closing Report is completed, signed, and dated by lender. Original Loan Note Guarantee form 1980-17 is attached and loan amount matches the note. i. Copies are accepted for all states except Wisconsin. ii. If this was not available at the time the closing package was sent to Purchasing, please provide a signed certified copy of RD form 1980-21 Request for SFH Loan Guarantee. First Payment / Goodbye Letter A First Payment / Goodbye Letter must be included with every uploaded closing package. Merchants Bank does not have a standard form that must be used; however the form must include the following three key elements: Payment information is included, correct, and broken down according to Principal and Interest, Hazard Insurance, Taxes, Flood Insurance, and MI. Purchasing the Loan-Files in Suspense 12/10/2014 15 The letter advises the loan is being sold to Merchants Bank National Association, and states payments should be mailed to Merchants Bank National Association at PO Box 248 Winona, MN 55987. The first payment date is listed and matches the note. Notice of Servicing Transfer form A Notice of Servicing Transfer form must be included with every uploaded closing package. Purchasing will review the form to ensure the following criteria have been met: The new servicer phone number is listed as 800-765-2194, and our address of 102 E 3rd St or PO Box 248 Winona, MN 55987 is listed. The loan is being sold to Merchants Bank National Association (this may not be abbreviated). The effective date is the first payment date. The stop accepting payments date is the first payment date or the day prior. The start accepting payments date is the first payment date. Application Purchasing will require an application on version 06/09 be provided in the uploaded closing package. All fields on the application must be completed in order to be compliant, however the purchasing department only reviews the items listed below. The year the home was built (only reviewed if we do not have an appraisal) The ownership interest in sections III and VIII of the application must match. If the borrower was renting you may leave both the rent and own fields blank. The application must be signed by all borrowers and the lender, and must be dated by all parties with the closing date. Government monitoring has been completed if application was taken face-to-face. Flood Certification Merchants Bank utilizes ServiceLink (fka LPS) as our flood certificate company. Purchasing will review for a ServiceLink certificate in our bank name with our lender ID of 8866, and if one is not present we will order it for you. The purchase advice will reflect the $9.00 fee for this service. Good Faith Estimate The closing package uploaded to Calyx Path Documents must include all versions of the GFE provided to the borrowers, along with a list of service providers or a letter stating the borrowers are not allowed to shop for services appearing on the GFE. A detailed change in circumstance form must be included for all redisclosed GFEs. Purchasing the Loan-Files in Suspense 12/10/2014 16 Please note: The purchasing department does not review the Good Faith Estimate, and we suggest speaking with your internal compliance department if you should have any questions regarding this document. HUD Settlement Statement A signed HUD must be included in all uploaded closing packages, and all pages must be included. Below are some of the items reviewed for by the purchasing department: (Please note this list is not all inclusive) Settlement and disbursement dates are correct. Escrow amounts match the Initial Escrow Disclosure. o Please see Initial Escrow Account Statement for additional information If an HVE was utilized the $75 fee may not appear on the HUD. A seller signed HUD must be included for all purchase transactions. If the seller’s HUD was signed by a POA, a copy of the POA documentation must also be included. Escrow Holdback Agreement In the event the Underwriter has approved an Escrow Holdback, a signed escrow holdback agreement must be uploaded with the closing package and the approved amount must be collected for on the HUD. This form is available in the Documents section of the Landing Page. The dollar amount must match between the UW receipt, amount collected on the HUD, and the amount appearing on the escrow holdback agreement. The form must indicate the date when work must be complete (actual date, not number of days) and must be signed by all parties. Shared Well / Shared Driveway Agreements All Shared Well Agreements and Shared Driveway Agreements must be recorded with the County Recorder or the Register of Deeds. Underwriting may condition for a copy of the recorded Shared Well Agreement to be provided as an at-close condition if the well is not located on the subject property. In addition, a copy of the recorded agreement must be provided with the Trailing Documents if the Shared Well Agreement and/or Shared Driveway Agreement is appearing on the title commitment. A recorded Shared Well Agreement / Shared Driveway Agreement must show that the agreement runs with the property and that the inhabitants of the subject property have the right to access the well on an ongoing basis. The agreement should also provide for maintenance of the well and/or driveway. SSA-89 Form Purchasing the Loan-Files in Suspense 12/10/2014 17 Next is a copy of the SSA-89 form with the required fields highlighted, along with directions for completing the form. The Company Name Address section should be completed with Merchants Bank National Association 102 E 3rd St. Winona, MN 55987 The name and address of the Company’s Agent should be completed with Kroll Factual Data 5200 Hahns Peak Drive Loveland, CO 80538 800-788-1676 All highlighted fields must be completed The Social Security Administration will not accept the form with any alterations, even if the alteration has been initialed by the borrower The Social Security Administration will not accept the form if it is signed by a Power of Attorney This form may be found in the Documents section of the Landing Page with the information for Merchants Bank and Kroll pre-populated. Purchasing the Loan-Files in Suspense 12/10/2014 18 Purchasing the Loan-Files in Suspense 12/10/2014 19 SSA-3288 Social Security Consent for Release Form This form is required to be included in all closing packages if Social Security Income was used to qualify for the loan. Below is a copy of the form available in the Documents section of the Landing Page, as well as directions for completing the form. The document is also available with the information for Merchants Bank pre-populated. Please note the Social Security Administration will not accept this form with any alterations, even if the alteration was initialed by the borrower. This form may NOT be signed by a Power of Attorney. Purchasing the Loan-Files in Suspense 12/10/2014 20 Purchasing the Loan-Files in Suspense 12/10/2014 21 Real Estate Tax and Hazard Insurance Payments If real estate taxes and/or hazard insurance premiums are due within 6 weeks of the borrower’s closing date, this amount must be collected on the HUD Settlement Statement at closing or proof of payment must be provided with the closing package. Name Affidavit A name affidavit is required whenever the file contains a variation in the borrower’s name or signature. The accepted name affidavit form may be located in the Documents section of the Landing Page. The name affidavit does not cover variations of how the borrower’s name is typed between documents. All name affidavits must be signed by the borrower and notarized. An over-signed legal document is acceptable and does not require correction or a name affidavit. A name affidavit will not suffice if the borrower holds title with a different name than how it is typed on the closing documents (i.e. maiden name vs married name). This situation will require a quit claim deed to be executed and recorded. As an alternative you may use FKA language on the note, mortgage, and assignment. Power of Attorney A Power of Attorney is an authority by which one person (principal) enables another (Attorney in Fact) to act for them. A Power of Attorney is required when documents are signed by an Attorney-in-Fact. The Trailing Docs Department will require a recorded copy of the POA if it was used to execute the note or mortgage on either a purchase or refinance transaction. A specific or limited Power of Attorney is required, and a copy must be included in the closed package submission. General Power of Attorney forms are not an acceptable alternative. The purchasing department will review the Power of Attorney form to insure the following conditions have been met: 1. Signed by the Grantor / Principal and dated prior to the date of the loan closing. 2. The Agent who signed the note / mortgage must be named in the POA. 3. The POA must grant the right to transfer real estate. 4. Whether or not the form includes an expiration date and for how long it is valid. 5. POA to sign under specimen signature. 6. The form must be notarized. 7. **Effective for all POAs signed on or after 01/01/2014** The POA must have signed a written acknowledgment with respect to receiving notice of his/her duties. We recommend the signature lines on the note and mortgage must be typed as shown below, with the agent signing must sign exactly as typed. John Doe, By Jane Doe as POA. Purchasing the Loan-Files in Suspense 12/10/2014 22 However, we will accept POA signature and typed lines alternatives as follows: The notary section of the mortgage must acknowledge the POA’s signature. A Power of Attorney utilized for a purchase transaction by the seller must be included in the closing package. A recorded copy will be required by the Trailing Documents Department if the POA was used to sign the warranty deed. A Power of Attorney may be used for all documents except the 4506T, SSA-89, and SSA-3288. Title Commitments Our Underwriting Department performs an initial review of the title commitment. We strongly encourage you to thoroughly review your title commitment prior to sending it to Underwriting. Please be proactive and contact the Underwriting help desk if you have a question regarding an item on your title commitment. They can advise if it may be an issue or whether Trailing Documents will request a copy of a document. This will allow you to request any additional documentation you may need for the Underwriter, which would allow the file to move through the process quicker and with fewer conditions. Items such as Conditional Use Permits, Easements, Encroachments, and Well/Driveway Agreements should be requested from the title company so they may be included with the title commitment that is uploaded for Underwriting to review. The title commitment is reviewed by the Purchasing Department after the loan has closed only to verify tax amounts, the borrower’s name, and the legal description. Right of First Refusal (Title Defects and Impediments) Fannie Mae has indicated in their publication B7-2-05 that title for a property that secures a conventional mortgage is acceptable even though it may contain minor defects or impediments. Below is an excerpt from the article dated May 27, 2010. Rights of lawful parties in possession, as long as such rights do not include the Purchasing the Loan-Files in Suspense 12/10/2014 23 Right of First Refusal to purchase the property. (No rights of parties in possession, including the term of a tenant’s lease, may have a duration of more than two years.) Freddie Mac has indicated the loan is eligible as long as the Right of First Refusal is subordinated to the first mortgage lien. Please note this is for Freddie Mac loans only. Fannie Mae has confirmed they will not accept a subordination for the Right of First Refusal. W9 Form A fully completed W9 form must be included in the uploaded closing package for all borrowers. The borrower’s name and address must be completed at the top of the form, the social security number must match the application, and it must be signed. All pages of the W9 must be included in the closing package for compliance purposes. Right to Cancel/Right of Rescission Merchants Bank requires a three business day right of rescission for all refinance transactions in which one is required by TILA and/or state or local laws. Merchants Bank will not purchase loans in which the right of rescission is required but has been waived. A file that has a right of rescission violation will be added to a tracking spreadsheet for Quality Assurance purposes. Security Instrument The Security Instrument is a legal document signed by the titleholders of a property agreeing to use the property as collateral for a loan and perfects a lender’s lien position. Fannie Mae state-specific Security Instrument documents are required for each state. The original recorded mortgage, recorder’s certified copy, signed and certified true copy, copy or “duplicate original” with original signatures is required to be included with the uploaded closing package. The recorded original mortgage is required as a follow-up document if it is not submitted with the closed loan package. Any errors on the security instrument must be initialed by the borrowers. White-out should not be used for correction. If you receive a suspense condition regarding the mortgage, mortgage rider, or assignment, please contact the applicable county recorder in order to determine how they require the correction to be made. If the document has not yet been recorded, you may simply make the correction and have it initialed by the borrower or notary (depending on where the correction was made) and upload it to the Documents section of Calyx Path. If the document has already been recorded there are generally three options for making the necessary corrections, depending on the preference of the county recorder. Please note your county recorder may have other options for you. 1. A new corrective document may be prepared and fully executed, and the corrective language must be added to the first page of the document. a. “This is a corrective _____ being recorded to correct _____ and will replace the _____ recorded as document number _____.” Purchasing the Loan-Files in Suspense 12/10/2014 24 2. The original recorded mortgage may be obtained in order to make the necessary correction and have initialed by the borrower, and the re-recording language must be added to the first page of the document. **PLEASE NOTE** Some county recorders are now requiring the borrower(s) to re-sign and the new signature(s) must be notarized in lieu of just having the borrower(s) initial. a. “This _____ recorded as document number _____ is being re-recorded in order to correct _____.” 3. An Affidavit of Correction may be used to correct an error on the mortgage if it is acceptable to the county that will be recording the document. The borrower(s) must sign the form and the signature(s) must be notarized. Loan Modification Lender’s Signature Paragraph The Lender’s signature paragraph on the loan modification must be completed exactly as shown below. Instruments – who must sign? The information below covers the five primary states we do business in, and is a reminder as to the signatures required on Security Instruments in the case of a Non-Owner Spouse / Civil Union Partner. Purchasing the Loan-Files in Suspense 12/10/2014 25 Subordination Agreement A Subordination Agreement is required if there is subordinate financing that was taken out prior to the subject lien that will not be paid off with the closing of the loan sold to Merchants Bank. The subordination agreement must specifically reference the first lien and a copy should be included with the closing package submission. Also, reference to the new mortgage must list the correspondent’s bank name and not Merchants Bank, since we are not the bank originating the loan. Mortgage Insurance Certificate Merchants Bank will order the MI Certificate for all loans and complete the activation process. If the MI Certificate is ordered in your institution’s name, the MI Notice of Transfer of Servicer form must be included with the uploaded closed package. This form is needed to transfer the name of the servicer of the loan to Merchants Bank. The Purchasing Department will review the MI documents to insure the following conditions have been met: 1. The MI certificate has not expired, and includes the correct coverage percentage, loan amount, appraisal amount, and purchase price. 2. The amortization schedule is included, and reflects the correct MI premium and drop-off dates. 3. The MI disclosure reflects the correct 80% and 78% drop-off dates. 4. The MI premium on the initial escrow disclosure matches the certificate. 5. The monthly escrow amount appearing on the TIL includes the full escrow amount, including taxes, hazard insurance, and MI premium. Purchasing the Loan-Files in Suspense 12/10/2014 26 Single Pay MI In cases where the borrower chooses Single Pay MI, an additional disclosure will print at the time Underwriting orders the MI certificate. Underwriting will upload the certificate along with the disclosure, which must be signed and dated by the borrowers at closing. The purchasing department will review the closing package for the Single Pay MI certificate and the signed and dated disclosure. Purchasing will also review for documentation showing the premium has been paid and submitted to the MI company, which is done by the originating lender and not by the purchasing department. Below is an example of the single pay MI disclosure. Initial Escrow Account Statement Each loan with an established escrow must contain an Initial Escrow Account Statement showing a one month cushion selected by the servicer, and the escrow account balance must run down to the same one month cushion. Properties located in Minnesota must also include the Notice of Right to Discontinue Escrow form signed by the borrowers. Properties located in either Wisconsin or North Dakota must include the Tax Option Notice form, and the option chosen by the borrower must match the Initial Escrow and the New Loan Setup Sheet. The annual tax amount used on the initial escrow may not be an estimate. The closing package must contain appropriate documentation supporting the dollar amount used. Purchasing the Loan-Files in Suspense 12/10/2014 27 Files with a LTV of greater than 80% must escrow, regardless of the type of loan program used. Flood insurance and Private Mortgage Insurance (PMI) must always be escrowed. If PMI is required the borrower must also escrow for any applicable taxes and hazard insurance. In the event the monthly escrow amount does not match between the HUD and Initial Escrow Account Statement due to a rounding issue with your document provider, the purchasing department will determine the correct monthly amount by dividing the annual amount of the property taxes and/or hazard insurance premium by 12. We will not require you to correct the HUD or Initial Escrow, however the First Payment Letter and ACH form (if applicable) must reflect the correct monthly amount. Escrow Waiver Merchants Bank will waive our requirement to escrow Hazard/Homeowners Insurance and Real Estate Taxes if the LTV is 80% or less. The borrower is required to sign an Escrow Waiver in addition to paying a flat fee of $315 that will appear on your purchase advice. The fee applies regardless of whether one or both items are being waived. NOTE: The $315 flat fee does not apply to loans in the state of Iowa. Amount Due Correspondent The amount due to the Correspondent at the time of purchase is based on the following formula: Principal Balance of the Loan (+/-) Interest Adjustment (+/-) Yield Spread / Discount Amount (-) Escrow (-) Fees The purchasing department calculates odd day’s interest based on a 365 day calendar year. Disbursing of Funds Once a loan has been cleared for purchase, the Correspondent will receive a notification advising the Purchase Advice has been uploaded in the file cabinet, detailing the amount due and the day the funds will be sent. Correspondents should review this notification for accuracy as soon as possible and notify the purchasing area if there are any discrepancies. Funds are sent to the Correspondent’s bank via ACH two business days after a loan has been cleared for purchase. If your ACH instructions change, please contact the purchasing area to update your information. **Please note Merchants Bank does not wire funds** Purchasing the Loan-Files in Suspense 12/10/2014 28 Automatic Payment Authorization Merchants Bank can deduct monthly mortgage payments from a borrower’s checking or savings account from any financial institution. Please use the Authorization for Automatic Payment form. A voided check or deposit slip should be uploaded with this document. This form should be under the ACH-Automatic Payment portion of the closing package. Purchasing will review the completed form for accuracy. The Mortgage Payment Amount must reflect the principal, interest, and any escrow amounts. The Automatic Payment Amount must reflect the amount the borrowers would like ACH’d from their account. Truth in Lending A signed original TIL is required to be included in all closing packages. Please note: The Purchasing Department does not review the Truth in Lending, and we suggest speaking with your internal compliance department if you should have any questions regarding this document. Manufactured Homes The legal description of the mortgage must contain the make, model, year, size, and serial number of the manufactured home, as well as the statement “The home is attached and affixed as real property”. We will require a signed certified copy of a fully completed Manufactured Home Affidavit of Intent be recorded with the mortgage. We will also require documentation showing the title to the manufactured home or the certificate of origin has been surrendered. Merchants Bank cannot purchase the loan until all necessary documentation has been received. The Affidavit of Intent as well as a copy of our Manufactured Home Checklist that Purchasing uses when reviewing the closing package may be found in the Documents section of the Landing Page,. This checklist will indicate the required documentation based upon the state the subject property is located. We also have a Power Point presentation for your reference, which may be obtained by emailing the request to purchasing@merchantsbank.com . This is a state by state guide on how to surrender a title to a manufactured home, including contact information and sample forms. IRS Form 4506-T When a lender uses copies of federal income tax returns to document a borrower’s employment and income, the lender must obtain the borrower’s written permission to request copies of the applicable federal income tax returns directly from the IRS if they are needed for quality assurance purposes. Purchasing the Loan-Files in Suspense 12/10/2014 29 IRS Form 4506T must be completed in its entirety to include the borrower’s signature(s), date, and telephone number. An incomplete or incorrectly completed form will result in the file being placed in suspended status until it is completed and/or corrected. The IRS will not accept a 4506T with any alterations, even if the alteration has been initialed by the borrower. The IRS will also reject a 4506T if one or more required fields are blank or incomplete. If personal and business returns are needed, a separate Form 4506T will be needed for each type of return. For the most recent version of the form required, you may visit www.irs.gov. Please note: The IRS will not accept a 4506T that has been signed by a Power Of Attorney. Instructions for Completing Form 4506-T Complete sections 1 through 7 and have the borrower(s) sign and date the form and fill in their telephone number. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Section 1a is the name shown on the tax returns. Section 1b is the social security number of the first person shown on the tax returns. Section 2a if the spouse’s name shown on the tax return, if applicable. Section 2b is the social security number of the second person shown on the tax returns, if applicable. Section 3 is the current name, address (or business address). This should include apartment, room or suite number, city, state and zip code. Section 4 is the name, address (or business address). This should include apartment, room or suite number, city, state and zip code shown on the previous year’s tax returns if different from Line 3. Section 5 is the address the tax transcripts should be mailed to. This should read: Kroll Factual Data 5200 Hahns Peak Drive Loveland, CO 80538 800-788-1676 Section 6 needs to have the form being requested (i.e. 1040, 1120s) Section 6a needs to be checked in order for the transcript to be returned. Section 9 needs the year-end date for the tax returns being requested. (i.e. fill in 12-31-2003 for tax-year ending for 2003). Request the years that have been provided by the borrower for the loan file. The borrower and co-borrower, if applicable, or business owner must complete the taxpayer section completely, including signature, date and telephone number. A 4506T for a business return must also include the title of the person signing the form. Revocable Trusts Special language must be utilized in the signature blocks of notes and mortgages that contain revocable trusts as borrowers. Purchasing the Loan-Files in Suspense 12/10/2014 30 In order to determine which signature form and related instructions are appropriate for each individual loan, the following terminology should be reviewed: √ Settlor: Refers to the individual(s) establishing the trust; √ Creditor Applicant: Refers to an individual whose income and assets are used to qualify for the mortgage. The forms of signature that should be used, dependent upon whether a borrower is a settlor, credit applicant, or both, are shown below: Signatures for Notes and Mortgages with Revocable Trusts A. Form of Signature Required on the Note for an Institutional Trustee and for an Individual Trustee Who is Not Both a Settlor and a Credit Applicant. Each institutional trustee of the revocable trust and each individual trustee of the revocable trust who is not both a settlor and a credit applicant must sign the promissory note (and any necessary addendum), using a signature block substantially similar to the following, inserted in the Borrower’s Signature lines: _________________________________________, Trustee of the ______________________________________Trust under trust instrument dated _____________________. B. Form of Signature Required on the Note for an Individual Trustee Who is Both Settlor and a Credit Applicant. (Used the majority of the time) Each individual trustee of the revocable trust who is both a settlor and a credit applicant must sign the promissory note (and any necessary addendum), using a signature block substantially similar to the following, inserted in the Borrower’s Signature lines: _________________________________________, Individually and as Trustee of the ______________________________________Trust under trust instrument dated _____________________. C. Form of Signature Required on the Mortgage for All Trustees Each trustee of the revocable trust must sign the security instrument (and any necessary rider), using a signature block substantially similar to the following, inserted in the Borrower’s Signature lines: _________________________________________, Trustee of the ______________________________________Trust under trust instrument dated _____________________. D. Form of Settlor/Credit Applicant’s Signature Acknowledgment Required on The Mortgage. Purchasing the Loan-Files in Suspense 12/10/2014 31 The following must be added to the security instrument (and any necessary rider) following the Borrower’s Signature lines (and then must be signed by each settlor of the revocable trust who is a credit applicant): BY SIGNING BELOW, the undersigned Settlor(s) of the______________________________________Trust under trust instrument dated _____________________,________ for the benefit of ________________________________________, acknowledges all of the terms and covenants in this Security Instrument and any rider(s) thereto and agrees to be bound thereby. ___________________________________ Trust Settlor The signature lines may vary according to how the trust name appears on the title work. The samples shown above are for reference purposes only. The trust name, date, and for the benefit of must always appear. The signature line on the note must always use either example A or example B as the reference. The signature line on the mortgage must always use example C as the reference. Also, the mortgage must always include example D below the signature paragraphs and before the notary section. The preamble of the mortgage (section B) should reflect the name of the trustees as well as the trust name and date (The Doe Trust dated 1/1/11). The notary section of the mortgage should be completed to match the preamble of the mortgage. Life Estates Merchants Bank will purchase a mortgage on the entire fee simple title to a property that is subject to a life estate, but not a mortgage on the life estate alone. The following is a summary of Merchant’s requirements for mortgages that have life estates: 1. The loan must be underwritten to Freddie Mac guidelines with LP being used as the automated underwriting engine. 2. The mortgage must be secured by the entire fee simple title, not just the life estate. 3. The mortgage must be signed by all life tenants and all remainderman. a. A basic definition of remainderman is “A person who is entitled to receive by inheritance a property after termination of an interest by a previous owner”. An example would be “to John for life and then to Jane”. Jane would be considered the remainderman. 4. An additional underwriting requirement is that at least one of the life tenants must be one of the credit seeking borrowers, and they must sign the note. Purchasing the Loan-Files in Suspense 12/10/2014 32 5. The life estate must be of public record and must be addressed on the title work to accurately show who has an interest in the property. Proper Correction of Signed Original Documents The only acceptable and legal method for correction of signed documents is as follows: A single line through the error, initialed by all parties. A correction written legibly above or below the error, also initialed by all parties. The initials validate that everyone acknowledges what the change was and that a change was made. Using correction fluid is not an acceptable method for correction of documents Forms that CANNOT be altered (This includes no cross offs, write overs, etc. even with borrower initials) 1. SSA-89 and SSA-3288 a. Social Security Administration will reject the form 2. HUD Settlement Statement a. The numbers that are input on the HUD populate on to other documents, thus if this document is altered it can affect whether numbers were populated correctly on other forms 3. 4506T a. IRS will reject the form Forms that CAN be altered (Must be initialed by the borrower) 1. Right of Rescission a. Must be initialed at the time of closing since this form may not be re-executed 2. Note 3. Mortgage 4. Mortgage Rider 5. Loan Modification 6. Authorization for Automatic Payment (ACH) 7. Notice of Servicing Transfer 8. First Payment / Goodbye Letter Certification and Authorization Form (Required with initial applications taken on or after 7/15/13 – bulletin #2013-5) The Certification and Authorization Form is available in the Documents section of the Landing Page. The form must read the Correspondent bank name throughout the body of the document, and must appear exactly as it does on the note. The form must also be signed by the lender and borrower(s), dated with the closing date, and include the typed name and title of the Authorized Officer. Purchasing the Loan-Files in Suspense 12/10/2014 33 Miscellaneous Hints & Tips From the Purchasing Department Please be sure a rate lock agreement signed by the lender and borrower(s) is uploaded to the Documents section of Calyx Path, whether it is in your initial submission or your closing package. Please be sure the initial application is signed by the lender. The rate lock agreement may not be dated prior the initial application. Please remember to complete the Appraisal Screen in Calyx Path. All loan terms must match between DU or AUS, your rate lock, and the closing documents. Please contact the Underwriting Department prior to loan closing if there are any questions or concerns regarding the At Close conditions. This is especially important if the cash to / from borrower is going to exceed the allowable amount. Requirements for Verbal Verifications of Employment The purchasing department currently reviews the verbal VOEs according to the type of form utilized and the data it includes, whether it is the form that can be located in the Documents section of the Landing Page or any variation thereof. Effective with all closing packages received in purchasing on or after 1/2/14 we will be reviewing for the following items regardless of which version of the verbal VOE is utilized. Typed or printed first name, last name, and title of person completing the form Name of financial institution is completed Date of verification is completed and is within 10 business days prior to closing (or within 30 days prior to closing for self-employed borrowers) Business name is completed and matches the application Borrower’s name is completed Form is signed The number of verbal VOEs is correct (including any primary or second jobs) First name, last name, and title of person spoken to are completed o If only the first name is included there must be a note indicating it is against company policy to provide the last name If a phone book was the source of the phone number it must include the name of the phone book, date, page, and phone number If a website was the source of the phone number a print screen of the website showing the phone number and address must be included If The Work Number was used the print screen must include the signature and title of the person obtaining the information as well as the date A verbal VOE is required for every borrower whose income is being used for qualifying. Completion of Self-Employed Verifications of Employment Merchants Bank would like to provide a few helpful hints for completing the Self-Employed VOEs in order to avoid any potential suspense items. We have indicated below the fields / items that are being reviewed by UW, purchasing, and quality assurance. Purchasing the Loan-Files in Suspense 12/10/2014 34 The Self-Employed VOE form located in the Document section of the Landing Page has been utilized Date of verification is completed and is within 30 calendar days prior to closing “Verification of Self-Employment for Borrower” is completed with the borrower’s name Name and title of person completing the form is completed Name of financial institution is completed One of the two methods for obtaining information must be completed and all supporting documentation is included Self-Employed business name, address, and phone number at the bottom of the form is completed Purchasing the Loan-Files in Suspense 12/10/2014 35
