융자지식 273- Assets and Liabilities

by usezloan | Mar 29, 2022 | Financial study

융자지식 273-5.5 Assets and Liabilities

5.5 Assets and Liabilities
Qualifying a buyer simply means evaluating a borrower’s credit-worthiness. In reviewing the
borrower’s loan application to determine whether to make the loan, the lender considers the
applicant’s credit, capacity, collateral, and cash by looking specifically at the following: Assets,
Liabilities, Income, Credit report, and Qualifying ratios.
The primary concern throughout the loan underwriting process is determining the degree of risk
a loan represents. The underwriter attempts to answer two fundamental questions:
Is there sufficient value in the property pledged as collateral to assure recovery of the loan
amount in the event of default?
Does the borrower’s overall financial situation – which is comprised of income, credit history, and
net worth indicate he can reasonably be expected to make the proposed monthly loan payments
in a timely manner?
Assets are items of value owned by the borrower, such as cash on hand, checking or savings accounts,
stocks, bonds, insurance policies, real estate, retirement funds, automobiles, and personal property.
In practically all cases, a borrower must have some assets in order to satisfy a down payment and
complete a mortgage transaction. It is important that the application clearly indicate the source of
funds that the applicant will use to close the mortgage loan because these funds must be verified in
the file. Some sources of fundsinclude:
• Cash in the Bank – If the applicant indicates on the application that he or she will use cash
currently on deposit in the bank to close the loan, then the loan originator can easily verify this
by asking for the last two or three months’ worth of bank statements.

o Two months’ statements must be obtained because investors want to see seasoned
funds (funds that have been in the account for a minimum length of time).
o If the bank statements reveal any large deposits, the applicants must provide a written
explanation of the source of those funds, along with supporting documentation like a
cancelled check.
o A large deposit, as defined by Fannie Mae, is any deposit that exceeds 50% of the
monthly qualifying income for the loan.
• Sale of Current Residence – In this case, the applicant must supply a copy of the Closing
Disclosure or HUD-1 Settlement Statement from the sale transaction, verifying that the
property has been sold and that the applicant received sufficient proceeds to close the new
loan.
• Gift Funds – The donor(s) must complete a gift letter indicating the amount of the gift and the
donor’s relationship to the applicant. The relationship must be acceptable to the investor.
Typically, the individual must be a family member.
o The gift letter must state that no repayment of the funds is required, and the creditor
must verify that the funds have been given; this is generally done with a copy of a
cancelled check. The donor must also typically provide a copy of a bank statement from
which the funds were transferred to evidence the ability to give.
• Sale of Other Assets – Some of the items often sold for cash to close a real estate transaction
include cars, boats, RVs, guns, artwork, antiques, jewelry and coin collections. In the case of an
asset sale, the applicant must prove ownership of the asset that was sold, provide a market
value for that asset (i.e., a Blue Book value for cars or an appraisal for jewelry), and show the
bill of sale and proof of payment.
• Secured Borrowed Funds – Unsecured borrowed funds, such as from a credit card advance, are
NOT an acceptable source of down payment. All borrowed funds must be secured by an asset,
such as a 401(k).
• Cash on Hand – Some applicants do not use or trust commercial banks and keep their cash at
home. This is referred to as “unverified cash” or “cash onhand.” Investors generally do not
allow cash on hand to be used as a source of down payment or closing costs.
• Reserves: Cash on deposit or other highly liquid assets a borrower will have available after the
loan funds
– Prefer at least 2 months PITI
– Non-owner occupied require 6 months
Liabilities are financial obligations or debts owed by a borrower. Debts are any recurring monetary
obligation that cannot be cancelled. Liabilities, including various credit-related obligations, must be
considered in order to determine the likelihood of repayment. Most lendersrequire that the
borrower’s monthly mortgage payment plus other liabilities not exceed a certain percentage of the
person’sincome.
• Revolving Accounts (e.g., Credit Cards) – For credit cards and otherrevolving accounts,the
paymentthat will be used in the calculation of the borrower’s debt-to-income ratio is the
minimum monthly payment shown on the credit report. If a credit report does not show a
minimum monthly payment, the underwriter will use 5% of the unpaid balance as a payment when calculating theratios.
• Installment Loans – Monthly paymentsfor installment loans (such as auto loans) with fewer
than ten (10) payments remaining may be excluded when calculating qualifying ratios.
Installment loans can also be paid off or paid down to fewer than ten (10) payments in order to
help an applicant qualify for a loan.
• Auto Leases – Monthly auto lease payments are always included in the qualifying ratios
regardless of the balance remaining on the lease (as compared to auto loans, which may be
excluded if ten (10) or fewer payments remain).
• Student Loans – If payment on a student loan is deferred, Fannie Mae and Freddie Mac both
require thatthe underwriter include a payment in calculating the borrower’s debt ratio for
qualification purposes. Generally, this is done by obtaining a payment letter from the
institution holding/servicing the student loan (e.g. Sallie Mae). If no payment letter can be
obtained, the lender must use 1% of the unpaid balance.
• Contingent Liabilities – A borrower has a contingent liability when he or she has co-signed for
another person’s installment debt, but the actual payments are being made by the primary
obligor. Such liabilities do NOT have to be taken into consideration when calculating the
borrower’s debt ratio as long as both of the following are true:
o The payments have been made on-time forthe previous 12- month period.
o The lender documents that the payments were made from the primary obligor’s
account(s).

융자지식 272-5.4 Completing the Loan Application

by usezloan | Mar 28, 2022 | Financial study

융자지식 272-5.4 Completing the Loan Application

Section III – “Borrower Information” – asks for the applicant’spersonal information. If the applicant
has lived in his/her home for less than two (2) years, residency information must be provided for the
past two years. Contact information for the applicant is also necessary.
The applicant must provide personal information including social security number, age and number
of dependents. Age is requested because the applicant must be of age to execute a contract.

Section IV – “Employment Information” – is for the applicant’s current and/or two-year employment
history. If the applicant has not been at his/her current job for two years or more, he/she must
provide information on employment for the past two years. If the applicant is self-employed, this
must also be specified.

Section V – “Monthly Income and Combined Housing Expense Information” – covers the information
required to calculate an applicant’s front and back debt-to-income ratios.

Section VI – “Assets and Liabilities” – addresses the applicant’s assets and liabilities.

Section VII – “Details of Transaction” – is for specific information about the proposed transaction.
The transaction information section is used to display how much money the borrower will need in
order to get the loan to closing.

Section VIII – “Declarations” – contains questions regarding judgments, citizenship, default status,
occupancy status and other questions that may affect the underwriting of the loan and may result in
additional conditions or immediate rejection of the loan.

Section IX – “Acknowledgment and Agreement” – allows applicants to affirm that they understand
the purpose of the loan application and that it is a binding agreement. Applicants are required to sign
this section and certify that all information contained in the 1003 is true and correct to the best of
their knowledge. The applicant should be made aware that his/her failure to truthfully complete the
application could result in civil liability or criminal prosecution for mortgage fraud.

Section X – “Information for Government Reporting Purposes” – is related to Government statistics.
The section is referred to as the Home Mortgage Disclosure Act (HMDA) Section. It requests
information regarding race, sex and national origin.

None of this information can be used to discriminate against the borrower, and it is at the applicant’s
discretion whether he/she completes this section. If the applicant decides not to furnish this
information, it will be up to the loan originator to make an “educated guess” concerning the
demographic information to report to the government (only in regards to face-to-face applications;
not internet, mail or telephone).
Applicants must be made aware of the status of their loan application in writing within 30 days of the
date of application (according to Regulation B – ECOA). Evidence of this notification must be kept in
the loanfile.
If information is missing from the application, the originator should make an effort to notify the
borrower immediately and allow them a reasonable amount of time to provide missing information.
All applicants must be made aware of the status of their application in writing within 30 days of the
date of the application. Evidence of this notification must be kept in the loan file.
Incomplete Application/Adverse Action: If the applicant submits an incomplete loan application,
under the Equal Credit Opportunity Act (ECOA), the loan originator is required to either send out a
notice of incompleteness or an Adverse Action Notice to the applicant. The request to complete
missing information can be given either verbally or in writing. However, if the applicant does not
respond in an appropriate amount of time to a verbal request, the request must be given in writing.

융자지식 271-5.4 Completing the Loan Application-Section II – “Property Information and Purpose of Loan” 

by usezloan | Mar 25, 2022 | Financial study

융자지식 271-5.4 Completing the Loan Application-Section II – “Property Information and Purpose of Loan”

Section II – “Property Information and Purpose of Loan” – is used to designate information concerning
the property address and how the loan proceeds will be used. The property address for the loan
collateral is the address that will be connected to the loan. The address may be different from the
applicant’s primary address. The property address must include the city, state and zip code.
Designation of the property type – a single-family home or a multi-unit – is disclosed here. This
section also requires the applicant to state:
• The year of construction of the property
• The purpose of the loan (how the borrower plans to use the loan proceeds)
• The type of property (primary residence, second home, investment property)
• Year of acquisition (when was the borrower added to the title)
• Original cost,
• Existing loan amounts
• Value of the property
• Names currently on title
• How the title will be held (joint tenancy, tenancy in common or single tenancy)