This morning I spoke at Laguna Board of Realtors Preview Meeting. A question was raised about if lenders and Underwriters are being harder on files. I answered that it is not Underwriters is is the policy of the given secondary source. Fannie Mae and Freddie Mac are maintaining cautious and careful rules. A few minor conditions have been loosened as we get farther away from the crash but I said one particular broker banker correspondant source has become more picky and more bitter coffee to deal with and that is J P Morgan Chase.
Chase is of the new habit of pricing very cheap and turning down loans after they have been shipped.
Sometimes the reasons are so small minded it appears they are cherry picking after the fact. Today Chase came out with a memo perhaps to make excuses for this recent dump on wholesale providers.
Here's the list of reasons Chase says they are giving back funded loans (these are all Jumbo not conforming not high balance mortgage types). This list you will note does not include some of the cough cough reasons they really dumped back loans to banker / brokers
Note: Information is valid as of 9/14/15 and is subject to change.
Overview Based on loans recently reviewed by our Non-Agency Underwriters, we have developed
these best practices which can help manage your pipeline and drive down suspense rates
when submitting Non-Agency loans to Chase.
Best Practices for Collateral
Initial Collateral Review: Attached your 1st Gen/xml file to Appraisal Data/1st Gen upload in
ChaseLoanManager.
Revised appraisals associated with collateral conditions must be uploaded in ChaseLoanManager > Image
Delivery as:
UW Conditions for non-delegated
Funding Conditions for delegated
Non-Delegated Delegated
Include comparison of PUD common elements
and amenities with competing developments
Identify and describe common elements
appropriately
Ensure Appraiser provides appropriate comments
reflecting reasoning for adjustments
Ensure Appraiser reconciles indicated values of
the comparable sales and explains weighting and
rational to derive the final value conclusion
Provide a complete 1004D with photos
Document reasoning when there is a meaningful
discrepancy between public record data and
Appraiser reported information for subject or
comps
Include all required comp photos
Use of MLS photos is discouraged unless a
satisfactory explanation is provided
Appraiser must comment on using any
comparable sale that’s more than 6 months old
Do not provide comparable sales that are dissimilar
to subject property without detailed
discussion
Provide a complete 1004D with photos
Include comparison of PUD common elements
and amenities with competing developments
Identify and describe common elements
appropriately
Ensure Appraiser reconciles indicated values of
the comparable sales and explains weighting and
rational to derive the final value conclusion
Include all Appraisal Data
Ensure Appraiser provides appropriate comments
reflecting reasoning for adjustments
Appraiser to comment on using any comparable
sale that’s more than 6 months old
Document reasoning when there is a meaningful
discrepancy between public record data and
Appraiser reported information
New PUD/Project: A comparable sale must come
from within the subject’s subdivision or condo
project
Top Underwriting Conditions
When reviewing a loan, Chase Underwriters encounter missing or deficiencies in documentation related to:
Profit and Loss Statement and Balance
Sheet is missing
Source of Funds for Large Deposits
12-month Housing History
HELOC Closures
Credit Inquiry LOE
K-1s / Business Returns
VOE with Variable Income (bonus,
commission, OT, etc.)
Current, Legally Enforceable Lease
Agreements
Bank Statement Debts Not Addressed
Payroll Loans/Deductions not included in
DTI and evidence fully secured is absent
CORRESPONDENT LENDING
Non-Agency Loans
Note: Information is valid as of 9/14/15 and is subject to change.
Non-Agency Best Practices - Final 100515.docx Page 2 of 2
Best Practices
Top Denial Reasons
The top reasons for a loan being denied by Chase are as follows:
HELOCS (Subject and
REO)
If a HELOC can still be drawn upon (open end), which includes HELOCs that
are frozen (since the freeze could be lifted by the creditor), the payment used in
the DTI calculation is the higher of:
Payment shown on credit report (or obtained from documentation from the
creditor), or
1% of the full line amount
Self Employed
Debts Payable < 1 Year
Mortgages, Notes and Bonds payable in less than one year must be deducted
from the self-employed income by the amount of the debt, regardless if the
business has sufficient assets to cover the debt or the debt has a history of
rolling over.
DTI Bonus income < 2 years
Ineligible add backs to business income (NOL, amortization, home office)
Declining income reflected on YTD P&Ls
Personal debt not included in liabilities due to evidence other party pays or <
10 months remain
2106 expenses not deducted from income
Self Employed < 2
Years
Self-employed borrowers should exhibit the following stability standards:
Minimum of two years operating the same business
Minimum of two years operating each additional business used to qualify
Potential for maintaining continuous operation of business and income
Documented ability to meet current and future obligations when income is
fluctuating
Independent verification, prior to closing, that the borrower is self-employed
Provide a 24 month history of self-employment, regardless of work history
Minimum of 12 months self-employment, reflected on tax returns
o If tax returns do not reflect the complete 24 month period (due to
timing), then P&L and balance sheet must be provided covering the
remaining period
Student Loan Payments All student loans must be included in the debt ratio regardless of deferment
status or number of payments remaining
If payment amount can be verified by credit report or by student loan lender
documentation supplied by the borrower, then use the greater of 1% of the
outstanding balance or actual payment
If payment amount cannot be documented, then use payment based on 1%
of the outstanding balance
