Application - Chapter 9 Flashcards
Complete Application
This complete application can be provided to an MLO in writing, through an electronic submission process, or verbally. If it is provided verbally, the MLO must keep a written or electronic record. However, these 6 pieces will typically be recorded on the Uniform Residential Loan Application. The six pieces of information include: • Address of the property to be mortgaged • Loan amount sought • Borrower’s Income • Estimated value of property • Borrower’s Name • Borrower’s Social Security Number
6 pieces of information on the Uniform REsidential Loan Application
A • Address of the property to be mortgaged L • Loan amount sought I • Income (Borrower’s) E • Estimated value of property N • Name (Borrower’s) S • Social Security Number (Borrower’s)
Borrower Information: Consumer Responsibility
The consumer is ultimately responsible for the information they provide on the application. Providing accurate information allows consumers to properly qualify for a mortgage loan that fits their situation.
Simple mistakes such as misspellings and the omission of information are typical and considered bona fide errors. However, falsifying any information to gain approval for a mortgage loan is considered fraud and is punishable by law. By signing the application, the consumer acknowledges the truthfulness of the information they have provided.
Borrower Information: MLO Responsibility
Technically the mortgage loan originator assists the borrower with completing the application (because the borrower is the one responsible for the information they provide). The MLO is the expert and therefore helps determine the suitability of mortgage loan products and programs for a consumer. There must be an advantage, or tangible net benefit, for a mortgage loan to be suitable for a borrower. For example, with a refinance, simply providing a lower monthly payment may not be a tangible net benefit if the length of the mortgage term is extended. On the other hand, if providing a lower monthly payment over a longer term helps the borrower meet their current financial obligations more effectively, it is a tangible net benefit.
When taking an application, the loan originator must assist the consumer in filling out the application accurately and must check for any mistakes. It is considered fraud and is punishable by law if the loan originator falsifies or alters any information on the URLA. During this time, it is important for the loan originator to properly explain all possible risks associated with the borrower’s new loan.
Examples of Tangible Tet Benefit:
- Lower interest rate
- Consolidation of debt
- Shorter amortization schedule
- Changing from an adjustable rate to a fixed rate
- Eliminating a negative amortization feature
- Eliminating a balloon payment feature
- Receiving a cash-out from the new loan in an amount greater than all closing costs incurred in connection with the loan
- Avoiding the likelihood of foreclosure
- Eliminating mortgage insurance
(co)Borrower
A co-borrower is somebody who is both on title (has ownership rights) and on the loan. A mortgage loan can have as many co-borrowers as desired.
(co)Signer
A co-signer is somebody who is on the loan but does not have ownership of the property. A co-signer is an individual who provides their qualifications to assist the borrower in receiving the loan. Typically, a co-signer is included on the loan application because the borrower is unable to qualify without the co-signer’s qualifications. Co-signers do not have ownership rights to the property.
Mortgage Fraud
Lying on the application is a punishable offense with as much as a $1 million fine and/or 30 years in prison. Given the severity of the penalty, it’s wise that the borrower understands not only how important it is to tell the truth but also that if they insist on lying, it’s fraud.
Credit Report
Typically one of the first things a mortgage loan originator will do as part of the application process is to look at the consumer’s credit report. This is known in the industry as a credit pull. You will likely do this before you do anything else, because the information it provides can tell you very quickly if the consumer will be able to qualify at all and, if so, for what type of product and program. To do the credit pull you’ll need the borrower’s name, social security number, date of birth, and current address (so far only half of ALIENS…).
Once the MLO reviews the credit report, they can determine the likelihood that the borrower may qualify for the loan product and program they need. Given the volume of information provided on the credit report, many consumers and MLOs choose not to move forward in the application process based on derogatory information provided on the report.
Permissible Purpose
The MLO will need permission from the consumer to access the report. This is known as permissible purpose.
Permissible purpose not only requires the consumer to agree to the credit pull, but the pull must also have a valid purpose (PERMISSION + PURPOSE = Permissible Purpose). For us, the application for a mortgage loan is a purpose.
Information On The Credit Report
The information on the credit report provides the borrower’s credit score and credit history including:
• Open and Closed Accounts - What credit accounts do they currently have as well as previous accounts?
• Payment History - Did they pay their bills on time and what kind of bills were they?
• Public Records Information - Do they have any legal judgments against them? Bankruptcies?
URLA
Uniform Residential Loan Application, form 1003 is the standard mortgage application form used in almost all mortgage processes.
The 9 Sections of the URLA
1 Borrower Information 2 Financial Information - Assets and Liabilities 3 Financial Information - Real Estate 4 Loan and Property Information 5 Declarations 6 Acknowledgments and Agreements 7 Military Service 8 Demographic Information 9 Loan Originator Information -- Continuation Sheet
Agency Case Number
The number assigned by the program provider such as FHA, VA, etc.,
Lender Case Number
The number the lender assigns to track the loan internally throughout the process.
