The Loan Officer's Handbook for Success

498 Pages·2004·6.566 MB·English

by  Steven W. Driscoll

Steven W. Driscoll

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COPYRIGHT

© Copyright 2004 Steven W. Driscoll
ISBN E-Book: 978-1-4140-1765-5
Updated & Revised for 2020
All rights reserved. No part of this book may be reproduced stored in a
retrieval system or transmitted by any means electronic, mechanical,
photocopying recording, or otherwise without
written permission from the author.

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TABLE OF CONTENTS
CHAPTER PAGE
Acknowledgments v
Introduction vi

SECTION I: BASIC STUFF 1

1 Basic Stuff You Should Know 2
2 Common Mortgage Lending Terms 15

SECTION II: LOAN QUALIFYING 75

3 Qualifying Your Borrowers 76
4 Loan Underwriting 90
5 Qualifying Documents 119
6 Ability-To-Repay & Qualified Mortgage Rules 141
7 Subject Property Concerns 156
8 Types of Mortgage Loans 168
9 Types of Loan Documentation 204

SECTION III: THE PAPERWORK 207

10 Uniform Residential Loan Application 209
11 Mortgage Loan Disclosures 243
12 The Loan Estimate 260
13 The Transmittal Summary Report 283
14 The Property Profile 290
15 The Purchase and Sales Agreement 295
16 Out of Town Customers 301
17 The Closing Disclosure 304

SECTION IV: THE REPORTS 328

18 Reading the Credit Reports 329
19 Reading the Rate Sheets 340
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TABLE OF CONTENTS
CHAPTER PAGE

SECTION IV: THE REPORTS

20 Title Insurance Report 349
21 The Appraisal Report 359

SECTION V: LOAN PROCESSING 371

22 Processing Your Loans 372
23 The Remarks Page 389
24 Loan File Stacking Order 392
25 Mortgage Lending Regulations 394
26 Putting It All Together 435

SECTION VI: MARKETING 441

27 Marketing Your Services 442
28 Closing Thoughts 460

Bibliographic Note 463
Index 476
About the Author 487

EXHIBITS

Exhibit I Weekly Loan Status Worksheet 464
Exhibit II Customer Pre-Qual Worksheet 465
Exhibit III Letter to Customer re: PMI 466
Exhibit IV Loan Application Needs List 468
Exhibit V Temporary Leave Income Worksheet 469
Exhibit VI Private Mortgage Insurance Schedule 470
Exhibit VII APR Calculation Worksheet 471
Exhibit VIII TIP Calculation Worksheet 472
Exhibit IX Property Profile 473
Exhibit X Lender Rate Sheet 474
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ACKNOWLEDGMENTS

I
would like to thank the many people who helped me make this book possible since its
first edition in 2003. Many of those are Mortgage Branch Managers, Loan Processors, and
Mortgage loan originators I have worked with and know. To name a few they are: Tim
Swartout, Terry Jo Carter, Ed Latscha, and Gary Wisben. My many thanks to those who
have reviewed and edited this book, in whole or in part, prior to first publishing it in 2003.
They are: Ernie Kroll, Debbie Herman, Steven Johnson, Tiffany Ipock, Barney Barnhart,
Leslie Wilson, and Robert Van Hemel. Their comments and recommendations (which I
have included) made this book better than it would have been otherwise.

I would be remiss if I didn’t thank Gary Grahn for patiently teaching me how to effectively
write business reports and memos in my early years in banking. On too many occasions to
recount he mercilessly showed me, by using his red marker pen, how to reduce a multi-
paged business report summary into one small paragraph. Also, thanks to Gary, I learned
to express and state information in business memos the same way as if I were speaking to
that person in the same room. And I hope, dear reader, that as you read this book you get
a sense of that as well: Like I am speaking to you personally.

I also thank those of you who have previously purchased this book and emailed me with
requests and suggestions of subjects to expound upon and/or include certain lending
subjects in this book. I listened to you and have followed up as you requested. You know
who you are and, again, I thank you.

And finally, to all of my family, friends, and working associates who have influenced and
stood behind me throughout the years. I thank you all.
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INTRODUCTION

T
his mortgage-training manual is the 2020 edition of The Loan Officer’s Handbook for
Success. Whenever I update this book, I research the mortgage lending business and
market as much as I can. That means reviewing the latest version of Fannie Mae’s Selling
Guide and Eligibility Matrix, what new mortgage lending laws have become effective
(since the previous year), and any new originating and processing documents, forms, and
maximum loan amounts that are now required. Thus, a lot of time is spent reviewing
Fannie Mae’s and the Consumer Financial Protection Bureau (CFPB) website. And,
sometimes I contact my friends, who are Escrow Officers, Mortgage Branch Managers,
Appraisers, Loan Processors, and Underwriters and ask them what, if any, changes have
occurred within the past year and in their particular area of mortgage lending that should
be included in this book. I take their suggestions, along with what I feel needs to be
included, and the revised 2020 edition of The Loan Officer’s Handbook for Success is what
you are reading.

I should also mention that the “Powers that Be” have been very busy burning the midnight
oil in researching and implementing changes for originating and processing mortgage loans
- so that the mortgage lending industry does not have (hopefully) another mortgage
meltdown and crisis that we all went through. This mortgage loan originator’s training
manual contains those changes that have been implemented and are required that you now
need to be familiar with and employ in loan origination and processing for 2020. That
includes regulatory requirements from the Consumer Financial Protection Bureau (CFPB)
for the mortgage industry and mortgage loan originators. For example, included within
this revised and updated mortgage loan originator’s manual are:

• Ability-To-Repay Rule
• Qualified Mortgage Rule
• High-Cost Mortgage Rule
• The Loan Origination Compensation Rule
• The new and revised Uniform Residential Loan Application (effective 2/1/2020)
• The Loan Estimate (replaced the Good Faith Estimate and Truth-In-Lending
Statement)
• The Closing Disclosure (replaced the HUD-1 Settlement Statement)
• The Appraisal Rule
• New Home Loan Underwriting guidelines from Fannie Mae’s Eligibility Matrix
and Selling Guide (both dated October 2, 2019)
• Fannie Mae’s Lender Letter LL-2019-09, dated November 26, 2019 showing the
new maximum loan limits for 2020 that become effective on January 1, 2020.

The information in this book is also from actual trainings I have given to mortgage loan
originators (when I was a mortgage Branch Manager), from seminars I have given to first-
time homebuyers, and from my own personal experiences as a mortgage loan originator. I
have structured this book with the new mortgage loan originators in mind and doing it this
way I felt I could be more certain that “no stone would be unturned”. And, after you have
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read this book I felt I could rest assured that you have the information you need to go
forward and do your job professionally and hopefully make some good money while doing
it. The sequence of subjects presented within this book also follows very closely the way
I have trained mortgage loan originators.

It’s kind of a funny thing that when the opportunity for me to become a mortgage loan
originator first presented itself, in early 1995, I wanted to obtain and read a book that wrote
about being a mortgage loan originator and about all the steps in originating mortgage
loans. Or, more importantly, a book that would introduce me to this profession and train
me on what I needed to know and how to do the things mortgage loan originators do in
originating loans. At that time I could not find one book on this subject. I looked in books
stores and libraries and found zilch! I thought perhaps knowing the ins and outs of this
profession might be like knowing the secrets of magic. However, I must say that today, on
the Internet, there are many mortgage training materials and resources that were not
available when I first wrote this book. If you are thinking about getting into this profession,
are just starting out as a mortgage loan originator, or have been in this profession for a
while but would like to have a good reference guide then this is the book for you.

I have tried to present the information in this book as if you were in one of my training
classes. I have also tried to make it as interesting as possible, throw in a story here and
there, and go beyond what any technical book might discuss. I will be presenting the
information contained within this book in my own words and in a way that (I hope) will be
easily understandable to you. Also, because this is a training manual you will find that
throughout this book I have capitalized, highlighted, and underlined certain words. I have
done this because I believe that word or phrase deserves capitalizing and/or I wish to bring
attention to that word or phrase. If I have made any grammatical errors in doing this (or
any others) I apologize for that.

I was in the banking business for many years as an internal consultant and provided training
seminars to employees and managers. For me, training was both exciting and gave me a
great deal of personal satisfaction. Especially when I saw how that training improved an
individual’s job performance. As a manager, within the banking and mortgage lending
areas, I have found that 80% of an employee’s problems, with his or her job (often referred
to as non-performance), could usually be attributed to the employee not knowing what they
were supposed to do or were unaware of what they were not supposed to do. I learned, at
that time, how important it is for managers to provide or see to it that their new employees
received that all-important thing called training. Training, that gives new employees the
necessary informational tools that can enhance their chances of realizing success in their
new job and career.

I bring this up because after I had been a mortgage loan originator for only about a year I
began attending some parties and gatherings that title and escrow companies give on
holidays and special occasions for people in the mortgage lending business. When I first
started attending those I felt somewhat conscious of myself because I felt I was still “wet
behind the ears.” However, when I spoke with some other mortgage loan originators, who
had been in the mortgage business longer than I had (with some of them having quite a few
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more years), I found that some of them did not know, understand, or had been trained in
some very basic things regarding originating and processing of mortgage loans. Some of
those mortgage loan originators told me that when they first started - their manager showed
them to their desk and said, “There’s the telephone, the phone book, and your telephone
script. Call me if you have any questions.” I could hardly believe it! But I have heard this
story (or something similar to it) more than once. So, what happened to their training?
There really wasn’t any.

When I first got into the mortgage lending business, as a mortgage loan originator, my
manager didn’t have a structured training program but gave me the information he felt I
needed to do the best job possible. For example, on my first morning as a new mortgage
loan originator he put on my desk a stack of papers three inches thick, covering subjects
such as FHA, VA, and conventional conforming loan processing and lending regulations.
When I finished with that stack he tested me and gave me another stack to read. After that
he did the same. This went on for about four weeks. I hadn’t taken a call or met with any
loan customers yet. It was his mortgage company and I’m sure he wanted me to be
knowledgeable and professional when I finally did meet with loan customers. Since I was
representing his mortgage company he wanted me to know what I was doing and to be able
to provide the best customer service possible to them. Into my fifth week I told him, “Look,
I have demonstrated that I know the lending information (he had given me). I think it’s
time for me to begin applying this.” He agreed and that’s when all the material I had read
really started to come together and make sense.

On reflection, there was a lot of information he gave me to read that I really didn’t need to
know or read at that time. But that will not happen here. I have specifically designed this
book to contain just the nuts and bolts and real world information of mortgage lending that
you need to know, as a new mortgage loan originator, to be knowledgeable, professional,
and provide the best customer service to your prospective borrowing customers. And, of
course, make a good living while doing it. I realize that this training manual now contains
498 pages - but let me assure you: Everything in this training manual is the “meat and
potatoes” of what every mortgage loan originator should be familiar with. I absolutely
refuse to put any fluff in any of my training manuals.

As I mentioned previously, I have designed this book pretty much the way I have trained
mortgage loan originators in the past. Thus, the subjects being covered are presented in a
sequential order that goes from the simple to the more complex, while building on the
information previously discussed. And, the flow of the chapters, within each section of
this book and what they cover, follows very closely the sequence of originating and
processing home loans by a mortgage loan originator (if that is possible):

1. How to Setup Your Work Station to make your time more productive.
2. Understanding the Basic Concepts and Terms of mortgage lending.
3. Qualifying Customers: When they call-in and/or you meet with them.
4. The different Types of Mortgage Loans and their Underwriting Guidelines.
5. Completing the Loan Application and Packaging the Loan for Submission.
6. Reading and Understanding the various Reports that can affect your loans and
are required.
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7. Processing Loans from Start (loan application) to Finish (loan closing).
8. Lending Regulations you need to be familiar with and apply.
9. Marketing Your Services as a mortgage loan originator.

Also, I wanted to make this book as self-contained as possible. I did this because some of
you may not be currently working at a mortgage or lending company and may either not
be aware of these forms or have them available to you. I therefore have included some
exhibits of those forms and reports discussed in this book. And, where available, I also
show the website addresses of those forms so you can download them in PDF format to
your computer. To make it easy for you to refer to those forms I have included hyperlinks
throughout this book - that allows you to immediately go to any exhibit (of a form or report
being discussed) by simply clicking that respective Link (blue underlined word). I have
also included Links that allow you to quickly go to and read and obtain additional
information on a subject being discussed at that time.

And, I have included a comprehensive Index to make it easy for you to find the subject
matter you are researching or working on. Thus, I have composed this book to be not only
a training manual for mortgage loan originators but also a reference guide for new and
experienced mortgage loan originators as well. It is my hope that I have done this in a way
that enables you to obtain the information you need easily and quickly.

Now, if you plan on printing this book then I suggest copying this e-book onto a CD or
thumb drive, take that to your favorite printing place and have them print it on both sides
of the papers and insert those into a binder. And, have them place page this book’s cover
page as your cover page. Following that, you will have a professional looking training
manual on originating and processing mortgage loans. Or, simply purchase this book in
paperback format, on Amazon.com. You’ll find that will save you time and money as well.

In writing this mortgage loan originator’s training manual I wanted it to be as complete and
comprehensive as possible. Therefore, the training material in this book is primarily for
mortgage loan professionals that work for a mortgage company. If you work for a bank,
credit union, financial institution, or correspondent lender then some of the lending
procedures, stated in this book may not apply to you. For example:

1. Shopping your mortgage loans to Wholesale Lenders:
Your bank or financial institution may require you to submit all your mortgage
loans to your bank or financial institution versus shopping the Wholesale Lender
Market for the right loan program with the best interest rates and terms for your
loan customers.

2. Loan Disclosures to your Loan Customers:
Working for a bank or financial institution may require you to provide more or less
mortgage Loan Disclosures, given to your loan customers, than what a mortgage
loan originator working for a mortgage company may be required to provide.

3. Processing of your mortgage loans:
This training manual was written for mortgage loan originators who process their
own loans as well as for those who pass their home loan files over to their Loan
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Processor. If you work for a bank or financial institution then you would most
likely pass your home loan files over to your Loan Processor after you have
originated that loan.

There may be a few more minor differences that may exist but those would most likely
depend on what bank or financial institution you work for. However, although these small
differences may exist for you - that would not affect the rest of the other 98% of the material
within this training manual. It has been my experience that most banks and financial
institutions have an in-house mortgage loan originator training program - which should
enable you to make those distinctions and differences in what is expected of you as a
mortgage loan originator for that bank or financial institution and what is stated in this
book. If you are uncertain of this then please contact me at:
[email protected]

I love the mortgage lending business because it allows me to do many of the things I enjoy
doing: Meeting with customers - sometimes in their home, doing the financial stuff that
needs to be done, and interacting with all the different mortgage lending related
professionals necessary to make a home loan happen. There are times when I felt I have
really helped some folks financially by savings them hundreds of dollars per month on their
monthly bills or helped some young couple get a mortgage loan for their first home.
Sometimes these types of loans give you what I call a “warm fuzzy” - it just makes you
feel good to be in a profession you enjoy and can truly help people. I hope that once you
have read the information in this book, get your feet wet with a few loans, then you too
will love this business.

And finally, I wish to include in this Introduction something I would rather not have to -
but have been advised that I should: A Disclaimer. First, let me say that the information in
this book has been well researched and, as I previously mentioned, much of it is based on
my personal experiences as a branch manager, mortgage loan originator, and trainer of
mortgage loan professionals.

Now, when I first told other experienced mortgage professionals that I was writing a
training book for new mortgage loan originators, back in 2003, some of them asked me if
I was including a chapter on mortgage lending regulations. I told them that, of course, I
was. After hearing my reply some of them looked startled and looked at me like I had two
heads. When this occurred I just asked them, “How can I write a book for training new
mortgage loan originators on mortgage lending if I do not include a chapter on lending
regulations? Many of the very things we must do in originating and processing loans is
influenced and dictated by lending regulations that determine if our home loans and we are
“In Compliance”. And, the consequences for being out of compliance can be quite severe.
Besides, a mortgage lending training manual without a discussion on lending regulations
and laws would just not be complete.” On these points they did agree.

However, one thing is for sure: I am not an Attorney and do not have the legal right and/or
capacity to advice on any legal matters. And yet, many of the required procedures for
processing mortgage loans presented in this book are based on lending regulations and
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