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Unformatted text preview: incipal Write Downs Temporarily Postpone / Reassign Payments Lenders HATE Principal Write Downs Deed in Lieu of Foreclosure Borrower Voluntarily Transfers Ownership Very Risky for Lender if Hidden Liens Short Sales Lenders Agree to Accept Proceeds from Sale Less Damaging to Borrowers Credit Texas Tech University 4 Lesson 9: Origination and Sec. Markets 5 rd st 6 2 Real Estate Fundamentals Dr. Eriksen UPFRONT PREVENTION OF DEFAULT Two Main Options by Lender Carefully select who gets a loan (underwriting) Purchase Insurance in case borrower defaults Underwriting Process Verify the 3 C's of Mortgage Lending Conventional v. Conforming Mortgage Loans Two Types of Mortgage Insurance Against Private Mortgage Insurance (PMI) Gov't Sponsored Mortgage Programs (FHA/VA) Conforming Loans Eligible for Purchase by GSEs Loan Principal Must Also Be Less than $417,000 Three C's of Residential Underwriting Capacity: Ability to Repay Housing Expense Ratio: (PITI / GMI) less than 28% Total Debt Ratio: [(PITI + LTO) / GMI] less than 36% Total Debt Ratio Temporarily Relaxed to 45% by GSEs Creditworthiness: Willingness to Repay Past Repayment History of Debt Credit History from Experian, EquiFax, TransUnion Conforming Requires FICO >> 660 Collateral: Ability to Recover if Borrower Defaults Done Thru Appraisal of Property's Market Value Loan to Value (LTV) Ratio < 80% without PMI GOV'T INSURANCE PROGRAMS Federal...
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This document was uploaded on 03/13/2014 for the course FIN 3332 at Texas Tech.
- Fall '08