The Fundamentals of the Mortgage Process - MGIC · axel mortgage with a triple lutz. Discussion Points — Slide 19/Pages 2-4 Explain that the next section will cover the loan types

59

The Fundamentals of the Mortgage Process

Facilitator Guide

Loan Officer Workshop For Real Estate Agents

To access the PowerPoint presentation visit:

mgic.com/fun

59

i FUN_LO to Realtor_Facilitator Notes_7.24.18

Table of Contents

To access the PowerPoint presentation visit: mgic.com/fun Table of Contents ............................................................................................... i About this Guide ................................................................................... 1 Intro Slide .................................................................................................. 5

BOOK 1 – UNDERSTANDING THE MORTGAGE CYCLE .................................................................. 7

The Mortgage Cycle .......................................................................................8 Key Players .......................................................................................................... 9 Regulatory Compliance ......................................................................9 Summary ..................................................................................................... 13

BOOK 2 – TAKING THE LOAN APPLICATION .................................................................. 15

Loan Types & Programs ................................................................................. 16 The Loan Application ............................................................................... 19 The Loan File Checklist ................................................................................ 27 Summary ...................................................................................................... 28

BOOK 3 – PROCESSING THE LOAN ............................................................................ 29

Processing the Loan ................................................................................. 30 Documenting the Loan File ........................................................................ 30 Automated Underwriting (AU) .................................................................... 31 Uniform Underwriting and Transmittal Summary (1008) ........................ 32 Qualifying Ratios ........................................................................................ 33 Loan-to-Value (LTV) Ratio ...................................................... 34 Summary ..................................................................................................... 35

BOOK 4 – EVALUATING CREDIT, CAPACITY, CAPITAL AND COLLATERAL ....................... 37

The 4 Cs ..........................................................................................38 Credit History .........................................................................................................39 Types of Credit ........................................................................................ 40 The Credit Report .................................................................................... 40 Types of Credit Reports ........................................................................... 41 Credit Score ..................................................................................................... 41 Capacity – Income .................................................................................. 42 Income ...................................................................................................... 42 Source of Income ...............................................................................................43 Capital – Assets ....................................................................................................44 Types of Assets ....................................................................................................44 Collateral ................................................................................................. 45 The Appraisal ......................................................................... 45 Evaluating the Appraisal ............................................................ 46 Sales Contract .............................................................................. 47 Checkpoint: Sales Contract .............................................................. 48 Summary...................................................................................................... 49

ii FUN_LO to Realtor_Facilitator Notes_7.24.18

BOOK 5 – UNDERSTANDING HOW MORTGAGE INSURANCE WORKS .............................. 51

What is Mortgage Insurance? ................................................... 51 Why MI? .................................................................................................. 52 With MGIC MI .......................................................................................... 52 Advantages for Borrowers ........................................................................... 53 Advantages for Lenders .......................................................... 54 Advantages for Realtors® ........................................................ 54 MGIC MI Premium Plans ................................................................................ 56 MGIC Rate Finder ........................................................................................... 56 MI Cancellation ................................................................................................. 57 Summary – Book 5 ............................................................................57 Connect with Us .............................................................................58 Thank You ......................................................................................59

1 FUN_LO to Realtor_Facilitator Notes_7.24.18

About This Guide

To access the PowerPoint presentation visit: mgic.com/fun

Who Should Deliver This Program?

Mortgage professionals with a thorough understanding of the

loan origination process.

Time

This program is modular in design to accommodate varying

program lengths. Depending on the modules that you

choose, the program can be delivered in longer or shorter

sessions.

Equipment

• Flip Chart/Markers

• Projector

Participant Materials

• Participant’s Kit including The Fundamentals of the

Mortgage Process book(s) being presented

To obtain participation materials, contact you MGIC

Account Manager at mgic.com/directory


Presentation

NOTE: Time frames will vary based on available time

and level of detail in which content is discussed.

Introduction – (Approx. 15 minutes)

1. Welcome participants to the program.

2. State purpose of the program (See summary of program

modules on pg. 2 – highlight book(s) to be presented) and

discuss ‘what’s in it for your audience’.

3. Ice Breaker - Have participants introduce themselves,

stating name, job title, length of time with organization

and their expectations of the class.

4. Review schedule and logistics. Explain breaks.

5. Review Participants Manual.

6. Explain that the manual contains handouts which will be

referred to during the course of the program. The

handouts can also be used for note-taking.

Transition

Now that we’ve discussed the program logistics, let us begin

by…


Summary of The Fundamentals of the Mortgage Process Books

Listed below is a brief description of each of the books

contained in the “The Fundamentals of the Mortgage

Process” program. The presentation time frames are

approximate and assume a ‘high level’ discussion based on

making the information relevant to the Realtors®’ needs.

Book 1 – Understanding the Mortgage Cycle

(Approx. 45 min.): This module examines the fundamental

stages in the life cycle of a mortgage and

highlights the basics of regulatory

compliance.

Book 2 – Taking the Loan Application

(Approx. 1hr.): This module explores the framework on which

the mortgage loan file is built.

Book 3 – Processing the Loan

(Approx. 1hr.): This module explains the relevance of

processing and documentation to

substantiate borrower data.

Book 4 – Evaluating Credit, Capacity, Capital & Collateral

(Approx. 1.5 hr.): This module explores The Four Cs individually

and collectively as a means to making sound

mortgage decisions.

Book 5 – Understanding How Mortgage Insurance Works

(Approx. 1hr.): This module defines MI’s place in the mortgage

process and the value it brings borrowers and

lenders.


Intro Slide

The Fundamentals of

the Mortgage ProcessPresented By:

Designs for Learning

Discussion Points — Slide 1

Welcome Participants!

Summarize purpose of program: to provide a

general understanding of how the mortgage

industry works.

Understand the importance of a well-taken loan

application regardless of which process is used —

manual or automated underwriting.

Talk about the “WHYs” behind the “HOW-TOs.”

Goal - A thorough understanding of the mortgage

process will enhance your value to your customers.

It will also help ensure an efficient, effective

customer service experience.


Legal Disclaimer

Legal Disclaimer

The information presented in these training materials is based on

guidelines and practices accepted within the mortgage finance

industry generally and is not intended to be all-inclusive. All

examples are hypothetical and are for illustrative purposes only.

Investor requirements change from time to time and their application

is subject to interpretation. Therefore, we cannot and do not

guarantee how any specific investor guidelines will be applied to

individual circumstances. Our training is not intended and should not

be interpreted or relied upon as legal advice. We encourage you to

seek legal and compliance advice from a qualified professional.

MGIC expressly disclaims any and all warranties, express or implied,

including without limitation, warranties of merchantability and fitness

for a particular purpose regarding these materials and our training

program. In no event will MGIC be liable for any direct, indirect,

incidental, punitive or consequential damages of any kind with

respect to the training or materials provided.


Mention key points of legal disclaimer

Refer participants to the Table of Contents.

Table of Contents

Table of Contents

• Book 1: Understanding The Mortgage Cycle

- The Mortgage Cycle & Key Players

- Regulatory Compliance

• Book 2: Taking the Loan Application

- Loan Types & Programs

- Completing the Loan Application

• Book 3: Processing the Loan

- Processing the Loan

- Automated Underwriting

- Uniform Underwriting & Transmittal Summary (1008)

• Book 4: Evaluating Credit, Capacity, Capital & Collateral

- Underwriting – 4Cs

- Credit, Capacity, Capital, Collateral

• Book 5: Understanding How MI Works

- What is MI?

- Premium plan options


ID the content/objectives that will be covered in

your session.

Customize as necessary to meet time frames and

audience needs.

Briefly explain content for sections being skipped

or reviewed at a later date. Encourage participants

to review the books in more detail on their own.


Book 1 – Understanding the Mortgage Cycle

Book 1

Understanding the

Mortgage Cycle

THE FUNDAMENTALS OF THE MORTGAGE PROCESS


Review slide content.

Understanding the Mortgage Cycle Helps You:

Understanding the mortgage cycles

helps you:

• Increase your credibility with your

client base

• Recognize and understand common

terms

• Set buyer expectations



Ask participants: “How will a better understanding

of the mortgage process benefit you and your

customers?”


Eight Stages of the Mortgage Cycle

8 Stages of the Mortgage Cycle

OriginationThe loan application is completed.

UnderwritingThe loan file is evaluated.

Secondary MarketMortgages are bought and sold by

lenders and investors.

ProcessingThe loan file is documented.

ServicingPayments to third parties

are collected.

ClosingLoan documents are signed;

title is transferred.

WarehousingClosed loans are temporarily held.

DeliveryLoans are packaged and

shipped to an investor.

Discussion Points — Slide 6/Pages 2-4

Review the 8 steps in the mortgage cycle.

ID the importance of participant’s role in the

‘ongoing’ cycle (i.e., accuracy, timeliness, customer

service skills, etc.) and relate to audience (i.e. sales

contract).

Each piece of the mortgage process is dependent

on the others.


Key Players

Key Players

• Borrowers

• Investors

— Fannie Mae & Freddie Mac (GSEs), Depository Institutions (Bank, Credit Union), Insurance Companies & Pension Funds, Foreign Investors

• Lenders

— Retail Originators, Mortgage Brokers, Correspondents

• Other Specialized Players

Discussion Points — Slide 7/Page 5

Review the role of each of the key players.

Relate the role of the key players back to the

mortgage cycle.

Ask participants to identify key players who interact

with their companies.

Regulatory Compliance

FAIR HOUSING ACT

CFPBHPA

LE CD TRID

Gramm-Leach Bliley Act

ECOA

HMDAFCRA

USA Patriot Act

QM

ATR


Dodd-Frank Act


The mortgage cycle is governed by laws that

promote fair lending.

Remind participants these regulatory acts go into

effect the moment the lender interacts with the

customer (i.e., a request for rate or other

information).




Review slide content

Explain that the next pages will cover the various

rules & regulations, entities and documentation in

place to help educate and protect borrowers.







Dodd-Frank Wall Street Reform and Consumer

Protection Act were enacted in July 2010.

The Act brought significant financial regulation

changes.














LE

• Key loan features

• Costs

• Risks

• Issued within 3 business days of receiving loan application

CD• Issued at least 3 business days before

closing



Summary – Book 1

Summary Book 1

• Eight Stages of the Mortgage Cycle

• Key Players

• Regulatory Compliance



Check for understanding about the content that

has been discussed.

Any questions?

In The Fundamentals of the Mortgage Process Book 1:

Understanding the Mortgage Cycle, you learned about

the mortgage cycles and the regulations that govern

mortgage lending. Now we’re ready to review a loan

application (1003), which we will discuss in The

Fundamentals of the Mortgage Process Book 2: Taking

the Loan Application.

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Book 2 – Taking the Loan Application

Book 2

Taking the Loan

Application




Explain the 1003 serves as blueprint for building

the loan file.

Introduce the Four Cs.

Understanding The Loan Application helps you:

Understanding the Loan

Application helps you:

• Minimize buyer anxiety about the home-buying

process

• Increase your credibility with your client base

• Set buyer expectations



The loan application is a buyer’s financial

snapshot. Understanding the information in the

loan application will help you explain to your

buyers what a lender is looking for in the loan

application process.

16


Loan Types & Programs

As an alternative to the traditional

30-year mortgage, we also offer an

interest-only mortgage, balloon

mortgage, reverse mortgage,

upside down mortgage,

inside-out mortgage,

loop-de-loop

mortgage

and the spinning double

axel mortgage with a

triple lutz.


Explain that the next section will cover the loan

types and programs typically used when originating

mortgage loans.

Opportunity: Review loan programs and highlight

features and benefits of your product offerings and

service.

Loan Types

Loan Types

• Conventional – loans NOT insured or

guaranteed by the Federal Government

- Conforming

- Nonconforming

• Government – loans insured or

guaranteed by the Federal Government,

i.e., FHA or VA


Define Conforming and Nonconforming.

Government and Conventional loans may have

different property requirements (for example,

repairs to a property, etc.).

17


Determine the Best Loan Program


Explain loan program selection will be determined

based on borrowers’ needs.

Explain how you determine borrower need by

asking questions.

Ask participants how the answers to the questions

influence loan program selection.

18


Common Mortgage Loan Programs

Mortgage Loan Programs

• Fixed-Rate Mortgage (FRM)

• Adjustable-Rate Mortgage

(ARM)

• Balloon

• Temporary Buydown

• Interest-Only



Summarize your product offering on a flip

chart.

• You may be specific or general in discussing

the features and benefits of the programs

based on your audience and the complexity of

your product.

19


The Loan Application

Framework of the loan file

• The 4 Cs

Credit- Borrowers’ willingness to repay a loan

Capacity- Borrowers’ ability to repay based on the

amount & stability of income

Capital- Borrowers’ investment in the property from

savings & other sources

Collateral

- Property’s value & marketability to provide adequate security for the loan based on an appraisal

The Loan Application



Discuss importance of the Four Cs and information

that is being gathered.

Be as specific or as general as you wish.

Loan Application

I. Type of Mortgage & Terms of Loan


Highlight the sections and types of information

that will be gathered.

20


Loan Application

II. Property Information & Purpose of Loan

Collateral




Loan Application

III. Borrower Information

Credit




21


Loan Application

IV. Employment Information

Capacity




Loan Application

Ask Specific Questions “How much money do you make?”

• What did your W-2 report as your income

last year?

• How are you paid?

- Hourly, salary, commission…

• How often are you paid?

- Weekly, bi-weekly, semi-weekly…

• Do you own more than 25% of a business?

- If yes – self-employed


Stress the importance of how questions are asked

in gathering complete information.

22


Loan Application

V. Monthly Income & Combined Housing

Expense Information




Loan Application

VI. Assets & Liabilities

Capital




23


Loan Application

VI. Assets & Liabilities (continued)

Capital




Loan Application


Liabilities




24


Loan Application


Liabilities




Loan Application

VI. Assets & Liabilities (continued) – REO

REO




25


Loan Application

VII. Details of Transaction




Loan Application

VIII. Declarations




26


Loan Application

IX. Acknowledgement & Agreement




Loan Application

X. Information for Government Monitoring

Purposes




27


The Loan File Checklist

The Loan File Checklist

Assists with packaging loan for underwriting

Check investor requirements


Direct participants to Appendix A for a sample

Loan File Checklist.

A loan file checklist is used to help expedite the

loan application process.

28


Summary – Book 2

Summary Book 2

• Loan Types & Programs

• Purpose of Loan Application

• Relationship of 4 Cs

• Asking Appropriate Financial

Questions

• Importance of an Accurate Loan

Application




has been discussed.

Any questions?

So now that the loan program has been selected

and the loan application has been completed, what

happens with the information? The next step is to

submit the completed app for processing. In The

Fundamentals of the Mortgage Process Book 3:

Processing the Loan, we will discuss the aspects of

processing a mortgage loan – from the processor’s

duties, to the automated underwriting systems, to

the 1008.

29


Book 3 - Processing the Loan


Book 3

Processing the Loan



Understanding Loan Processing Helps You:

Understanding Loan Processing

helps you:

• Understand why the various documentation is

required

• Set realistic expectations regarding closing

dates

• Increase your credibility with your client base



30


Processing the Loan

Processing the Loan

• Data integrity

• Communication among all parties

• Gather & verify documentation

• Prepare & submit to underwriting

• Satisfy underwriting conditions



Stress the importance of data integrity.

Explain that the processor in many cases is the

expeditor of the loan.

The processor will be in contact with all parties

involved with the loan from origination to closing

and beyond.

Documenting the Loan File

Documenting the Loan File

• Standard Documentation

- Verification of Employment (VOE)

- Verification of Deposit (VOD)

• Electronic Documentation

- Paystubs and W-2’s

- Bank Statements

• Third-party verification

- The Work Number


Explain the document options and how they differ.

Stress regardless of the documentation path used,

the documents gathered must support the

information on the loan application; and if they do

not, an explanation may be required.

31


Automated Underwriting (AU)

Automated Underwriting (AU)

• Provides U/W recommendation based

on loan data

• Streamlines processing & underwriting

• Most common AU systems:

- Desktop Underwriter (DU)

- Loan Product Advisor


Explain that DU is Desktop Underwriter and is

Fannie Mae’s proprietary underwriting system and

that Loan Product Advisor is Freddie Mac’s

proprietary underwriting system.

Discuss the significance of automated underwriting

in mortgage lending.

Optional – refer participants to finding/feedback

reports in book Appendix A and B and discuss

‘general’ content.

Each loan is unique and the documentation needed

is based on loan risk.

32


Uniform Underwriting and Transmittal Summary (1008)

Uniform Underwriting &

Transmittal Summary (1008)

Borrower & Property

Mortgage

Seller, Contract &

Contact Info

Borrower & Property


Acknowledge document is usually generated and

populated by a Loan Origination System.

We will highlight some of the key content to help

you understand ratio calculations when working

with your buyers.

Explain: For approved loans, 1008 information is

used to create the final loan documents so

accuracy is important.

33


Qualifying Ratios

Qualifying Ratios

Total Primary Housing Expense= Housing Ratio

Total Income

Total All Monthly PaymentsTotal Debt Ratio

Total Income

Evaluate borrowers’ ability to repay the loan

Qualifying Ratios

$1,470.55 / $9,159 = 16.1% Housing Ratio

$2,455.55 / $9,159=

26.8% Total Debt Ratio


Explain: Ratios provide underwriters and investors

with the ability to evaluate the degree of risk

associated with the borrowers’:

• ability to repay the loan and

• how much money is being borrowed as

compared to the value of the property.

Calculating the ratios will answer two questions:

• are the borrowers viable mortgage candidates?

• which mortgage programs will best meet their

needs for sustainable homeownership?

(Indicating how easy or difficult it will be to

process and approve the loan.)

Summarize — ratios tell what percentage of the

borrowers’ gross monthly income goes to paying

each of the two debt categories.

Explain typical ratio guideline and that compensating

factors are needed if exceeded.

Calculating Qualifying Ratios:

• Using a flip chart and the examples on

pages 10-11, illustrate calculating the

housing ratio and total debt ratio.

• Optional: Create second example with new

data.

34


Loan-to-Value (LTV) Ratio

Loan-to-Value (LTV) Ratio

Sales Price: $200,000

Appraised Value: $201,000

Mortgage Amount: $180,000

$180,000= 90% LTV

$200,000

Because the Sales Price is less than Appraised Value,

you will use the Sales Price in your LTV calculation


LTV compares money borrowed to property value.

Explain LTV calculation uses appraised value or

purchase price, whichever is less.

Stress the relationship between the amount of risk

associated with a loan and the amount of money

borrowers put into the transaction.

• High LTV = Higher Risk (less money down)

• Low LTV = Lower Risk (more money down)

Loan programs, guidelines and processing will vary

depending on the LTV (for example, LTVs of 80% or

greater typically require mortgage insurance).

Calculating Loan-to-Value Ratios:

• Using a flip chart and the example on page

11, illustrate calculating the LTV ratio.

• Optional: Create 2nd example with new

data.

35


Summary – Book 3

Summary Book 3

• Importance of processing in origination

cycle

• Documentation types

• Importance of AU systems in mortgage

lending

• Uniform Underwriting & Transmittal

Summary (1008)




has been discussed.

Any questions?

The work that goes into processing the loan

application will expedite and ultimately support the

decision whether to approve the borrowers’

mortgage. The Fundamentals of the Mortgage

Process Book 4: Evaluating Credit, Capacity, Capital

and Collateral will cover the next stage of the

Mortgage Cycle, Underwriting.

37


Book 4 – Evaluating Credit, Capacity, Capital &

Collateral



Understanding Underwriting Helps You:



Ask participants: How will a better understanding

of underwriting help you work with your

customers?

38


The 4 Cs

The 4 Cs

• Credit- Borrowers’ willingness to repay a loan

• Capacity- Borrowers’ ability to repay based on the

amount & stability of income

• Capital- Borrowers’ investment in the property from

savings & other sources

• Collateral- Property’s value & marketability to provide

adequate security for the loan based on an appraisal


Explain layering of risk:

• An individual risk factor in one of these areas

doesn’t necessarily threaten the borrowers’

ability to maintain homeownership.

• Multiple risk factors, or layers of risk and the

severity of the risk factors without sufficient

offsets or compensating factors dramatically

increase the likelihood of default.

• The goal for everyone involved is to have the

borrowers maintain long-term sustainable

homeownership.

Discuss what layering of risk means to buyers and

agents; the best situation is to put buyers into

homes that they can afford long term. If the buyers

are not ready, agents can prepare them by

referring them to a credit or home purchase

counselor.

39


Credit History

Credit History

Is the credit history ‘adequate’?

✓ Sufficient number of accounts

✓ Acceptable length of time

accounts have been active

✓ Is it verified through traditional

credit report

✓ Demonstrate borrowers’

willingness & ability to repay

debt

Past credit history is indicative of

future credit performance



Ask: Why is credit history important?

• Credit history is an indicator for the

performance of a mortgage loan.

Explain that real estate agents can help buyers

avoid problems by detecting and addressing credit

concerns as soon as the buyers begin looking for a

home.

40


Types of Credit



Describe differences between traditional and

nontraditional credit and the impact of trended

credit.

Nontraditional payments are not automatically

reported to credit repositories.

The Credit Report


Address three credit repositories and their

purpose.

At least two repositories are usually required.

Discuss credit vendors

• Provider of credit report.

• Uses repositories to gather credit information.

41


Types of Credit Reports


Describe 3 different traditional credit reports - why

one would be chosen over the other.

• RMCR – generally complete an employment and

income verification over phone.

• In-file – used in AU generated reports; very

common today.

Credit Score

Credit Score

• Predictor of loan performance

• Derived by statistical models that evaluate these risk factors:

Payment history

Amount owed vs. credit limit

Credit history

New credit

Types of credit

• Range from 300 - 850

• Higher score = lower risk

• Majority of scores fall between 600 - 800



Underwriters will review the credit score, but will

also evaluate the buyer’s full credit history.

42


Capacity - Income



Ask: Why is sufficient income an important risk

factor of a mortgage loan?

Income

Income

History

Do borrowers

have history of earning income?

Consistent

Has borrowers’

income been stable during

the past 2 years?

Ongoing

Will borrowers’

income continue in the future?



Discuss the importance of income stability and the

role it plays in evaluating the loan risk.

43


Source of Income

Sources of Income

Non-variable Variable

• Base/salaried

• Pension

• Social Security

• Family Employment

• Long-term disability

• Alimony

• Child support

• Note receivable

• Commission

• Bonus

• Self-Employed

• Seasonal

• Hourly

• Contract – by the job

• Tip

• Overtime



Ask participants to identify different sources of

income.

Ask participants to ID income types that are most

stable/least stable.

44


Capital - Assets



Explain why cash investment and reserves are

important. i.e. – borrowers have funds in the

transaction as well as funds after closing. Both will

help the borrower to stay committed to the

property should they experience financial hardship.

Example of $0 down payment vs. $20,000 down

payment.

Types of Assets

Types of Assets

• Depository accounts

(i.e., savings, CDs, retirement

accounts)

• Sale of real property

• Gifts

• Sale of personal assets

• Borrowed funds

• Stocks, bonds, mutual funds



Describe the different types of assets used for

down payment.

Discuss how borrowed funds should be secured by

“borrower-owned asset.”

45


Collateral

Collateral

• Appraisal

• Sales contract



The Appraisal

The Appraisal

• Describes the property

• Estimates the value

• Identifies positive &

negative factors that

affect value &

marketability

• Evaluation considers

neighborhood, site,

physical characteristics

& property condition



High-level overview of appraisal.

46


Evaluating the Appraisal

Discussion Points — Slide 65/Page 26-29


Let’s review sample appraisal on page 26.

Point out some ‘red flags’, e.g. – excessive distance

of comparables, large line and gross adjustments,

declining market.

47


Sales Contract

Sales Contract

• A legally binding agreement

with dates that set time lines

for the loan process.



Information from the sales contract is used to

complete the loan application.

Sales contract sets loan processing timeline (e.g.

loan approval dates, closing dates, contingencies,

etc.)

Ask participants for examples of information on the sales

contract that influences the loan process (e.g. down

payment, mortgage terms and seller concessions).

48


Checkpoint: Sales Contract

Discussion Points — Slide 67/ Page 30


Based on your company guidelines, explain what an

underwriter will do if contract references chattel

property? (e.g. pool table, living room furniture, big

screen tv, etc.)

49


Summary – Book 4




has been discussed.

Any questions?

We have one final step of the mortgage process to

cover – Mortgage Insurance. MI decreases the

lender’s exposure should a borrower default. The

Fundamentals of the Mortgage Process Book 5:

Understanding How Mortgage Insurance Works will

explain the purpose of MI and the advantages to

investors, originators and borrowers. In addition, it

will describe three commonly used premium plans

and how to calculate MI premiums.

50


51


Book 5 – Understanding How Mortgage Insurance Works

Book 5

Understanding How

Mortgage Insurance

Works




What Is Mortgage Insurance?

What Is Mortgage

Insurance (MI)?

• Investor: a financial

guaranty

• Borrower: a credit

enhancement

• Originator: a way to close

loans

Discussion Points — Slide 70/Pages 3

Investor has financial guaranty that MGIC will pay a

claim should the loan go into default.

Borrower is able to purchase a home sooner.

Originators can expand their customer base to low

down payment lending.

Explain what MI is not:

• Mortgage Life Insurance

• Homeowner’s Insurance

52


Why MI?

Why MI?

• Provides homeownership

with <20% down

• Secondary market

requires MI

on loans with <20% down



With MGIC MI, It’s Possible To…

With MGIC MI

It’s Possible For You To…

• Structure higher-LTV

loans in today’s market

• Finance higher loan

amounts

• Expand borrower options



53


Advantages for Borrowers


Increase buying power/options — illustrate on a

flip chart impact on purchase price with 10% vs.

20% down payment.

54


Advantages for Lenders

Advantages for Lenders

• MI = Risk Protection

• Increase customer base

• Better serve community

Discussion Points — Slide 74/Pages 3 and 13


Advantages for Realtors®

Advantages for Realtors®

• Knowing options makes you more valuable to your buyers

• More borrowers may qualify for more properties

• More borrowers can afford the home you’re selling

• Reason to reach out to past customers

Discussion Points — Slide 75/Pages 3-4 and 13

FHA is going to be the right option for some borrowers and a

conventional with MGIC MI is going to be right for others.

Which option is better for your buyers will vary depending on

the buyer, but knowing the options will make you more

valuable to your buyers. Here are some important points

about conventional financing with MGIC private mortgage

insurance:

55


Homebuyers can qualify with just 3% down.

• What does that mean to you as a Realtor®? More

borrowers may qualify for more properties.

MGIC’s Credit-Tiered rates provide a lower or

comparable monthly payment to FHA pricing.

• What does that mean to you as a Realtor? More

borrowers can afford the home you’re selling.

The homebuyer will also be thankful that you

sent them to a lender who used MGIC Credit-

Tiered rates to help save them thousands of

dollars over the life of the loan. Imagine the

positive referrals from this satisfied homebuyer!

MGIC MI provides a chance to cancel sooner than FHA.

• What does that mean to you as a Realtor? It

creates a built-in reason to reach out to past

customers. Offer to do a free assessment to see

if they could cancel their MI after a few years.

You may learn they would prefer to sell and buy

a bigger home.

56


MGIC MI Premium Plans

MGIC MI Premium Plans

• Borrower-Paid Monthly

- Borrower pays monthly

• Borrower-Paid Single

- Borrower pays up front

- Borrower may finance into loan

• Split Premiums

- Borrower pays part of MI upfront with lower

monthly premium

• Lender-Paid Monthly & Single Premium (LPMI)

- Premium paid by a third-party



MGIC Rate Finder

Discussion Points — Slide 77/ Page 12


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MI Cancellation



Summary – Book 5

Summary Book 5

• How MI fits into the big picture

• What is mortgage insurance?

• MGIC premium plans

• Calculating MI premium


Ask participants what questions they have related

to the day’s discussion.

Review participant objectives and ask participants if

the program met their needs.

Summarize key content covered for each book

discussed – time permitting, you can navigate

PowerPoint to appropriate Book Title slide.

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Connect with Us

Connect with us.

Twitter: mgic.com/twitter

MGIC Connects Blog: mgic-connects.com

LinkedIn: mgic.com/linkedin

YouTube: mgic.com/youtube

Facebook: mgic.com/facebook


Connect with MGIC for timely and relevant industry

topics for you and your potential homebuyers.

59


Thank You!

Thank You.


Thank participants

• YOUR COMPANY NAME and MGIC want to thank you

for this opportunity to meet with you and help you

in whatever way we can to support your success. We

value our relationships and recognize our success

depends on your success.

• We enjoy bringing you programs like this as a way

of earning your business and believe it

demonstrates how we differ from our competition.

Remember, we’re just a phone call away – so if you

have questions relating to what we discussed here

today, please call…

• Thank you again for this opportunity to serve you

and welcome to the world of mortgage

professionals. I look forward to working with you

and earning your business.

Documents

The Fundamentals of the Mortgage Process - MGIC · axel mortgage with a triple lutz. Discussion Points — Slide 19/Pages 2-4 Explain that the next section will cover the loan types