8. MLDS EX1 AND OTHER.pptx

8. MLDS & Other Items By Amber Hatter Summary 1 2 3 This document provides an overview of the mortgage process, highlighting the Annual Percentage Rate (APR), closing costs, and the Mortgage Loan Disclosure Statement (MLDS). It details how APR encompasses the total yearly cost of a loan, including i...

8. MLDS & Other Items By Amber Hatter Summary 1 2 3 This document provides an overview of the mortgage process, highlighting the Annual Percentage Rate (APR), closing costs, and the Mortgage Loan Disclosure Statement (MLDS). It details how APR encompasses the total yearly cost of a loan, including interest and fees, for easy comparison of financial products. It also explains the HUD-I APR Table, which lists fees affecting the APR. Closing costs are categorized into Recurring (for ongoing homeownership expenses) and Non-Recurring (one-time payments at settlement). Also, it contrasts mortgage bankers and brokers, outlining their roles and the loan options they provide. The MLDS is emphasized as essential for offering borrowers detailed loan and closing cost information, promoting transparency and informed decision-making. APR Definition I. Agenda Calculation Closing Costs Recurring Non-recurring Mortgage Loan Disclosure Statement (MLDS) Banker Vs. Broker Traditional Purchase Example I. Annual Percentage Rate (APR) > Definition & Calculation i. Annual Percentage Rate (APR) APR, or Annual Percentage Rate, is a key metric that shows the total yearly cost of borrowing, or the interest earned on investments, including both interest rates and fees for a comprehensive cost view. It's standardized as a yearly percentage, facilitating easy comparison across different loans or investments, regardless of their term lengths. Commonly applied to credit cards and mortgages, APR encompasses yearly interest, annual fees, origination fees, and closing costs, offering a consistent basis for comparing financial products from various lenders or institutions. HUD-I APR Table: 800-828 HUD-1 Item APR Table: Exclude Include 800 Items Payable in Connection with Loan 801 Lender's Loan Origination Fee Yes x 802 Lender's Loan Discount Fee Yes x 803 Appraisal Fee No x 804 Credit Report No x 805 Lender's Ins. App. Fee Yes x 806 Mortgage Ins. App. Fee Yes x 807 Assumption Fee Yes x 808 Mtg Broker Commission/Fee Yes x 809 Tax Service Fee Yes x 810 Processing Fee Yes x 811 Underwriting Fee Yes x 812 Wire Transfer Fee Yes x 813 CLO Access Fee Yes x 814 Flood Cert Yes x 815 Administration Fee Yes x 816 Reservation Fee Yes x 817 Commitment Fee Yes x 818 Application Fee Yes x 819 Verification Fee No 827 Doc Prep Fee (lender) Yes 828 Other Varies x x Tbd Tbd HUD-I APR Table: 900-907 HUD-1 Item Table: APR Exclude Include Tbd Tbd 900 Items Required by Lender to be Paid in Advance 901 Interim Interest (depends) 902 Mortgage Insurance Premium Yes 903 Hazard Insurance Premium No x 904 County Property Taxes No x 905 VA Funding Fee Yes 906 Flood Insurance Premium No x 907 City Property Tax No x Varies x x HUD-I APR Table: 1000-1005 HUD1 Item Table: APR Exclud e 1000 Reserves Deposited with Lender 1001 Hazard Insurance: Monthly No 1002 Mortgage Insurance: Monthly Yes 1003 School Tax: Monthly No x 1004 Co. Property Tax: Monthly No x 1004 Flood Insurance: Monthly No x 1005 City Property Tax Monthly No x Includ e x x HUD-I APR Table: 1100-1109 HUD-1 Item APR Table: 1100 Title Charges 1101 Settlement or Escrow Fee: 1102 Abstract of Title Search 1103 Exclude Yes Include x Varies Tbd Title Examination No x 1104 Title Insurance Binder No x 1105 Doc Prep Fee No x 1106 Notary Fee No x 1107 Attorney's Fees (Depends) Varies Tbd 1108 Title Insurance Owners No x 1109 Alta Policy - Lenders No x Tbd Tbd HUD-I APR Table: 1200-1203 HUD-1 Item APR Table: Exclude Include Varies Tbd Tbd x 1200 Government Recording and Transfer Charges 1201 Recording Fees: (Depends) 1202 City/County Tax/Stamps: No 1203 Fed/Ex Courier Fee Yes x HUD-I APR Table: 1300-1304 HUD-1 Item APR Table: Exclude 1300 Additional Settlement Charges 1301 Survey No x 1302 Pest Inspection No x 1303 Well and Septic Inspection No x 1304 YSP (rebate or poc) No x Include HP10BII APR Calculation $500,000 PV 6 I/YR Note Rate 360 N P&I = ? ? = $2,997.75 Let’s say NRCC’s is $10,000 What is the APR? $490,000 PV I/YR = ? Reflects 6.189 APR cost of credit II. Closing Costs > RCC & NRCC i. Recurring Closing Costs (RCC’s) Despite the misleading name, Recurring Closing Costs (RCC’s) don't represent ongoing payments to your closing agent or lender. Instead, they are upfront payments for future homeownership expenses.  Pre-paid Items: This term better describes recurring closing costs, emphasizing they cover future expenses paid in advance.  Common Types: These typically include property taxes, homeowner's insurance (hazard insurance), HOA fees (if applicable), and, if necessary, private mortgage insurance (PMI).  Prorated Payments: Calculated at closing, these costs are adjusted for the timeperiod up until the next due date, such as pre-paying property taxes for the next six months.  Impound Accounts (Optional): Lenders may require an escrow or impound account to manage these pre-paid funds, using them to cover your property taxes and homeowner's insurance as they come due. ii. Non-Recurring Closing Costs (NRCC’s) Non-Recurring Closing Costs (NRCCs) consist of one-time payments made during the settlement. These payments are for diverse services and expenses necessary to finalize it. As one-time fees, they are unique to the scenario at hand, paid at closing, and encompass the various services and procedures essential to complete the deal.  Loan Origination Fees: Charges for processing and underwriting your mortgage, enhancing financial transparency in your loan disclosure statement.  Third-Party Service Fees: Costs for essential services like appraisals and inspections, crucial for informed decision-making and error detection in the mortgage process.  Government Charges and Recording Fees: Fees by government entities for document processing and recording, a key aspect of the disclosure statement for mortgage transparency.  Title and Insurance Fees: Expenses ensuring clear title and protection, vital for financial empowerment and informed decision-making in real estate transactions.  Other Closing Costs: Miscellaneous fees, such as attorney or courier fees, specific to your transaction, highlighting the importance of thorough review for error detection and financial transparency in your mortgage disclosure statement. III. Mortgage Loan Disclosure Statement (MLDS) > Traditional i. What’s the difference between a banker and a broker? Feature Mortgage Banker Mortgage Broker Definition Acts like a one-stop shop. They handle your application, underwriting (deciding if you qualify for the loan), approval, and closing. They may use their own funds or funds from a warehouse lender to fund the loan initially. Then, they may sell the loan to investors on the secondary market. Works more like a middleman. They gather your information and find the best lender for your situation from their network of banks and other lenders. They don't fund the loan themselves, but they guide you through the application process and help you get the paperwork in order. Loan Originator Yes No Loan Funder Yes (initially) No Loan Options May be limited Wider variety Control over Process More Less ii. Fannie Mae Form 1008 1: MLDS (Traditional) 2: Items Payable in Connection with the Loan 3: Items Required by Lender to be Paid in Advance 4: Reserves Deposited with Lender 5: Title Charges 6: Government Recording and Transfer Charges 7: Additional Settlement Charges 8: Compensation to Broker (Not Paid out of Loan Proceeds) 9: Additional Required California Disclosures 10: General Information about Loan 11: Balloon Payment Information 12: Prepayment Information 13: Taxes and Insurance 14: Borrower Must Plan For (?) 15: Other Liens 16: Article 7 Compliance 15: Stated Income 16: Notice to Borrower: This is Not a Loan Commitment 17: DRE License Info., etc. The End