HELOC Training 2024 PDF

Alliance Catholic Credit Union HELOC Training What we offer ACCU offers one type of equity loan, a HELOC Features of our HELOC  20-year term  10-year draw period  10-year additional repayment period after the draw period expires  Payments of 1% of the outstanding balance at the end of the stat...

Alliance Catholic Credit Union HELOC Training What we offer ACCU offers one type of equity loan, a HELOC Features of our HELOC  20-year term  10-year draw period  10-year additional repayment period after the draw period expires  Payments of 1% of the outstanding balance at the end of the statement cycle  Variable rates readjust quarterly (not monthly) based on changes in prime rate  Tiered rates based on credit history  Minimum limit of $20,000  Maximum limit of $200,000  Accessible through online banking transfers or HELOC checks  HELOC Talk What can I do?  Let members know we offer HELOCs  Let members know the rates are variable  Let members know the features of our HELOCs  Hand the member an application packet (or email it) if they are interested in applying  Enter the completed application into Symitar What can’t I do  Do not quote a rate, even after you pull credit  Do not steer members into a HELOC, even if you think it may be the best option for their situation  If members have detailed questions about a HELOC for their situation, contact a Loan Officer to speak with them in detail  Do not complete the application for the member, as you need have a registered NMLS # to do this HELOC Talk contd. What can I say?  Yes, we offer HELOCs with credit lines up to $200,000  Our HELOC is a variable rate starting as low as 8.50%, and we are currently offering promo rates as low as 6.99% for a limited time for qualified borrowers  The origination fee is $349 for limits up to $100,000 and $549 for limits over $100,000  Our HELOCs are a 20-year term, a 10-year advance period and an additional 10 years to pay the remaining balance  Would you like me to print you a packet or would you prefer I email it to you?  Our HELOC limits are accessible through online banking, transferring to an account at ACCU, or by checks that draw from this account HELOC Talk contd. What can’t I say?  It looks like you qualify for 8.50%  It would be more advantageous to apply for a HELOC to consolidate your bills  The HELOC payment is lower than a signature loan payment and you can advance funds as needed  I will take your application by phone and email you a completed HELOC packet to sign Knowing the HELOC Facts What is the cost for our HELOCs? There is a $349 origination fee for limits of $20,000-$100,000 For limits over $100,000, there is a $549 fee Do we ever refund the origination fee? This fee is non-refundable, but if the loan is denied before we begin ordering any of the documents required to complete the HELOC process, we will refund the fee in full. What is our maximum HELOC Limit? $200,000 What is our minimum HELOC Limit? $20,000 When are the HELOC payments due? Payments are due on the 28th of each month Knowing the HELOC Facts How long does the member have to make credit advances? Members have a 10-year period to advance from their HELOC line How long must a member wait after purchasing a new home before they can apply for a HELOC? 6 months for primary residences and 12 months for vacation home HELOC Facts contd. Note: Members will receive two letters by mail to let them know that their advance period will be expiring. These are mailed at two months and at one month prior to the expiration date. What happened after the loan advance period expires? The member will have an additional ten years to pay make payments on the balance. What will happen if the minimum monthly payment is not enough to pay off the balance in ten years? This could possibly happen, especially on larger balance loans. The member will get a letter two months before the limit expires, giving them some time to consider their options. When are the funds available to the member? There is a three business day waiting period before the HELOC funds become available. Business days do not include Federal holidays, but they do include non-Federal holidays when ACCU is closed, such as Good Friday. Ex: Member closes on Tuesday before Easter, so the business days are Wednesday, Thursday, and (Good) Friday, so funds become available on the following HELOC Facts contd. What is our max loan-to value and how is this calculated? The max LTV for primary residences is 80% and for vacation homes (MI only) is 70%. This is calculated based on the home value (from Zillow at initial application). Ex: Member is requesting a limit of $65,000. Zillow is $200,000 80% of $200,000 is $160,000. Member owes $106,000 on their first mortgage. So $160,000 minus $106,000 equals $54,000. This is the max amount we can lend the member on their home. But the home value we order comes in at $215,000. 80% of $215,000 equals $172,000 $172,000 minus $106,000 equals $66,000, so member can have either the $65,000 they requested, or the $66,000 that is available on their home. HELOC Facts Contd. How is the monthly payment calculated? The monthly payment is calculated at 1% of the outstanding balance at the end of the statement cycle. HELOC Facts Contd.. Do we offer HELOCs on condominiums? Yes, we do! We will not do HELOCs high-rise condo units. All condo associations must answer a questionnaire to be reviewed by us. All condo associations must be warrantable. The condo association must be warrantable. We will determine this based on the answers provided on the condo questionnaire, which MUST be completed by a member of the Condo Association BOD, and MUST be delivered by an ACCU Loan Officer, either by email or mail. A member may not hand-deliver these. If the condo is not warrantable and the member knows this already, we cannot move forward with the loan. We will not refund the questionnaire fee, once it has been ordered, so this would be a good question to ask the member. Gaining knowledge can push you ahead of the game! Collecting Documents Please follow the HELOC checklist when collecting the documents. Everything listed on this checklist is important, and missing documents may hold up the HELOC process. There are only two forms that are time sensitive, one is the Affiliated Business Arrangement, and the other is the Right to receive Appraisal (if ACCU is in first lien position). Failure to collect/provide these documents could result in fines. The Loan Officers mail the Right to Receive Appraisal as soon as the application is received. We have three business days to mail this out, so if the application was entered into Symitar two days after the member brought it in, Checking the Application Documents Review the application to be sure all fields are completed The most commonly missed fields: Vesting on page 1-- (single man/woman, married man/woman, husband and wife, a married couple, etc.)—We need to know this when we order title, so it is listed correctly on the mortgage document Escrow question on page 2—If members list that they do not escrow for tax/ins, we will need summer and winter tax bills Estimated home Value and Mortgage balance on page 2—We will only finance 80% of the home value. If you subtract the member’s mortgage balance from 80% of the home value, and there is not enough value to grant the minimum HELOC amount ($5000), then the home doesn’t have enough value to do a HELOC Demographic—This must be completed. If the member doesn’t wish to complete it, an MSR must complete it, even if it is a guess. It is needed whether the loan is approved or denied. There are three fields to complete, ethnicity, Race, and sex Collecting Application Documents, contd. Disclosure of Affiliated Business Agreement—This form is required by RESPA at the time of the referral to our title company or with the initial disclosures. We provide this with the HELOC application as part of the initial disclosures, because ACCU owns 4.63% of the title company. After further review of this form, from our onsite legal counsel, this form has been revised to exclude the other CU partners and include only the services that ACCU orders, while still meeting the requirements of Reg X under RESPA (Real Estate Settlement Procedures Act). This must be signed by all borrowers at application. Borrower Authorization—Members must sign and date this form. We use this to add mortgage on to the homeowners Ins policy and for employment verifications when needed. Documents needed for Underwriting Income—We require two consecutive pay stubs or if self-employed, two years of personal tax returns, all schedules and K-1 forms which may come separate from the business tax returns. Please make sure all copies are clear and legible, and make sure the tax returns are in order. Side note: We do not count overtime or bonuses HOA dues—If the member lives in a condo, whether attached or detached, we will need a copy of the paid HOA bill(s) These are either paid monthly, bi-annually, or yearly. Please ask the members what they pay, and how often they pay it. Sometimes we find this amount on Zillow or on our appraisal, but not always. We will need to add the amount to the liabilities to get an accurate DTI when we process the HELOCs Documents needed for Underwriting contd. Mortgage Statement—We use this not only to verify the mortgage balance, but to see if the member(s) escrow for property taxes and insurance. If they don’t we need to add these costs to the liabilities. We will also need mortgage statements for any vacation homes, as well. Property Tax statements—We will need both the summer and winter tax bills for the subject property as well as vacation homes owned. This will be added to the liabilities if it isn’t included in the mortgage payment. Homeowner’s Insurance—We will check to see if the dwelling coverage is sufficient to cover the first mortgage and HELOC. If not, we may ask the member to increase it (if they do not have. For condos, we require a copy of the building insurance, as well (covers the building to the walls). For detached condos, there is only the homeowner’s ins. policy. Please remember to enter the insurance policy information into the tracking when entering the application into ELA. Flood Insurance Policy (if applicable)—Members MUST carry this if it is determined that the property is in a flood zone. Deed/Quit Claim Deed—We use this to see what names are on the property and how the names are vested. If the house is deeded in a trust, we will ask for the Existence of Trust document Documents needed for Underwriting contd. Divorce Decree—The title company will ask for this if they find there was a divorce while searching the property records. The want to be sure that the ex-spouse isn’t owed any money from the home, as many don’t need to pay this until the house is sold refinanced, or a second mortgage is taken out. Trust Existence-This gives us the exact vesting for the mortgage document, along with the Liber and page of the recording. It also lists the provisions of the Trust, such as the names of the Successor Trustees. Origination fee—We collect this upfront. If the loan is denied, we will send a note back to the branch to refund the fee. Scanning Documents---When scanning in your HELOC documents, please be sure to review the attachment(s) before you email them to us. Make sure all documents scanned clearly, and are not cutting off any important information we need. Also, keep all documents that have multiple pages in order. Looking for Approval Everything you wanted to know about the Underwriting Experience, but were too afraid to ask… There are four main factors we look for when reviewing HELOCs for approval  Credit history  Debt-to-income ratio  Loan-to-value  Job time There are other compensating factors, but these are one ones that take precedence 1. We review the credit history, not only to look at the repayment history, but to look at patterns of repayment. 2. Debt-to-Income ratio must be under 55%. We also look at the unsecured debt ratio. If this ratio is high, we don’t want the DTI ratio to be at max. 3. Income—We will calculate the hourly or salary amount, and an average of commission amounts. We ask for the previous year W2 form and the YTD total for the current year to calculate an average amount Looking for Approval contd. 4. Debts—We look at the amount of debts, particularly the timing of these. If the member has escalading revolving/unsecured credit obtained over a short time period (unless there was an event to caused this, such as an illness, death, job loss, etc.), it becomes a concern. We also look at the mortgage date to be sure it matches the lien on title. If it doesn’t, there may have been another mortgage since this. Note regarding the mortgage date, please make sure members know that we require a 6-month waiting period after the purchase or refinance of the (primary residence) home and a 12-month waiting period for vacation homes before we are able to grant a HELOC. If members are aware of this before the application is entered, it will avoid an unnecessary credit pull. 5. Liabilities—We will add property tax and insurance for any homes owned by the member where these are not escrowed with the mortgage payment. We will add in HOA fees, as well, as these are rarely included with escrows unless they were seriously delinquent at any time. 6. Loan-to-value—Loan to value is reviewed. The maximum loan-to-value allowed is 80% for primary residences and 70% for vacation homes. There are times where we will not approve the maximum ratio, based on credit, home condition, debt ratio, etc. Looking for Approval contd. Note regarding the Appraisals--We revise our process of valuation types based on market conditions. There are several different values we use. If members ask what we use, simply tell them it changes consistently, and a Loan Officer will contact them discuss which valuation will be used once the application is submitted. Zillow is only used as an initial guideline. Closing Documents Time to Review! Practice Makes Perfect!