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Underwriting Standards at PFN brought to you by BankerBroker.com

posted May 25, 2013, 7:37 PM by Massey Kouhssari

Underwriting Standards 

 

OVERVIEW 

Equal opportunity in the financing of housing and individual credit is a well-established policy of the United States, created through various Federal statutes, regulations, Presidential orders and proclamations. 

To comply with this policy, Priority Financial Network (PFN) a DBA of BM Real Estate Services, Inc. (The Company) will not: 1) discriminate in the origination of a loan or or 2) discriminate in fixing the amount, interest rate, duration, or other terms and conditions of a Loan on the basis of the age or location of any dwelling securing the Loan, or on the basis of the race, national origin, color, religion, sex, marital status, age (provided the person has the capacity to contract), familial status (having one or more children under the age of 18) or handicap of any of the following (collectively Applicant"):

  • An applicant or co-applicant;

  • Any person associated with an applicant or co-applicant regarding the Loan; or

  • The present or prospective owners, lessees, tenants, or occupants of the dwelling that will secure the Loan.

The Company will follow the best underwriting and appraisal practices in the financial services industry to ensure that the Company's decisions regarding extensions of credit are based on an Applicant's creditworthiness and capacity, as well as the value of any collateral that is offered to secure the credit. 

In determining whether to grant credit, or to set the terms and conditions of any credit extension, the following are among the factors that the Bank will evaluate: 

 

  • Current information on income, employment, assets, liabilities and net worth;

  • Previous credit experience, including a review of credit bureau reports; 

  • Verification of information provided to the Company; and 

  • The value of any collateral or property being offered to secure a Loan. 

Guidelines for Loans on 1-4 Family Dwellings: 

The following explains the general guidelines used by the Bank to evaluate owner occupied residential loan applications secured by one-to-four unit real property, including home equity loans. Guidelines may differ for investment and non-owner occupied real property.  


PROPERTY CONSIDERATIONS

Consistent with sound lending practices, the Company generally requires an appraisal (prepared by a licensed appraiser) of the real property securing a Loan which supports the Loan amount requested. The purpose of the appraisal is to identify the market value of the real property. Generally, this is accomplished by finding similar property sales in the same area. Other factors that are considered by the appraiser include the condition of the real property, zoning issues and availability of basic services such as utilities. For some home equity loans, the Company, at it sole discretion may use an Automated Valuation Model to determine the property value instead of requiring a full appraisal done by a licensed appraiser. 

CREDIT HISTORY

The Company obtains a credit report from an independent credit reporting agency in evaluating applications. This report is obtained either directly or from a third party originator. This credit report must document a history of responsible management of an Applicant's financial obligations. Past or isolated financial problems will not necessarily disqualify an Applicant for credit consideration. A valid explanation and a current pattern of financial esponsibility may mitigate the impact of negative data on the credit report. The Company may consider letters of reference from landlords or utility companies as an alternative to a credit report for Applicants with limited or no credit history for this type of credit extension. 

The Company may also use a credit score (i.e., FICO score) to evaluate an application. A credit score is an indicator of the likelihood that a Loan will be repaid. This number is calculated by the credit reporting agency, based on both negative and positive variables contained in an individual's credit history. 

INCOME AND EXPENSE INFORMATION

The Company evaluates how the Loan will be repaid, and whether the amount of an Applicant's debt is reasonable given the Applicant's income (debt-to-income ratio). In most cases, repayment will occur through employment income. A history of employment in the same field is a strong indicator of steady income. The Company will also evaluate income from self-employment, as well as other income sources such as pensions, bonuses, investments, rentals, and protected income. Alimony and child support income may also be included if it is disclosed during the application process and continuity of this income for three years is established. The income must be sufficient to cover housing and living expenses, other fixed expenses such as credit card and car payments, and the projected monthly payment on the proposed Loan. Qualifying debt-to-income ratios will vary based on the Loan product requested. Typically company requires housing obligation ratio not to exceed 28% of income and total debt obligation ratio not to exceed 31%. The company at its sole discretion may exceed stated ratios.

INFORMATION ABOUT YOUR ASSETS

The Company will evaluate and may verify liquid assets to ensure there are sufficient funds to close the Loan. 

Applicants may also be required to document other liquid assets in an amount equal to two to six months of loan payments as reserves. 

NON-OWNER OCCUPIED PROPERTY

The Company will consider applications secured by non-owner occupied one-to-four unit real property. The general standards noted previously will apply. In addition, any projected rental income or loss will be considered in the analysis of an Applicant's total income and expenses. 

INCOME AND EXPENSE INFORMATION

The Company evaluates how the Loan will be repaid, and whether the amount of an Applicant's debt is reasonable given the Applicant's income debt-to-income ratio). In most cases, repayment will occur through employment income. A history of employment in the same field is a strong indicator of steady income. The Company will also evaluate income from self-employment, as well as other income sources such as pensions, bonuses, investments, rentals and protected income. Alimony and child support income may also be included if it is disclosed during the application process. The income must be sufficient to cover housing and living expenses, other fixed expenses such as credit card and car payments, and the projected monthly payment on the proposed Loan. Qualifying debt-to-income ratios will vary based on the Loan product requested. 

CREDIT HISTORY

The Company obtains a credit bureau report from an independent credit reporting agency in evaluating applications. This credit report must document a history of responsible management of an Applicant's financial obligations. Prior or isolated financial problems will not necessarily disqualify an Applicant for credit consideration. A valid explanation and a current pattern of financial responsibility may mitigate the impact of negative data on a credit report. 

The Company may also use a credit score to evaluate an application. A credit score (i.e., FICO score) is an indicator of the likelihood that the Loan will be repaid. This number is calculated by the credit reporting agency based on both negative and positive variables in an individual's credit history. 

Other Terms and Conditions 

In addition to the information described above, the Company may require other supporting documentation in order to review a Loan request. Loan programs, terms and rates are subject to change or discontinue at any time without prior notice. Rates and terms may change if borrower's information varies from the time original loan application was submitted. Please inquire about our current Loan rates and terms.

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