Enact Holdings, Inc. · NASDAQ:ACT
Enact — Investor Presentation (June 2019)
87 slides from Enact's investor presentation, June 2019
Slide 1: Avoiding Common Underwriting Errors
Avoiding Common Underwriting Errors Suggested Best Practices June 2019 Genworth Mortgage Insurance Corporation ©2019 Genworth Financial, Inc. All rights reserved.
Slide 2: Agenda
Agenda Introduction General Underwriting Tips – Resources – Examining and Documenting Files Specific Errors and Recommendations – Capacity, Credit History, Capital, Compliance Questions and Answers Avoiding Common Underwriting Errors 1
Slide 3: Resources
Resources Job Aides, Tools, Websites Avoiding Common Underwriting Errors 2
Slide 4: For Information: Fannie Mae Single Family
For Information: https://www.fanniemae.com/singlefamily Avoiding Common Underwriting Errors 3
Slide 5: Fannie Mae Job Aids/FAQs
Fannie Mae Job Aids/FAQs https://www.fanniemae.com/singlefamily/originating-underwriting-training Avoiding Common Underwriting Errors 4
Slide 6: Fannie Mae Borrower Income Verification FAQs
Fannie Mae Borrower Income Verification FAQs Answers Common Lender Income Questions – https://www.fanniemae.com/content/faq/borro wer-income-verification-faqs.pdf Avoiding Common Underwriting Errors 5
Slide 7: Fannie Mae Top Trending Questions
Fannie Mae Top Trending Questions https://www.fanniemae.com/singlefamily/trending-questions?taskId=task-47 Avoiding Common Underwriting Errors 6
Slide 8: Fannie Mae Underwriting FAQs
Fannie Mae Underwriting FAQs Answers Common Lender Income Questions – https://www.fanniemae.com/content/faq/ underwriting-faqs.pdf Avoiding Common Underwriting Errors 7
Slide 9: Freddie Mac Single-Family Website
https://sf.freddiemac.com/ Effective Loan Application Review and Submission 8
Slide 10: Effective Loan Application Review and Submission
Effective Loan Application Review and Submission 9
Slide 11: Freddie Mac Loan Advisor Learning Resources
https://sf.freddiemac.com/tools-learning/loan-advisor/resources- learning#learning Effective Loan Application Review and Submission 10
Slide 12: Documentation and Rental Income Matrix
Documentation and Rental Income Matrix – Documentation Matrix Updated June 2019 – Rental Income Matrix Updated March 2019 – Assists with processing and documenting loan files – Be mindful of Product Overlays Effective Loan Application Review and Submission 11
Slide 13: Genworth Underwriting Guidelines
Genworth Underwriting Guidelines new.genworth.com Loan Product Advisor
Slide 14: Avoiding Common Underwriting Errors
Avoiding Common Underwriting Errors 13
Slide 15: Genworth MI Top Decision Errors
Genworth MI Top Decision Errors https://new.mi.genworth.com/underwriting-tips-and-credit-policy Effective Loan Application Review and Submission 14
Slide 16: Effective Loan Application Review and Submission
Effective Loan Application Review and Submission 15
Slide 17: Effective Loan Application Review and Submission
Effective Loan Application Review and Submission 16
Slide 18: Genworth MI Decision Tips Updated Every Quarter
Genworth MI Decision Tips Updated Every Quarter Avoiding Common Underwriting Errors 17
Slide 19: Rate Express
Rate Express™ x"% 800 444.5664 Genworth =! %, & la 's MI & RATES UNDERWRITING & GUIDES | LOS&CONNECTIONS | GENWORTHTOOLKIT | TRAINING YGet A Quote -Rate PIONS THAT MATTER Genworth Mortgage Insurance Express View Rate Cards \ \ / Explore MI | \ | J Products Learn About MI | Understand Your Master Pol
Slide 20: Genworth Training
Genworth Training Loan Product Advisor
Slide 21: Training Tools and Information
Training Tools and Information Avoiding Common Underwriting Errors 20
Slide 22: Common Underwriting Errors
Common Underwriting Errors Capacity, Credit History, Capital, Compliance Avoiding Common Underwriting Errors 21
Slide 23: Underwriting Reminders
Underwriting Reminders Every loan is unique Always follow prudent underwriting standards Information must be consistent All applicable guidelines should be followed Guidelines show minimum requirements Avoiding Common Underwriting Errors 22
Slide 24: Five Cs Six Cs
Five Cs Six Cs Capacity Capacity Credit History Credit History Collateral Collateral Capital Capital Compliance Compliance Common Sense Avoiding Common Underwriting Errors 23
Slide 25: Capacity Errors
Capacity Errors Income Calculation and Documentation, Self-Employed Borrowers Avoiding Common Underwriting Errors 24
Slide 26: Capacity
Capacity Steady, Stable, Likely to Continue – Two Year History – Guideline exceptions for some income types – Examples: Alimony, Survivor Benefits, Retirement • Three Year Continuance from application date Documentation – Check guidelines for minimum documentation requirement – Seek addition
Slide 27: Capacity: Fannie Mae
Capacity: Fannie Mae Fannie Mae Single Family Selling Guide §B3-3.1-01, Employment and Other Sources of Income Avoiding Common Underwriting Errors 26
Slide 28: Capacity: Fannie Mae
Capacity: Fannie Mae https://www.fanniemae.com/content/guide/selling/b/index.html Avoiding Common Underwriting Errors 27
Slide 29: Capacity: Freddie Mac
Capacity: Freddie Mac Avoiding Common Underwriting Errors 28
Slide 30: Capacity: Freddie Mac
Capacity: Freddie Mac Income continuance charts were added to Topic 5301.1 – Income and earnings types typically without documentable continuance – Income types with documentable continuance – Other income types that may or may not have documentable continuance Freddie Mac’s Single-Family Seller
Slide 31: Capacity: Freddie Mac
Capacity: Freddie Mac Employed Income Types Primary – Borrower’s primary source of employed income Secondary – Second job, part-time job or multiple jobs Primary Additional – Commissions – Bonus Additional – Overtime Secondary – Tips – Auto allowance – Mortgage differential – Militar
Slide 32: Capacity
Capacity Examine Paystubs Carefully – Clear explanations for withholding items • Possible undisclosed debt – Consistent information • Address • Social Security number – Last four digits – Year to date income • Showing on paystub • Consistent with income – Stale dated? – Year End paystub for borr
Slide 33: Capacity: Fannie Mae Commission Income
Capacity: Fannie Mae Commission Income Avoiding Common Underwriting Errors 33
Slide 34: Freddie Mac 2106 Policy
Freddie Mac 2106 Policy Effective February 2019 – All commission income will be treated the same – Individual returns or tax transcripts will not be required for any commission income – Loan Product Advisor has been updated Avoiding Common Underwriting Errors 34
Slide 35: Capacity
Capacity Income Trend/Declining Income – Can the income be used to qualify? – If so, use only the lower of the two years Fannie Mae Comparative Income Form (Form 1088) – For Self-Employed Borrowers – Reference Guide on the Genworth website Genworth calculators can be found at https://mi.genw
Slide 36: Capacity: Self-Employed Income
Capacity: Self-Employed Income Fannie Mae Income Calculations – Bulletin 2016-05 • Clarification in determining adequate business liquidity when required • Eliminated the requirement to document the borrower’s access to income • Extended the VVOE on Self-Employed from 30 days prior to the note t
Slide 37: Capacity: Self-Employed Income
Capacity: Self-Employed Income Freddie Mac Income Calculations – Bulletin 2016-19 • Revised and clarified self-employed income requirements for Freddie Mac • Distributions are not required for partnerships and S corporations but business must be capable of paying out profit and generating future
Slide 38: Capacity: Self-Employed Income
Capacity: Self-Employed Income Freddie Mac Income Documentation Avoiding Common Underwriting Errors 38
Slide 39: Capacity
Capacity Rental Income Guidelines And Rental Income Forms • Fannie Mae Forms 1037, 1038 and 1039 – Genworth has calculators on website • Genworth Rental Income Calculator is an option • Freddie Mac Update - Rental Form 92 – Genworth has posted Form 92 calculator on our website – Overview-Existin
Slide 40: Capacity: Freddie Mac Long Term Rental Income
Capacity: Freddie Mac Long Term Rental Income One-year management history or ownership of a primary home income (Section 5306.19c)(ii) March 1, 2019 – The borrower must own a Primary Residence to use rental income to qualify when purchasing a new rental property; and – Whether purchasing a new r
Slide 41: Capacity
Capacity Show Your Income Calculation Work – Agencies/Investors require calculations – Self-Employed Borrowers • Written analysis • Available Worksheets on The Genworth Website without requiring and ID or password – Fannie Mae Cash Flow Analysis (Form 1084) – Freddie Mac Income Analysis (Form 91
Slide 42: Credit History Errors
Credit History Errors Credit Scores, Credit Reports, Liabilities Avoiding Common Underwriting Errors 42
Slide 43: Credit History
Credit History Credit Concerns Not Always Recognized by AUS or Common Errors – Examples of Errors • No evidence in file why you are *omitting a debt • Taxes and insurance for properties owned free and clear omitted • Debts evidenced on paystub or disclosed during initial application • Paid mortgage
Slide 44: Credit History
Credit History Credit Scores – Minimum score requirement? • Non-traditional credit borrowers (without a credit score) eligible for AUS submission with Fannie Mae’s Desktop Underwriter® 10.0 – Two non-traditional credit references must be reviewed and one must be housing related – See Selling Gui
Slide 45: Credit History
Credit History Credit History – Trended Credit Data • Additional information can be found in Fannie Mae’s DU Version 10.0 Frequently Asked Questions • Credit reports used with Version 10.0 must include trended credit data • For now, lenders do not need to analyze trended data • Borrowers making
Slide 46: Credit History
Credit History Disputed Information – AUS Loans • DU provides messaging if impactful and further action necessary • Loan Product Advisor will provide “Invalid” recommendation if impactful • Manually underwritten typically significant items must be resolved prior to approval Inaccurate Informatio
Slide 47: Credit History
Credit History Minimum Payments – Usually on credit report. If not on credit report • Creditor supplied documentation • Revolving, – DU uses the greater of: • 5% of outstanding balance or • $10 – Loan Product Advisor allows • 5% of outstanding balance Open Ended Accounts (O-J or O-I under MOP on
Slide 48: Credit History
Credit History Student Loans – Fannie Mae Guidelines Stated Are Generic Fannie Mae Policy Avoiding Common Underwriting Errors 48
Slide 49: Credit History
Credit History Student Loans – Freddie Mac Prudent Underwriting Practices Will Apply Avoiding Common Underwriting Errors 49
Slide 50: Credit History
Credit History Excluding Debts – Contingent Liabilities or Not – Fannie Mae • Allows for any type debt (revolving, leases, student loans & mortgage debt) – Must document 12 month payment history with no delinquencies – Evidence payments made by someone other than borrower(s) – Mortgaged properti
Slide 51: Credit History
Credit History Recent Credit Inquiries – Definition • Freddie Mac: within past 90 days – Review updated messages on Loan Product Advisor Feedback • Fannie Mae: The report must list all inquiries that were made in the previous 90 days. – Confirm if new credit obtained • Do you see the new account
Slide 52: Capital Errors
Capital Errors Assets to Close, Borrower’s Own Funds, Gift Funds, Reserves and Large Deposits Avoiding Common Underwriting Errors 52
Slide 53: Capital
Capital Excessive Seller Contributions – Follow GSE, Investor and MI Guidelines – Loans with payment abatements are ineligible • Exception condo/HOA dues up to 12 months but amounts must included as IPC – Check for guideline overlays – See guidelines on next slides Avoiding Common Underwriting E
Slide 54: IPC's- Fannie Mae
IPC’s- Fannie Mae Avoiding Common Underwriting Errors 54
Slide 55: IPC's- Freddie Mac
IPC’s- Freddie Mac * *Freddie determines value by using the lessor of the sales price or appraised value Avoiding Common Underwriting Errors 55
Slide 56: Capital
Capital Purchase Price (or refinance of all debt to be paid off) - Earnest Money Deposit (only if verified) - Other Financing (if applicable) - Loan Amount Applied for + Balance Owed on 30 day accounts “O” + Closing Costs + Prepaids and escrows + Judgments, collections and debt to be brought current
Slide 57: Capital
Capital Assets to Close – Cash to close plus any reserves? – Reserves • Loan Product Advisor/DU – Verify funds required – Best practice: only enter needed funds – Match assets on 1003 with DU/Loan Product Advisor and 1008; Verify and submit to underwriter only what is needed. – Manual calculatio
Slide 58: Capital
Capital Large Deposits Fannie Mae – A large deposit is any deposit that is 50% or more of the total qualifying income being used to qualify • Source any account opened in most recent 90 days if using VODs • Asset statements look for one or two month seasoning depending on recommendation • Invest
Slide 59: Capital
Capital Large Deposits Freddie Mac – A large deposit is any deposit that is 50% or more of the total qualifying income being used to qualify • Source any account opened in most recent 90 days if using VODs Freddie Mac Seller/Servicer Guide § 5103.1 and 5501 Required funds Deposits Which May Indi
Slide 60: Capital
Capital Earnest Money – Documentation • From eligible source (account listed on 1003?) • Correct documentation per guidelines – Is it a gift? – Make sure funds are not counted twice • Back out of bank account balance if necessary Avoiding Common Underwriting Errors 60
Slide 61: Capital
Capital Borrower’s Own Funds – Fannie Mae 1. If the borrower receives a gift from a relative or domestic partner who has lived with the borrower for the last 12 months, or from a fiancé or fiancée, the gift is considered the borrower’s own funds and may be used to satisfy the minimum borrower co
Slide 62: Capital
Capital Borrower’s Own Funds – Freddie Mac • No requirement for >80% LTV loans where: – Primary residence and – Gift or gift of equity received from eligible donor used as source of funds or – Employer Assisted Homeownership (EAH) Benefit is used as source of funds • Some >80% LTV loans secured
Slide 63: Capital- Gift Funds
Capital- Gift Funds Gift Funds – Enter into AUS correctly – Must come from acceptable source – A gift can be provided by: • A relative, defined as the borrower’s spouse, child, or other dependent, or by any other individual who is related to the borrower by blood, marriage, adoption, or legal gu
Slide 64: Assets and Liabilities
Assets and Liabilities *New * List Assets – Breakdown by type of asset – Ask applicant which account or accounts or “source” of funds will be used for the transaction – Collect two months assets statement – Know what is considered a large deposit – Explain any change source of funds must be comm
Slide 65: Assets & Liabilities
Assets & Liabilities *New Do not enter gift funds in Section 2. Gifts are entered in Section 4. * Gifts must be evidenced by a letter signed by the donor, called a gift letter. The gift letter must: – specify the dollar amount of the gift; – specify the date the funds were transferred; – include
Slide 66: Capital- Gift Funds/ Documentation Requirement
Capital- Gift Funds/ Documentation Requirement Gifts must be evidenced by a letter signed by the donor, called a gift letter which: – Specifies the dollar amount of the gift; – Specifies the date the funds were transferred; – Includes the donor’s statement that no repayment is expected; and – In
Slide 67: Capital- Gift Funds
Capital- Gift Funds Availability & Transfer of Funds The lender must verify that sufficient funds to cover the gift are either in the donor’s account or have been transferred to the borrower’s account. Acceptable documentation includes the following: – a copy of the donor’s check and the bor
Slide 68: Capital- Gift Funds: Freddie Mac
Capital- Gift Funds: Freddie Mac Page 23 of matrix Much more detailed information regarding gift funds Avoiding Common Underwriting Errors 68
Slide 69: Capital: Fannie Mae
Capital: Fannie Mae Borrowers with Multiple Financed Properties – Reserve Requirements – DU determines the reserves required for the other residential financed properties (excluding the borrower’s principal residence and the subject property) – The reserve amount is determined by applying a perc
Slide 70: Capital: Fannie Mae
Capital: Fannie Mae Borrowers with Multiple Financed Properties Avoiding Common Underwriting Errors 70
Slide 71: Capital: Freddie Mac
Capital: Freddie Mac Loan Product Advisor Updated To Determine Reserves For Other Financed Properties – Loan Product Advisor will determine reserves for additional properties owned and obligated on when subject is a second home or investment property – Data accuracy is critical – Enter all eligible
Slide 72: Capital: Freddie Mac
Capital: Freddie Mac Effective August 20, 2018 Selling Updates Increasing number of financed properties to 10 when subject is a second home or investment. When 7-10 range loan must have: • 720 credit score • 8 months reserves for each second home or investment property borrower owns/obligate
Slide 73: Compliance
Compliance Completeness Avoiding Common Underwriting Errors 73
Slide 74: Compliance
Compliance Ensure Completeness of the Loan Application and Loan Package – Two year history • Employment • Residence – Occupancy • Make sense • Consistent throughout loan file – Final 1003URLA Signed – AUS updated with final data • Within tolerances, if permitted – Proofread • All information pro
Slide 75: Compliance
Compliance No Cash-Out, Limited Cash-Out. Rate & Term Refinance – Fannie Mae Limited cash-out refinance transactions must meet the following requirements: The transaction is being used to pay off an existing first mortgage loan (including an existing HELOC in first-lien position) by obtainin
Slide 76: Compliance
Compliance No Cash-Out, Limited Cash-Out. Rate & Term Refinance – Fannie Mae Limited cash-out refinance transactions. The following are acceptable in conjunction with a limited cash-out refinance transaction: ▪ modifying the interest rate and/or term for existing mortgages; ▪ paying off the unpa
Slide 77: Compliance
Compliance No Cash-Out, Limited Cash-Out. Rate & Term Refinance . Freddie Mac- A refinance Mortgage is either: 1. A Mortgage the proceeds of which are used to pay off an existing Mortgage or Mortgages secured by the Mortgaged Premises with the cancellation of the existing promissory note
Slide 78: Compliance
Compliance No Cash-Out, Limited Cash-Out. Rate & Term Refinance . – Freddie Mac No Cash-Out Avoiding Common Underwriting Errors 78
Slide 79: Underwriting Guides And Tools
Underwriting Guides And Tools
Slide 80: Rate Express
Rate Express x"% 800 444.5664 Genworth =! %, & la 's MI & RATES UNDERWRITING & GUIDES | LOS&CONNECTIONS | GENWORTHTOOLKIT | TRAINING YGet A Quote -Rate PIONS THAT MATTER Genworth Mortgage Insurance Express View Rate Cards \ \ / Explore MI | \ | J Products Learn About MI | Understand Your Master Poli
Slide 81: LOS Connections
LOS Connections EA GenworthZ, =. MI & RATES YOU-CENTRIC SOLUTIONS | UNDERWRITING & GUIDES LOS & CONNECTIONS Submit on our Site Submit with your LOS Use Optimal Blue & Doc Delivery Access Paper Applications GENWORTH TOOLKIT | TRAINING 7\N\ | Underwritin ° — | Innovate ewes % KNOW MORE Rate Express Fi
Slide 82: Genworth Training
Genworth Training Genworth =! % © — lulQ MI&RATES | UNDERWRITING & GUIDES | LOS &CONNECTIONS | GENWORTH TOOLKIT TRAINING YOU-CENTRIC SOLUTIONS THAT MATTER Browse Course Catalog Genworth Mortgage Insurance \/ View Live Webinar Calendar \ | 7 Self-Employed Borrower Calculators \\7 LEARN MORE NN Get to
Slide 83: Calculators and Webinars
Calculators and Webinars Course Catalog (em | Searen Waring courses a) Genworth offers a comprehensive suite of training opportunities to boost your know-how, benefit your bottom line and ultimately best serve your borrowers, With more than 70 courses in our catalog, our team is here to help you sta
Slide 84: Additional MI Site Information
Additional MI Site Information
Slide 85: Your Genworth Resources
Your Genworth Resources ➢ ActionCenter®: 800 444.5664 ➢ Your Local Genworth Regional Underwriter ➢ Your Genworth Sales Representative
Slide 86: Legal Disclaimer
Legal Disclaimer Genworth Mortgage Insurance is happy to provide you with these training materials. While we strive for accuracy, we also know that any discussion of laws and their application to particular facts is subject to individual interpretation, change, and other uncertainties. Our train
Slide 87: Questions?
Questions? Avoiding Common Underwriting Errors 87