Say Goodbye to Stated Income at Hudson City – Jan 10th

Good news: Northstar Funding has an exclusive alternative product which is a NO-DOC loan. We base the loan on rental income (leases only) and qualify as a commercial loan. No primary residences allowed. Debt Service coverage of 1.25%. 70% LTV, min credit score 650, rates range from 7.49 – 10.99. All property types allowed, single family, condo, 1-4 unit, 5+ units, mixed use & commercial. Register and lock any loans you have ASAP!!!

I can help you!

Joseph M. Pisa

President, CEO

Northstar Funding

(800) 917-1595 x 9

Fax: (800) 917-1595

Cell: (800) 917-1595

Email: jpisa@nshomefunding.com

www.nshomefunding.com

79 Hudson Street, Ste 301A

Hoboken, NJ 07030

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HUDSON CITY Policy changes for 2014

Memo to: All Mortgage Bankers and Brokers

Memo from: Thomas E. Laird, Executive VP & Chief Lending Officer

Re: CFPB Ability-to-Repay and Qualified Mortgage Regulations

Date: 12/26/2013

The Bureau of Consumer Financial Protection (CFPB) has amended Regulation Z, which implements the Truth in Lending Act (TILA). This rule becomes effective on January 10, 2014.

Regulation Z currently prohibits a creditor from making a higher-priced mortgage loan without regard to the consumer’s ability to repay the loan. The final rule implements Sections 1411 and 1412 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which generally require creditors to make a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and establishes certain protections from liability under this requirement for “Qualified Mortgages.” The final rule also implements sections of the Dodd-Frank Act, which limits prepayment penalties and includes provisions relating to loan officer compensation, amended appraisal requirements; homeownership counseling notifications, new servicing requirements and mandates that creditors retain evidence of compliance with the rule for three years after a covered loan is consummated.

In light of the changes made under this new legislation, the Bank has had to make some weighty decisions about the products it can reasonably offer without violating either the intent or spirit of the rules in this new regulatory environment. In as much as the Ability-to-Repay (ATR) and Qualified Mortgage (QM) rules harbor significant consequences for non-compliance as well as affords additional protection for borrowers to use as a defense in a foreclosure proceeding, the Bank will amend its Lending Policies, Underwriting Guidelines and will revise and/or require several new forms with the acceptance of any new application beginning on 01/10/2014. Copies of related policy and document changes are attached hereto.

Changes will be made as follows:

Lending Policy:

Reduced documentation loans, since they do not meet the requirements of the Ability-to-Repay rules will no longer be offered by the Bank
Loans made in the name of a Trust or Limited Liability Company (LLP) will no longer be permitted
“Interest-Only” loans, although not meeting the requirements of the Qualified Mortgage rules will continue to be offered by the Bank but be generally qualified using ATR and QM standards
1/8% rate reduction for borrower paid compensation is being eliminated
As previously communicated to you, the Bank will begin to send copies of adverse action letters directly to the borrower(s) in addition to your company
A copy of the appraisal report submitted to the Bank for review will automatically be forwarded to the borrower(s) when the file is evaluated by our staff

Form Revisions:

Application Disclosure was revised to reflect the new requirements relating to provision of appraisal copies
Condo Policy was revised to clarify that project would not be acceptable if any portion of the units in the building were being operated under a hotel or leasing arrangement
Underwriting Manual has been revised to include all changes necessitated by the Ability-to-Repay rules and those applicable Qualified Mortgage rules under which the Bank will analyze loans
A new Homeownership Counseling Disclosure will be provided at the time we send the Good Faith Estimate along with a list of 10 local counseling service providers based upon the current zip code of the applicant(s)
Broker Lending Policy with all applicable changes made reflecting items listed above
Addition of the requirement for an executed Form 4506T at time of application to be included in the required list of items to be forwarded when submitting an application to the Bank for review as well as an additional signed copy of the form at time of closing

Requirement for the underwriting package to include documentation verifying the current real estate tax expenses on the property being financed (in addition to the proper figure listed by appraiser on submitted appraisal report)

Revisions to Master Broker Agreement (previously provided) as well as a new Broker Fee Agreement which now includes a section with the required Company and Loan Originator NMLS information. This new form (attached) has been made interactive and the appropriate fields can be pre-filled by your employees for your convenience.

The primary challenge that all lenders will have in this new regulatory environment is to be able to evidence compliance with the ATR and QM standards. This will be needed to satisfy internal auditors or for other internal purposes as well as to fulfill regulatory requirements and defend against borrower actions under TILA. As best we can see it, the prevailing concerns can all be addressed by a variety of methodologies, but the overriding “cure-all” is to take all requisite steps to properly document, validate and be able to defend the thought processes used in making a reasonable, good faith determination that consumers have the ability to repay the loan.

While this places a great deal of responsibility on the part of the lender, regulators are equally concerned with the quality of the lender’s business partners and their ability to perform in accordance with the requirements of the regulations. It is widely anticipated that nationwide mortgage loan volume next year will be down as the new regulations take hold, effectively excluding borrowers who may have qualified for loans in the past as well as increasing the costs and timeframe to process and approve loans. Careful due-diligence will be required of all lenders and Quality Assurance and Quality Control staffs.

This is where you come into play.

Helping our staff members by diligently processing files, getting appropriate, supportive information and ancillary evidence documented and supplementing anything that “may raise eye-brows” in the file with instructive notes or explanatory information will go a long way in reducing both timelines and/or overall decisions. Haphazard or shoddily prepared files will delay the process and add additional steps, workload and time to the process.

Accordingly, we ask that you review all of the information being provided to you with appropriate members of your staffs to assure that everyone is “up-to-date” on the changes taking place and ask that they be patient as the process rolls out, since this will be a learning experience for us all as we traverse “the new normal”.