Mortgage Money Finance in Relocation by jolinmilioncherie


       Money, &
       Finance in
    Brenda DiMuro, Bank of America
      Sally Anne Hughes, Citibank
     Matt Canfield, GMAC Mortgage
Rick Willard, Wells Fargo Home Mortgage
   Solutions for

Brenda DiMuro, Senior Vice President
         Bank of America
          February, 2007
Lending Solutions
Mortgage Solutions
 Interest only loans can lower monthly
  payment by keeping debt ratios down. This
  feature is typically available on 5, 7, and 10
  year Adjustable Rate Mortgages.
 Combination first and second mortgage
  maximizes the LTV and CLTV
 Low down payment programs
 Use of duplicate housing benefit when there
  is no buyout offer
 Corporate sponsored seconds
 Subsidy Programs for high cost of living
Corporate Sponsored Second Mortgage
What is a Corporate Second?
A corporate-backed (guaranteed) second mortgage
closed simultaneously with the transferee’s first
mortgage. The corporation makes the payments
on the second mortgage.
Why a Corporate Second?
Addresses the problem of giving large sign-on bonuses
to recruit high level executives/specialists, encourage
individuals to accept assignments, as well as covering
loss on sale.

 Can be applied toward down payment,
   lowering mortgage amount
 Can be applied toward a higher purchase
 Can be used to cover loss on sale
How Does It Work?
 Lender advances funds for the second
 Loan is in employee’s name but guaranteed
  by the company even in the event that the
  employee terminates
 Total CLTV can be up to 100%

  Note: should not be offered to employees
  who are subject to Sarbanes-Oxley
Benefits To Corporation
 Controls initial cash outlay
 Enables the company to invest funds in other
  income-producing activities
 Administration is handled almost entirely by Lender
 Retains employees for a defined period of time since
  company pays off second mortgage only as long as
  borrower remains employed by company.
Benefits To Employees
 Helps employee who has limited funds for down
  payment due to
       Loss on sale
       High Cost area
       Short cash to close
 Allows employee to purchase larger home
       Lowers loan amount, or
       Increase down payment
 Provides for potential tax benefits
Mortgage Subsidy
Why a Subsidy?
 With mortgage buy downs and subsidies,
  companies can contribute to the additional
  cost associated with moving transferees to
  high cost of living areas
 Efficient method of increasing employee
  purchasing power
 Attracts, develops, empowers, and retains
  valuable employees
Types of Subsidies
 Cost of Living Adjustment (COLA)
 Interest Rate Driven Subsidies
 Dollar Driven Subsidies
 Subsidy Comparison vs. Relocation
 Allowance or Signing Bonus
                                                                                    Relocation Allowance or
                                     Subsidy Program                                Signing Bonus

Buying Power                         100% credited to                               Many lenders use only a portion
                                     qualification                                  of allowance to qualify borrowers

Benefit Usage                        100% directed                                  Undirected

Taxability                           Interest deductibility at                      Taxable as income to
                                     note rate                                      employee

Control                              Rate reverts to original if                    Lump sum paid as expense
                                     employee leaves; Company                       borne by Company
                                     no longer pays Subsidy

Administration                       Lender                                         Company

Let’s say you give the employee a lump sum of $25,000 toward their new home purchase. How much
more house will that buy? It may increase buying power by only $25,000 or approx. $15,000 if the
benefit is not grossed up. Additionally, it may cost $35,000+ if you tax protect it, and the money may be
lost if the employee resigns after they relocate.
 Subsidy Comparison vs. Cost Of Living
 Allowance (COLA) or Salary Increase
                          Subsidy Program                       COLA                             Salary Increase

Paid                      Annually 3-5                          Varies                           Annually Indefinitely

Buying Power              100% credited                         Approx. 28-33%                   Approx. 28-33%
                                                                debt ratios                      debt ratios

Cost                      Predetermined                         Predetermined                    Depends on length of
                          prior to closing                      prior to closing                 employment
                          of loan                               of loan

Other Costs               N/A                                   N/A                              • Increased benefit cost
                                                                                                 • Increased tax payment
                                                                                                 • Increased merit raise, etc.

A company would have to increase an employee’s salary significantly to make up a large cost difference,
because the mortgage company can typically only use 28-33% of an employee’s income for qualifying.
Conversely, the buydown goes directly to the mortgage payment for a far greater impact on
qualifications and no effect on salary, benefit cost, tax payment, etc.
Financial Solutions for International
    Assignees coming to the US
        Brenda DiMuro, Senior Vice President
                    CRP, GMS
                 Bank of America
                  February, 2007
Financial Solutions
 Mortgages – priced the same as loans to
  domestic transferees
 New Accounts – prior to or upon arrival into
  the US
 Funds Transfer – International wire transfers
  in US dollars or foreign currency
 Credit Cards – without corporate guarantee
  or cash deposit required
Financial Solutions continued
 Auto Loans – available with domestic
  pricing for length of term in US
 Online Banking – normally available at no
  cost to the transferee
 Wealth Management – available to qualified
       For additional information, contact:

 Brenda DiMuro, Senior Vice President, CRP, GMS
                 Bank of America
360.604.4470 or
  Jan Mitchell, Senior Vice President, CRP, GMS
                 Bank of America
 505.282.4198 or
 Solutions for
Moving Abroad

Sally Anne Hughes, Vice President,
         Corporate Sales
Citibank Global Executive Banking
         February, 2007
You’re Moving Me Where?
 Financial concerns and challenges for employees
  moving overseas
   How will you pay me?
   What happens if the exchange rate changes?
   How will I pay bills and access my money
   How will I manage my finances at home?
We’re Paying Them How?
 Financial concerns and challenges for international
  HR teams
    Developing equitable, cost-effective programs to
     compensate international assignees
    Ensuring assignee satisfaction during an
    Dealing with time zone differences
    Managing foreign exchange fluctuations
    Limited resources
Compensation Delivery Options
 Payment in home country currency
    Easy to administer
    Assignee needs method to deliver funds to destination
    Currency risk
 Payment in host country
    Complex for organization to manage
    Assignee may have ongoing home country requirements
 Payment in organizational HQ
    Easy for organization, challenge for assignees
 Payment split between home and host
    Difficult to administer
Additional Considerations
 International assignee population
    Size of population
    Assignment locations
    Short term vs. long term assignments
 Types of compensation over base
    COLA, premiums, bonuses, relocation allowances
    Tax payments
 Regulations in countries concerned
    Legal, tax, immigration, labor laws, political situation
 Organizational culture
    Centralized or regionalized policies
    Available resources
Compensation Dilemma
 Compensation delivery methods which provide
  the most value, convenience and protection for
  the assignee are typically difficult and expensive
  for the company to administer
 Split pay programs may work for large
 Home country pay often used by mid-sized or
  small populations
   Protect assignees from currency risk
   Provide assignees with funds transfer
Currency Risk
 Paying an employee in home country while
  expenses are incurred in destination subjects
  employee to foreign exchange risk
 Decline in the US dollar is problematic for
  US outbound assignees
Currency Risk continued
  $ equivalent of rent of £4000 over past two years

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Currency Risk continued
 Methods to mitigate FX risk include
  FX premiums
  Guaranteed exchange rate program
Sending Funds Overseas
 All exchange rates are not equal
    Interbank rate available for transfers of $1 million
    Spread over Interbank varies between 1% and 4%
 International wire transfer fees
    Debited from account or
    Billed directly to company
    Costs vary by bank, size of population, destination,
      size of transfer, method used to transfer funds
Banking Overseas
 Banking customs vary by country
    Limited use of checks overseas
    Typically strong online banking programs
 Fees vary
    Incoming wire fees
 Account opening requirements vary by country
 Access to credit varies by country
    Credit cards
    International mortgages
       For additional information, contact:

Sally Anne Hughes, Vice President, Corporate Sales
        Citibank Global Executive Banking
212.783.6383 or
With the Mortgage Process in 2007

          Matt Canfield, CRP
      Director, National Accounts
GMAC Mortgage, LLC – Corporate Relocation
True or False
1. Your salary is included in your credit score.
2. The previous owners insurance claims will not
   affect the new owners premium.
3. Your relocating employee’s identity is “totally”
   protected during their move.
4. A mortgage appraisal includes forecasting.
5. Good Faith Estimates are an exact breakdown of
   fees due at closing.
6. It is “best” to pick the loan product with the lowest
Credit Score Case Study
                                    CASE STUDY:
       Why isn’t my credit
                                    Salary - $300,000
        score high enough?          Credit Score - 560
                                    Reason Denied - Minimum Credit Score for Jumbo
                                    Loan is 660
                                    Area Moving To/From - NY to Detroit
                                    Down Payment – 20%
                                    Loan Amount - $925,000
                                    Debt-to-Income Ratio: 21%

                 CREDIT SCORE is #1 Reason People are Denied for a Loan

              Salary - $45,000

              Credit Score - 801
              Are Moving To/From - MO to NJ
              Sales Price - $450,000
              Loan - $427,500
              Debt-to-Income Ratio: - 64.7 %
Credit Scores
                   15%                      What is in my
                10%                         credit score?

                                 What’s Not In Your Score
                               · Your salary, occupation,
                               title, employer, date
                               employed or employment
                               · Your race, color, religion,
                               national origin, sex and
                               marital status
                               · Your Age
                               · Where you live
                               · Any interest rate being
Insurance Case Study
                                                     Purchase Price: $323,000
                                                     Loan Amount: $290,700
                                                     Location: Austin, TX
• Theft during the previous owner's tenure reported on a CLUE record
• Expected to pay about $650 a year (for insurance)
     • First and second company wouldn't insure them
     • Third quoted a $1,200 premium
• Two days away from closing, in danger of falling out of escrow
• Helped them find a company and it ended up costing $900 a year

                        Does information from your
                          relocating transferee’s
                        PREVIOUS property follow
                         them to their new home?
Insurance Scores
                                              What's On Your
1. General Information                         Property CLUE
2. Claims History of Property Being Insured
    (Last 5 Years)
3. Claims History of Individual(s)Seeking
4. Date of Previous Claim
5. Insurance Company(s) involved in Claim
6. Policy Number
7. Claim Number
8. Cause of Claim
9. Amount Paid
10. Status of Claim
11. Identifies who has received the report
Identity Theft Case Study
                                                      Purchase Price: $279,900
                                                      Loan Amount: $195,000
ISSUE:                                                Location: Tampa, FL
• Employee initiated at the beginning of relocation
• Went through pre-approval process immediately and discovered erroneous
  items showing up on credit report – turned out to be identity theft
• Worked with employee and credit agency to correct error
• Provided employee with pre-approval after score was corrected
• Happy Ending: Because the employee’s company provides advanced
  notification to their national lender allowing “time” for errors on credit
  reports to be corrected

And you thought your relocating
employee wasn’t vulernable to ID
Identity Theft
                             What can your transferees do
                                  to curtail IDENTITY
                               THEFT while relocating?
   • Secure websites/email
   • Open Houses
   • Mail Collection
   • Packing Information
Appraisal Case Study
                                                    Asking Price: $445,000
ISSUE:                                              Loan Amount: $425,000
• House didn’t appraise out                         Location: New Jersey
• Really wanted the house
• Slowing market caused property to be listed at high end of range
• Appraiser uses sale data within past 2 weeks to reflect “current”
  market conditions
• Buyer renegotiates with seller using the appraisal as leverage

                    “What do you mean my property
                     didn’t APPRAISE OUT? Get
                         another appraiser!”
1. Lender will request additional comps from selling
2. Underwriting reviews the comps to verify the
   validity of the original appraisal.
3. If the original appraisal is deemed invalid, an new
   appraisal is ordered. The new value is used-
   regardless of price-no averages are used.
4. Transferee is counseled on different options
   including renegotiating the selling price, looking at
   different loan options.

                Steps to Follow if a Low Value
                    APPRAISAL is Received
Subsidy vs. Points
Benefits & Drawbacks
         Action                  Subsidy
                                 Subsidy         Points
    Terminating             STOP Subsidy – You Paid it!
                            STOP Subsidy – – You Paid it!
                            STOP Subsidy         Paid it!
    Employee                SAVE unspent
                            SAVE unspent $ They Got it!
                            SAVE unspent $ $ They Got it!
                                             They Got it!
    Tracking &
    Tracking &              Pay over 1-5
                            Pay over 1-5      Pay 1 time
                                              Pay 1 time
    Reporting               years, normally
                            years, normally
    Refinancing             Move it to the
                            Move it to the    The $’s are
                                              The $’s are
                            new loan
                            new loan          gone
    Relocation      More difficult to         Mortgage for
    Policy Language grasp                     dummies
 Is paying points REALLY the
     best way to handle moving
         to a high cost area?
Good Faith Estimates Case Study
                                                Purchase Price: $464,333
ISSUE:                                          Loan Amount: $366,823
• Initially, taxes were provided to the lender  Location: LA to Montclair, NJ
  by the title company at $6,300 annually
• Lender provides borrower with a GFE based on the initial tax quote
• A day prior to closing, the title company provides the lender with a new tax
  amount of $9,500 (county records hadn’t been updated previously)
• Higher tax charges of $1600 were due at closing to meet escrow requirements
• Borrower couldn’t come up with the additional funds overnight
• During the loan process the lender had approved the borrower for a home
  equity line of credit (HELOC)
• Borrower was able to use the HELOC that he had not planned on
  utilizing for the additional $1600

             Where do Good Faith
             Estimates come from?
               Good Faith Estimates (GFEs)
                                                                 Line Number               Where estimate comes from
                                                       801   Origination Fee             % of loan amount.
                                                       802   Discount Fee
                                                       803   Appraisal Fee               Approximation dependent on
                                                                                         third party provider.
                                                       804   Credit Report Fee           Direct costs which are charged to
                       I. Estimate of Closing Costs    810   Tax Service Contract
                                                                                         the lender by third party
                                                                                         providers. Fees are virtually
                                                       814   Flood Certification Fee     always the same regardless of
                                                                                         loan amount.
                                                       817   Express Mail
Where do the GFE                                       836   Life of Loan Flood Cert
estimates come from?                                   812   Application Fee             Lender fees that are virtually
                                                                                         always the same regardless of
                                                       819   Lender’s Doc Prep Fee
                                                                                         loan amount.
                                                      1101   Settlement or Closing Fee   Estimates based on local title
                                                                                         company average fees. Fees
                                                      1103   Title Examination
                                                                                         typically regulated by state and
                                                      1108   Title Insurance             local government.
                                                      1201   Recording Fee Deed
                                                      1206   (Misc) Rec./Trans Cost
                                                      1301   Survey                      Estimates based on third party
                                                                                         provider average fees. Some
                                                                                         states do not require a survey.
Good Faith Estimates (GFEs) continued
                               Line Number                Where estimate comes from
                            901 Prepaid Interest   Prorated and based on the transferee’s
Escrow and Adjustments
II. Estimated of Prepaid                           closing date.
                            903 Hazard Insurance   Based on averages for the location. Final
                                                   number is dependent on insurance
                                                   transferee chooses.
                           1001 Hazard Escrows     Based on 903 Hazard Insurance. An
                                                   escrow account may be required.
                           1004 County Tax         Based on tax information that the
                                                   transferee provides. Final numbers will be
                                                   provided by the title company.

                                    Where do the GFE
                                    estimates come from?
New Loan Products
    Product                 Benefit                       Risk
Option ARM       • Choice of payment plan     • Negative amortization
                 • Payment: Minimum,          • Deficit equities
                   Interest Only, or Fully    • Delinquency
                   Amortized                  • Rate adjustments
Interest Only    • Interest Only payment      • Deficit equities
                   increases monthly cash     • Delinquency
                   flow                       • Rate adjustments
40 Yr Fixed      • Fixed rate                 • Higher total cost
                 • Slightly reduced monthly
50 Yr Mortgage   • Lower initial monthly      • Delinquency
– 5/1 Hybrid
                   payment                    • Higher total cost
                                              • Rate adjustments

                 Is a 50 year loan a good solution
                 for high cost of living?
Loan Products Case Study
         Jane Smith is moving from Austin, TX to Troy, MI

         Purchase Price & Loan Amount: $240,000
 CASE    Debt-to-Income Ratio: 54%
         Expects to Own Home: 5 Years
         Loan Product: Which should she choose?

                                                                                  Monthly Cost
                                           Interest          Monthly              (30Yr fixed –
              Product                       Rate             Payment                product)
1   30 Yr Fixed                            6.250%         $1,477.72            ($0)
2   5 Yr ARM*                              6.125%         $1,458.27            - $19.45
3   40 Yr Fixed                            6.750%         $1,448.06            - $29.66
4   50 Yr Fixed*                           7.000%         $1,444.05            - $33.67
5   30 Yr Fixed Interest Only              6.375%         $1,275.00            - $202.72
6   5 Yr ARM Interest Only*                6.125%         $1,225.00            - $252.72
* Interest rate only fixed for the first 5 years, afterwards annual interest
rate adjustments will affect subsequent payments.
     For additional information, contact:

            Matt Canfield, CRP
        Director, National Accounts
GMAC Mortgage, LLC – Corporate Relocation
 973.239.3324 or

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