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CALSTRS-Certification-Training---FMC-April-2011 Powered By Docstoc
					Desktop Underwriter is a registered trademark of Fannie Mae. Loan Prospector is a registered trademark of Freddie Mac.
This presentation is a summary and is not complete. This information is for mortgage professionals only and should not be
distributed to or used by consumers or other third-parties. Information is accurate as of the date shown below and is
subject to change without notice. 04/05/2011

  • Introduction
  • Eligibility Guidelines
  • Program Guidelines
       Eligible 1st Loan Program
       Second Loan Products
         • 80/17
  • General Underwriting Guidelines
  • Rate Locks, Fees and Float Downs
  • CalSTRS Marketing Guidelines

Introduction to CalSTRS
Quick Facts
Advantages of the Program


                   Introduction to CalSTRS
 CalSTRS is the California State Teachers Retirement Program providing
 retirement related benefits to teachers in public schools and Community
 Colleges in the state of California.
     Largest U.S. Teachers Retirement Fund
     2nd Largest U.S. Public Pension Fund
     CalSTRS assets stands at $150.1 billion as of February 28, 2011
     CalSTRS membership stands at over 852,316 as of June 30, 2010

 The CalSTRS Home Loan Program was established in 1984, and
 restructured in July of 2004.

 It was designed as additional source of home financing for its members and
 retirees giving them a great choice of mortgage loans with competitive rates.

Money Works for Pension Fund
    Borrowers can obtain a great loan with a competitive rate
    and their money works for them, since income derived from
    the Home Loan Program goes directly into the Teachers’
    Retirement Fund.

FIRST                               MORTGAGE
                                    Quick Facts
        Topic            06/30/10       06/30/09

Active Members           441,544        459,009

Inactive Members         166,976        156,207

       Total Members     608,520        615,216

Service Retirements
Disabilities             243,796        232,617
Survivor Benefits

       Total Members
     including Benefit   852,316        847,833

   FIRST                    MORTGAGE
                SPONSOR: CalSTRS
    (California State Teachers Retirement System)

                (First Mortgage Corporation)

                       (Bank of America)
  (BofA is the master servicer and provides administrative services;
                    i.e. marketing, support, etc.)

FIRST                        MORTGAGE
     New Requirements for BROKERS
CalSTRS is enforcing additional requirements to lenders who allow brokers
to originate loans under their program. This is to ensure the broker is
knowledgeable of the program. (See announcement from August 17, 2009)

Lenders must implement the following for brokers:
•      Mandatory broker training for each broker/loan officer and processor
•      (conducted by lender).
•      Loan officer certification, valid for one year (managed by lender);
•      Lender must send Bank of America the broker certification for
       CalSTRS tracking purposes.
•      Loans to be submitted to lender with a special identification number
       for the Certified loan officer (so that lender can ensure broker is
•      If CalSTRS requests a broker to be removed from participation, the
       lender must comply.

    FIRST                            MORTGAGE
Eligible Borrowers
Eligible Properties


  CalSTRS Eligibility Guidelines
  Topic                             Description
             1. Employees of a California public school district
             2. Employees of a California Community College
             3. Member(s) of the California State Teachers' Retirement
             4. CalSTRS employees

                 •   As proof of eligibility, a copy of a CalSTRS benefits
 Eligible            statement, or a pay stub or VOE from a California
Borrowers            public school district or Community College
                 •   Borrowers must have a valid social security number
                 •   Inactive CalSTRS Members are eligible as long as
                     they have funds in their CalSTRS retirement account
                 •   Non-permanent resident aliens are eligible on the
                     Standard Conventional Program ONLY (LTV is limited
                     to 75%)

 Eligible        SFR Attached & Detached
                 PUDs Attached & Detached
                 Condos – must be Fannie Mae approved
                 2-4 Unit properties
 CalSTRS Eligibility Guidelines
Topic           Description

Geographic      Properties within the State of California ONLY

Occupancy       Owner Occupied Primary Residences only

FTHB            No First-Time Home Buyer requirement

Income Limits   No Income Limits

Sales Price     No Sales Price Limits

 FIRST                     MORTGAGE
Standard Conventional
2ND Products



 1. Standard Conventional
    •   Conforming

 2. 80/17 Program
    •   2nd Product – 3% Down

FIRST                MORTGAGE

1. Insurability of Mortgages by MI Companies
   (Standard CalSTRS Programs)

     Check individual MI company guidelines for
     insurability guidelines – especially for CA

FIRST                  MORTGAGE
                                 Conforming Product
Topic                 Description
Term                  15 or 30 Year Fixed

Loan Amount           Up to $417,000 – Fannie Mae Loan Limit
Max LTV – 1st         95% (Subject to MI restrictions – 90% in CA)
2nd Mortgage          Standard Fannie Mae Guidelines – Limited to 80% CLTV
Max CLTV              95% subject to MI restrictions (80% if using subordinate
Loan Purpose          Purchases, R&T Refinance, Cash Out Refinance
Eligible Properties   Owner-occupied
                      •2- to 4-units

Minimum Down          5% from borrower’s own funds
Own Other             Borrower can own other properties but with only 1
Properties            CalSTRS mortgage at a time
                             Conforming Matrix
                                        Loan Amounts up to $417,000

LTV Restriction: Max LTV allowed when there is secondary financing is 80%

FIRST                               MORTGAGE
    Conforming Loan-Level Price Adjustments
                                                Loan Amount up to $417,000

        All add-ons must be disclosed as Loan-Level Price Adjustments on the GFE or HUD-1. Loan-
        level price adjustments must be disclosed on line 808, NOT on line 802. They may not be
        disclosed as discount points.

 FIRST                                          MORTGAGE
Underwriting Guidelines
Standard Program UW Guidelines
Specific 80/17 UW Guidelines
Mortgage Insurance


                                       Standard Conventional
                                      Underwriting Guidelines
Topic              Description
Underwriting       DU Approval Required
                   Manual UW not allowed

Reserves:              DU: Per DU or 2 months PITI (use more restrictive)
                       LP: Per LP or 2 months PITI (use more restrictive)
                       Manual: N/A

                   • Funds from 401k, 403b and IRA/Keogh may be used for reserves
                   if accessible prior to retirement
                   • CalSTRS retirement accounts MAY NOT be considered cash

Ratios             Follow DU findings – Standard Fannie requirement
Homebuyer          Not Required

Non Occupant Co-   Allowed following Fannie/Freddie guidelines
Borrowers / Co-

Down Payment       Minimum 5% from borrower’s own funds
Closing Costs      May be paid by 3rd Party
                                Standard Conventional
                       Underwriting Guidelines cont’d…

Topic            Description
Buy-downs        Temporary and Permanent buy-downs NOT permitted
Seller           3% for LTV >90%; 6% for LTV 75-90%; 9% for LTV <75%

Assumable        Loans are not assumable
Prepayment       Not allowed
Title Policies   Title Policies required.
                           Title Policy for 80/17 must cover 1st & 2nd loan amounts including
                        recording information on 2nd

Hazard           Must equal 100% of value or unpaid balance of the mortgage with
Insurance        replacement cost
Escrow/          90% LTV or higher – Impounds are mandatory
Impounds         < 90% LTV – Impounds optional but with a 0.15% price adjustment
Alt Docs         Permitted according to Fannie Mae & Freddie Mac guidelines.
                 Appraisal or property inspection required according to AUS Cert unless
                 waived by AUS cert (fee assessed)

   FIRST                                    MORTGAGE
                       Mortgage Insurance
          LTV                        Standard MI%

   80.01% to 85%                           12%

   85.01% to 90%                           25%

   90.01% to 95%                           30%

Required on all loans exceeding 80% LTV.
Standard coverage Mortgage Insurance required. Lower Cost
MI is NOT allowed.
FMC acceptable MI Companies include MGIC and Genworth.
80/17 program does not require MI.

FIRST                       MORTGAGE
80/17 Program

     Purchase Only

     30 Year Conforming

                       80/17 Program Summary
Topic                    Description
Eligible Properties      Owner-occupied
                         •  SFRs (1 unit only)
                         •  Fannie Approved Condos
                         •  Detached/Attached PUDs
Term                     30 Years 1st and 2nd
Maximum Loan             Up to $417,000 (Up to $505,612 – 1st & 2nd combined)
         1st - Max LTV   80%
         2nd - Max LTV   17%
            Max CLTV     97%
       Down Payment      3% (1% min from borrower’s own funds)
Loan Purpose             Purchase Only
Sources of Closing       Borrower’s own funds, seller contributions up to 3%, gift from
Costs                    relative, or unsecured grant from approved government agency

2nd Mortgage             Deferred payments on the 17% 2nd mortgage for the first 5
Own Other Properties     Borrower and/or their spouse may NOT own or be liable on
                         any other properties
                         •Current ownership of a timeshare will not disqualify from 80/17
Minimum Fico Scores:
       640 for Loan Amt up to $400k (combined 1st and 2nd)

       740 for LA between $401k and $505,612k (combined 1st & 2nd)

                      80/17 Matrix
                                               Max             Max
                 Max Loan      Max Loan
  Loan Type             st           nd      Combined        Purchase
                  Amt: 1       Amt: 2
                                             Loan Amt          Price

Conforming       $417,000       $88,612       $505,612       $521,250

                  *LTVs must be exactly 80% and 17%
                                         Second Mortgage Loans
                                                       (17% )
2nd Mortgage Information
 Interest rate for the second mortgage loans are set by CalSTRS, and carries the
 same rate as the first mortgage
 30-year term with a five-year deferred payment structure

 Simple interest calculation will be used for years 1 through 5, no principal or interest
 payments shall be due during the first 5 years (60 months).
 Borrowers will receive an annual statement for the 2nd from BofA.
 Qualifying Borrower: Since repayment of the 17% 2nd is deferred for 5 years, the
 monthly payment for the 17% 2nd need NOT be included in the monthly housing
 expense calculation.

Year 6 / Payment number 61:
    The accrued simple interest balance from the deferral period will be added to the
    original loan balance.
    The new loan amount will be amortized using compounding interest over the
    remaining 25 years (300 months). The borrower will make monthly payments for
    the remaining life of the 2nd loan (months 61-360).
    1.   Down Payment Assistance Program (80/17) has 2 Notes & 2 Deeds of
    2.   CalSTRS Note and Deed must be used
    CalSTRS 2nd P&I Sample Calculation
     Interest will be charged at the rate of ___________________________________ percent
     (_______%) on the unpaid principal until the full amount of principal has been paid. I will pay
     simple interest until one month before the first payment date shown in Section 3(B) and then
     compounded interest until the earlier of the Maturity Date (as defined below) or the date this
     Note is repaid in full.

2nd Balance: $59,160     Int. Rate: 7%   Settlement Date: 10/19 1st Due Date: 12/1
                    $59,160      loan amount
                    x       7% interest rate
                    $4141.20 accrued interest

                    x         _5 yrs deferral period
                    $20,706.00 total accrued interest for 5yrs

                    +$59,160.00 original loan balance
                    + $ 147.49 13 days of interest from 10/19 (sett date) on 11/01 (one month
                        prior to 1st payment)

                    $80,013.49 amortized for 25 years = $565.52

FIRST                                           MORTGAGE
               80/17 AUS Underwriting

               SPECIAL NOTES:
Non Conforming loan amounts discontinued effective
80/17 program does not require MI
               80/17 Underwriting Guidelines
•   640 is required for all combined loan amounts up to $400,000
•   740 for combined loan amounts between $400,001 to $505,612

  Follow DU finding

  Stricter of 2 Months or AUS.
         CalSTRS retirement accounts may NOT be considered cash reserves.

    Required for 1st Time Homebuyers only.
        Only one occupant borrower must attend but recommend for all to attend.

   80/17 loans run through DU will have Conventional Standard
   underwriting guidelines and will appear as Conventional Standard loans
   with secondary financing (Flex is no longer available).
         Input the 2nd into DU as a “Community 2nd”. This will provide a more
         favorable Approve/Eligible findings since the 2nd mortgage is recognized as
         deferred for 5 years.
                      80/17 Underwriting Guidelines
NON-OCCUPANT Co-Borrower and Co-Signer:
   Not permitted

   3% down payment is required
   Minimum of 1% must come from the borrower’s own funds.
   Remainder may come from:
       Gift from a relative if repayment is not required
       Grant from a government agency or an employer-assisted housing
       program, which has been approved

  Can be paid from following sources:
      Borrower’s own funds
      Seller contributions up to 3%
      Gift from relative
      Unsecured grant from a government agency or an employer–assisted
      housing program, needs approval by CalSTRS.
      A minimum $500 contribution from borrower’s own funds

   Mandatory on all 80/17 loans.
Interest Rate Lock, Float Down & Commitments
CalSTRS Program Fees
Current CalSTRS Program Rates


        CalSTRS Interest Rate Lock, Float Down &
Topic            Description
Interest Rates     Available daily on the FMC Website (WS: Check with your AE for website)
                   Available from the CalSTRS Website
                   Available from your Account Executive
Lock Periods       FREE 45 day rate lock
Float Down        One-time FREE float down
Opportunity       The float down may occur at any time during the 45-day lock period
                  The Float Down is NOT available after the 15-day extension period is
                 exercised, regardless of when the extension is take
Extension        • Multiple extensions and relocks allowed up to a max 90 days
Policy           • Extensions are in 15 day periods at a time
                 • 1st 15 day extension (FREE) will be used by FMC for delivery
                 • Subsequent extensions subject to a .350% FEE for each to max 90 days
                 • Loans that have not closed after all other extensions have been exhausted
                 will be subject to worse case plus .350% FEE
                 • All extensions must be made before re-lock/cannot extend once relock is
                 • All extensions on 2nd liens are FREE

    Lock for 80/17 1st and 2nd mortgages must be made concurrently
    Property changes require new lock

      FIRST                                   MORTGAGE
    No fee for cancellations, all loans that will not be delivered must be cancelled
                       CalSTRS Program Fees
Topic              Description
Max Origination    •   1% (Standard Conventional CalSTRS)
Fees               •   1.25% (80/17 - only on the 1st loan)
                             Broker retains Origination Fees they charge

Discount Points    NOT ALLOWED

Rebate/Premium     None available

Other Closing      Normal and customary fees including an appraisal fee,
Costs              credit report fee, survey fee, title insurance premium,
                   and other closing costs as permitted by the respective
                   agency. Must be fully disclosed on the HUD-1.

Loan-Level Price   Must be disclosed on GFE and HUD-1 and may NOT be
Adjustments        disclosed as discount points.

  FIRST                             MORTGAGE
            CalSTRS Marketing Guidelines

  ALL marketing materials must be approved by CalSTRS.
  Marketing materials include hard copy advertisements (e.g.,
  flyers, letters, ads, bulletins, etc.) as well as electronic

  Lenders may not use CalSTRS-approved marketing pieces
  from previous mortgage loan programs.

 Correspondence for approval must be sent through your A/E

who will in turn forward it the FMC Marketing Team for approval!

FIRST                            MORTGAGE
Advantages of the CalSTRS Program
Low Cost loans with many options
    Buy a home
    Lower your existing payments
    Take cash out

80/17 program requiring a 3% down payment from the borrower, and comes with
a 17% 2nd with deferred payments during the first 5 years.

We’re on your side by offering the following:
     Competitive interest rates set daily
     FREE 45-day interest rate lock upon submission to protect from rising rates
     If rates drop after application, there is a ONE TIME interest rate reduction
     (float down option)

Receive Discounts
     CalSTRS has negotiated discounts on escrow, title fees and mortgage
     insurance rates
     Old Republic Title Company offers CalSTRS members a special
     escrow rate for the sale or purchase of their principal residence;
     this rate is seventy-percent (70%) of the applicable charge as set forth
     in Old Republic Title Company’s Residential Sale Transactions Rate
     contained in paragraph 1.1 of Section One of its Schedule of Escrow
     and Service Fees.

FIRST                               MORTGAGE
     CalSTRS Certification Requirement

Certification Requirement
        In an effort to continue offering the CalSTRS program to our Wholesale
        Division, CalSTRS requires that all 3rd Party Originators (Wholesale Brokers,
        Loan Officers, Processors) be certified before originating their program.
        As part of the Certification Process, each Broker/Loan Officer will be
        required to attend a CalSTRS Training, take the Certification Test, and
        obtain a Certificate which will be required in every CalSTRS loan file
        submitted for purchase.
        CalSTRS Certification is now available through First Mortgage Corporation.

Broker Selection
        All broker requests for certification will be sent to their respective FMC A/E.
        Participation in this program is at the FMC Branch Manager’s discretion.

 FIRST                                 MORTGAGE
              CalSTRS Certification Process?

First Mortgage’s Certification Policy
    1.   First Mortgage offers live on-line CalSTRS Certification Trainings once a
    2.   Upon completion of the Training, and when you’re ready to take the test,
         submit a request via e-mail to your FMC A/E for the Certification Test.
    3.   The FMC Wholesale Branch Manager is responsible for sending out the
         CalSTRS test for their respective brokers.
    4.   Completed tests are to be sent to
    5.   Upon passing the Certification Test, the Certificate will be sent directly to the
         certified Broker/Loan Officer with a copy to the FMC A/E.
    6.   A copy of the Broker Certificate must be in all new CalSTRS files going to
         Underwriting effective October 1, 2009.
    7.   A list of all certified brokers will be sent to BofA on a monthly basis.
    8.   BofA has the right to request the removal of a Broker from participation in the
         CalSTRS Program.

 FIRST                                   MORTGAGE
Helpful Hints…
These are some of the hot buttons we’ve seen with BofA
with regards to CalSTRS loans…
1.   Flipped Properties – Even though Fannie Mae does not have a flip
     rule (90-day rule), do not try and deliver any flip transactions on the
     CalSTRS program (BofA) as there is a high risk of decline.

2.   Non-permitted additions – Absolute NO-NO with BofA which
     includes the CalSTRS program.

3.   Borrower paying Realtor fees – Isn’t a guideline violation, however,
     it does raise additional concerns if borrower is not purchasing
     property below appraised value – RED FLAG!

     Old Republic Title Company offers CalSTRS members a special
     escrow rate for the sale or purchase of their principal
     residence; this rate is seventy-percent (70%) of the applicable
     charge as set forth in Old Republic Title Company’s Residential
     Sale Transactions Rate contained in paragraph 1.1 of Section One
     of its Schedule of Escrow and Service Fees.
                                  First Mortgage Support
       WEB SITE                    TRAININGS                     SUPPORT

Go to our FMC websites for:   First Mortgage offers FREE           Retail:
                              Weekly ONLINE Trainings         Contact Loan Help

1.   RATE SHEET                                                  Wholesale:
                                See April 2011 Training        Contact your A/E
                                Schedule for upcoming
                                                           For help with your:
                                                               •    Scenarios
4.   FORMS                                                     •    Pricing
                              4/13 - FHA 203(k) Training
5.   CALCULATORS                                               •    Program
                              4/15 – FMC Products & FMC
6.   TOOLS                          Overlays Update
                                                               •    Loan
7.   MARKETING                 4/20 – HomePath Training             Submissions
                                                               •    Fees

            FIRST                             MORTGAGE
•     On behalf of First Mortgage Corporation,
    thank you for joining our training today and
       we hope the material was helpful and

        Thank you for your business!


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