page contents Mortgage News Digest: July 2015

Wednesday, July 29, 2015

Processor Boot Camp: Training Processors no Longer Means Re-Inventing the Wheel!

A goldmine of pre-developed training by industry leaders means you no longer have to pay to train new processors


Beginning in 1996 we ran Loan Processor Boot Camp classes as an answer to the fact that there was no real training in the area of processing. Over the last 20 years, the industry grew so much, and so many resources were deployed to use training as a sales tool, we can now benefit from vast libraries of pre-developed material when designing a training program. And the best news is that you can now use these tools to deploy your own pre-developed training program for new processors that you do not have to pay for.

We have often called processing the "life blood" of the industry. We live and die on the quality of our customer service, and so much of that service delivery depends on the processor doing his or her job well. While the processor must have some key skills - attention to detail, ability to multi-task - the industry has a very steep, though not long, learning curve to understand the business. Once a processor has achieved basic competency, the tasks become routine. The individual can start to rely on intuition and internal procedures to smoothly manage a pipeline. Once in place, companies almost forget that they have this critical resource in place. Like a finger, you don't realize how much you depend on processing until it's gone.

It takes some sort of upheaval, like a surge in volume or a raid from a departing manager, to cause the company to initiate the search for new processors. That's when you discover there aren't any. This presents the next choice - training one from scratch. But you don't have a training program. 

Fortunately, we have developed the template for you. But this remains a good opportunity to refine the way your company works. Going through the process of developing the program can really help you understand where the weaknesses in your production system are.

Step 1: Take Inventory of Necessary Skills


The first step in designing a training program involves making a detailed inventory of the key skills it should deliver. In the case of processing, looking at the duties as defined in a job description should provide the key components. If you or your company doesn't have a detailed job description, this may be at the heart of your processing problem.  We have provided a sample overview, but you really should have the detailed step-by-step for the job function, such as we provide here in your processing policies and procedures. 


Step 2: Assess the Training Needs


The training needs involving matching the specific skill with a deliverable, or a topic, that can be quantified in a training program. Sometimes these needs really don't need a whole training program because it's really a step-by-step process performed uniquely in your environment. But then there are elements which everyone in the industry needs to know which require some explanation. These form the core of your training program.

  • Introduction to the business
  • Basic Skills - Loan Origination System
  • Basic Skills - Loan File Set Up
  • Basic Skills - Credit Reports
  • Basic Skills - Income/Assets
  • Basic Skills - Income Calculation
  • Basic Skills - Appraisals
  • Basic Skills - Purchase Contract Review
  • Basic Skills - Submission
  • Workflow Management
  • Advanced Skills

When you look at this, you realize this represents the core "boot camp" with a focus on all of the general knowledge a processor needs to effectively do the job anywhere. The only thing left is to identify the courses that meet these requirements and assign the individual to take them.

Step 3: The No-Cost Curriculum Assembled


When we began updating our processing courses, we started having the distinct feeling that we were reinventing the wheel. In fact, it was true. Most of the core material in our boot camp was available in the public domain. We just needed to pull it together.

click to download the free training curriculum template
This template covers all of the content in the standard New Loan Processor Initiation Course

You can download the curriculum here as a template, and feel free to edit and share as you see fit.

Other Training Resources - Behind the Registered User Login

Many other training resources exist to supplement your training program for mortgage processors, but many of these are hidden behind password protected areas of a company's site. All of your vendors, however, offer training as part of their bundle of services; some is a value-added service, but some has a cost associated with it.

  • LOS provider - Calyx is the only provider that offers open source training to the public, but all of the LOS providers have training of some sort, much of it hidden behind the login screen. Ask your provider for access.
  • Investors and wholesalers - Many account executives will provide live on-site training. Utilize this to augment your training. But for each of your wholesalers, ensure someone goes through their offerings to determine if there is a catalog of past on-line webinars that can be added to your library.
  • Associations and Agencies - for advanced training, in particular, the agencies and associations often provide needs based training. The associations use this as a tool to drum up membership, so while it may be no-cost, it may be limited to members only.

The Practical Guide to Loan Processing - Still Relevant


Despite this, we still think our Practical Guide to Loan Processing is relevant as a foundational tool that allows an individual to independently learn all of the keys to the loan processing position. We offer hundreds of "job-based" tips and tools that cannot necessarily be provided in a service providers training. In addition, no one addresses the issue of role management and career advancement.

In addition, for companies, the detailed work of identifying process flow, synchronizing forms to ensure that the myriad compliance, quality control, agency and investor rules do integrate into the process mean that a detailed policy and procedure is much more important than the general knowledge that is in the public domain. 

Wednesday, July 1, 2015

"I Need Income Computation Training" means I don't understand self-employment

Changes to FNMA 1084 and Rental Income Computation Create Frustration

4 Months After SEL-2014-16, Confusion Persists


When a processor with more than 2 years of experience reports that he or she needs help computing income, fight the instinct to say "we need more training on income computation" and break out the elementary initial training material. What his or her statement expresses reflects the frustration of submitting a case to an underwriter after 45 days of processing only to have the file rejected for insufficient income. Clearly a bad day.

While you might expect this result from a rookie loan officer or processor, income computation worksheets have all but eliminated the problem for hourly or salaried borrowers; what remains is the self-employed and the uncertainty of rental income computation. This is because many processors and underwriters have not begun using the new forms. This may be due to the fact that Freddie Mac hasn't changed its online Form 91. In addition, internal policy may dictate the use of specific calculations that are MORE conservative that Fannie Mae's forms allow.

Please note that the changes required in SEL-2014-16 were effective 4/1, but then tabled until further notice by Selling Notice 3/24.  This article is not about the FNMA guidelines specifically but to point out the tools which are available for use in analyzing self-employed borrowers. 

FNMA 1084 Changes Not Fully Appreciated


The reality is that FNMA made major changes to the self-employment computation in its 1084 process. FNMA, as of January, no longer really endorses the Adjusted Gross Income Method of income computation, and has morphed the Schedule Analysis Method (1084) into a "Cash Flow Analysis Method." What's more, once you complete that analysis, you now need to evaluate the stability of that income using a "Comparative Income Analysis" form which reviews income over a period of time. According to Michael Whitbeck of Uber-Writer.com, the new process significantly changes qualifying for 1065 Partnership and S-Corporation principals.

The good news is that the underwriting industry has provided some free tools to help with this process.  You simply need to understand the variations.

FNMA 1084

The Fannie Mae form doesn't provide a form filler or calculator mode, so you stand the chance of making a math error on top of perhaps incorrectly attributing income.
Fannie mae income computation for self-employed borrowers provides line-by-line instruction
You should include the income computation in each file. This serves as the basis for discussion as to what an underwriter feels he or she must change.

"Standardized" 1084 Format Provided by Radian MI

Radian has taken the time to provide the Fannie Mae form in Excel format. This means that it will make the calculations for you. You can also see the impact of "what if" scenarios.

In addition to doing the math, the Radian Form provides prompts for sourcing the information from the tax return. 

The Radian form also provides a simple Rental Income Worksheet which takes into consideration new rules for subject property and other property rental calculations meeting FNMA guidelines.


MGIC Worksheet Provides Augmented Instruction

MGIC lists two different worksheets - an AGI (Adjusted Gross Income) method and SAM (Schedule Analysis Method). However, they refer to both as a "Cash Flow Analysis." This can confuse the individual trying to source a FNMA Cash Flow Analysis.  The AGI version seems to be closer to the FNMA 1084.



Freddie Mac is still an Option


Loans which do not meet the new criteria for Fannie Mae should be scrubbed against Freddie Mac's guidelines to determine if they are eligible as FHLMC still uses form 91 which still uses traditional calculations.

Fannie Mae Comparative Income Analysis

In addition to the income calculations required by the Cash Flow Analysis, the underwriter must perform a second analysis of the stability of the income.  If the income is decreasing, underwriting may require that the lower of two years be utilized, or may disallow the self-employment income entirely.