Mortgage Ooan Origination

2. CENTRE FOR HOUSING FINANCE, MONEY AND
BANKING
CERTIFIED MORTGAGE BANKERS DIPLOMA
CHAPTER 6 (SIX): LOAN ORGINATION
MORTGAGE BANKING SCHOOL OF SOUTHERN AFRICA
6th Floor, Throgmorton House, Julius Nyerere Way & Sam Machel Avenue,
Harare. Zimbabwe
www.mbssa.net; info@mbssa.net enquiries@mbssa.net
Telephone 263-4 750447 / 48
MBSSA
MORTGAGE BANKING SCHOOL
OF SOUTHERN AFRICA
Facilitator: Dr Sam RUTURI
samruturi@yahoo.com or samruturi@mbssa.net
: LOAN ORIGINATION

3. INTRODUCTION – PROCESSING RESIDENTIAL MORTGAGE LOANS
LOAN
ORIGINATION
MARKETING
INTERVIEWS
APPLICATION
DATA CAPTURE
LOAN PROCESSING
LOAN FILE SETUP
VERIFICATIONS:
EMPLOYMENT
CREDIT
CLEARING
PROPERTY
VALUATION
LOAN
UNDERWRITING
PROPERTY
LOAN TO VALUE
BORROWER’S
INCOME RATIO
BACK-END
RATIOS
FRONT-END RATIOs
LOAN REGISTRATION
INSTRUCTION TO
CONVEYANCER
LIFE ASSURERS
HOC INSURERS
REGISTRATIONS
BOND, PROPERTY
TRANSFER
LOAN SERVICING
LOAN
COLLECTIONS
DELINQUENCY &
FORECLOSURE
PREMIUM
RENEWAL
PROPERTY
INSPECTION &
REVALUATION
PROCESSING RESIDENTIAL MORTGAGE LOANS

4. LEARNING OUTCOMES: LOAN ORIGINATION
Define mortgage loan origination
Determine the various methods used to generate mortgage business
Determine the responsibilities of mortgage loan originators
State and describe the different types of mortgage loan programs
Determine the rationale for waving a standard or uniform loan
application program.

5. CHAPTER SIX – LOAN ORIGINATION
Loan
Origination
Loan origination is the creation of mortgages.
Loan
Processing
is the process of collecting of documentations and
verifications to support information provided.
Loan
Underwriting
Underwriting is the evaluation of loan documentation to
facilitate the decision making process of either approving
or decline the loan application.
Loan
registration
If a loan is granted and accepted by the applicant, the society
Instructs its attorneys to draw up the necessary documents.
Loan
Servicing /
Administration
This is the collection of monthly instalments, management of
delinquencies and default, insurance renewals of both property and life
covers, deceased and insolvent estate administration, cancellation of
mortgage bonds and management of properties in possession.
Underwriting a
Residential
mortgage loan
After submission the loan application is subjected to rigorous checks and
verifications in order to determine the suitability of the borrower as a good
credit risk and the property as good collateral security for the loan.

6. RESIDENTIAL MORTGAGE UNDERWRITING PROCESS
5Cs OF CREDIT
UNDERWRITING
GUIDELINES
IS THE PROCESS OF ARRIVING AT A DECISION TO APPROVE OR REJECT A LOAN
APPLICATION
COLLATERAL
PROPERTY AS GOOD
SECURITY
FOR DEBT
IS THE PROPERTY OFFERED AS SECURITY WELL LOCATED OF GOOD APPEAL
AESTHETICALLY
CAPITAL LOAN-TO VALUE RATIO
IS THE DOWN-PAYMENT / DEPOSIT.
IS THEE PROPERTY CORRECTLY PRICED VIS-A-VIZ VALUE TO THE LOAN BEING
APPLIED FOR.
BORROWER AS GOOD
CREDIT RISK
IS THERE ABILITY OF BORROWER TO PAY DEBT?
IS THERE BORROWER WILLINGNESS TO PAY DEBT?
CAPACITY
FRONT-END RATIO
RATIO OF INCOME WHICH GOES TOWARDS SERVICING MORTGAGE DEBT.
CHARACTER BACK-END RATIO
RATIO OF INCOME WHICH GOES TOWARDS PAYING OTHER HOUSEHOLD DEBTS.
CONDITION ECONOMIC, LEGAL &
SOCIAL CONDITIONS
ARE ECONOMIC CONDITIONS FAVOURABLE FOR THE BORROWER TO AFFORD
TIMELY PAYMENTS FOR THE LOAN.

7. INTRODUCTION – PROCESSING RESIDENTIAL MORTGAGE LOANS
Capacity refers to the applicant’s ability to make monthly housing payments
and other financial resources such as money at the bank.
Character refers to the applicant’s motivation to make monthly mortgage
payments.
Capital refers to the liquid assets the borrower has available to make the
down payment on the loan, meet loan transfer.
Collateral refers to the underwriter’s evaluation of the subject property using a
professionally prepared appraisal.
Condition
refers to the prevailing economic climate which determines the
preparedness of a borrower to make timely payment towards
the loan.

8. Generating Mortgage Banking Business
Mortgage Banking Loan Programs
Completion Of The Loan Application
Qualities And Responsibilities Of The Loan Originator
Regulatory Compliance
Application Follow-up
LOAN ORIGINATION

9. MARKETING – GENERATING MORTGAGE BANKING BUSINESS
Loan Officer is responsible for generating mortgage
banking business i.e. seeking out loan applicants
The Loan Officer’s business comes from spot
originations, builder & developer originations and
walk-in originations

10. QUALITIES & RESPONSIBILITIES OF LOAN ORIGINATOR
 Must have excellent sales skills to sell themselves, their company
and products
 Must possess a high degree of personal integrity
 Well developed presentation skills and a thorough knowledge of
mortgage lending practices and products, origination market area
and competitive forces
 The loan originator is responsible for initial interview with the
prospective borrower
 The loan originator determines if the applicant can afford the
property pre-qualification involves two ratios, these are:-
Housing-to-income ratio and total debt-to-income ratio

11. RISKS PRESENT IN THE PRIMARY & SECONDARY MORTGAGE MARKETS
RISK TYPE PRIMARY
MARKET
SECONDARY
MARKET
BOTH: IN DIFFERENT
FORMS
LEGAL:
 Loan Agreement 
 Enforceability 
 Property  
 Consumer Protection 
 Business Fraud 
BORROWER
CREDIT/DEFAULT:
 Repayment  
 Collateral  
INTEREST RATE:
 Prepayment  
 Pipeline  
OPERATIONS:
LIQUIDITY:

12. CREDIT ENHANCEMENT MECHANISMS
Internal Credit Enhancements
External Credit Enhancements
 the full cash amount deposited with the society;
 the full amount of deposits with a permanent building society or fixed
deposits with a bank;
 the full paid up amount of shares in a permanent society;
 the surrender value of a life assurance policy;
 the full amount from a bank or another acceptable guarantee;
 75% of the value reasonably determined of the collateral
 acceptance in the case of a fixed-term bond over immovable property.

13. MORTGAGE BANKING LOAN PROGRAMS
Graduated payment mortgages (GPMs)
Growing equity mortgages (GEMs)
Fixed-rate mortgages (FRMs)
Adjustable-rate mortgages (ARMs) or
variable-rate mortgages (VRMs)
Balloon mortgages

14. INTERVIEWS
Be careful not to discourage an application
explains the general nature and financial obligations
inherent in a mortgage loan.

15. LOAN APPLICATION
names in which title to the property will be held;
physical address of property to be purchased;
date of birth and national identity number of applicant (s);
brochure should request information on the following topics
copy of Agreement of sale and proof of income
name and address of current employer and if employed for less
than two years, previous employers;
principal residential address for the previous two years;
list of liquid assets and where held with account numbers.

16. COMPLETION OF THE LOAN APPLICATION
borrower’s address, phone, and social security number,
borrower’s income (primary, rental, interest, and child support),
mortgage information (loan program, amount, rate, term),
borrower’s employer (past and present, plus military status if VA)
borrower’s assets (cash, stocks, real estate and businesses),
UNIFORM APPLICATION

17. COMPLETION OF THE LOAN APPLICATION
2. property address and sales price, and
1. borrower’s liabilities (credit cards and consumer and real
estate loans),
3. legal information (how title will be held, past judgements)
UNIFORM APPLICATION (Contd.)

18. UNIFORM APPLICATION
Supporting documentation includes:-
certificate of eligibility, if a veteran,
past W-2s, current year pay stubs, evidence of Social Security benefits,
past tax returns and financial statements (if any)
bank statements (savings, checking investments),
debt statements (any loans outstanding) and property sales contract.

19. REGULATORY COMPLIANCE
Equal Credit Opportunity Act (Regulation B)
Fair Credit Reporting Act,
Real Estate Settlement Procedures Act (Regulation X),
Truth in Lending Act (Regulation Z).

20. Loan officer’s duties continues after application, document collection
and regulatory closure
Loan officer communicates with internal departments – processing,
underwriting, & closing to ensure progress according to schedule
Loan officer communicates with the borrower on the status of loan
approval and the anticipated closing date
APLLICATION FOLLOW-UP

21. Building Society needs to be specific as possible in
Transmittal letter concerning
requesting additional information;
how to complete the application
MAILING OUT APPLICATION FORMS
Signing the various verifications where necessary

22. Loan originator should consider the applicant’s employment
status, whether formally employed or self employed, nature of
regular income
Be mindful of the fact that the borrower has contractual capacity to
enter into credit agreement.
QUALIFYING AN APPLICANT
A credit reference will be required by the lender for mortgage
applicant

23. Salary or wages
APPLICANTS – POSSIBLE SOURCES OF INCOME
Rent, interest or commission
Self employment
Child support, alimony or maintenance
Pension, disability or welfare
As a rule income from such sources as commission may
need to be taken over at least two or three years to
establish the average level.

24. Chapter 6: Assessment Exercise
1. What are the major sources of mortgage business which loan originator relies
on?
2. State and give examples of the qualities and responsibilities of a mortgage loan
originator
3. What are your misgivings as regards the serve-for-your-own home scheme as
one of the special loan programs which has been used in Zimbabwe?
4. Explain the concept of the Graduated Payment Mortgage (GPM) loan programme,
under what circumstances may this scheme be used in Zimbabwe? Give three
examples.

25. 1. Explain the difference between sources, credit mechanisms and credit
enhancement mechanisms as concepts used in financing housing.
Use three examples of each to demonstrate how each concept operates.
2. Give an overview of how an efficient cooperative development system
operate in the delivery of housing finance.
3. Explain the properties which are included in the definition of urban
immovable property in terms of the building Societies Act Chapter 24:02.
4. Use the concept of Current Housing Finance Schemes to give a short
account of how an employer assisted housing scheme operates.
ASSESSMENT QUESTIONS

26. Seriously,
Any Questions?

27. THE END
THANK YOU!