Emerging Mortgage Banker Training...

Emerging Mortgage Banker Training Manual October 7, 2015

WHL_TPL_121V9

EMERGING MORTGAGE BANKER

Training Manual

Introduction to the EMB Program

Franklin American Mortgage Company’s (FAMC) Emerging Mortgage Banker (EMB) program is

designed for Brokers, Community Banks, and Credit Unions that have the resources and desire to

fund their own loans, who are looking to take the next step to becoming a lender.

This program allows the EMB to act as a lender without incurring expenses related to operating and

employing an entire fulfillment center. The EMB lender uses its own funds to close. FAMC performs

a post-funding audit on the closing documents and purchases the loan once the docs are

satisfactory, provided the loan meets all applicable guidelines and is in compliance with appropriate

laws and regulations.

Truth in Lending Act (TILA)-Real Estate Settlement Procedures Act (RESPA) Integrated

Disclosures (TRID) Rule Impact

FAMC originates and purchases loans that are in compliance with the requirements of TILA and

RESPA. Accordingly, FAMC will also originate and purchase loans that are in compliance with the

TRID requirements as specified in FAMC’s published policy, which is available in the FAMC

Lending Guide > Federal > TRID.

Emerging Mortgage Banker Training Manual 2

Benefits of the EMB Program 6

Registering and Locking an EMB loan 7

EMB Lock Policy for Delivery and Purchase 8 – 9

EMB Underwriting Submission Procedures 10

Loan Estimate (LE) Requirements 11 – 12

Loan Estimate (LE) Delivery Requirements 13

QM Guidelines 14 – 15

Program Eligibility 16

FHA Approved Lender without DE Authority (SOFA) 17

FHA Approved Lender with Unconditional DE Authority 18

FAMC Customer Type Chart 19

UCDP and SSR 20 – 22

Higher Priced Loan (HPML) Determination Instructions

• FFIEC Rate Spread Calculator

23

24

Undisclosed Debt 25 – 26

Table of Contents


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EMB Closing Procedures 27

Ordering Procedures when FAMC Prepares Docs 28

Final Underwriting Approval - Best Practices 29 – 30

Third-Party Processing Fees 31 – 35

Third-Party Documents Procedures/MERS Requirements 36 – 39

Closing Disclosure (CD) 40

CD Timing Reference Guides 41

Proof of CD Delivery 42

CD Revisions and Corrections 43

ICPL Requirements 44

Opt In/Opt Out 45

Disaster Requirements 46 – 47

List of Approved Third-Party Document Vendors 48

Closed Loan Submissions Via Upload

49 – 50

Table of Contents, continued



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EMB Lock Policy for Delivery and Purchase 51

EMB Purchase Requirements 52

EMB Post-closing Procedures

Remittance of FHA MIP, VA LGC and USDA Guarantee Fee

EMB Late Fees

FHA and VA Late Fees

EMB Universal Closed Loan Submission Form (For Purchase)

Common suspense items

53

54 – 56

57

58

59

60

EMB Shipping Procedures 61

EMB Auditing Procedures 62

Purchase Advice E-mail 63

Purchase Advice 64

Purchase Suspense Notice 65

Final Document Delivery 66

Final Docs/Outstanding Final Document Report 67

EMB Final Document Transmittal Form 68

Table of Contents, Continued


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Benefits of the EMB Program

A few benefits of the EMB program include the following:

1. Allows pricing flexibility since the EMB is not tied to a specific compensation selection.

2. Qualified EMBs allowed to select their AMC of choice or set up their own AMC.

Allowed on Conventional loans and USDA loans.

Allowed on FHA loans if EMB is HUD approved with DE lending authority.

3. Allows EMB the ability to take control and issue initial and final disclosures.

4. FAMC handles the Underwriting and Government insuring. Subject to prior approval by

FAMC, EMB may remit their own UFMIP and/or VAFF if desired.

5. EMB lenders also have the option to use FAMC closers to draw documents for them.

6. Having the ability to prepare closing documents with an approved vendor of choice.

7. Funding loans on time without the Investor’s prior approval.


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Registering and Locking an EMB Loan

After signing into

FAMC’s website,

select “Register/Lock

Loan.”



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EMB Registration and Locking Procedures Customers that participate in both the

EMB and Broker programs must

submit all loans of the same product

type as EMB or Brokered (no

‘flipping’ between EMB and Broker on

Conventional loans, for example).

Customer accounts are set with the

appropriate program for each product

which is then automatically reflected on

FAMC’s website at the time of

lock/register.

EMB loans have a unique loan number

and separate pricing.

Please refer to the current rate sheet

on the FAMC website for additional

information..

Note:

Select “FLOAT” as the Lock Term if

wanting to register, but not lock the

loan.



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EMB Registration and Locking Procedures

Important note: when

selecting a lock period,

EMB lenders should be

mindful of turn-times and

potential issues that could

affect funding of the

loan.

EMB lenders must fund the

loan on their line prior to

the lock expiration and are

required to submit the loan

to FAMC prior to the

expiration of the lock.



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EMB Underwriting Submission Procedures

All loan submissions must be uploaded to the FAMC website via Q.image.

Loan files must be submitted with a Q.image Submission Form which can

be found on the FAMC website under “Forms.”

Loan files must clearly indicate “EMB” on the folder or Q.image

Submission Form.

Underwriting procedures remain unchanged. Offsite contract underwriting

is not allowed.

Ohio properties are eligible. However, they must be done through the TN

office and FAMC must draw the closing documents. Third party closing

documents are ineligible.

Note:

Make sure the loan is

registered or locked

under the EMB

program before

submitting to FAMC’s

underwriting

department.


The LE is intended to provide consumers with help understanding the key features, costs, and

risks of the mortgage loan they are applying for. The LE will be reviewed upon submission to

ensure it is completed in its entirety and is not lacking any required information.

Note: In order to accurately review the disclosure, the settlement services provider list must

be included with the loan submission.

Loan Estimate Content

The EMB lender must ensure the LE is delivered or placed in the mail no later than the third

business day after receiving an application and the disclosure must comply with all

prescribed information within the Rule. For the purpose of the LE, a business day is a day on

which the creditor’s offices are open to the public for carrying out substantially all of its

business functions. The EMB lender must ensure the LE contains the correct and specific

content for that transaction.


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Loan Estimate (LE) Requirements


Loan Estimate (LE) Requirements


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All new Changed Circumstance Worksheets (CCWs) and LEs must be submitted to FAMC for

review so that FAMC’s systems may be updated accordingly.


LE Delivery Requirements The EMB lender is responsible for ensuring that it delivers or places in the mail the LE no later than

the third business day after receiving the application. The Mortgage Disclosure Improvement Act

(MDIA) waiting periods apply; therefore the LE must also be delivered or placed in the mail no later

than the seventh (7th) business day before consummation of the loan. Please refer to the TILA MDIA

Policy, which is available in the FAMC Lending Guide > Compliance > Federal, for further information.


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QM Specific Guidelines Closely review all typical fees being charged to the consumer in your markets. It is important to

note that loans with points and fees that exceed the limits cannot be purchased.

EMB loans that exceed the Points and Fees Test CANNOT be cured after origination and WILL

NOT be purchased.

Review all affiliate relationships, if applicable and as allowed. As previously noted, all fees that are

paid to an affiliate of the lender are included in the Points and Fees Test. This includes both real

estate fees that are non-APR, and fees included in the finance charge.

Review and consider all available mortgage insurance (MI) products when determining the

best fit for your customers, while ensuring the loan maintains QM eligibility. Due to the

uncertainty surrounding the pro‐rata ‘refund ability’ of the various MI products, FAMC will

include the entire amount of borrower‐paid, single premium mortgage insurance in the

applicable Points and Fees Test (regardless of seller or lender credits). LPMI, annual, and

Monthly premiums will remain *excluded* from the Points and Fees Test.


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Document Applies to Link Description

Broker Compensation

Acknowledgment and

Agreement (BCAA)

Current Policy - This specific

form is required.

Broker Link to BCAA Added an affiliate fees section to

certify that no fees and charges in

connection with the loan were paid

to or retained by an affiliate of the

broker. Needed for the Points and

Fees Test.

Discount Points Form and

Instructions

New Policy - This specific form

is optional but may be required

to determine if discount points

need to be excluded from the

QM Points and Fees Test on

EMB loans.

EMB

Lender

Link to Discount Points

Form and Instructions

Created a loan level specific form

and instructions to ensure

discount points are bona fide and

the appropriate amount may be

excluded from the QM Points and

Fees Test.

Invoices on 3rd Party Charges

Current Policy – Invoices on all

3rd party charges are required.

Broker or

EMB

Lender

N/A Invoices for all 3rd party charges

must be present in the file. Needed

for the Points and Fees Test to

determine affiliate relationship

and/or reasonableness.

QM Documentation Requirements


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https://www.franklinamerican.com/wiki/_media/public_extranet/wholesale_forms_general/broker_compensation_agreement_111213.pdf





https://www.franklinamerican.com/wiki/_media/public_extranet/wholesale_forms_general/discount_points_form_instructions_112213.pdf

https://www.franklinamerican.com/wiki/_media/public_extranet/wholesale_forms_general/discount_points_form_instructions_112213.pdf


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Program Eligibility

ELIGIBLE LOAN PROGRAMS

The following programs are eligible for the EMB program:

Conventional

FHA, under SOFA or principal agent relationship

VA

USDA (must use FAMC’s Q.docs; third-party docs not allowed)

Jumbo (must use FAMC’s Q.docs; third-party docs not allowed)

Ohio properties (must use FAMC’s Q.docs; third-party docs not allowed)

INELIGIBLE LOAN PROGRAMS

The following programs are ineligible for the EMB Program:

Borrowers held in a trust

HELOCs

FHA for non approved HUD-EMBs (SOFA and full DE allowed)

POAs (Power of Attorney) on cash-out

Note: Third-Party

closing documents

are not allowed on

any Jumbo and

USDA loans or

Ohio properties.

Closing documents

must be drawn

through FAMC’s

Q.docs.



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FHA Approved Lender without DE Authority (SOFA)

Originating lender goes through the approval process with FHA, but does not need to have a DE

underwriter on staff or submit test cases to FHA.

Originating lender enters into a Sponsored Originator (SO) relationship with FAMC.

FHA Approved (SOFA) File Flow:

– The FHA approved SO originates the FHA loan

– FAMC orders the case number, manages the appraisal process, and underwrites the file

– FAMC may prepare the closing docs, or may allow doc approval by

an approved vendor

– FHA allows the loan to close in the SOFA’s name



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FHA Approved Lender with Unconditional DE Authority

Lender goes through the approval and test case process with FHA, and must continually

maintain a DE underwriter on staff

The lender enters into a principal/agent relationship with FAMC

Under a principal/agent relationship, the originating DE lender(Customer) is the principal

and the underwriting DE lender (FAMC) is the agent

Typical Principal/Agent File Flow:

– The principal (customer) originates the FHA loan, orders the case number, and may

manage the appraisal process under certain circumstances as allowed by FAMC

– The underwriting agent (FAMC) underwrites the file

– The underwriting agent (FAMC) may prepare the closing docs, or may allow doc

approval by the originating principal through an approved vendor

– FHA allows the loan to close in either the originating OR the underwriting DE

lender’s name

– The loan is purchased by FAMC after the collateral and closing packages are reviewed

– FAMC performs the mortgage insurance function although either party is allowed

access in FHAC



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FAMC Customer Type Chart Broker/EMB Case Number, Appraisal, and Closing Authorities

(FHA/Conventional)


Uniform Collateral Data Portal (UCDP) and Submission Summary Report (SSR)

To facilitate the electronic collection of appraisal report data to the Government-Sponsored Enterprises

(GSEs), Fannie Mae and Freddie Mac, at the direction of the Federal Housing Finance Agency (FHFA),

developed the Uniform Collateral Data Portal® (UCDP®), which is a single portal for the electronic

submission of appraisal data files. Lenders are required to use the UCDP to submit electronic appraisal data

files that conform to all GSE requirements, including the Uniform Appraisal Dataset (UAD) when applicable,

before the delivery date of the mortgage to Fannie Mae and Freddie Mac.

If you have been approved by FAMC to manage the appraisal process and elect to continue to do so, it will

be your or your Appraisal Management Vendor’s responsibility to obtain the Doc File ID and the SSRs from

both GSEs and provide them at the time of appraisal delivery.

Note: Franklin American Mortgage Company will not purchase any loans with a missing Doc File ID or

unacceptable SSRs.

All appraisals successfully uploaded to the UCDP receive a Submission Summary Report (SSR)

summarizing the appraisal submission details and the status of the submission, as well as a Document File

Identifier (Doc File ID), which is the unique appraisal identifier generated by the UCDP. Loans delivered to

either GSE must have an appraisal with a "Successful" status in the UCDP prior to loan delivery.


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Sample UCDP Submission Summary Report Fannie Mae


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Sample UCDP Submission Summary Report Freddie Mac


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HIGHER PRICED MORTGAGE LOAN (HPML) DETERMINATION INSTRUCTIONS


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There are a number of guidelines regarding HPML /Section 35 Mortgages. An Average Prime Offer

Rate (APOR) is an APR that is derived from average interest rates, points, or other loan pricing terms

currently offered to consumers. The APOR and a rate spread calculator can be found on the Federal

Financial Institutions Examination Council (FFIEC) website.

EMB lenders must submit a printout of the HPML determination with their closed loan package.

Detailed HPML guidelines can be found at www.franklinamerican.com > Lending Guide > Compliance

> Federal > TILA - Higher Priced Mortgage Loans (HPML).

1. Access the FFIEC website at www.ffiec.gov/ratespread/newcalc.aspx

2. Choose the amortization type: fixed or adjustable

3. Enter the Lock-in Date (mm/dd/yyyy) – the date that the EMB locks the loan with the customer

4. Enter APR (00.00)%

5. Enter the loan term in years

6. Confirm lien status (1st or 2nd)

7. Select “Submit”

If the result is > 0, then the loan is HPML. If the result is N/A, the loan is not HPML.

8. Print the results and place with the loan file. Submit this with the closed loan package.


http://www.ffiec.gov/ratespread/newcalc.aspx


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FFIEC Rate Spread Calculator


Undisclosed debt is generally considered either new debt or customer obligations not

otherwise reported on the initial or final loan application. In addition to full disclosure at the

time of application, borrowers have an obligation to inform their lender of any new debt or

change in financial responsibility that occurs prior to closing the loan. Any consumer debt that

is not on the loan application, credit report, or otherwise not disclosed throughout the loan

process is considered undisclosed debt. This includes all new debt acquired after credit is

pulled at time of initial application through loan closing (for loans that are brokered).

Any new debt obtained by the borrower(s) will require the loan to be re-underwritten to

account for the additional credit; any new inquiries must be addressed by the borrower(s) with

a signed letter of explanation. While the new disclosure informs the borrower(s) of their

responsibilities, EMB lenders are strongly encouraged to educate their customers of these

guidelines and their obligations.

What is Undisclosed Debt?


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FAMC strongly encourages EMB lenders

to utilize the “Undisclosed Debt

Acknowledgement” disclosure (or a

similar disclosure) for all loans.

The disclosure is available at

www.franklinamerican.com > Forms >

EMB for your convenience.

EMB Lenders are responsible for ensuring

that no new debt has been incurred on or

before the date of the note.


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EMB Closing Docs Ordering Procedures

When FAMC Prepares the Documents

Closing documents will be delivered as indicated by the EMB during the Q.docs process. There are Two Options: The EMB may choose to receive the entire closing package and

forward to the settlement agent. OR The EMB may choose to have FAMC forward the entire closing

package to the settlement agent on their behalf.

Note:

TN Closing Coord. fax:

(615.778.0900)

TX Closing Coord. fax:

(214.765.9163)

CA Closing Coord. fax:

(866.802.8401)

MA Closing Coord. fax:

(615.261.8956)

PA Closing Coord. fax:

(866-900-1907)



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1. Once Q.docs has been completed, all RCDs (Required Closing Docs) need to be e-

mailed/faxed to the closing coordinator. The RCDs include insurance, taxes, title commitment,

flood certificate, survey (if required) and Insured Closing Protection Letter (ICPL). Once

FAMC receives notification of the Q.docs completion and is in receipt of all RCDs, the file will

be merged with the approved underwriting file and assigned to a closer.

2. FAMC will coordinate with the Settlement Agent in order to prepare the Closing Disclosure

(CD) and will disclose the CD to all applicable borrowers.

2. All Q.docs procedures remain unchanged in regards to document delivery and turn times.

3. All EMB loans must close in the EMB’s name (a corporate POA must be on file with FAMC).

4. No fees will be paid to or collected by FAMC at closing (administration, cure, and penalty fees

will be net funded from EMB proceeds at time of purchase).

5. Franklin American Mortgage Company will allow funds to be held in escrow for weather and

non-weather related repairs under some circumstances. Detailed guidelines can be found at:

www.franklinamerican.com > Lending Guide > Property Eligibility > Escrow Holdbacks.

Reminder:

POAs

(Power of

Attorney)

are not

allowed on

Cash-Out

EMB Closing Docs Ordering Procedures, cont.


Final Underwriting Approval – Best Practice for EMB Lenders FAMC recommends that EMB lenders obtain final underwriting approval prior to closing the loan.

Closing the loan prior to the receipt of final underwriting approval may result in the loan becoming

ineligible for purchase by FAMC.

Note: FAMC will not purchase an FHA loan with a Note Date prior to the Direct

Endorsement (DE) final approval date.

Examples:

An EMB lender’s FHA loan receives a DE final approval date on 4/1/2015 and has a Note

date of 4/10/2015. The loan is eligible for purchase by FAMC.

An EMB lender’s FHA loan receives a DE final approval date on 4/1/2015 and has a Note

date of 3/30/2015. The loan cannot be purchased by FAMC since the DE final approval

date is after the Note date.

The EMB lender’s conventional/VA/USDA loan receives a final underwriting approval date on

4/1/2015 and has a Note date of 4/10/2015. The loan is eligible for purchase by FAMC.


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Final Underwriting Approval, continued Examples, continued:


4/1/2015 and has a Note date of 4/10/2015. The loan is eligible for purchase by FAMC.


4/1/2015 and has a Note date of 3/30/2015. The loan will require further review by FAMC EMB

management since the final underwriting approval date is after the Note date. The loan purchase

process may be delayed or the loan may become ineligible for purchase by FAMC.


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Third-Party Processing Fees

EMB lenders can choose to outsource certain aspects of loan processing to a 3rd party.

Services that may be provided by a 3rd party processor include, but are not limited to, the

following:

• Collecting signed loan documents from the borrower

• Obtaining borrower paystubs and tax returns

• Ordering appraisals

• Performing verifications of borrower information (employment, assets, etc.).

FAMC will allow reasonable 3rd party processing fees to be charged on EMB transactions provided

they are not in violation of FAMC restrictions and requirements.

FAMC reserves the right to review each 3rd party processing fee charged on a loan to

determine: if the services performed merit the fee being charged and the fee is reasonable;

and/or the independence of the 3rd party processor and processing company from the

mortgage loan originator or mortgage loan originator’s company.

3rd party processing fees that do not meet the requirements or are considered to be excessive

cannot be charged. EMB lenders in this scenario would need to build their processing fee into

the compensation plans and make the appropriate adjustments. FAMC policy exceptions

cannot be made.


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Third-Party Processing Fees, cont. Restrictions

• The 3rd party processing company must not be affiliated with or connected to the mortgage loan

officer/originator (LO) and/or the mortgage loan origination company.

• The 3rd party processor cannot be related to the EMB lender or LO.

• The 3rd party processor cannot have the same work location as the EMB lender or LO, unless

required by state law.

• The 3rd party processor cannot be employed by the mortgage loan origination company.*

-The 3rd party processor cannot be employed as a LO for the EMB lender or any other

mortgage company.

-The 3rd party processor cannot be employed both as an originator and as a processor within

the mortgage industry but can hold additional employment outside the mortgage industry.

*Some states require 3rd party processors to be sponsored by a mortgage loan origination

company and it is permissible in those cases.


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Third-Party Processing Fees, cont. EMERGING MORTGAGE BANKERA Procedural Guide

Required Documentation

If the 3rd party processor is listed in NMLS, their self-reported employment record must reflect the

3rd party processing company as their current employer. This includes states that require the

mortgage loan origination company to sponsor the 3rd party processor.

The Third-Party Processing Company Certification & Acknowledgement form must be provided on

all loans that charge a 3rd party processing fee.

An invoice describing the services must be included, and the fee disclosed/charged must be equal

to the invoice and the certification.

o The invoice must be computer generated and not hand-written.

o The processing invoice must include the processing company name, address,

borrower name, loan number, amount of the 3rd party processing fee, and description

of services.

o The invoice should be provided at or prior to closing.

A Procedural Guide EMERGING MO


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Third-Party Processing Fees, cont.

Third-Party Processing Company Certification and Acknowledgement

Effective on all submissions, loans that have a 3rd party processing fee require the Third-Party

Processing Company Certification & Acknowledgement form to be completed by the EMB

lender.

This form identifies the amount of the 3rd party processing fee and which services are being

performed on the loan.

• The form is required for all loan types and must be provided at submission.

• The certification must be completed in its entirety, including an accurate description of

services provided by the processor (commensurate with the fee charged), and must be

signed by the LO.

• The processing fee included on the certification must match the amount disclosed on the

Loan Estimate and the invoice provided by the processor.


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Third-Party Processing Fees, cont.

Third-Party Processing Company

Certification and

Acknowledgement Form

A copy of the form is located at

www.franklinamerican.com > Forms >

Miscellaneous.


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EMB Loans Closing on Third-Party Documents

This enhancement to FAMC’s Emerging Mortgage Banker (EMB) program is intended to

accommodate an EMB account who possesses the resources and ability to generate a set of

closing documents through a third-party vendor. This allows the EMB to maintain control of

the closing and funding process without incurring the expenses associated with employing an

entire back shop to resolve post-closing issues.

Note: All Franklin American Mortgage Company (FAMC) Emerging Mortgage Banker

(EMB) customers who would like to utilize a third-party vendor to generate closing

documents must obtain prior approval by FAMC.

If a third-party doc vendor is utilized, the EMB lender or third-party doc vendor will be

responsible for preparing and disclosing the CD to the borrower within the appropriate timing

guidelines, as outlined in FAMC’s published TRID policy, which is available in the FAMC

Lending Guide > Federal > TRID.

Reminder:

Third-party documents are not allowed on Jumbo loans. Closing documents must be ordered

through Q.docs.



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EMB Loans Closing on Third-Party Documents, continued

Texas A-6 Loans

Lender Credits on page 3 of the Closing Disclosure are not allowed to cure the A-6 3% test.

Fees will need to be lowered on page 2 the Closing Disclosure in order to pass the 3% test.

FEDERAL TOLERANCE COMPLIANCE TEST INCLUDES FNMA AND FHLMC

Charges included in the points and fees calculation –

Points and fees for purposes of this threshold include:

• Origination fees, underwriting fees, broker fees, and finder’s fees

• Charges imposed as a condition for making the mortgage and paid to the seller or third party


EMB Loans Closing on Third-Party Documents

MERS Requirements

Any loan utilizing a “MERS as Original Mortgagee” (MOM) must be originated by a MERS member.

The EMB lender is responsible for notifying FAMC if they are a MERS member. Provide the MERS Org ID# and

expiration/renewal date to FAMC’s Broker Administration Department

([email protected]). For more information about MERS membership, please visit

www.mersinc.org.

If the EMB lender has MERS membership, MOM documents (security instrument with MERS

verbiage) should be utilized. Either FAMC’s MIN or the EMB Lender’s MIN (if capable of generating

one) may be used. FAMC’s MIN is located on the Underwriting Disposition in the “Loan Info”

section. The MIN will only be displayed for customers that FAMC has identified as MERS members.

If the EMB Lender has MERS membership and uses their own MIN number, FAMC will require the

batch number for the transfer of the MIN to FAMC prior to purchase.

If the EMB lender is NOT a MERS member, a ‘non-MOM’ security instrument must be used in lieu of

a MOM. This must be accompanied by an Assignment for MERS purposes as “Assignment to MERS”.


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mailto:[email protected]

http://www.mersinc.org/

EMB Loans Closing on Third-Party Documents MERS Requirements

MERS Rider – State Specific for Montana, Oregon, and Washington

Freddie Mac and Fannie Mae announced the creation of a new joint MERS Rider (Form 3158), to be attached

to an updated security instrument with revised MERS verbiage, for mortgages in the states of Montana,

Oregon, and Washington. The new MERS Rider and updated security instrument must be used effective

immediately.

Loans in these states are now required to be registered with MERS on the original security instrument and

rider; subsequent assignments into the MERS system are not permitted. Consequently, if you wish to close

loans in your name in these states, you are required to be a MERS member.

Franklin American Mortgage Company (FAMC) will not purchase loans if the updated security instrument and

MERS rider are not utilized in these states.

Non-MERS Members

If you are an EMB lender that table funds and you are not a MERS member and do not wish to become one,

loans with property states in Montana, Oregon, or Washington must be brokered and close in the name

of FAMC.


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Delivery Requirements and Definitions:

• The EMB lender must ensure that the CD is delivered to the consumer no later than three (3)

business days before consummation. The loan documents cannot be signed until the third (3rd)

business day after the CD is considered delivered. If documents are ordered through Q.docs,

FAMC will disclose the CD to all applicable parties. If a third-party document vendor is utilized, the

EMB lender or third-party document/fulfillment provider will be responsible for disclosing the CD.

• Definition of a Business Day: for the CD, a business day means all calendar days except Sundays

and legal public holidays. **Please note that this is a different definition than business days for

purposes of the LE.

Who must receive the CD?

• Purchase Money Loan: the CD can be given to the primary applicant or any consumer with

primary liability for the loan.

• Rescindable Transaction: the CD must be given separately to each consumer who has the right to

rescind under TILA.

Reminder: The consummation date for EMB loans, in all states, is defined as the date that the

borrower(s) sign the Mortgage Note.


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Closing Disclosure (CD)



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CD Timing Reference Guides


• For documents that are ordered through Q.docs, FAMC will disclose the CD to all applicable

parties and maintain proof of delivery.

• For loans through third-party doc vendors, proof of delivery must be submitted with the closed

loan file for purchase.


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Proof of CD Delivery


Creditors must re-disclose terms or costs on the CD if certain changes occur to the transaction after

the disclosure was first provide that cause the disclosure to become inaccurate. Please note that

after a CD has been received by the borrower, a revised LE cannot be disclosed.

There are three (3) categories that require a corrected CD:

• Changes that occur before consummation that require a new three (3) business day

waiting period.

Changes that occur before consummation and do not require a new three (3) business day

waiting period.

Changes that occur after consummation.


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CD Revisions and Corrections


ICPL should be in the EMB lender’s name for all EMB loans

ICPL should be dated within 30 days of the closing date

FAMC will validate the ICPL prior to purchase for third-party doc loans (prior to docs out if FAMC is

drawing the docs)

To be complete, the ICPL must include the following:

• FAMC loan number,

• Borrower name,

• Property address,

• Title commitment number,

• The name of Insurer who issued the commitment,

• The Insurer on the Insured Closing Protection Letter must be the same as the Insurer on the title commitment.

ICPLs are required on ALL loans* and no exceptions are to be made to this policy.

*An ICPL is not required for a HUD REO Property

Note: If the loan is drawn through FAMC, we will require and validate the CPL just as we would on a

wholesale loan (i.e. prior to the documents being drawn as part of the Required Closing Documents

review process).


Training Manual

ICPL Requirements


Regulation P, Privacy of Consumer Financial Information, requires that each borrower must receive a

Privacy Notice. Each borrower must select and sign to participate in, or opt out of, the sharing of personal

information. If a borrower makes no choice on the form, they are considered to be agreeable to receiving

materials except in the states of California and Vermont. In those states, a borrower must specifically opt

in to receive materials, otherwise they are considered to have “opted out”. Franklin American Mortgage

Company (FAMC) is required to capture this data and provide it to the sub-servicer on any loans in which

servicing rights are maintained.

To ensure all FAMC loans are able to be funded, Emerging Mortgage Bankers (EMBs) will need to

ensure the Privacy Policy Disclosure is completed, signed, and submitted with all other loan documents

in the closing package.

• If not utilizing FAMC for documents, the EMB is responsible for making sure the third-party includes the

disclosure in the closing package and that it is submitted with the closed loan that is presented to FAMC

for purchase.

• An Opt Out Model Privacy Form can be found on the Federal Trade Commission’s website.

Note: If the borrower(s) have not made any selections on the form, FAMC will automatically opt them “In”

or “Out” based on their state.


Training Manual

Opt In/Opt Out Process


Disaster Policy

FAMC distributes and publishes a Disaster List on our website and Lending Guide that generally

includes counties that have been declared by FEMA as eligible for Individual Disaster

Assistance (applies to all loan products) or Public Disaster Assistance (only applies to the

conventional non-conforming jumbo product).

Properties that are located in the counties listed on the Disaster List must comply with FAMC’s

Disaster Policy requirements.

Disaster Policy requirements apply to all EMB loans that have not yet been purchased.

Resources:

For detailed guidelines, please refer to www.franklinamerican.com > Lending Guide > Appraisal

Guidelines > Disaster Policy. Click on the “FAMC Disaster County List” link to access the most

current Disaster List. The list can also be accessed on the EMB materials and FAMC bulletins

pages at www.franklinamerican.com > Resources.


Training Manual


http://www.franklinamerican.com/

http://www.franklinamerican.com/

Summary of Disaster Policy Requirements

All Loans with Full Appraisals: Eligible if the appraisal was performed on/after the “Full

Appraisal/Inspection Eligibility” date. If the appraisal was performed before the “Full

Appraisal/Inspection Eligibility” date, then a disaster inspection must be performed on/after that date.

Refer to the Lending Guide for FHA Damage Inspection Requirements.

Conventional Loans with PIW/PIA: Eligible if the most recent AUS submission offering the PIW/PIA is

dated on/after the “PIW/PIA Eligibility” date. If the most recent AUS submission date is before the

“PIW/PIA Eligibility” date, then a full appraisal is required.

FHA Streamlines w/o Appraisal: Eligible with a Standard Disaster Inspection performed on/after the

“Full Appraisal/ Inspection Eligibility” date. The inspection is no longer required for initial applications

dated on/after the “Non-Standard Appraisal Eligibility” date.

All VA Loans: Require a “Certification of Undamaged Property” form signed by the borrowers at

closing, if the appraisal was performed before the “Full Appraisal/Inspection Eligibility” date. This form

is programmed to print in VA closing packages where the property is located in an active disaster area.


Training Manual


Beadles, Newman & Lawler International Document Systems (IDS)

Black, Mann & Graham Jackson Law Firm

Creative Thinking McGlinchey Stafford and Youngblood & Bendalin L.L.P.

Document Express M.D. Gibson & Associates, P.C.

DocMagic * MRG Document Technologies

Doc Prep Services Inc. Online Documents, Inc.

Docu Prep PeirsonPatterson L.L.P.

Docutech Polunsky & Beitel, L.L.P.

EllieMae (DocMagic Version) RapidDocs

Encompass 360 Robertson & Anschutz, P.C.

FirstFunding Schwartz & Associates

Gregg & Valby L.L.P. www.Proclose.com

Guardian Mortgage Documents

Approved Third-Party Document

Vendors


Training Manual


http://www.proclose.com/





Closed Loan Submissions Via Upload

The upload method is the most efficient approach for submitting a closed loan package. EMB

lenders are encouraged to use this method whenever possible. Please note that EMB lenders that

use fulfillment companies will still need to submit closed loan packages via e-mail using the

process outlined in the section below. Future system enhancements will allow fulfillment

companies to use the upload feature.

Once the loan receives final approval and is in the “U/W – Approved” or “Docs-Out” stage, a

closed loan package may be uploaded by following the steps below. Only PDF or TIFF files can

be uploaded.

1) Log into www.franklinamerican.com and select a loan from your pipeline to be rerouted to the

Loan Status page.

2) Under the “Closed Loan Submission” section toward the bottom of the page, select the

applicable file using the browse function and then click “Upload”. If “Closed Loan Submission”

does not appear in the green banner, please contact an EMB auditor.


Training Manual


Closed Loan Submissions Via Upload, Continued

3) Once the package is uploaded, the “Closed Package Received” date will populate. The name

of the FAMC EMB auditor will populate in the “Auditor” field once the loan is assigned to

an auditor.

Note: If the package is uploaded on a holiday, weekend, or after 5:00 PM local time of the

EMB lender, the following business day will populate.


Training Manual



Training Manual

EMB Lock Policy for Delivery and Purchase

All closed loans MUST be delivered to FAMC, in purchasable condition, prior to lock expiration. If the lock has

expired prior to delivery, the loan must be relocked at worse case pricing.

Important note: EMB lenders must fund the loan on their line prior to the lock expiration and are

required to submit the loan to FAMC prior to the expiration of the lock.

If the lock expires after delivery, FAMC will grant a two business day “Grace Period” to cure any

deficiencies. If the loan is still not purchasable after the grace period, the loan will be subject to a two basis

points (2 bps) per day “Cure Fee” up to a maximum of 15 calendar days. At the end of the 15-day cure

period, if still not purchasable, the loan will be subject to a mandatory re-lock at worse case pricing plus the

accrued cure fees.

Note: The two (2) business day grace period allotted to clear suspense items does not include weekends

or holidays.

The loan can always be relocked at worse case pricing once the original lock has expired plus accrued cure

fees, if any

All FHA and VA delivery requirements still apply regardless of lock expiration date. Please refer to the FHA or

VA sections of this presentation for more information.


EMB Purchase Requirements

FAMC’s warehouse bank must have the Note twenty four (24) hours prior to clearing for

purchase. FAMC will not clear a loan for purchase until seventy two (72) hours past

disbursement date.


Training Manual



Training Manual

EMB Post Closing Procedures

1. Settlement agent is required to ship all executed closing documents directly to

the EMB after funding.

2. Both the Closed Loan Package and the Collateral Package should be

thoroughly reviewed for accuracy, consistency and compliance prior to delivery

to FAMC. This will help avoid delays in the purchase process.

3. Prior to shipping the Closed Loan Package, the EMB or warehouse bank must

endorse the Note (executed by an authorized signer). The interim endorsement

on the “Note” should read as follows:

Pay to the order of Franklin American Mortgage Company Without Recourse

by (EMB company name)

1) By: __________________________ (signature)

2) Name: ________________________ (printed name)

3) Title: _________________________

1. Executed documents need to be delivered to FAMC according to the

(conventional, FHA or VA) “Emerging Mortgage Banker Closed Loan Stacking

Order.” All documents must be included in a file folder.

Note:

FAMC will not order

funds for purchase until

the complete collateral

package is received.

Reminder: FAMC will not purchase a USDA loan if USDA/RD funds are not available unless the conditional commitment was obtained prior to USDA running out of

funds.


Remittance of FHA UFMIP, VA Funding Fee, and USDA-RD Guarantee Fee

FHA Up Front Mortgage Insurance Premium (UFMIP) and VA Funding Fee

With prior FAMC approval, EMB customers may remit their own FHA Up Front Mortgage Insurance Premium

(UFMIP) and/or VA Funding Fee (VAFF) payments directly to HUD and VA. EMB lenders requesting to

participate in this option will need to contact their Account Executive (AE) to submit the initial request for

approval.

If an EMB does not wish to remit their own fees, FAMC is responsible for insuring FHA loans, and thus, is

responsible for the remittance of the UFMIP. The UFMIP will be remitted at the time FAMC purchases the

loan. Additionally, the VA Funding Fee will be remitted by FAMC at the time FAMC purchases the loan.

FAMC obtains the Conditional Commitment (Form RD 1980-18) and thus is responsible for the remittance

of the Guarantee Fee to Rural Development (RD). The Guarantee Fee is paid by the borrower on the CD. In

order to comply with the USDA requirements, FAMC net funds the USDA Guarantee Fee on all EMB loans.

• On the CD, USDA Guarantee fee may be made payable to "USDA", or "(EMB lender) fbo USDA". Both of

these will be acceptable.

•The EMB must net fund the USDA Guarantee Fee from the wire they send to the title company for closing.

FAMC will net fund the USDA Guarantee Fee and it will be itemized on the EMB lender's purchase advice.

FAMC will finalize remittance of the Guarantee Fee electronically to RD at the time FAMC purchases the loan.


Training Manual


EMB Remittance of UFMIP/VAFF With prior FAMC approval, EMB customers may remit their own FHA Up Front Mortgage Insurance

Premium (UFMIP) and/or VA Funding Fee (VAFF) payments directly to HUD and VA.

EMB lenders requesting to participate in this option will need to contact their Account Executive (AE)

to submit the initial request.

The approved EMB must also provide a signed and dated EMB Certification advising they are

aware of their responsibility to remit payment in full along with proof of payment.


Training Manual


EMB Remittance of UFMIP/VAFF, Continued

Verifying Acceptable Proof of Payment

FHA Loans

For FHA loans, the EMB must provide a printout of a Case Query from FHA Connection (FAHC) that

shows the UFMIP has been received.

The EMB auditor will review the printout provided by the EMB and match up the FHA Case Number on

the query to that of the loan to ensure they match. The amount paid will also be reviewed to ensure a

full payment has been received.

VA Loans

For VA loans, the EMB must provide a printout of the VAFF Receipt showing that full payment for the

VAFF has been made.

The EMB auditor must match up the VA Loan Number (VA Case Number) on the paid receipt to that of

the loan to ensure they match. The amount paid should also be reviewed to ensure a full payment has

been received.


Training Manual



Training Manual

All EMB Late Fees

All closed loans MUST be delivered to FAMC, in purchasable condition, prior to lock expiration. If

the lock has expired prior to delivery, the loan must be relocked at worse case pricing. If the lock

expires after delivery, FAMC will grant a two (2) business day “grace period” to cure any

deficiencies. If the loan is still not purchasable after the grace period, the loan will be subject to a

two (2) basis point per day “cure fee” up to a maximum of fifteen (15) calendar days. At the end of

the 15 day cure period, if still not purchasable, the loan will be subject to a mandatory re-lock at

worse case pricing plus the accrued cure fees. The loan can always be relocked at worse case

pricing once the original lock has expired plus accrued cure fees, if any.

• Loan amount x .02% x # of days = cure fee

Note: These late fees will be net funded when FAMC purchases the loan.



Training Manual

The following FHA requirements are in addition to previously stated procedures and guidelines:

The loan MUST be purchased eight (8) calendar days after the interest date on the CD, regardless of

weekends or holidays. If it is not, there will be a 4% fee added to the UFMIP.

Original UFMIP $$ x 4% = the late charge

Example:

Up-front MIP amount of $3,340.20 will result in a late fee of $133.61. ($3,340.20 x 4% = $133.61)

The following VA requirements are in addition to previously stated procedures and guidelines:

• The loan must be purchased twelve (12) calendar days after the closing date, regardless of weekends or

holidays. If the loan is not purchased, there will be a 4% fee added to the funding fee.

• Original VA funding fee $$ x 4% = the late charge

Example:

Funding fee amount of $4,794.50 will result in a late fee of $191.78. ($4,794.50 x 4% = $191.78)

Note: These late fees will be net funded when FAMC purchases the loan.

FHA and VA Late Fees



Training Manual

EMB Universal Closed Loan Submission Form (for Purchase) **EMB Universal Closed Loan Submission Form can be found on the FAMC Website under “Forms”



Training Manual

Common Suspense Items

1. Figures on the executed CD do not match the final closing instructions.

2. Signatures on the executed CD are incorrect, missing, or undersigned.

3. Escrow amount collected on the executed CD does not match the Initial Escrow Account Disclosure Statement.

4. Borrower’s name or address is incorrect on the hazard insurance policy.

5. Coverage amount on the hazard insurance policy is insufficient.

6. Mortgagee clause on the hazard insurance is incorrect.

7. Coverage amount on the flood insurance policy is insufficient.

8. Mortgagee clause on the flood insurance is incorrect.

9. Note is not endorsed.

10. Note is endorsed incorrectly.

11. Signatures on the Note are incorrect, missing, or undersigned.

12. POA verbiage on the Note is missing.

13. Property address on the Note does not match the appraisal.

14. Alterations on the Note were not initialed.

15. Note is not a certified copy.

16. Signatures on the Security Instrument are incorrect, missing, or undersigned.

17. POA verbiage on the Security Instrument is missing.

18. Property address on the Security Instrument does not match the appraisal.

19. Alterations on the Security Instrument were not initialed.

20. Security Instrument is not a certified copy.

21. Legal description on the Security Instrument does not match the title commitment.

22. Legal description is missing.

23. Applicable Rider boxes are not checked on the Security Instrument.

24. Applicable Riders are missing.

25. Notary acknowledgement on the Security Instrument is incorrect.

26. Non-Purchasing spouse did not sign the Security Instrument.

27. Borrower(s) executed rescission papers on a different date than the Security Instrument.

28. Borrower(s) did not sign the rescission papers.

29. Borrower(s) rescinded.

30. Loan disbursed prior to the end of the rescission period.

31. Dates on the rescission papers are incorrect.

32. Underwriting conditions from the final approval were not met.

33. Final 1003 is not signed by the borrower(s).

34. Final 1003 is not signed by the loan officer.

35. HMDA information on the final 1003 is incomplete or missing.

36. Collateral package has not been received by FAMC.

37. Lock has expired.

38. Missing a copy of the borrower(s) ID.

39. Documents are missing.


EMB Shipping Procedures The audit function for all EMB loans is centralized to the Texas Regional Operations (Ops) Center.

This only applies to the audit portion of the loan process (after the loan is closed and is being

submitted for purchase). Underwriting will remain in the Ops Center that the EMB is assigned to.

Also, EMB lenders that utilize FAMC for documents will continue to order them in their designated

Ops Center.

EMB lenders will need to submit the following to the address below:

Original Note

Original Allonge (if applicable)

Bailee Letter

Please be sure to use the mail code of EMB-1000 to ensure proper delivery to the EMB

Purchase Department.

Franklin American Mortgage Company EMB-1000

5221 N. O’Connor Blvd, Ste 1000 Irving, TX 75039


Training Manual



Training Manual

EMB Internal Auditing Procedures

FAMC will audit the Closed Loan Package to insure all required documentation is

included and is satisfactory, both in content and in form.

Upon completion of the audit process, one of the following events will occur:

A. If the audit reveals no deficiencies, the loan will be purchased within 72

hours of when the Note is received. For example, if the loan and Note are

delivered on Monday, the earliest date to purchase will be Wednesday.

B. If the audit reveals documentation deficiencies, the purchase of the loan will

be suspended pending the correction of such deficiencies. The EMB will

receive a “Purchase Suspense Notice” via fax or e-mail.

C. The VVOE (Verbal Verification of Employment) is valid through the Note

date.

IMPORTANT NOTE: Part of FAMC’s purchase process includes a re-verification

of the VVOE(s) if they expire prior to the Note date. If the borrower is no longer

employed, FAMC will not purchase the loan.

Any expense

incurred due to

correcting and / or

recording documents

must be paid by the

EMB.

Refinance loan

transactions will not

be purchased until

the rescission period

has expired.



Training Manual

Purchase Advice E-mail



Training Manual

Purchase Advice

Once a loan is

determined to be

“Purchasable”, a

Purchase Advice,

detailing the loan

proceeds, will be e-

mailed to the EMB the

following business day.



Training Manual

Purchase Suspense Notice

An example of

the “Purchase

Suspense Notice”


EMB lenders are responsible for delivering all final documents (docs) to FAMC within 60 days of the

loan purchase date. This is outlined in the EMB Loan Purchase Agreement > Article II – Purchase and Sale of

Mortgage loans > Section 2.5 “Closing and Delivery of Documents”. Note: final docs are separate from those

docs included in the closing package.

Final docs required to be submitted to FAMC:

• Original recorded mortgage

• Final title policy

EMB lenders should utilize the EMB Final Document Transmittal Form to deliver all final docs to FAMC. The

form is located at franklinamerican.com> Forms > EMB and in the Lending Guide > Forms > EMB. Upon

receipt, please deliver all final docs to:

Franklin American Mortgage Company

Attn: Final Documents

501 Corporate Centre Dr., Ste. 400

Franklin, TN 37067

FAMC’s post-closing department will submit a monthly “Outstanding Final Document Report” to all

EMB lenders to indicate if there are any remaining outstanding documents on a loan. If the report indicates that

a document is missing, the EMB lender should submit the document along with the EMB Final Document

Transmittal form, as indicated.


Training Manual

Final Document Delivery


https://www.franklinamerican.com/ext/general?npage=home

Final Docs The following Outstanding Final Document Report will be generated to advise the EMB of any remaining

outstanding documents on a loan.


Training Manual


A Procedural Guide


EMB Final Document Transmittal Form EMBs will submit final documents to FAMC utilizing the following EMB Final Document Transmittal Form

.


Training Manual


EMERGING MORTGAGE BANKER A Procedural Guide


A Procedural Guide

Equal Housing Lender; Franklin American Mortgage Company, 6100 Tower Circle, Suite 600, Franklin, TN 37067. Company NMLS

#1599. For mortgage banking professionals only; not authorized for distribution to consumers or third-parties. All info herein is current

as of 11/18/2015 and subject to change without notice.

This presentation is made available to trusted partners of Franklin American Mortgage Company and is intended for sales

enhancement purposes only. The material present herein is not intended as legal advice nor does it represent the counsel or opinion of

Franklin American Mortgage or its employees. Borrowers must qualify in accordance with current Franklin American Mortgage product

and program guidelines (login as a registered user at www.franklinamerican.com to view). All attendees should consult their company’s

policies, procedures, and/or internal compliance/legal guidelines regarding all regulatory or

compliance matters.

For questions, please contact your Account Executive


Training Manual


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