RC_LP_U_311.2 Underwriting Reduced Payment Products and Piggyback Loans
The landscape of the mortgage industry has always been very sensitive to market forces. Following the financial crisis of the late 2000s, industry participants focused more on traditional underwriting and mortgage products, avoiding those previously available products now seen to be predatory to consumers. With generally low rates more recently, consumers had choices of housing and alternative mortgage products. Today, however, affordability and available housing inventory for buyers have become leading issues for lenders and borrowers. Housing values have been rising, allowing current homeowners to cash in on greater equity when selling—but, that same appreciation means limited available homes to trade up to. Even where product is available, income increases haven’t kept up with housing cost increases, favoring all-cash purchasers over those needing a mortgage. One thing the industry has taken to heart—volume increases achieved primarily by lowering credit standards won’t be sustainable and will ultimately hurt consumers. Development of alternative lending products will continue, but standard underwriting of standard agency products will lead the way for the foreseeable future.
The housing industry is very cyclical in nature, driven by economic and social factors such as unemployment rates, varying interest rates, housing growth, stock market volatility, and changes in consumer confidence. Therefore, it is important to understand the variety of products that are available and how they can be used to help borrowers purchase homes.
Underwriting Reduced Payment Products and Piggyback Loans provides a historical perspective of reduced payment products and the risks underwriters face when evaluating these loans. However, this course is not intended to provide guidance on the Dodd-Frank Act's Ability-to-Repay (ATR) rule, including Qualified Mortgage (QM) requirements, as some of the reduced payment options mentioned are not considered QM-compliant. Be sure to check lender guidelines to determine eligibility for specific lenders.
This course covers adjustable-rate, interest-only, and buydown mortgages. It also discusses piggyback mortgage loans as an alternative to maximum mortgage finance. While piggyback loans are not as widely available as before the housing crisis, some local banks and credit unions may still offer these types of loans. The course ends with two case studies that will bring the content to life using real-world scenarios.
This is a single-family/residential course.
Seat time approximately 45 mins.