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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
EMERGING MORTGAGE BANKER
Training Manual
Emerging Mortgage Banker Training Manual 3
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
Emerging Mortgage Banker Training Manual 4
EMERGING MORTGAGE BANKER
Training Manual
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
EMERGING MORTGAGE BANKER
Training Manual
Emerging Mortgage Banker Training Manual 5
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.
EMERGING MORTGAGE BANKER
Training Manual
Emerging Mortgage Banker Training Manual 6
EMERGING MORTGAGE BANKER
Training Manual
Registering and Locking an EMB Loan
After signing into
FAMC’s website,
select “Register/Lock
Loan.”
Emerging Mortgage Banker Training Manual 7
EMERGING MORTGAGE BANKER
Training Manual
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.
Emerging Mortgage Banker Training Manual 8
EMERGING MORTGAGE BANKER
Training Manual
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.
Emerging Mortgage Banker Training Manual 9
EMERGING MORTGAGE BANKER
Training Manual
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.
Emerging Mortgage Banker Training Manual 10
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.
EMERGING MORTGAGE BANKER
Training Manual
Loan Estimate (LE) Requirements
Emerging Mortgage Banker Training Manual 11
Loan Estimate (LE) Requirements
EMERGING MORTGAGE BANKER
Training Manual
All new Changed Circumstance Worksheets (CCWs) and LEs must be submitted to FAMC for
review so that FAMC’s systems may be updated accordingly.
Emerging Mortgage Banker Training Manual 12
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.
EMERGING MORTGAGE BANKER
Training Manual
Emerging Mortgage Banker Training Manual 13
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.
EMERGING MORTGAGE BANKER
Training Manual
Emerging Mortgage Banker Training Manual 14
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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Emerging Mortgage Banker Training Manual 15
EMERGING MORTGAGE BANKER
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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.
Emerging Mortgage Banker Training Manual 16
EMERGING MORTGAGE BANKER
Training Manual
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
Emerging Mortgage Banker Training Manual 17
EMERGING MORTGAGE BANKER
Training Manual
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
Emerging Mortgage Banker Training Manual 18
EMERGING MORTGAGE BANKER
Training Manual
FAMC Customer Type Chart Broker/EMB Case Number, Appraisal, and Closing Authorities
(FHA/Conventional)
Emerging Mortgage Banker Training Manual 19
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.
EMERGING MORTGAGE BANKER
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Emerging Mortgage Banker Training Manual 20
Sample UCDP Submission Summary Report Fannie Mae
EMERGING MORTGAGE BANKER
Training Manual
Emerging Mortgage Banker Training Manual 21
Sample UCDP Submission Summary Report Freddie Mac
EMERGING MORTGAGE BANKER
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Emerging Mortgage Banker Training Manual 22
HIGHER PRICED MORTGAGE LOAN (HPML) DETERMINATION INSTRUCTIONS
EMERGING MORTGAGE BANKER
Training Manual
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.
Emerging Mortgage Banker Training Manual 23
EMERGING MORTGAGE BANKER
Training Manual
FFIEC Rate Spread Calculator
Emerging Mortgage Banker Training Manual 24
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?
EMERGING MORTGAGE BANKER
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Emerging Mortgage Banker Training Manual 25
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.
EMERGING MORTGAGE BANKER
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Emerging Mortgage Banker Training Manual 26
EMERGING MORTGAGE BANKER
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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)
Emerging Mortgage Banker Training Manual 27
EMERGING MORTGAGE BANKER
Training Manual
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.
Emerging Mortgage Banker Training Manual 28
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.
EMERGING MORTGAGE BANKER
Training Manual
Emerging Mortgage Banker Training Manual 29
Final Underwriting Approval, continued Examples, continued:
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.
The EMB lender’s conventional/VA/USDA loan receives a final underwriting approval date on
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.
EMERGING MORTGAGE BANKER
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Emerging Mortgage Banker Training Manual 30
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.
EMERGING MORTGAGE BANKER
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Emerging Mortgage Banker Training Manual 31
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.
EMERGING MORTGAGE BANKER
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Emerging Mortgage Banker Training Manual 32
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
EMERGING MORTGAGE BANKER
Training Manual
Emerging Mortgage Banker Training Manual 33
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.
EMERGING MORTGAGE BANKER
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Emerging Mortgage Banker Training Manual 34
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.
EMERGING MORTGAGE BANKER
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Emerging Mortgage Banker Training Manual 35
EMERGING MORTGAGE BANKER
Training Manual
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.
Emerging Mortgage Banker Training Manual 36
EMERGING MORTGAGE BANKER
Training Manual
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
Emerging Mortgage Banker Training Manual 37
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”.
EMERGING MORTGAGE BANKER
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Emerging Mortgage Banker Training Manual 38
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
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• 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
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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
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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).
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ICPL Requirements
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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.
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Opt In/Opt Out Process
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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.
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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.
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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EMB Universal Closed Loan Submission Form (for Purchase) **EMB Universal Closed Loan Submission Form can be found on the FAMC Website under “Forms”
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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.
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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
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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.
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Purchase Advice E-mail
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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.
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Purchase Suspense Notice
An example of
the “Purchase
Suspense Notice”
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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.
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Final Document Delivery
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Final Docs The following Outstanding Final Document Report will be generated to advise the EMB of any remaining
outstanding documents on a loan.
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EMERGING MORTGAGE BANKER
A Procedural Guide
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EMB Final Document Transmittal Form EMBs will submit final documents to FAMC utilizing the following EMB Final Document Transmittal Form
.
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EMERGING MORTGAGE BANKER A Procedural Guide
EMERGING MORTGAGE BANKER
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
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