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The intent of the following article is to provide an overview of mortgage industry loan documentation types and demonstrate methods that mortgage industry investors use to track and report loan documentation type statistics for loans in their servicing portfolio for risk management and seller performance monitoring purposes.


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Mortgage Loan Documentation Type Overview

In underwriting a mortgage loan it is necessary to determine the borrower's ability and willingness to repay a loan in accordance with its terms and to determine if the subject property provides and maintains sufficient value to recover the investment should a loan default occur. Typically, no single loan or borrower characteristic automatically affects the worthiness of a loan. The borrower’s overall situation is evaluated and, often, compensating factors may be used to offset areas of weakness.

In ascertaining the borrower's credit worthiness and the subject property's value investors will require their sellers and underwriters to document loans in accordance with industry specific standards to ensure quality and marketability. The following documentation types are defined by MISMO, recognized throughout the mortgage industry and represent various levels of credit risk:

  • Alternative
  • Full Documentation
  • No Deposit Verification
  • No Deposit Verification Employment Verification Or Income Verification
  • No Documentation
  • No Employment Verification Or Income Verification
  • Reduced
  • Streamline Refinance
  • No Ratio
  • No Income No Employment No Assets On 1003
  • No Income On 1003
  • No Verification Of Stated Income Employment Or Assets
  • No Verification Of Stated Income Or Assets
  • No Verification Of Stated Assets
  • No Verification Of Stated Income Or Employment
  • No Verification Of Stated Income
  • Verbal Verification Of Employment
  • One Paystub
  • One Paystub And Verbal Verification Of Employment
  • One Paystub And One W2 And Verbal Verification Of Employment Or One Year 1040

For the purposes of this article, only the most commonly used investor documentation types are defined.
Full Documentation
This documentation type refers to Fannie Mae / Freddie Mac documentation requirements for a mortgage loan. Documentation includes a fully completed Verification of Employment (VOE), Verification of Deposit (VOD), and Verification of Mortgage (VOM) forms. A loan with Full Documentation represents the least amount of risk for an investor.

For electronic mortgage data mapping purposes mortgage loans with "Full Documentation" should be mapped to the MISMO LOAN_FEATURES\LoanDocumentationType = "FullDocumentation" attribute.
Alternative Documentation
This documentation type refers to Fannie Mae / Freddie Mac acceptable alternative standard verification forms, to include:
  • Certified copies of previous 2 years W-2’s and a full months most recent computer generated pay stubs with YTD figures in lieu of a VOE.
  • Two (2) months most recent bank statements in lieu of a VOD.
  • Certified copies of past twelve (12) months canceled checks to evidence timely repayment of a mortgage, in lieu of a VOM.
A loan with Alternative Documentation represents, more or less, the same amount of credit risk as a loan with Full Documentation. As such, sellers typically group Full and Alternative (Full/Alt) documentation types together for qualification and pricing purposes. However, this grouping of Full and Alternative documentation types in seller loan origination systems often causes problems when the loan is sold on the mortgage secondary market where the investor is required to specify Full or Alternative for Mortgage Backed Securities and other down stream reporting purposes.

For electronic mortgage data mapping purposes; mortgage loans with "Alternative" documentation should be mapped to the MISMO LOAN_FEATURES\LoanDocumentationType = "Alternative" attribute.
Stated Income Documentation
This documentation type does not require verification of the borrower's income. The borrower’s qualifying ratios are calculated on the basis of information disclosed on the loan application. Liabilities and assets are verified according to full or alternative documentation type guidelines. A loan with Stated Income documentation represents a slightly higher credit risk than a loan with Full/Alt Documentation. Typically, there are price adjustments and more restrictive Loan To Value (LTV) ratios associated with loans that have a Stated Income documentation type.

For electronic mortgage data mapping purposes; mortgage loans with "Stated Income" should be mapped to the MISMO LOAN_FEATURES\LoanDocumentationType = "NoVerificationOfStatedIncome" attribute.
Stated Income / Stated Assets (SISA) Documentation
This documentation type does not require verification of the borrower's income or assets. The borrower’s qualifying ratios are determined on the basis of information disclosed on the loan application. The borrower’s stated income is based upon the previous year’s income. Stated income should be consistent with income typically derived from the borrower’s occupation. It is assumed that a borrower's stated income is the upper estimate of the borrower’s actual income. Funds to close and assets are also determined on the basis of information disclosed on the loan application. Qualifying ratios based upon the borrower’s stated income and assets should generally be below maximum acceptable qualifying ratios.

A loan with SISA Documentation represents a higher credit risk than a loan with Stated Income Documentation. Investors will have price adjustments and more restrictive Loan To Value (LTV) ratios associated with loans that have a SISA documentation type.

For electronic mortgage data mapping purposes; mortgage loans with "Stated Income / Stated Assets" should be mapped to the MISMO LOAN_FEATURES\LoanDocumentationType = "NoVerificationOfStatedIncomeOrAssests" attribute.
No Ratio Documentation (NR) a.k.a. No Income Disclosure (NID) Documentation
This documentation type does not require the calculation of the borrower's debt ratios. Typically, to qualify a loan with this documentation type the borrower's income should not be disclosed on the loan application or in the file documentation. However, the application is complete as to liabilities, assets, schedule of Real Estate Owned (REO), and all other documentation. A loan with NR Documentation represents a significant credit risk. Typically, price adjustments and more restrictive Loan To Value (LTV) ratios associated with loans that have a NR documentation type.

For electronic mortgage data mapping purposes; mortgage loans with "No Ratio" documentation should be mapped to the MISMO LOAN_FEATURES\LoanDocumentationType = "NoRatio" attribute.
No Income / No Asset (NINA) Documentation
This documentation type does not require the calculation of qualifying ratios. Neither the borrower's income nor assets are disclosed on the application or in the file documentation. Typically, employment must be verified. A loan with NINA Documentation represents one the highest credit risks from an investor perspective. Price adjustments and more restrictive Loan To Value (LTV) ratios are associated with loans that have a NINA documentation type.

For electronic mortgage data mapping purposes; mortgage loans with "No Income / No Asset (NINA)" should be mapped to the MISMO LOAN_FEATURES\LoanDocumentationType = "NoIncomeNoEmploymentNoAssetsOn1003" attribute.
No Documentation
This documentation type does not require the calculation of qualifying ratios. Neither the borrower's income nor assets are disclosed on the application or in the file documentation. The difference between NINA and No Documentation is an investor distinction. A loan with No Documentation represents the highest credit risk from an investor perspective. Price adjustments and more restrictive Loan To Value (LTV) ratios are associated with loans that have a "No Documentation" documentation type.

For electronic mortgage data mapping purposes; mortgage loans with "No Documentation" should be mapped to the MISMO LOAN_FEATURES\LoanDocumentationType = "NoDocumentation" attribute.

The "Reporting Mortgage Loan Documentation Type" section of this article details steps for creating a report that an investor may use to track and report the distribution of loan documentation types for loans that a seller has delivered to the investor. A disproportionate percentage of loans with a low documentation level from a single seller could represent a significant risk to the investor. The Sample Mortgage Loan Documentation Type Report in this article can be used as a model for a stand alone loan documentation type report or incorporated into a comprehensive Seller Scorecard report.



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