Chapter 8 — Further Reading

Sources are grouped by the book's three tiers. Tier 1 is verified canonical material we can stand behind. Tier 2 is real practice and real benchmarks whose current values change and must be checked at the source. Tier 3 is this book's own constructed material, useful for practice and not for citation.

Tier 1

The TILA-RESPA Integrated Disclosure rule, and the Loan Estimate and Closing Disclosure forms themselves (Consumer Financial Protection Bureau). Read an actual blank Loan Estimate beside §8.4. Its structure is the best available public statement of what a regulator concluded, after consumer testing, that a borrower most needs to see: the estimated total monthly payment rather than principal and interest, an explicit "can this amount increase after closing?" column, estimated closing costs and estimated cash to close as separate figures, and a five-year comparison. Everything on page one is something you can say out loud on day 1. Case Study 8.1 works this in full.

The Truth in Lending Act and Regulation Z — the definition of "application" and the Loan Estimate timing requirement. The six items whose submission constitutes an application (name; income; Social Security number to obtain a credit report; property address; an estimate of the value of the property; and the loan amount sought) are the single most operationally consequential definition in this chapter. Read the rule text and the Official Interpretations, then read your own company's pre-approval procedure and see whether you can explain why it says what it says. Chapter 22 works TRID timing properly.

The Equal Credit Opportunity Act and Regulation B, with the Official Interpretations. Two things live here that matter to a pre-qualification conversation. First, Regulation B's definition of "application" is not Regulation Z's, and the commentary addresses prequalification requests specifically — including when a creditor's handling of one turns it into an application whose denial requires an adverse action notice. Second, the prohibition on discouraging an application on a prohibited basis. Read the commentary rather than a summary; the distinctions are in the examples.

The Fair Credit Reporting Act. Permissible purpose, consumer authorization, and the disclosure obligations that attach when a credit score is used in a mortgage decision. The prescreening provisions are also the mechanism behind the unsolicited calls your borrower will receive after you pull — §8.1 argues you should warn them first.

The Dodd-Frank Wall Street Reform and Consumer Protection Act; the Ability-to-Repay and Qualified Mortgage rule. The post-crisis answer to the question "how do we stop lenders from making loans people cannot repay?" Read it for what it does — verified income, no negative amortization, no interest-only, no payment resets the borrower did not understand — and then for what it does not do. Case Study 8.2 turns on the fact that the determination is made on a ratio computed on gross income.

Fannie Mae Selling Guide and Freddie Mac Seller/Servicer Guide — the income sections. The authority on what may be counted, how variable income is averaged, what a rising versus declining trend does to the calculation, and what continuance requires. Both are free, public, searchable, and continuously updated. Read the variable-income and commission sections before your next discovery call; they are the source of the \$4,350 / \$4,200 distinction in §8.3.

HUD Handbook 4000.1 — FHA underwriting, including manual underwriting and compensating factors. The 31/43 benchmark the Harlow Street file exceeds, the conditions under which an automated recommendation carries a file past it, and the treatment of an increase in housing expense. Chapters 16 and 18 use it directly.

Department of Veterans Affairs — the residual income requirement. The one place in mainstream American lending where §8.2's question is asked inside the guidelines: a calculation of dollars remaining after the mortgage, obligations, taxes, and estimated maintenance and utilities, tested against a figure varying by region and family size. Worth reading even if you never originate a VA loan, because it shows what the affordability question looks like when a program takes it seriously. Chapter 17. Verify the current tables with the VA.

Your Home Loan Toolkit: A Step-by-Step Guide (CFPB). The plain-language guide that replaced the older RESPA special information booklet for purchase transactions. Read it as a model of register — it is written for the person on your phone, and it is a useful check on how much jargon has crept into your own explanations.

Tier 2

Your own company's pre-approval letter template, and its written procedure for issuing one. Every lender has one, most loan officers have never read the procedure behind it, and it encodes compliance decisions someone made deliberately — particularly whether a subject property may be named. Find out who owns the template and ask them why it says what it says. Company-specific; not generalizable.

Program credit score minimums, ratio limits, and reserve requirements. Every figure in this class changes. Conventional programs generally look for a representative score at or above the low 600s and price meaningfully better well above that; FHA's minimums and its manual underwriting benchmarks are set in Handbook 4000.1 and revised. Never quote a threshold from memory in front of a borrower. Verify at the source, every time.

Mortgage insurance factors, FHA MIP schedules, and upfront premium rates. The \$176.78 on the Linden Street file and the \$96.76 on the Harlow Street file are computed from factors that are periodically revised. Learn how a factor becomes a monthly figure; look up the current factor when you quote.

Credit report and income document validity windows. These determine how long a pre-approval letter should live, and they vary by program and are periodically revised. Sixty days is a defensible choice for a purchase pre-approval letter, not a rule. Check the applicable guide.

County and state down-payment assistance programs. The Harlow Street file's \$10,000 forgivable second is constructed. Real programs come and go, change their income limits and forgiveness schedules, and run out of money mid-year. Maintain a live list for your own market and re-verify it quarterly. Chapter 33.

Property tax reassessment practice in your market. Whether and how a sale triggers reassessment is state and local law and it varies enormously — and it is the mechanism by which a first-time buyer's payment changes in year two. Ask a title officer or the county assessor in your market. Do not generalize from a market you used to work in.

The National Survey of Mortgage Originations (CFPB and FHFA). A public, ongoing survey of borrowers about their experience of getting a mortgage, including what they shopped for and what they understood. Useful for orientation. Read the published documentation before citing any individual figure, and cite the release rather than a secondary summary.

Tier 3 — constructed for this book

The Linden Street file. The progressive project: \$385,000 purchase, two borrowers, 5% down, \$10,500.00 of qualifying income, \$1,446.00 of monthly debts, PITI + MI of \$3,033.72, ratios 28.89% / 42.66%, payment shock of 1.64×. All figures are constructed to compute and to teach; none is a real borrower's file.

The Harlow Street file. A single borrower, 641 representative score, \$4,150.00 gross monthly income, \$395.00 of debts, a \$215,000 townhome with FHA financing and a \$10,000 forgivable county second. PITI + MIP \$1,721.57; ratios 41.48% / 51.00%. The human anchor for expectation-setting and for delivering bad news early.

Case Study 8.2 — the household approved at 49.00%. A clearly labeled composite assembled from documented industry patterns. Every figure computes and no figure is a measurement.

The discovery call agenda, the call-note template, and the two letter specimens (§8.3, §8.6, §8.9). Constructed teaching artifacts. Adapt them; do not treat any of them as compliant forms. Use your company's approved template for anything that leaves the building.

If you read only one thing

Read a blank Loan Estimate — the actual form, from the Bureau — with §8.2 and §8.4 open beside it.

It takes fifteen minutes. Page one gives you the exact items a regulator decided, after testing, that a borrower most needs: the total monthly payment including escrow and mortgage insurance, whether each figure can increase, and cash to close as a number distinct from closing costs. Every one of those is something you can say in a discovery call three weeks before the form is generated — which is the only point in the transaction when the borrower can still act on it.

Then notice what the form does not contain, anywhere: a line for what is left over at the end of the month. That absence is Chapter 8.