Vista Point Assets LLC ABS-15G
Exhibit
99.3
EXECUTIVE
SUMMARY
VSTA
2025-CES2
Description
of the due diligence performed
Overview
of the assets that were reviewed
Incenter
Lender Services LLC, c/k/a Incenter Diligence Solutions (“Incenter Diligence”), performed an independent third-party
due diligence review of 136 loans acquired by Vista Point Mortgage, LLC (the “Client”). The review was performed from
January 2025 through June 2025 using the scope of review described herein, which was agreed to at the time of review. The results
of the review performed by Incenter Diligence only reflect information concerning the related loans on which such review was performed
as of the date such review was performed based on the scope of review used as of the date such review was performed and not as
of any subsequent date. Incenter Diligence has not subsequently performed any review with respect to the loans, and Incenter Diligence
will not be required to complete or provide any additional, new, or refreshed review or results with respect to the loans.
Sampling
of assets
Incenter
Diligence follows the nationally recognized statistical rating organizations, NRSRO(s), criteria. For all originators, Incenter
Diligence performed review on 100% of the loans. The loan population was 136 loans for an aggregate original principal balance
of $33,820,565.00.
The
review was conducted in accordance with the following NRSRO(s) Third Party Due Diligence Criteria:
| Identity
of NRSRO |
Title
and Date of Criteria |
| DBRS,
Inc. |
Third-Party
Due-Diligence and Representations & Warranties Criteria for U.S. RMBS Transactions – September 30, 2024 |
Data
integrity, review scope and methodology
Data
Integrity – Incenter Diligence performed a data integrity analysis by comparing the information in the loan file against
the data tape supplied by the Client to ascertain accuracy and completeness. All discrepancies are reported on the Data Comparison
Report
The
data comparison consisted of the following data fields:
| Data
Compare Field Name |
| ARM
Interest Data |
| Amortization
Term |
| Borrower
1 First Name |
| Borrower
1 Last Name |
| Borrower
2 First Name |
| Borrower
2 Last Name |
| Borrower
1 FTHB |
| Borrower
2 FTHB |
| Doc
Type |
| First
Payment Date |
| Interest
Only Flag |
| Lien
Position |
| Loan
Program |
| Loan
Purpose |
| Loan
Type |
| Maturity
Date |
| Note
Date |
| Number
of Units |
| Occupancy
|
| Original
Interest Rate |
| Original
Loan Amount |
| Original
Loan Term |
| Original
P&I |
| Originator
DSCR |
| Prepayment
Penalty |
| Property
Address |
| Property
City |
| Property
State |
| Property
Zip Code |
| Property
Type |
| QM
Designation |
| Qualifying
Appraised Value |
| Qualifying
CLTV |
| Qualifying
FICO |
| Qualifying
LTV |
| Qualifying
Total DTI |
| Refinance
Type |
| Sales
Price |
| Subordinate
Lien Amount |
| Underwriting
Guideline Name |
Underwriting
Conformity (Standard Residential Loans)
Incenter
Diligence performed a complete review of all loan files, as supplied by the Client, to determine whether the loans were originated
in accordance with the underwriting guidelines provided by the Client (which, for the avoidance of doubt, may be either the Client’s
or a third party’s underwriting guidelines), eligibility requirements, Ability to Repay (ATR), Qualified Mortgage and Appendix
Q requirements (where applicable), and applicable Policies & Procedures, noting any exceptions and compensating factors. The
review included, where applicable, the following items:
Conformance
to Ability to Repay (ATR) standards – Incenter Diligence reviewed each loan to validate that the underwriter correctly
assessed the borrower’s ability to repay based on employment and credit/repayment history, income and assets, projected
monthly payment and current obligations, debt to income ratio, and other information provided to support ability to repay prior
to originating the loan.
An
evaluation of Qualified Mortgage and Appendix Q requirements, if applicable – Based on the information provided, Incenter
Diligence will review each loan to determine that it satisfies all requirements for a Qualified Mortgage, if designated as such,
including an evaluation of points and fees, risk factors associated with the loan terms, re-calculation of debt to income and
a review of all income and assets.
Credit,
Income, Assets and Employment
| A. | Validate
that the appropriate employment and income documentation, such as pay stubs, tax transcripts,
and bank statements, was provided and used to accurately qualify the borrower according
to guidelines. Recalculate the borrower’s income and debt to determine the appropriate
debt to income ratio in accordance with the guidelines. Validate borrower’s employment
history and confirm that the appropriate income and assets were used to qualify. Make
a reasonable assessment of whether there are any indications that income documentation
may be fraudulent. |
| B. | Validate
that assets used to qualify the borrower match the documentation in the file and the
information used to calculate down payment, closing costs, and reserves meet program
guideline requirements. |
| C. | Review
exceptions, compensating factors and underwriter comments, if available. |
| D. | Review
program guidelines against the loan approval for discrepancies such as: |
| 1. | Employment
requirements; |
| E. | Review
the loan approval against all supporting documentation and loan application to verify
accuracy. |
| F. | Review
the initial loan application against the final loan application or other loan applications
found in the file to validate the application was signed and properly completed and to
expose discrepancies. |
| G. | Confirm
that credit report(s) and verification of mortgage or rental history, when required,
have been provided for all borrowers/guarantors, are consistent with loan approval, and
meet guideline requirements. Verify whether any fraud alerts are listed on the credit
reports and make a reasonable assessment of whether the borrower’s profile adheres
to applicable guidelines. |
| H. | Review
the loan file for inconsistencies based on information derived from source documentation
provided in the loan file, for the purposes of identifying misrepresentations contained
in the loan file, including with respect to occupancy and mortgage liabilities. |
Occupancy,
Taxes, Title and Insurance
| A. | Review
source documents for consistency with regard to subject property occupancy intent. |
| B. | Review
the title report for possible judgments and other liens that may have existed upon origination;
verify chain of title, as required by guidelines. |
| C. | Verify
and validate the file contains sufficient property insurance coverage as required by
guidelines; confirm property insurance policy contains appropriate mortgagee clause.
For subject properties located in a Special Flood Hazard Area where flood insurance is
required, verify and validate the file contains sufficient flood insurance coverage as
required by guidelines and that flood insurance policy contains appropriate mortgagee
clause. |
| D. | Review
property details on appraisal including a review for ineligible properties. |
| E. | Verify
that Business Purpose Affidavit and Occupancy Affidavit, if applicable, were executed
by the borrowers/guarantors and confirm that document addresses are consistent with subject
property address and do not match the primary residence address. |
Underwriting
Conformity (Business Purpose/DSCR)
For
each loan, Incenter Diligence validated conformance to Client supplied and program requirements and noted any exceptions. Unless
otherwise directed by the Client, no regulatory compliance review was performed.
| A. | Validate
Conformance to Product Type and Eligibility |
| 4. | Geographic
Requirements |
| B. | Transaction
Types: Verify Conformance with Business Purpose Loan Requirements |
| 1. | Business
Purpose Affidavit – verify signed Borrower Statement of Business Purpose is present
in the file |
| 2. | Non-Owner
Occupancy – verify Occupancy certification is present in the file |
| 3. | Validate
that there is no information in the loan that contradicts occupancy type |
| C. | Review
Debt Service Coverage Ratio |
| D. | Review
Cash Flow and Expense Factor |
| E. | Review
Hazard/Flood Insurance |
| F. | Review
preliminary Title Report/Commitment |
| 1. | Validate
documentation requirements |
| 2. | Verify
acceptable Residency Status |
| 3. | Review
credit reports used to qualify borrower, as well as consumer credit history/charge offs/collections,
and cite any exceptions or unusual findings |
| a. | Evaluate
credit scores and tradelines against guidelines |
| b. | Evaluate
other debt obligations (alimony, child support, etc.) |
| 4. | If
required, verify that a 3rd party fraud report (DataVerify, etc.) is contained in the
loan file and review findings to confirm all deficiencies were resolved |
| 5. | Evaluate
borrower’s mortgage/rental payment history using credit reports or other information
supplied in the loan file |
| 6. | Verify
that all judgements/liens/tax liens have been satisfied |
| 7. | Verify
that any bankruptcy, foreclosure or forbearance activity is in accordance with guidelines |
| 8. | Perform
a review of all asset information supplied in the loan file against guidelines |
| 9. | Evaluate
borrowers’ asset utilization and verify sufficient liquid assets to supplement
income |
| 10. | Perform
a rental income analysis using the information supplied in the loan file as per the guidelines |
Property
Valuation Review (Standard Residential and Business Purpose/DSCR Loans)
Incenter
Diligence reviewed all loans to validate the original appraisal report was provided in the loan file and that it is substantially
complete. The evaluation will include the following components:
| A. | Review
the original appraisal report to ensure the valuation was performed by a licensed appraiser
and in accordance with guidelines, |
| B. | Verify
subject property type meets applicable guidelines, |
| C. | Note
any exceptions to stated value or appraisal guidelines, |
| D. | Verify
value used to calculate LTV/CLTV and note any deviations. |
| E. | Verify
that the loan and property data within the appraisal report matches the loan documents. |
| F. | Review
the appraisal report to ensure report value is “as is” or, if report is “subject
to”, that there is an associated completion report resolving all noted issues,
and |
| G. | Review
additional valuation products in the file; if there is a variance greater than 10% below
the appraisal value, Client will be notified and an additional independent valuation
product will be obtained as requested. |
Regulatory
Compliance Review (Standard Residential Loans Only, Unless Otherwise Requested)
Incenter
Diligence’s Regulatory Compliance analysis is intended to expose certain potential risk associated with the loans examined.
It is strictly limited to the review scope outlined below and is based solely on the accuracy of the documentation and data supplied
by the Client or other agreed upon third parties. The review findings are not guaranteed to encompass all critical elements related
to the underwriting, origination or regulatory compliance status of the loans
examined.
Further, the findings are not to be construed as guidance on future indicators of positive or negative performance.
Incenter
Diligence will perform a review of all loans supplied by the Client to verify all documentation provided is complete and complies
with all applicable federal and state regulatory requirements, in addition to following the RMBS 4.0 TRID Compliance Review Scope
published by the Structured Finance Industry Group (now the Structured Finance Association or “SFA”) (the “SFIG
Compliance Review Scope”), as amended from time to time, and the advice of outside counsel. As it relates to TILA-RESPA
Integrated Disclosures (“TRID”) testing, Incenter Diligence works with outside counsel on an ongoing basis to understand
and interpret compliance regulations based on recent guidance by the Consumer Financial Protection Bureau (the “CFPB”)
that has created deviations in the TRID review scope and related exceptions/cures. The TRID-related review scope, outlined below
and not performed for investment properties, will continue to be amended where appropriate as future guidance and rules are published.
Incenter Diligence’s conclusions are representative of best efforts to identify material risks and exceptions associated
with each loan based on interpretation of the continually evolving regulations. Incenter Diligence maintains an active dialogue
with outside counsel, Clients, Rating Agencies, SFA and other parties when interpreting compliance regulations and amending the
review scope to accurately expose the risk associated with a loan. However, no guaranties can be made that the Review includes
all areas of risk that may be present in the Transaction. In addition to the foregoing, Incenter Diligence utilizes nationally
recognized integrated compliance analyzer tools.
Incenter
Diligence does not employ personnel who are licensed to practice law in the various jurisdictions and the findings set forth in
the reports prepared by Incenter Diligence do not constitute legal advice or opinions. They are recommendations or conclusions
based on information provided to Incenter Diligence. All final decisions as to whether to purchase or enter into a transaction
related to any individual loan or the loans in the aggregate and any legal conclusions, including the potential liability related
to the purchase or other transaction involving any such loan or loans, shall be made solely by the clients that have engaged Incenter
Diligence to prepare their reports pursuant to their instructions and guidelines. Client acknowledges and agrees that the scoring
models applied by Incenter Diligence are designed to identify potential risk and the Client assumes sole responsibility for determining
the suitability of the information for its particular use.
Incenter
Diligence reviews each loan to validate compliance with the following federal and state regulatory requirements, whenever applicable.
| A. | Truth
In Lending Act - 12 CFR §1026 (“TILA”) |
| a. | Finance
Charge Test (12 CFR §1026.18(d)(1)) |
| i. | It
is understated by no more than $100; or |
| ii. | It
is greater than the amount required to be disclosed |
| b. | Rescission
Finance Charge Test (12 CFR §1026.23(h)(2)(i)) |
| i. | It
is understated by no more than $35; or |
| ii. | It
is greater than the amount required to be disclosed |
| c. | Rescission
Total of Payments Test ((12 CFR §1026.23(h)(2)(ii)) |
| i. | Is
understated by no more than $35; or |
| ii. | Is
greater than the amount required to be disclosed |
| d. | Foreclosure
Rescission Finance Charge and Total of Payments Tests (12 CFR §1026.23(h)) |
| e. | APR
Test 12 CFR (§1026.22(a)(2), (4)) |
| i. | The
disclosed annual percentage rate (APR) is considered accurate because it is not more
than 1/8 of 1 percentage (for regular transactions) or 1/4 of 1 percentage (for irregular
transactions) point above or below the APR as determined in accordance with the actuarial
method; or |
| ii. | The
disclosed APR results from the disclosed finance charge, and the disclosed finance charge
is considered accurate under §1026.18(d)(1) (the finance charge test), or for purposes
of rescission the disclosed finance charge is considered accurate under §1026.23(g)
or (h) (the rescission finance charge test or the foreclosure rescission finance charge
test), whichever applies |
| f. | Right
of Rescission Test (12 CFR §1026.23(a)(3), §1026.15(a)(3)) |
| i. | The
funding date is not before the third business day following consummation |
| ii. | The
consumer may exercise the right to rescind until midnight of the third business day following
consummation |
| iii. | Validate
Right of Rescission Notice was provided, and the correct form was used |
| g. | Dual
Broker Compensation Test (12 CFR §1026.36(d)(2)) |
| i. | If
any loan originator receives compensation directly from a consumer in a consumer credit
transaction secured by a dwelling, no loan originator shall receive compensation, directly
or indirectly, from any other person other than the consumer in connection with the transaction
for loan origination activities |
| h. | Loan
Originator Credits Test (12 C.F.R. §1026.36(d)(1)) |
| i. | Test
that the initial disclosure (GFE/TIL/LE) does not contain any broker fees paid by the
broker |
| i. | Financing
of Single Premium Credit Insurance Test (12 CFR §1026.36 (i)) |
| i. | A
creditor may not finance, directly or indirectly, any premiums or fees for credit insurance
in connection with a consumer credit transaction secured by a dwelling (including a home
equity line of credit secured by the consumer’s principal dwelling) |
| 2. | TIL
Disclosure (Pre-TRID) |
| a. | TIL
Disclosure Date Test (12 CFR §1026.17(b),1026.19(a)) |
| i. | The
loan is a mortgage transaction subject to the Real Estate Settlement Procedures Act (12
U.S.C. §2601 et seq.) that is secured by the consumer’s dwelling; and |
| ii. | The
initial TIL disclosure date is not later than the third business day (counting days on
which the creditor’s offices are open to the public for carrying on substantially
all of its business functions) after the creditor receives the consumer’s written
application; and |
| iii. | The
initial TIL disclosure date is not later than the seventh business day (counting all
calendar days except Sunday and specified legal public holidays) before consummation
of the transaction, or the application date of the loan is before July 30, 2009; and |
| iv. | The
loan is a “residential mortgage transaction” subject to the Real Estate Settlement
Procedures Act (12 U.S.C. §2601 et seq.); and |
| v. | The
initial TIL disclosure date is before consummation or three business days after the creditor
receives the consumer’s written application, whichever is earlier; and |
| vi. | Test
the final TIL disclosure and any re-disclosed TIL(s); and |
| vii. | The
final TIL disclosure is properly executed; and |
| viii. | The
final TIL disclosure and any re-disclosed TIL(s) is properly completed |
| 3. | TILA
RESPA Integrated Disclosures (TRID) |
| a. | Initial
Loan Estimate Delivery Date Test (from application) (12 CFR §1026.19(e)(1)(iii)(A)) |
| i. | The
creditor shall deliver or place in the mail the disclosures required under §1026.19(e)(1)(i)
(provision of loan estimate form) not later than the third business day after the creditor
receives the consumer’s application |
| b. | Initial
Loan Estimate Delivery Date Test (prior to consummation) (12 CFR §1026.19(e)(1)(iii)(B)) |
| i. | The
creditor shall deliver or place in the mail the disclosures required under §1026.19(e)(1)(e)(1)(i)
(provision of loan estimate form) not later than the seventh business day before consummation
of the transaction |
| c. | Loan
Estimate (12 CFR §1026.19 and 37) |
| i. | Verify
applicable sections of the disclosure determined to carry assignee liability were accurately
completed |
| ii. | Verify
final Loan Estimate was provided to borrower prior to the Closing Disclosure |
| d. | Written
List of Service Providers (SSPL) Disclosure Date Test (12 CFR §1026.19(e)(1)(vi)) |
| i. | If
the consumer is permitted to shop for a settlement service, the creditor shall provide
the consumer with a written list identifying available providers of that settlement service
and stating that the consumer may choose a different provider for that service. The creditor
must identify at least one available provider for each settlement service for which the
consumer is permitted to shop. The creditor shall provide this written list of settlement
service providers separately from the disclosures required by §1026.19(e)(1)(e)(1)(i)
but in accordance with the timing requirements in §1026.19(e)(1)(e)(1)(iii) |
| e. | Revised
Loan Estimate Delivery Date Test (prior to consummation) (12 CFR §1026.19(e)(4)(ii)) |
| i. | The
creditor shall not provide a revised version of the disclosures required under §1026.19(e)(1)(i)
on or after the date on which the creditor provides the disclosures required under §1026.19(f)(1)(i).
The consumer must receive a revised version of the disclosures required under §1026.19(e)(1)(i)
not later than four business days prior to consummation. If the revised version of the
disclosures required under §1026.19(e)(1)(i) is not provided to the consumer in
person, the consumer is considered to have received such version three business days
after the creditor delivers or places such version in the mail |
| f. | Valid
Change of Circumstances Test |
| i. | The
changed circumstance(s) form was provided and the reason for re-disclosure is: |
| a. | Changed
circumstance affecting settlement charges; or |
| b. | Changed
circumstance affecting eligibility; or |
| c. | Revisions
requested by the consumer; or |
| d. | Expiration
of initial loan estimate; or |
| e. | Delayed
settlement date on a construction loan for new construction transactions only; or |
| f. | The
date the rate was set was not provided and interest rate dependent charges change once
the interest rate is locked; or |
| g. | The
reason for re-disclosure is “Decrease in charges affecting settlement or eligibility,
a consumer-requested revision, or other non-tolerance-related re-disclosure;” or |
| h. | The
initial loan estimate was not delivered timely |
| g. | Initial
Closing Disclosure Delivery Date Test (12 CFR §1026.19(f)(1)(ii)) |
| i. | The
creditor shall ensure that the consumer receives the disclosures required under paragraph
§1026.19(f)(1)(i) no later than three business days before consummation |
| h. | Closing
Disclosure Test (12 CFR §1026.19 and 38) |
| i. | Verify
applicable sections of the disclosure determined to carry assignee liability were accurately
completed |
| i. | Revised
Closing Disclosure Delivery Date Test (waiting period vs. no waiting period required)
(12 CFR §1026.19(f)(2)(i) & (ii)) |
| i. | If
the disclosures provided under §1026.19(f)(1)(i) become inaccurate before consummation,
the creditor shall provide corrected disclosures reflecting any changed terms to the
consumer so that the consumer receives the corrected disclosures at or before consummation |
| ii. | If
the consumer determines that the extension of credit is needed to meet a bona fide personal
financial emergency, the consumer may modify or waive the three-business-day waiting
period for the revised closing disclosure after receiving the disclosures |
| j. | TRID
Tolerance Testing - Charges That Cannot Increase Test (12 CFR §1026.19(e)(3)(i)) |
| i. | An
estimated closing cost disclosed pursuant to §1026.19(e) is in good faith if the
charge paid by or imposed on the consumer does not exceed the amount originally disclosed
under §1026.19(e)(1)(i) |
| k. | TRID
Tolerance Testing - Charges That in Total Cannot Increase More Than 10% Test (12 CFR
§1026.19(e)(3)(ii)) |
| i. | The
aggregate amount of charges for third-party services and recording fees paid by or imposed
on the consumer does not exceed the aggregate amount of such charges disclosed under
§1026.19(e)(1)(i) by more than 10 percent |
| l. | TRID
Tolerance Testing - Lender Credits That Cannot Decrease Test (12 CFR §1026.19(e)(3)(i)) |
| i. | An
estimated closing cost disclosed pursuant to §1026.19(e) is in good faith if the
charge paid by or imposed on the consumer does not exceed the amount originally disclosed
under §1026.19(e)(1)(i) |
| m. | TRID
Reimbursement Amount Test (12 CFR §1026.19(f)(2)(v)) |
| i. | Refunds
related to the good faith analysis. If amounts paid by the consumer exceed the amounts
specified under §1026.19(e)(3)(i) or (ii), the creditor complies with §1026.19(e)(1)(i)
if the creditor refunds the excess to the consumer no later than 60 days after consummation |
| n. | TRID
Reimbursement Date Test (12 CFR §1026.19(f)(2)(v)) |
| i. | Refunds
related to the good faith analysis. If amounts paid by the consumer exceed the amounts
specified under §1026.19(e)(3)(i) or (ii), the creditor complies with §1026.19(e)(1)(i)
if the creditor refunds the excess to the consumer no later than 60 days after consummation |
| o. | Disclosure
of Escrow Account (§1026.38(l)(7)) |
| i. | If
the loan indicates an escrow account will be established |
| a. | Verify
all amounts disclosed in the Projected Payments Table are accurate (§1026.38(c);
§1026.37(c)) |
| b. | Verify
all amounts disclosed in the Estimated Taxes, Insurance and Assessments (ETIA) are accurate
(§1026.37(c)(4),(5)) |
| c. | Verify
all amounts disclosed in Section G – Initial Escrow Payment and Closing are accurate
(§1026.37(g)(3)) |
| d. | Verify
all amounts disclosed in the Escrow Account Section are accurate (§1026.38(l)(7)) |
| ii. | If
the loan indicates an escrow account will not be established |
| a. | Verify
all amounts disclosed in the Projected Payments Table are accurate (§1026.38(c);
(§1026.37(c)) |
| b. | Verify
all amounts disclosed in the Estimated Taxes, Insurance and Assessments (ETIA) are accurate
(§1026.37(c)(4), (5)) |
| c. | Verify
all amounts disclosed in the Escrow Account Section are accurate (§1026.38(l)(7)) |
| p. | Disclosure
of Seller Paid Closing Costs (§1026.38(t)(5)(v)(B)) |
| i. | In
transactions involving a seller, validate whether the lender disclosed all costs being
paid by the seller on the borrowers Closing Disclosure |
| ii. | If
seller paid fees are present on the borrower’s Closing Disclosure, review the seller’s
Closing Disclosure or alternative documentation for accuracy of disclosure |
| q. | Post-consummation
Event and Revised Closing Disclosure Delivery Date Test |
| i. | The
post-consummation revised closing disclosure delivery date is not more than 60 calendar
days after the consummation date, or closing / settlement date if no consummation date
was provided; and |
| ii. | The
provided reimbursement date is not more than 60 calendar days after the consummation
date, or closing / settlement date if no consummation date was provided |
| r. | Non-numeric
Clerical Error and Post-consummation Revised Closing Disclosure Delivery Date Test (12
CFR §1026.19(f)(2)(iv)) |
| i. | A
creditor does not violate §1026.19(f)(1)(i) if the disclosures provided under §1026.19(f)(1)(i)
contain non-numeric clerical errors, provided the creditor delivers or places in the
mail corrected disclosures no later than 60 days after consummation |
| s. | Loan
Calculation Test on the Closing Disclosure (12 CFR §1026.38)) |
| iv. | Total
Interest Percentage |
| 4. | Qualified
Mortgage / Ability To Repay – Dodd Frank |
| a. | Classification
of QM designated loan |
| i. | Validate
whether the mortgage loan is a Safe Harbor QM or Higher Priced QM by comparing the mortgage
loan’s actual annual percentage rate, as recalculated, to the applicable average
prime offer rate plus a certain applicable percentage |
| ii. | Determination
of conformity thresholds (Safe Harbor or Rebuttable Presumption) |
| b. | Negative
Amortization Loan (12 CFR 1026.43(e)(2)(i)(A)) |
| i. | A
qualified mortgage is a covered transaction that provides for regular periodic payments
that are substantially equal, except for the effect that any interest rate change after
consummation has on the payment in the case of an adjustable-rate or step-rate mortgage,
that does not result in an increase of the principal balance |
| c. | Interest
Only Loan (12 CFR 1026.43(e)(2)(i)(B)) |
| i. | A
qualified mortgage is a covered transaction that provides for regular periodic payments
that are substantially equal, except for the effect that any interest rate change after
consummation has on the payment in the case of an adjustable-rate or step-rate mortgage,
that does not allow the consumer to defer repayment of principal |
| d. | Balloon
Payment Loan (12 CFR 1026.43(e)(2)(i)(C)) |
| i. | A
qualified mortgage is a covered transaction that provides for regular periodic payments
that are substantially equal, except for the effect that any interest rate change after
consummation has on the payment in the case of an adjustable-rate or step-rate mortgage,
that does not result in a balloon payment |
| e. | Loan
Term (12 CFR 1026.43(e)(2)(iii)) |
| i. | A
qualified mortgage is a covered transaction for which the loan term does not exceed 30
years |
| f. | Points
and Fees (12 CFR §1026.43(e)(3)) |
| i. | Points
and fees do not exceed the qualified mortgage points and fees threshold |
| g. | DTI
(12 CFR §1026.43(e)(2)(vi)) |
| i. | The
ratio of the consumer’s total monthly debt to total monthly income at the time
of consummation does not exceed 43 percent, calculated in accordance with Appendix Q |
| ii. | For
Fannie Mae and Freddie Mac, however, the revised QM rules become mandatory on July 1,
2021, meaning that the QM Patch effectively terminates on July 1, 2021—and that
all loans sold to Fannie and Freddie must comply with the revised QM rules, effective
July 1, 2021. |
| iii. | (iv)
For creditors not selling loans to Fannie Mae and/or Freddie Mac, loans underwritten
from March 1, 2021 until October 1, 2022 will continue to apply the legacy QM rules;
however, commencing July 1, 2021, legacy QM loans must be underwritten to Appendix Q
and NOT to the QM Patch. |
Stated
another way, since the FHFA terminated the QM Patch, loans underwritten to the QM Patch after July 1 are no longer eligible for
sale to the GSEs, and in effect, the QM Patch
disappeared
after that date, notwithstanding the CFPB’s intent for it to continue until October 1, 2022. Hence, for non-agency loans,
underwritten between July 1, 2021 and October 1, 2022, legacy QM loans must be underwritten in accordance with Appendix Q.
| iv. | Client
is required to advise regarding which application of QM/DTI or QM/APR rule for loans
with application dates between 03/01/2021 and 10/01/2022 for the proper evaluation of
QM. |
| v. | Loans
underwritten after 10/1/2022 will be reviewed following the revised QM (QM 2.0) rules, |
| h. | APR
(12 CFR §1026.43(e)(2)(vi)) |
| i. | The
loan APR is not to exceed the APOR plus percentage threshold, calculated according to
12 CFR §1026.43(e)(2)(vi). With a QM/APR optional test period for loans with application
dates between 03/01/2021 and 10/01/2022 and mandatory compliance and testing for loans
after 10/01/2022. |
| a. | The
APR on the loan does not exceed the threshold for the loan amount: |
| b. | For
a first-lien loan with a loan amount greater than or equal to $110,260 (indexed for inflation),
2.25 or more percentage points; |
| c. | For
a first-lien loan with a loan amount greater than or equal to $66,156 (indexed for inflation),
but less than $110,260 (indexed for inflation), 3.5 or more percentage points; |
| d. | For
a first lien loan with a loan amount less than $66,156 (indexed for inflation), 6.5 or
more percentage points; |
| e. | For
a subordinate-lien loan with a loan amount great than or equal to $66,156 (indexed for
inflation), 3.5 or more percentage points; and |
| f. | For
a subordinate-lien loan with a loan amount less than $66,156 (indexed for inflation),
6.5 or more percentage points. |
| a. | QM/DTI
test will cease as of application dates on or after 10/01/2022 |
| b. | In
addition to the Generally Applicable Factors above, all Revised QM loans must meet the
following: |
| c. | Monthly
Payment. The amount of the monthly payment on the loan is calculated using the maximum
rate that may apply during the first five years and considers the monthly payment for
simultaneous loans and mortgage obligations. |
| d. | Consider
and Verify. The creditor considers and verifies the consumer’s current or expected
income and assets and debt and his DTI or residual income |
| e. | As
part of the “consider” requirement, Incenter Diligence will review the (i)
creditor’s policies and procedures provided by Client, as well as any exceptions
thereto, for how the creditor takes into account the underwriting factors enumerated
above, and (ii) the documentation retained by creditor, such as an underwriting worksheet
or a final automated underwriting system certification, showing how the creditor took
these factors into account in its ability-to-repay determination. |
| f. | Consider
and Verify Safe Harbor (VSH). Creditor is deemed to have complied with this “verify”
requirement if it complies with the verification standards in one or more of these following
agency manuals: |
| g. | Chapters
B3-3 through B3-6 of the Fannie Mae Single Family Selling Guide, published June 3, 2020
including all subsequent updates; Sections 5102 through 5500 of the Freddie Mac Single-Family
Seller/Servicer Guide, published June 10, 2020 including all subsequent updates; |
| h. | Sections
II.A.1 and II.A.4-5 of the Federal Housing Administration’s Single-Family Housing
Policy Handbook, issued October 24, 2019 including all subsequent updates; |
| i. | Chapter
4 of the U.S. Department of Veterans Affairs’ Lenders Handbook, revised February
22, 2019 including all subsequent updates; |
| j. | Chapter
4 of the U.S. Department of Agriculture’s Field Office Handbook for the Direct
Single Family Housing Program, revised March 15, 2019 including all subsequent updates;
and |
| k. | Chapters
9 through 11 of the U.S. Department of Agriculture’s Handbook for the Single-Family
Guaranteed Loan Program, revised March 19, 2020 including all subsequent updates. |
| l. | For
purposes of compliance with VSH, a creditor must comply with only those provisions in
the manuals that require creditors to verify income, assets, debt obligations, alimony
and child support using specified documents or to classify and count particular inflows,
property, and obligations as income, assets, debt obligations, alimony, and child support. |
| m. | Revised
versions of manuals. A creditor also complies with the verification safe harbor where
it complies with revised versions of the manuals listed above provided that the two versions
are “substantially similar”. |
| n. | The
QM 2.0 Rule permits the creditor to “mix and match” verification standards
from different agency manuals. Incenter Diligence will test the creditor’s “verification”
of third- party records in instances when the creditor either uses (i) its own procedures
or alternatively, (ii) the verification standards of one or more of the agency handbooks
listed above. |
| o. | Note:
the Client must provide written policies and procedures and related documentation such
as underwriter worksheets in order for Incenter Diligence to review loans under the QM
2.0 Rules, and in particular, with regard to the “consider” and “verify”
requirements. Further, if the Client intends to use the VSH, its written policies and
procedures must specify the precise agency handbook(s) that it is relying on with specific
references to the particular provisions addressing income, assets, debt obligations,
alimony and child support using specified documents or to classify and count particular
inflows, property, and obligations as income, assets, debt obligations, alimony, and
child support—as well as the specific date(s) of the agency handbook(s) issuance,
publication or revision. In addition, Incenter Diligence is not responsible for determining
whether revised versions of the manuals listed above are “substantially similar”
for purposes of the VSH; such a determination of the sole responsibility of the Client. |
| p. | Note:
due to the inherent subjectivity of the foregoing “consider” and “verify”
requirements, Incenter Diligence will review the Client’s: (i) policies and procedures
and worksheets and (ii) methods and criteria for verification of income and assets (regardless
of whether the “safe harbor” is utilized) for content only, and will not
opine whether such policies and procedures, worksheets and verification methods and criteria
themselves comply with applicable law, and cannot guarantee that a court, governmental
regulator, rating agency or another third party diligence provider would reach the same
conclusions using such work product. |
| iii. | Prepayment
Penalty (12 CFR 1026.43(g)) |
| a. | A
covered transaction must not include a prepayment penalty unless: |
| i. | The
prepayment penalty is otherwise permitted by law; and the transaction: |
| ii. | Has
an annual percentage rate that cannot increase after consummation; |
| iii. | Is
a qualified mortgage under paragraph (e)(2), (e)(4), or (f) of this section; and |
| iv. | Is
not a Higher Priced Mortgage Loan, as defined in § 1026.35(a) |
| 5. | Home
Ownership and Equity Protection Act – HOEPA (Sections 32) |
| a. | Federal
HOEPA coverage (12 CFR §1026.32(a)(1)(i), (ii)) |
| i. | Tests
that the loan is/is not secured by the consumer’s principal dwelling; or |
| ii. | Tests
that the loan is/ is not an open-end credit plan; or |
| iii. | That
the application date of the loan occurs before/after the effective date of October 1,
1995; or |
| iv. | That
the date the creditor received application occurs on or after January 10, 2014, the effective
date of the High-Cost Mortgage amendments |
| b. | High-Cost
Mortgage APR threshold test (12 CFR §1026.32(a)(1)(i)(A), (C)) |
| i. | The
loan is secured by a first-lien transaction, and the annual percentage rate (APR) does
not exceed the Average Prime Offer Rate by more than 6.5%; or |
| ii. | The
loan is a subordinate-lien transaction, and the annual percentage rate (APR), does not
exceed the Average Prime Offer Rate by more than 8.5% |
| c. | High-Cost
Mortgage Points and Fees Threshold Test (12 CFR §1026.32(a)(1)(ii)(A), (B)) |
| i. | The
total points and fees do not exceed allowable limits per the given loan amount |
| d. | High-Cost
Mortgage Prepayment Penalty Threshold Test (12 CFR §1026.32(a)(1)(iii)) |
| i. | The
loan contract or open-end credit agreement does not allow the creditor to charge: |
| a. | A
prepayment penalty more than 36 months after consummation or account opening; or |
| b. | Prepayment
penalties that can exceed, in total, more than 2 percent of the amount prepaid |
| e. | High-Cost
Mortgage (12 CFR §1026.32(a)(1)) |
| f. | High-Cost
Mortgage Repayment Ability Test (12 CFR §1026.34(a)(4), 1026.43) |
| g. | Other
high-costs tests pursuant to (12 CFR §1026.32(a)(1)) |
| iii. | Negative
amortization |
| viii. | Financing
of points and fees |
| 6. | Higher
Priced Mortgage Loan – HMPL (12 CFR §1026.35) |
| a. | Higher
Priced Mortgage Loan tests (12 CFR §1026.35(a)) |
| b. | Higher
Priced Mortgage Loan required escrow account test (12 CFR §1026.35(b)) |
| c. | Higher
Priced Mortgage Loan required appraisal test (12 CFR §1026.35(c)) |
| 7. | Prohibited
Acts – Brokers Comp |
| a. | Broker
Compensation Test (12 CFR §1026.36(d)(2) |
| i. | If
any loan originator receives compensation directly from a consumer in a consumer credit
transaction secured by a dwelling: |
| a. | No
loan originator shall receive compensation, directly or indirectly, from any person other
than the consumer in connection with the transaction; and |
| b. | No
person who knows or has reason to know of the consumer-paid compensation to the loan
originator (other than the consumer) shall pay any compensation to a loan originator,
directly or indirectly, in connection with the transaction |
| 8. | Nationwide
Mortgage Licensing System (NMLS) Tests (12 CFR §1026.36) |
| a. | review
for presence of mortgage loan originator organization and individual mortgage loan originator
name and NMLSR ID, as applicable, on the credit application, note or mortgage loan contract,
security instrument, Loan Estimate and Closing Disclosure; and |
| b. | verify
the data against the NMLSR database, as available |
| B. | Real
Estate Settlement Procedures Act – 12 CFR §1024 (“RESPA”) |
| a. | Homeownership
Counseling Organizations Disclosure Date Test (12 CFR §1024.20(a)) |
| i. | Not
later than three business days after a lender, mortgage broker, or dealer receives an
application, or information sufficient to complete an application, the lender must provide
the loan applicant with a clear and conspicuous written list of homeownership counseling
organizations that provide relevant counseling services in the loan applicant’s
location |
| ii. | The
list of homeownership counseling organizations distributed to each loan applicant under
this section shall be obtained no earlier than 30 days prior to the time when the list
is provided to the loan applicant |
| a. | Good
Faith Estimate Disclosure Test (12 CFR §1024.7) |
| i. | Not
later than 3 business days after a loan originator (broker or lender) receives an application
for a federally related mortgage loan, or information sufficient to complete an application,
the loan originator must provide the applicant with a GFE |
| b. | Good
Faith Estimate Disallowed Credit and Charge test (GFE Block 2) |
| i. | Looks
for any amounts entered for both a loan discount fee and a yield spread premium or a
lender credit |
| ii. | Only
one charge or one credit affecting the interest rate is allowed under the new RESPA regulations |
| C. | Equal
Credit Opportunity Act – 12 CFR §1002 (“ECOA”) |
| 1. | ECOA
Valuation Rule (12 CFR §1002.14(a)(1)) |
| a. | Review
all applicable loans for the Disclosure of Right to Receive a Copy of Appraisals. Validate
if the customer(s) waived their right to receive copies of their appraisals three business
days prior to consummation/account opening |
| b. | Review
all applicable loans for proof that lender delivered copies of appraisals and other written
valuations three business days before consummation (closed-end), or account opening (open-end) |
| c. | If
the customer(s) waived their right to receive copies of their appraisals three business
days prior to consummation/account opening, review the Post-Closing submission for an
Acknowledgment of Receipt of Appraisal Report, or other proof that the lender provided
the copies either at, or prior to, consummation or account opening |
| D. | State
Specific tests (varies by state and applicability, but at a minimum includes); |
| 1. | Consumer
/ Home Loan tests |
| 3. | Higher
Priced Mortgage Loan tests |
| 5. | Points
and fees threshold tests |
| 7. | Negative
Amortization tests |
| 9. | Texas
Home Equity Loans |
Document
Review
Incenter
Diligence reviewed all mortgage loan files supplied and verified that the following documents, if applicable, were included in
the file and that the data on the documents was consistent:
| ● | Initial
Application (1003) |
| ● | Final
Application (1003) |
| ● | HUD1
from Sale of Previous Residence |
| ● | Loan
Estimates and Closing Disclosures |
| ● | Business
Purpose Affidavit |
| ● | Employment
Documentation |
| ● | Change
of Circumstance Documentation |
| ● | Disclosures:
Right of Rescission, Net Tangible Benefit and FACTA |
| ● | Appraisal
Valuation Reports |
| ● | Flood
and Hazard Insurance Policies |
Other
review and methodology
Not
applicable.
Summary
of findings and conclusions of review
Below
provides the summary of the review findings:
Final
Overall Grade Summary
| Overall |
#
of Mortgage Loans |
%
of Mortgage Loans |
| A |
125 |
91.91% |
| B |
11 |
8.09% |
| C |
0 |
0.00% |
| Total |
136 |
100.00% |
Credit
Grade Summary
| Credit |
#
of Mortgage Loans |
%
of Mortgage Loans |
| A |
130 |
95.59% |
| B |
6 |
4.41% |
| C |
0 |
0.00% |
| Total |
136 |
100.00% |
Compliance
Grade Summary
| Compliance |
#
of Mortgage Loans |
%
of Mortgage Loans |
| A |
136 |
100.00% |
| B |
0 |
0.00% |
| C |
0 |
0.00% |
| Total |
136 |
100.00% |
Property
Grade Summary
| Property |
#
of Mortgage Loans |
%
of Mortgage Loans |
| A |
120 |
88.24% |
| B |
5 |
3.68% |
| C |
0 |
0.00% |
| N/A |
11 |
8.08% |
| Total |
136 |
100.00% |
Exception
Summary
Below
provides a summary of the individual exceptions based on the general categories of Credit, Compliance, and Property.
*
Loan was not delivered to the reviewer or the file is not sufficiently complete to perform the basic review.
| Credit
Exception Categories |
Exception
Count |
Credit
Grade A |
Credit
Grade B |
Credit
Grade C |
Credit
Grade D * |
| Assets |
3 |
3 |
0 |
0 |
0 |
| Borrower |
6 |
6 |
0 |
0 |
0 |
| Closing |
2 |
2 |
0 |
0 |
0 |
| Data |
4 |
4 |
0 |
0 |
0 |
| Debt |
10 |
10 |
0 |
0 |
0 |
| Eligibility |
34 |
29 |
5 |
0 |
0 |
| Income/Employment |
11 |
10 |
1 |
0 |
0 |
| Insurance |
7 |
7 |
0 |
0 |
0 |
| Missing
Doc |
82 |
81 |
1 |
0 |
0 |
| QM-ATR |
0 |
0 |
0 |
0 |
0 |
| Title |
14 |
14 |
0 |
0 |
0 |
| Total |
173 |
166 |
7 |
0 |
0 |
Compliance
Exception
Categories |
Exception
Count |
Compliance
Grade A |
Compliance
Grade B |
Compliance
Grade C |
Compliance
Grade D * |
| Ability
to Repay |
2 |
2 |
0 |
0 |
0 |
| Closing |
0 |
0 |
0 |
0 |
0 |
| Compliance
|
13 |
13 |
0 |
0 |
0 |
| Data |
0 |
0 |
0 |
0 |
0 |
| Disclosure |
2 |
2 |
0 |
0 |
0 |
| Documentation |
0 |
0 |
0 |
0 |
0 |
| Fees |
0 |
0 |
0 |
0 |
0 |
| Missing
Doc |
66 |
66 |
0 |
0 |
0 |
| Points
& Fees |
4 |
4 |
0 |
0 |
0 |
| QM-ATR |
0 |
0 |
0 |
0 |
0 |
| Right
to Rescind |
0 |
0 |
0 |
0 |
0 |
| State
Reg |
0 |
0 |
0 |
0 |
0 |
| TRID |
4 |
4 |
0 |
0 |
0 |
| Total |
91 |
91 |
0 |
0 |
0 |
Property
Exception
Categories |
Exception
Count |
Property
Grade A |
Property
Grade B |
Property
Grade C |
Property
Grade D * |
| Appraisal |
12 |
11 |
1 |
0 |
0 |
| Data |
0 |
0 |
0 |
0 |
0 |
| Missing
Doc |
5 |
4 |
1 |
0 |
0 |
| Property
Issue |
5 |
2 |
3 |
0 |
0 |
| Value |
0 |
0 |
0 |
0 |
0 |
| Total |
22 |
17 |
5 |
0 |
0 |
Data
Integrity Summary
The
table below provides a summary of the data compare results:
| Data
Compare Field Name |
#
of Discrepancies |
%
of Accuracy |
| ARM
Interest Data |
0 |
100.00% |
| Amortization
Term |
4 |
97.06% |
| Borrower
1 First Name |
1 |
99.26% |
| Borrower
1 Last Name |
2 |
98.53% |
| Borrower
2 First Name |
0 |
100.00% |
| Borrower
2 Last Name |
1 |
99.26% |
| Borrower
1 FTHB |
2 |
98.53% |
| Borrower
2 FTHB |
0 |
100.00% |
| Doc
Type |
11 |
91.91% |
| First
Payment Date |
1 |
99.26% |
| Interest
Only Flag |
0 |
100.00% |
| Lien
Position |
0 |
100.00% |
| Loan
Program |
8 |
94.12% |
| Loan
Purpose |
0 |
100.00% |
| Loan
Type |
19 |
86.03% |
| Maturity
Date |
0 |
100.00% |
| Note
Date |
15 |
88.97% |
| Number
of Units |
0 |
100.00% |
| Occupancy |
1 |
99.26% |
| Original
Interest Rate |
6 |
95.59% |
| Original
Loan Amount |
1 |
99.26% |
| Original
Loan Term |
0 |
100.00% |
| Original
P&I |
4 |
97.06% |
| Originator
DSCR |
1 |
99.26% |
| Prepayment
Penalty |
3 |
97.79% |
| Property
Address |
0 |
100.00% |
| Property
City |
1 |
99.26% |
| Property
State |
0 |
100.00% |
| Property
Zip Code |
2 |
98.53% |
| Property
Type |
17 |
87.50% |
| QM
Designation |
43 |
68.38% |
| Qualifying
Appraised Value |
38 |
72.06% |
| Qualifying
CLTV |
3 |
97.79% |
| Qualifying
FICO |
14 |
89.71% |
| Qualifying
LTV |
3 |
97.79% |
| Qualifying
Total DTI |
13 |
90.44% |
| Refinance
Type |
4 |
97.06% |
| Sales
Price |
1 |
99.26% |
| Subordinate
Lien Amount |
10 |
92.65% |
| Underwriting
Guideline Name |
36 |
73.53% |
| Total |
265 |
95.65% |