Corporate Policies

Borrower Types and Document Signature Requirements

Overview

Unless dictated otherwise by state law, the difference between a co-borrower and a co-signer is simply a matter of choice as it pertains to which loan documents are signed.  For example, a borrowing spouse may be either a co-borrower or a co-signer/co-guarantor depending on whether or not he or she takes title and/or signs the security instruments.  loanDepot Wholesale follows agency definitions and requirements in relation to this topic.

Definitions

Borrower Type

Definition

Co-Borrower

An individual, who applies jointly with the applicant, takes title to the property and is liable for the debt. The co-borrowers income and liabilities are used for loan qualification. Signs all of the loan documents.

Non- Occupant Co-Borrower

A non-occupant co-borrower applies with the applicant, takes title to the property and is liable for the debt but does not live in the property.

Co-Signer

An individual who has no ownership interest in the property and does not sign the security instrument, but is liable for the debt by signing the note.

Co-Mortgagor

Has ownership interest in the property but is not liable for the debt. Signs all collateral documents (Mortgage/Deed of Trust, TIL & Right to Rescind, as applicable). Signature is to subordinate their interest in the property to the lien. Income, assets and debts are not used in qualification.

Non-Borrowing/Non Purchasing Spouse

Generally have no ownership interest in the property and are not liable for the debt. In certain states, state law requires they sign documents to protect their ownership interest. FHA and VA require the liabilities of the spouse to be included in the qualification process when the property is in a community property state.

Guarantor

A guarantor personally guarantees payments will be made if the original applicant defaults, but he has no claim to the property because he is not on title

Personal Endorser

Same as a guarantor

Surety

The guarantee of the debts of one party by another. A surety is the organization or person that assumes the responsibility of paying the debt in case the debtor policy defaults or is unable to make the payments. The party that guarantees the debt is referred to as the surety, or as the guarantor

Agency Guidelines

FNMA

Guarantors and co-signers are credit applicants who:

Non-occupant co-borrowers are credit applicants on a principal residence transaction who

DU analyzes the risk factors in the loan casefile without the benefit of the non-occupant co-borrowers income or liabilities. DU does not require verification of employment or income for non-occupant co-borrowers. Because DU does not consider the income of a non-occupant co-borrower, there are no additional LTV or CLTV ratio restrictions.

FHLMC

A mortgage with a personal endorser, guarantor and/or surety may be eligible for purchase by Freddie Mac provided the following requirements are met:

FHA

Both occupying and non-occupying borrowers and co-borrowers

Cosigners

The table below describes additional requirements and conditions for co-borrowers and cosigners:

Condition/Requirement

Description

Financial Interest Prohibited A party who has a financial interest in the mortgage loan transaction, such as the seller, builder, or real estate agent, may not be a co borrower or co signer. Exceptions may be granted when the party with the financial interest is a family member.
Basic Ineligibility for Participation An individual signing the loan application must not be otherwise ineligible for participation in the mortgage loan transaction for reasons described in HUD Handbook.
Principal United States Residence Non-occupying co-borrowers or cosigners must have a principal residence in the U.S. unless exempted due to military service with overseas assignments.

VA

There is no distinction between co-borrowers and co-signers.  All borrowers on the loan transaction must also be vested on title and sign the security instruments.

 

 

Topic Date: 09/30/15