Small creditor. How do I document repayment ability, (according to the loan terms), using assets? I understand that you must consider a reasonable value, if not cash, and how long it might take to actually liquidate, but I do not understand how you can document ATR, according to terms in the note, with assets.

Do you simply take anticipated values and spread them across the term of the loan? Assets are enough to payoff the loan when and if liquidated, but how do you work that into being able to make monthly payments, according to the term of the loan? One time I wish the regulation contained more information.

This bank deals with a lot of high net worth borrowers, with high DTIs, (and more residual income than my bimonthly paycheck). They can payoff the loan with assets all day long, but the DTI comes in around 70%. Obviously not a historically sound number. How do I teach my lenders to calculated repayment using assets?

Thanks for your help on this seemingly elementary question.

Debbie

Bump. I guess I'm not the only who thinks this is totally ambiguous.

If you sell to Freddie go to Section 5307.1 of the Sellers/Servicing Guide and it gives you their guidance for using assets as a basis for repayment.

(b) Asset calculation for Mortgage qualification
Seller may use 70% of the balance of the eligible asset less any funds required to complete the transaction (e.g., downpayment, Closing Costs, Financing Costs, Prepaids/Escrows), divided by 360 months, regardless of loan term or account balance, to qualify the Borrower for the Mortgage.