Loan Officer Training 08/28/2024 - How to Structure an ITIN Borrower Loan

In this episode of the Loan Officer Training podcast, we dive into the intricacies of structuring ITIN borrower loans. If you’ve ever faced the challenge of helping clients without a Social Security Number secure financing, this episode is for you.

We’ll break down the key steps to successfully structure ITIN loans, from understanding eligibility requirements to navigating documentation hurdles. Learn the best practices for guiding ITIN borrowers through the loan process, ensuring compliance, and ultimately closing the deal.

Whether you’re new to ITIN loans or looking to refine your approach, this episode will equip you with the knowledge and strategies you need to confidently serve this growing market.

Tune in and enhance your skills as a loan officer by mastering the art of structuring ITIN borrower loans!


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About The Mortgage Calculator:

The Mortgage Calculator is a licensed Mortgage Lender (NMLS #2377459) that specializes in using technology to enable borrowers to access Conventional, FHA, VA, and USDA Programs, as well as over 5,000 Non-QM mortgage loan programs using alternative income documentation! 

Using The Mortgage Calculator proprietary technology, borrowers can instantly price and quote thousands of mortgage loan programs in just a few clicks. The Mortgage Calculator technology also enables borrowers to instantly complete a full loan application and upload documents to our AI powered software to get qualified in just minutes!

Our team of over 350 licensed Mortgage Loan Originators can assist our customers with Conventional, FHA, VA and USDA mortgages as well as access thousands of mortgage programs using Alternative Income Documentation such as Bank Statement Mortgages, P&L Mortgages, Asset Based Mortgage Programs, No Ratio CDFI Loan Programs, DSCR Investor Mortgages, Commerci

Catch all the episodes of the Loan Officer Training Podcast at https://themortgagecalculator.com/Page/Loan-Officer-Training-Series-Podcast

Catch all the episodes of the Loan Officer Training Podcast at https://themortgagecalculator.com/Page/Loan-Officer-Training-Series-Podcast

Loan Officers for Unlimited Free Non-QM Leads & Trainings Join The Mortgage Calculator at https://themortgagecalculator.com/join

The Mortgage Calculator is a licensed Mortgage Lender (NMLS #2377459) that specializes in using technology to enable borrowers to access Conventional, FHA, VA, and USDA Programs, as well as over 5,000 Non-QM mortgage loan programs using alternative income documentation!

Using The Mortgage Calculator proprietary technology, borrowers can instantly price and quote thousands of mortgage loan programs in just a few clicks. The Mortgage Calculator technology also enables borrowers to instantly complete a full loan application and upload documents to our AI powered software to get qualified in just minutes!

Our team of over 350 licensed Mortgage Loan Originators can assist our customers with Conventional, FHA, VA and USDA mortgages as well as access...

Transcript

Restream recording Aug 28, 2024 • 11:04:29 PM: 0:13

So, Welcome everyone. My name is Kyle Hiersche. I'm the COO of the Mortgage Calculator joined here by our president, Nick Hiersche and our CSO, Jose Gonzalez. We are a lender that specializes in non QM loans and what we do every Tuesday, Wednesday, and Thursday evening at 7 p. m. Eastern on this show is a new loan officer training topic. And tonight we're going to be talking about how to structure I 10 borrower loans. So I'll let Jose go ahead and get into the presentation. Good evening, everybody. Thank you for joining us for tonight's training on I 10 borrower loans, right? Um, it's a very interesting, uh, training, and it is a very hot, uh, segment of secondary, right? Uh, where there's a lot of, uh, action, and when there's more action in secondary, that means that we're going to have more product offerings, uh, better guidelines, Uh, you know, better rates, right? I 10 borrowers, I 10 DSER, bank statement loans. Those are very popular segments right now in secondary and non qf. Uh, and, um, if you aren't, uh, looking into adding, uh, I 10 borrowers to your, uh, portfolio of lending, then you're leaving money on the table. But it is important to know. What exactly is an ITIN borrower? Because a lot of times, um, they are missed. They are confused with foreign national borrowers, because as you see there, uh, from the photo of our ITIN borrower, uh, they are usually going to be at one point or another have originated from a foreign country, right? Uh, as you can see him there, but the difference is that the ITIN borrower, as I want to get into the presentation, lives permanently. In the United States versus the foreign national borrower that, uh, may not live permanently in the United States. Uh, they definitely do not have United, uh, any, but neither share status, any legal full time residency status in the U. S. The difference is that one lives in the U. S., works in the U. S., and the other one doesn't. The foreign national does not. So before I spill all the beans, now let me break it down for you like I always do. What is an I 10? ITIN uh, stands for individual taxpayer identification number. Even though many times we will ask for the I 10. But really, all we got to ask for is the ITIN, just like, uh, we may be talking about DSCR and say, ask, what's the DSCR ratio when DSCR actually means debt service coverage ratio. We tend to do that a lot, right, in the industry. Now, very important to note that an ITIN, document card, whatever they may hold is not a substitute for a social security number or a social security card. Two totally separate numbers that allow two totally separate functions. And ITIN is only available to individuals with a foreign or alien status. And the reason that those individuals with a foreign and alien status need the I 10 is because it helps these individuals comply with U. S. tax laws and submit income tax returns when they are required, right? If they have self employment income, somebody's reporting a 1099, Uh, for them or they may be self employed, right? And they want to file, you know, their income for their self employment. The I 10 allows them to file with the I 10. Now, please note that just because the borrower has a valid I 10 does not mean that they are authorized to legally work in the United States via the form of W 2 employment. They may be working in the U. S., deriving income in the U. S., but it is not going to be W 2 employment unless they have a social security number and not an I 10. If you have an I 10 borrower that gives you W 2s, Look at the W 2 document to make sure that the, uh, tax ID number there is actually their I 10 and not, uh, somebody else's social security number. Be aware also that an I 10 begins, it's a nine digit number and it begins with a number nine. So what exactly is an I 10 borrower? Well, you heard me briefly mentioning to it at the beginning of the presentation. An ITIN borrower is a borrower who derives their income solely within the U. S. Whatever other action they have going on outside the U. S. is not possible to use unless they're actually claiming that income in a U. S. tax return. This ITIN borrower also lives full time in the U. S. They are here, this is where they live, this is where they work, this is where they have their credit because the ITIN borrower also needs to have U. S. based credit and meet the credit requirements for the selected program, whatever that may be, right? Uh, whatever the minimum credit score for the program, whatever the trade line requirements are for that particular ITIN program, because remember it's a non QM. All the guidelines are going to be different. They're all going to have a different matrix for, uh, credit as well and LTVs. As mentioned also previously, do not confuse An ITIN borrower with a foreign national borrower that does not have to live full time in the U. S., does not have to derive their income from the U. S., and does not need to have U. S. based credit. That last one is unless you pick an option that actually requires them to have US based credit, which I think there is a couple of random investors out there that when they publish a credit score, it has to be based on US based credit. But I would say 99. 99 percent of the options out there do, uh, do not require foreign nationals to have US based credit. But you see for nationals, totally the opposite of ITIN. Regarding what one needs to have and the other doesn't. The only, uh, trait, the only attribute that they share is the fact that neither has legal, uh, status in the U. S. to live, to reside permanently in the U. S. That's why the ITIN borrower has the I can document so talking about documents and I'm going to get into this a little bit on our last slide when I look at a couple of sample guidelines, but talking about documents. Now, right? What are the document requirements? Well, document requirements are an unexpired. I can. But again, when we look at the guidelines on the last slide, you're going to see the workarounds for that. Uh, U. S. based credit, meaning the program guidelines chosen. I just touched on that. Now here, here's the one that tends to affect ITIN borrowers the most. Valid, unexpired picture ID. It could be a driver's license from the U. S. driver's license from their country of origin, or a passport from their country of origin, but it has to be unexpired and it has to be, for example, if it's a driver's license, it has to be like a federally issued or state issued from their country, or if it's U. S. same. It has to be state or federal picture ID or the passport would work as well from their country of origin. Now, this again, sometimes the borrower that does not have legal status, depending on where they live, may have difficulties in obtaining some type of a federal or state picture ID. If they don't have one that's unexpired to begin with. So keep that in mind when interviewing your borrowers, uh, again, the ID could be from the U S or it could be from their dream origin, make note that depending on the guidelines. that you are considering, um, the borrower may have to provide documents showing their initial entry into the U. S., right? I think they call that an I 594, right? Well, whatever the document is, you look at the guidelines and it'll state if you have to, um, Provide that document or not. So make sure you review the guidelines for any immigration type documents that may need to be provided, showing when they legally entered the country. Uh, now depending on the income type, right. If, depending if you're looking, if you're going full doc or bank statement. P& L 1099 or DSER because we have all of those income types for item borrowers. I'll let you know. So depending on that is what income docs you're going to present or not have to present if it's DSER and it can be a one or two year option depending on the program selected. DTI is going to vary DTI requirements anywhere from 43 to 50 percent depending on the option chosen, the ITIN option chosen. Because again, like I always like to mention, all program guidelines are specific to the investor. So what are some of our loan options? Well, we got quite a few. You wouldn't think we have so many for ITIN, but we do. If you're looking at a primary residence, 85 percent is the maximum LTV for full doc bank statement or 1099. Uh, 80 percent maximum, uh, for a P& L. Those are a little bit more restrictive. And then on your cash outs, 80 percent are the, is the best option with 75 percent being the more restrictive option for, uh, the P& L option. Now, if it's a second home, as you would expect, LTVs are going to drop a little bit. So LTVs do drop for 5%. On the full dog bank statement and 1099 option. The LTV stay the same for the profit and loss option. Cause there it's already at 80 and 75%, which is lower than the other two to begin with investment properties. This is where we see some amazing improvements over what may have been available six months to a year ago. And actually in all, all of the categories, we see amazing improvements in higher LTVs and reduced guidelines, less strict, but an investment, especially full doc, we can go up to 80%. Purchase 75 percent cash out. Look at the bank statement as well. 80 percent purchase, 75 percent cash out and 1099s. Those are, those are very amazing options there. Same for P& L 80 and 75 and uh, the mind blower as well. DSCR 75 percent LTV on a purchase and 70 percent LTV in a cashout. All of these for our ITIN borrowers, so many options available for ITIN borrowers that were not at our disposal 12 months ago. And, uh, last but not least, I wanted to share with you here, um, a couple of different, uh, excerpts from two different guidelines just so you can have an idea when reviewing guidelines, the kind of stuff to look for that's specific for ITIN, which is the stuff I was talking about, the IDs, right? And the ITIN, the actual ITIN documents, because again, all guidelines are specific, specific to the investor or lender chosen for the loan. So if we look at the first example on the top, it says what an ITIN borrower is or a noun, a noun, permanent resident alien without a social security. Uh, number can qualify using an I 10 number. All it says on the top, borrower must possess valid I 10 card or IRS I 10 letter. Notice it has either the card or the letter and an unexpired photo ID. Right, driver's license, international passport, etc. So notice they, they want you to have the document, right? Gift funds allowed, power of attorney, or, or Iran remote online authorization is not allowed. And it shows the different programs that they can do it basically under the one program that allows for AltDoc and under the DSCR. What I really want you to notice in the one below, notice it says all documentation and file must support the borrower's I 10 number and cannot reference a social security number belonging to another individual. And then it's stating evidence of uninspired I 10 can be accomplished as follows. Notice if it's a full doc file. Uh, whatever full doc we're talking about, uh, self employed borrower, full doc, or a 1099 borrower, full doc. You just need current executed transcripts to that, that are going to be pulled down from irs. gov with the ITIN, right? With that number and the bars information. If you can pull a transcript that's valid, that validates your itin. You don't have to show, uh, the actual card or a letter or anything like that in case, whatever may be happening with that document. And if it's all doc loan. Provide one of the following IRS letter dated less than three years ago. That doesn't talk anything about expiration fully executed W seven, including the agent's signature. That sounds like an immigration document letter from tax preparer confirming they have filed the borrower's most recent tax return with the IRS. Any of those three workarounds for an alt doc option, which would be bank statement P and L. Would be, uh, acceptable. And then DSCR, obviously, um, I guess you would have to get also one of those other alt doc options as well as DSCR. So you see how looking at one guideline, they specifically want a hard copy of the document. I mean, PDF, you know, PDF or whatever it is of the document versus if the, if the borrower doesn't have the document. On the second guidelines below, there is workaround saying, you know, sometimes they lose the letter, they didn't get the letter, they just know what the account is dealing with, that they don't have the letter. Well, you got to work around an option number two, and that's why it's so important in non QM. When you're structuring your loan, there is no valid quest. I mean, it's not a valid question. If you say for ITIN loans, can you dot, dot, dot. If you are a loan officer reaching out for guidance to your team leader or your mentor or sales manager, you want to stay for an ITIN loan. Um, considering the guidelines for ABC investor. Right? Uh, would such scenario be possible? And hopefully you have a copy of the guidelines that you can share with your, with your, uh, manager or whoever's reviewing the file with you so that you can review those guidelines and figure out what's the best course of action. So, uh, as you can see, I 10 pretty simple loan, a lot of options for the borrowers, just certain basic requirements. Don't confuse them with a foreign national borrower at the mortgage calculator. We have many itin options, as you can see, especially for itin investors that don't want to be left out of the mix. So look to the mortgage calculator for your itin borrower loans. I don't see any questions. So I think we'll go ahead and wrap it up Remember that we do this at 7 p. m. Eastern every Tuesday, Wednesday and Thursday where we go through a new loan officer training topic So we will see you all tomorrow 7 p. m Eastern for the next episode of the loan officer training series with the mortgage calculator. Have a great night