CORRESPONDENT SELLER GUIDE

Section 100: Introduction

100Introduction

The Correspondent Lending Division of Sierra Pacific Mortgage (SPM) purchases mortgage loans closed in the name of the Correspondent using the Correspondent’s warehouse line(s). Correspondent is defined as the seller of a closed mortgage. All Sellers are considered non-delegated; all loans must be submitted to Sierra Pacific for prior approval underwriting and must receive a clear to close disposition from Sierra Pacific prior to Seller drawing closing docs.

101Available Loan Products

The products listed below are currently available to approved Sellers. Please visit Product Matrices under the Products & Rates tab on the Sierra Pacific website for a full description of each product.

  • Conventional Conforming Fixed
  • 5/1 and 7/1 Conforming ARMs
  • Fannie High BalanceFixed
  • Fannie High Balance 5/1 and 7/1 ARMs
  • Non-Agency Jumbo Fixed
  • Non-Agency Jumbo 5/1, 7/1, and 10/1 ARMS
  • DU Refi Plus Expanded
  • Sierra Direct Conventional

102Seller Guide Distribution

An electronic version of this Seller Guide may be obtained by visiting the Sierra Pacific Mortgage web site. To access the information, Sellers must be assigned a username and password.

103Updates to Seller Guide

The Seller Guide may be updated from time to time. The written notice will be posted to the SPM website. Sellers should review the changes to the Seller Guide on the web, to ensure they have the most current information.

104Internet Access

The SPM web site provides Seller with easy access to automated underwriting, rate sheets, Seller’s Guide, current announcements, and many other valuable tools. Sellers must be registered to view the secured areas of the SPM web site.

105Corporate Address and phone number

The corporate mailing address for Sierra Pacific Mortgage is:

Sierra Pacific Mortgage

Correspondent Division

1180 Iron Point Road, Suite 200

Folsom, CA 95630

1 (800) 696 4471

106Regional Fulfillment Center

Loan files, suspense conditions and correspondence for delivered loans pending purchase should be sent to your assigned SPMregional fulfillment center.
The regional fulfillment center is responsible for handling all functions directly involved with the purchasing of loans from Sellers. These functions include:

  • underwriting prior approval
  • auditing and status of loan files delivered
  • loan purchase
  • post-purchase

107Loan Servicing

Borrowers must have their SPM loan number available when contacting the Loan Servicing department. Sellers should remember to provide the borrower with the new SPM loan number when providing them with the Loan Servicing customer service telephone number. The customer service is open Monday–Friday from 8:00am–5:00pm (PST), toll free number 1 (800) 4473386.

Borrowers should send written correspondence to the address below.

Sierra Pacific Mortgage

Servicing Department

1180 Iron Point Road, Suite 200

Folsom, CA 95630

SPM may not be the end servicer of all purchased loans.

108Forwarding Payments

To insure prompt posting of all payments, Sellers should immediately forward any payments inadvertently received to the address below.
Sierra Pacific Mortgage

Servicing Department

1180 Iron Point Road, Suite 200

Folsom, CA 95630

109Borrower Inquiries

Sellers should refer borrowers’ written account status inquiries on purchased loans to:
Sierra Pacific Mortgage
Servicing Department
1180 Iron Point Road, Suite 200
Folsom, CA 95630

110Final Documentation

Final Documents (such as the recorded Deed of Trust / Mortgage and Final Title Policy, etc.) should be sent to:
Sierra Pacific Mortgage
1180 Iron Point Road, Suite 200
Folsom, CA 95630

111Warehouse Facilities

It is the Correspondents responsibility to obtain approval from each warehouse facility to add Sierra Pacific Mortgage as an approved investor. If you have any questions, please contact your Account Executive.

SPM Correspondent Seller Guide - Section 100 Introduction Page 1 of 521.23.2013

CORRESPONDENT SELLER GUIDE

Section 200: Seller Requirements

200Introduction

Sellers seeking to sell loans to Sierra Pacific Mortgage Correspondent Lending Division (SPM) must be an organization accustomed to making conventional residential mortgages. Seller must have at least one warehouse line of credit and must be actively selling closed loans to at least one investor other than Sierra Pacific.

201Disclaimer

Sierra Pacific Mortgage reserves the right to amend Seller requirements set out in this section without providing prior notice to the Sellers.

In order to remain eligible, the Seller must be active with SPM in the preceding calendar year, maintain the initial eligibility standards or eligibility standards currently in effect, and comply with the continuing obligations as defined in this Seller Guide. In addition, SPM reserves the right to amend any or all continuing eligibility standards for a Seller based upon its current financial strength, volume and performance.

202Seller Requirements

  • Completed and approved correspondent application
  • Executed Purchase and Sale Agreement (provide two with original signatures)
  • Sellers must have a minimum net worth of $250,000 of which a minimum of $100,000 of the net worth requirements should be in cash. Net worth is determined in accordance with GAAP guidelines.
  • Errors and Omissions insurance and a fidelity bond, with minimum coverage of $300,000. The carrier of such insurance must be rated B/III, A/II or better in the current Best’s Key Rating Guide. Sierra Pacific Mortgage Company, Inc. must be named as an additional loss payee.
  • Audited Financial Statements
  • In lieu of audited statements, the following are acceptable for financial institutions:
  • Banks: Form #FFIEC034
  • Savings and Loans: Form #FHLBB1313
  • Credit Unions: Form #NCUA5300
  • Unaudited financial statements, if the reporting date on the audited statements is over 6 months old.
  • A minimum institutional Warehouse line of at least $2,500,000. Cash funding is only allowed for Bank and Credit Union clients.
  • A minimum of five years Mortgage Banking experience strongly preferred
  • Resumes of management, officers and key personnel.
  • QC Policies and Procedures
  • Corporate or Partnership Resolution
  • Articles of Incorporation
  • Satisfactory Credit Standing, including letters of explanation for any MARI issues
  • Be properly licensed to originate and sell loans in the applicable state(s) and provide proof of licensure
  • IRS W-9 detailing the organization’s Tax ID Number
  • Wire Instructions & copies of bailee letters from all warehouse facilities
  • Provide Servicing information
  • Provide sample copies of RESPA/TIL and goodbye letters
  • Provide copy of Correspondent’s privacy policies and procedures and evidence of compliance with FTC’s Red Flags Program
  • Provide copy of your loan officer compensation policy and procedures and sample LO compensation agreement
  • Provide copy of Correspondent’s AIR policies and procedures
  • Provide a brief description and/or attorney opinion letter for all pending legal issues naming Correspondent as a defendant and specifically addressing any material issues that may have an effect on the financial stability of Correspondent or that involve a potential loss of more than $25,000 to the Correspondent.Documentation should include information concerning who is the plaintiff, their base for taking the action, if the matter has been referred to legal counsel and Correspondent’s insurance carrier, coverage status with the insurance carrier, case status, etc.
  • Copies of HUD, VA, FNMA & FHLMC (as applicable) approval letters
  • Evidence of compliance with BSA/AML program including CIP procedures
  • Contact list with name, phone, fax & email for the following: Admin Web User, Commitment, Underwriting, Delivery, Post-Closing, Servicing, Purchase Advice and who is authorized to commit loans.
  • Follow acceptable practices and prudent lending guidelines.
  • Maintain satisfactory facilities in which to originate real estate mortgages.
  • Must be an approved and trained MERS member

Fiscal Review

At the discretion of Sierra Pacific Mortgage, the following documents will be needed for annual certification. They include but are not limited to the following:

  • Fiscal year end Audited Financial Statements of Condition and Operations. If the Seller is a subsidiary company and there is no consolidating schedules provided in the Audited Financial Statements of Condition and Operations, the fiscal year end Audited Financial Statements of Condition and Operations of the parent are also required.
  • Statement of Stockholder’s Equity
  • The names and resume of new officers, management and directors appointed since the last review.
  • A summary and explanation of any significant changes in methods of operation, financial condition or relationship with regulatory agencies governing the operations of the Seller.
  • A current Fidelity Bond and Errors and Omissions Insurance policy.
  • The most recent Quality Control management report.
  • The most recent review by any state agency, FNMA, FHLMC, GNMA and HUD.
  • Warehouse aging reports for the previous three months
  • Update/status on any pending legal issues previously disclosed in initial or renewal package

203Fidelity Bond and E & O Policy

Each approved Seller must have a Fidelity Bond and an Errors and Omissions Insurance policy in effect at all times. These policies must contain insurance coverage protecting the Seller against losses resulting from acts, errors, and omissions committed by the Seller’s personnel or other parties providing any type of service to the Seller. The carrier of such insurance coverage must be rate B/III, A/II or better in the current Best’s Key rating guide or rate A or better in Demotech rating guide.

The Fidelity Bond and Errors and Omissions Insurance policies held by a parent corporation may be used to provide insurance coverage to a Seller that is a subsidiary as long as that Seller is clearly indicated as being covered by the policy. The coverage must be adequate and equivalent to the insurance coverage that would otherwise be obtained on a separate basis by the subsidiary Seller.

Purchaser will also accept insurance coverage under the Mortgage Banker’s Blanket Bond Policy or the Savings and Loan Blanket Bond Policy for corporate Sellers. Individual insurance coverage is required if the Seller is owned as a sole proprietorship or is a partnership.

The Seller must furnish proof that the insurer has agreed to notify Sierra Pacific Mortgage if the required insurance coverage is canceled, reduced or amended for any reason. Claims against this policy, whether or not pertaining to loans sold by the Seller to SPM, must be reported to SPM. The Seller should indicate the total amount of the loss and circumstances surrounding the claim.

The Seller must notify SPM if it receives notice from its insurer of intent to cancel, not renew or otherwise modify the Seller’s coverage. This notification must be sent to SPM by registered mail at least 10 days before it becomes effective.

The Seller must report to SPM all cases of material theft, embezzlement or fraud and all claims made against the insurer within 10 days after the occurrence.

The Errors and Omissions Insurance coverage must, at a minimum, protect the Seller against negligence, errors and omissions with regard to the following:

  1. Maintaining hazard and flood insurance that meets SPM requirements.
  2. Maintaining conventional mortgage insurance.
  3. Proper flood zone determination has been performed
  4. Paying real estate taxes and any special assessments.
  5. Complying with the reporting requirements of the mortgage insurance companies.
  6. Any errors made by employees or officers of Seller
  7. Fraud, misrepresentation, etc. committed by employees or officers of Seller.

This policy must be written on an “occurrence” basis. The minimum amount of coverage per occurrence must equal the amount required for the Fidelity Bond.

If there are any changes in the Fidelity Bond and Errors and Omissions insurance coverage, Sellers must provide to SPM an updated policy within 30 days of any such change.

204Wire Instructions

Each Seller will be set up to have mortgage loan purchase proceeds wired to the account listed on the Wire Set-up/Change Authorization Form submitted at the time of application and signed by one principal officer of the company. If a Seller wishes to change these instructions or add additional instructions, a separate Wire Set-up/Change Authorization Form must be submitted to SPM and should be signed by two principal officers of the company. Please allow 48-72 hours for wire set up.

It is the seller’s responsibility to get an approval from your warehouse facilities for Sierra Pacific Mortgage to be an approved investor. A bailee letter, including contact name and phone number, must accompany each loan submitted for purchase.

205Seller Number

Once the completed application package is reviewed and approved, the Seller will be issued a notification letter and a Seller Number. This number should be referenced on all correspondence submitted to SPM.

206Periodic Reviews

At SPM’s discretion we may conduct periodic reviews at times other than the annual re-certification review of the Seller’s performance.

The Seller agrees to allow SPM to conduct, from time to time, audits or inspections at one or more of the Seller’s offices during normal business hours. At that time, the Seller shall provide the assistance of a knowledgeable and responsible individual and will grant SPM access to all books, records and files pertaining to:

  1. Residential real estate loans directed to SPM
  2. The Seller’s compliance with the terms and provisions of the Loan Purchase and Sale Agreement, including this Seller’s Guide

The Seller also agrees, upon the request of SPM, to deliver the material described in the Maintenance of Records section of this Seller’s Guide. SPM may, from time to time conduct audits at SPM offices using information and documents provided by the Seller. During these audits the Seller should provide a person or persons to contact by telephone for additional information.

207Changes in Approved Status

Immediate notification of a change in the Seller’s approval status will be provided by SPM when it is determined that a Seller’s minimum certification or delivery performance criteria are not being met.

208Availability of Records

Each Seller is expected to promptly respond to any request for documents or records that SPM may require pertaining to the business dealings between SPM and the Seller. In the event a Seller does not respond in a timely manner to such a request, SPM may conclusively presume that such documents cannot be produced because they would confirm that the Seller either did not take certain actions required by this Seller’s Guide, the Loan Purchase and Sale Agreement, and any other agreement by and between SPM and Seller, or that the Seller took certain actions prohibited by any or all of these documents. In such case, SPM will take appropriate action based on the Seller’s inability to produce the necessary documentation, including Loan repurchase and/or termination of the Seller’s approval status.

If SPM is required to take legal action to obtain access to the contested documents or records, which it has a legitimate right to examine, the Seller will be liable for any legal fees, costs, and related expenses that are incurred in enforcing SPM’s right of access to the documents or records in question.

209Maintenance of Records

The Seller shall maintain adequate records of all loans submitted to SPM for underwriting approval for such periods of time as may be necessary to comply with the Equal Credit Opportunity Act and other applicable laws and regulations. The Seller shall maintain a file for each loan purchased by SPM . The Seller shall maintain each file for a period of three years from the date the loan is fully paid or, if the loan is accelerated, for at least six years from the date the loan is fully paid or state law whichever is the most restrictive. The file must contain:

  1. Copies of all documents delivered in their original form to SPM.
  2. Originals of all documents, copies of which were delivered to SPM.
  3. All other loan and related documents not required to be sent to SPM.

210Quality Control

The Seller shall maintain an internal quality control program that ensures the accuracy of legal and origination documents, as well as the soundness of underwriting decisions. The program should be supported by a written plan outlining the objectives and scope of the review and applicable policies and procedures and shall include, at a minimum, post and pre-closing review procedures.

Seller’s Pre-Closing Review

A pre-closing review should, at a minimum, consist of the following procedures on all or a representative sample of loan production:

  1. Review legal documentation for accuracy and completeness
  2. Obtain review appraisals (when applicable)
  3. Re-verify other origination documentation as deemed appropriate by the Seller
  4. A documented telephone verification of employment is required to be obtained within three days prior to closing.

Sellers Post-closing Review

In the interest of sound quality control measures, SPM requires that the Seller audits at least a 10% randomly selected sample of recently closed loan inventory sold to SPM and reviews the product within 90 days of closing. The quality control plan should also allow for discretionary and targeted sampling where appropriate. SPM recommends that the Seller increase the scope or sample of loans audited when new employees are added.

Unless performed as an element of the pre-closing review, the post-closing audit should, at a minimum, consist of the following:

  • Complete underwriting of each loan, including an evaluation of the appraisal report by the quality control staff to evaluate the soundness of underwriting judgment and compliance with program criteria and to determine the existence of any irregularities. The presence of irregularities should lead to a more thorough investigation.
  • Written re-verification of loan documentation, (i.e. employment and income, deposits, source of funds, etc.). In this process, a blanket authorization form is required.
  • The Seller must obtain a new appraisal from a qualified source, independent of the original appraiser, on at least 10% of the audited sample. This appraisal may take the form of a new appraisal or field review. It should include, at a minimum, an exterior inspection of the mortgaged premises and comparables and a validation of the factual data on the original appraisal report.
  • The Seller must obtain and review a new credit report (independent of the original reporting agency) on each loan. SPM recommends that the Seller order a new residential mortgage credit report or a source in-file credit report on all the sample loans selected for the audit. These credit reports must meet the requirements set forth in the credit report requirements section of this Seller Guide, including the requirement of a public records search.
  • Review the remaining documentation, including the loan application and closing documents, for consistency, accuracy, validity, completeness, etc.
  • Review the loans included in the audit sample to determine compliance to the various SPM representations and warranties set forth in this Seller Guide.

The Seller must also include in its quality control review all loans in which a 30 day delinquency occurred within the first four months of the loan. In addition, the Seller should include any loan in which foreclosure proceedings have been instituted within the first three years of the loan if a delinquency occurred during the first year with respect to that loan. In this case, the Seller should obtain a new credit report and a new appraisal.