Mortgage Origination & Underwriting Standards

Mortgage Origination and Underwriting Standards:

make customers happy
prevent law suits
make regulators happy

Application of GAMUS™ to Private Lending and Non-Private Lending (traditional) transactions

Origination Standards for BOTH private lending and non-private lending are distinguished from one another by

fiduciary duty requirements (as applicable)
exceptions made by the parties (representations and warranties, by either)
the below standards are not defined as

When a mortgage broker or agent is preparing a mortgage application for you, the following minimum items must be included in the lender information package (LIP) so that the lenders can effectively underwrite the mortgage request in accordance with the underwriting standards.

To prevent being sued - like the appraisers in VSH Management Inc. v. Neufeld, 2002 BCSC 755 (CanLII)

Gamus™ Origination Standards help by establishing the "minimum standard" that a private lending or non-private lending mortgage broker must meet in order to not be found negligent.

In summary, the determination of whether or not an appraiser was negligent will be based on whether or not the appraiser acted reasonably having regard to the standards prevailing in the profession and the imprecision inherent in the methods by which the value of the property is determined. This is the minimum standard that an appraiser must meet in order to not be found negligent.

Whether or not a Mortgage Broker meets the "minimum standard" test, is subject to prior contractual agreements between mortgage broker and their fiduciary or nonfiduciary customer (lender or applicant).

Mortgage Underwriting Standards

For mortgage lenders and investors.

Mortgage underwriting standards enable mortgage lenders to determine if a mortgage application fits the lenders guidelines and is suitable to accept for purposes of lending. The below is an informal version of the GAMUS.org origination standards. To learn more about the GAMUS.org underwriting standards, email info[at]gamus.org.

Mortgage Origination Standards

For mortgage brokers and agents

Individual Home-Owner/Retail/Non-Commercial transactions

Email info[at]gamus.org for details.

Rental, Construction, Development, Industrial/Wholesale/Commercial transactions

The below is not a complete list. For a complete list, email info[at]gamus.org for details.

Commercial Due Diligence Requirements (COMM-DDR) - Checklist

Personal Background: Either as part of the loan application or as a separate document, you will be asked to provide some personal background information, including previous addresses, names used, criminal record, educational background, etc.

Resumes: Some lenders require evidence of management or business experience, particularly for loans that are intended to be used to start a new business.

Business Plan: All loan programs require a sound business plan to be submitted with the loan application. The business plan should include a complete set of projected financial statements, including profit and loss, cash flow and a balance sheet.

Personal Credit Report: Your lender will obtain your personal credit report as part of the application process. However, you should obtain a credit report from all three major consumer credit rating agencies before submitting a loan application to the lender. Inaccuracies and blemishes on your credit report can hurt your chances of getting a loan approved. It’s critical you try to clear these up before beginning the application process.

Business Credit Report: If you are already in business, you should be prepared to submit a credit report for your business. As with the personal credit report, it is important to review your business’ credit report before beginning the application process.

Income Tax Returns: Most loan programs require applicants to submit personal and business income tax returns for the previous 3 years.

Financial Statements: Many loan programs require owners with more than a 20 percent stake in your business to submit signed personal financial statements. You may also be required to provide projected financial statements either as part of, or separate from, your business plan. It is a good idea to have these prepared and ready in case a program for which you are applying requires these documents to be submitted individually.

Bank Statements: Many loan programs require one year of personal and business bank statements to be submitted as part of a loan package.

Collateral: Collateral requirements vary greatly. Some loan programs do not require collateral. Loans involving higher risk factors for default require substantial collateral. Strong business plans and financial statements can help you avoid putting up collateral. In any case, it is a good idea to prepare a collateral document that describes cost/value of personal or business property that will be used to secure a loan.

Legal Documents: Depending on a loan’s specific requirements, your lender may require you to submit one or more legal documents. Make sure you have the following items in order, if applicable:

Business licenses and registrations required for you to conduct business

Articles of Incorporation

Copies of contracts you have with any third parties

Franchise agreements

Commercial leases

Questions that must be answered:

Why are you applying for this loan?

How will the loan proceeds be used?

What assets need to be purchased, and who are your suppliers?

What other business debt do you have, and who are your creditors?

Who are the members of your management team?

Construction - Development Checklist

Please provide us with as much of the below information that you can. The more you give us "up front" the faster and cheaper it will be for you.

Corporate Borrower & Signing Officer Details:

Company name

Company background memo (history/experience)

Company Certificate of Incorporation

List of Shareholders/Directors

Corporate Financials for the past 3 years

Corporate Mortgage Application (get form from link below)

Statement of Personal Financial Affairs for all signing officers (get form from link below)

Name of Company Lawyer

Name of Company Accountant

New Home Warranty Proof (as required)

List of suppliers

List of subcontractors

Spreadsheet of all real estate assets owned by company

Current copies of title for all real estate assets owned by company and invidual signing officers (get form from link below)

Subject Property Details (for each property you are building or developing):

Address of property

Name of City/Town

Name of Sub-Division

Development Approval

Building Permit

Demolition Permit (as required)

Other permits (water/gas/electricity) - as required

Appraisal of land ("as is" - to determine lot value)

Appraisal of property ("as constructed")

Blueprints for dwelling (plus floor plans/renderings)

Legal description of each lot

Original purchase agreement of lot from land developer

Status: pre-sold vs. spec.

Status of present construction:

Land/Foundation/Pre-Lockup/Lockup/Finishing/Complete

Construction Budget (materials/engineering/architecture/labour/financing/fees/selling costs, etc.)

Confirmation you have cash downpayment to put towards the project.

Construction Schedule

Cash Budget (to be integrated with your Construction Schedule)

Cost Engineers (quantity surveyor/engineer) Report may be required to validate your budget and costs and to ensure that ALL of the potential cost items are addressed (including contingency and GST components).

Project Profitability Statement (Proforma's of project)

Time required to build (4 months/5 months/6months)

Copy of pre-sold purchase/sale agreement (including all attachments (schedule A), proof of deposits)

Confirmation of purchaser's financing condition waived, may be required.

Additional info for Land Development:

Absorption Rate Studies

Marketing Analysis and Sales Strategy

Approvals/Correspondence form Municipality

Additional Info for Commercial Projects:

Phase 1 Environmental

Phase 2 Environmental (as required)

Re-mediation Plan (as required)