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Mortgage, Money, & Finance in Relocation Brenda DiMuro, Bank


Mortgage, Money, & Finance in Relocation Brenda DiMuro, Bank of America Sally Anne Hughes, Citibank Matt Canfield, GMAC Mortgage Rick Willard, Wells Fargo Home Mortgage – PowerPoint PPT presentation

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Title: Mortgage, Money, & Finance in Relocation Brenda DiMuro, Bank

Mortgage, Money, Finance in Relocation
  • Brenda DiMuro, Bank of America
  • Sally Anne Hughes, Citibank
  • Matt Canfield, GMAC Mortgage
  • Rick Willard, Wells Fargo Home Mortgage

Financial Solutions for Transferees
  • Brenda DiMuro, Senior Vice President
  • Bank of America
  • February, 2007

Lending Solutions
Mortgage Solutions
  • Interest only loans can lower monthly payment by
    keeping debt ratios down. This feature is
    typically available on 5, 7, and 10 year
    Adjustable Rate Mortgages.
  • Combination first and second mortgage maximizes
    the LTV and CLTV
  • Low down payment programs
  • Use of duplicate housing benefit when there is no
    buyout offer
  • Corporate sponsored seconds
  • Subsidy Programs for high cost of living areas

Corporate Sponsored Second Mortgage
What is a Corporate Second?
  • A corporate-backed (guaranteed) second mortgage
    closed simultaneously with the transferees first
    mortgage. The corporation makes the payments on
    the second mortgage.

Why a Corporate Second?
  • Addresses the problem of giving large sign-on
    bonuses to recruit high level executives/specialis
    ts, encourage individuals to accept assignments,
    as well as covering loss on sale.
  • Benefits
  • Can be applied toward down payment, lowering
    mortgage amount
  • Can be applied toward a higher purchase price
  • Can be used to cover loss on sale

How Does It Work?
  • Lender advances funds for the second mortgage
  • Loan is in employees name but guaranteed by the
    company even in the event that the employee
  • Total CLTV can be up to 100
  • Note should not be offered to employees who
    are subject to Sarbanes-Oxley

Benefits To Corporation
  • Controls initial cash outlay
  • Enables the company to invest funds in other
    income-producing activities
  • Administration is handled almost entirely by
  • Retains employees for a defined period of time
    since company pays off second mortgage only as
    long as borrower remains employed by company.

Benefits To Employees
  • Helps employee who has limited funds for down
    payment due to
  • Loss on sale
  • High Cost area
  • Short cash to close
  • Allows employee to purchase larger home
  • Lowers loan amount, or
  • Increase down payment
  • Provides for potential tax benefits

Mortgage Subsidy
Why a Subsidy?
  • With mortgage buy downs and subsidies, companies
    can contribute to the additional cost associated
    with moving transferees to high cost of living
  • Efficient method of increasing employee
    purchasing power
  • Attracts, develops, empowers, and retains
    valuable employees

Types of Subsidies
  • Cost of Living Adjustment (COLA)
  • Interest Rate Driven Subsidies
  • Dollar Driven Subsidies

Subsidy Comparison vs. Relocation Allowance or
Signing Bonus
Relocation Allowance or Signing Bonus Many
lenders use only a portion of allowance to
qualify borrowers Undirected Taxable as income
to employee Lump sum paid as expense borne by
Company Company
Subsidy Program 100 credited to qualification 1
00 directed Interest deductibility at note
rate Rate reverts to original if employee
leaves Company no longer pays Subsidy Lender
  • Buying Power
  • Benefit Usage
  • Taxability
  • Control
  • Administration

DID YOU KNOW? Lets say you give the employee a
lump sum of 25,000 toward their new home
purchase. How much more house will that buy?
It may increase buying power by only 25,000 or
approx. 15,000 if the benefit is not grossed up.
Additionally, it may cost 35,000 if you tax
protect it, and the money may be lost if the
employee resigns after they relocate.
Subsidy Comparison vs. Cost Of Living Allowance
(COLA) or Salary Increase
Subsidy Program Annually 3-5 years 100
credited Predetermined prior to closing of
loan N/A
COLA Varies Approx. 28-33 debt
ratios Predetermined prior to closing of
loan N/A
  • Salary Increase
  • Annually Indefinitely
  • Approx. 28-33
  • debt ratios
  • Depends on length of
  • employment
  • Increased benefit cost
  • Increased tax payment
  • Increased merit raise, etc.
  • Paid
  • Buying Power
  • Cost
  • Other Costs

DID YOU KNOW? A company would have to increase an
employees salary significantly to make up a
large cost difference, because the mortgage
company can typically only use 28-33 of an
employees income for qualifying. Conversely, the
buydown goes directly to the mortgage payment for
a far greater impact on qualifications and no
effect on salary, benefit cost, tax payment, etc.
Financial Solutions for International Assignees
coming to the US
Brenda DiMuro, Senior Vice President CRP,
GMS Bank of America February, 2007
Financial Solutions
  • Mortgages priced the same as loans to domestic
  • New Accounts prior to or upon arrival into the
  • Funds Transfer International wire transfers in
    US dollars or foreign currency
  • Credit Cards without corporate guarantee or
    cash deposit required

Financial Solutions continued
  • Auto Loans available with domestic pricing for
    length of term in US
  • Online Banking normally available at no cost to
    the transferee
  • Wealth Management available to qualified

For additional information, contact Brenda
DiMuro, Senior Vice President, CRP, GMS Bank of
America 360.604.4470 or brenda.dimuro_at_bankofameric OR Jan Mitchell, Senior Vice President,
CRP, GMS Bank of America 505.282.4198 or
Solutions for Transferees Moving Abroad
  • Sally Anne Hughes, Vice President, Corporate
  • Citibank Global Executive Banking
  • February, 2007

Youre Moving Me Where?
  • Financial concerns and challenges for employees
    moving overseas
  • How will you pay me?
  • What happens if the exchange rate changes?
  • How will I pay bills and access my money
  • How will I manage my finances at home?

Were Paying Them How?
  • Financial concerns and challenges for
    international HR teams
  • Developing equitable, cost-effective programs to
    compensate international assignees
  • Ensuring assignee satisfaction during an
  • Dealing with time zone differences
  • Managing foreign exchange fluctuations
  • Limited resources

Compensation Delivery Options
  • Payment in home country currency
  • Easy to administer
  • Assignee needs method to deliver funds to
  • Currency risk
  • Payment in host country
  • Complex for organization to manage
  • Assignee may have ongoing home country
  • Payment in organizational HQ
  • Easy for organization, challenge for assignees
  • Payment split between home and host
  • Difficult to administer

Additional Considerations
  • International assignee population
  • Size of population
  • Assignment locations
  • Short term vs. long term assignments
  • Types of compensation over base
  • COLA, premiums, bonuses, relocation allowances
  • Tax payments
  • Regulations in countries concerned
  • Legal, tax, immigration, labor laws, political
  • Organizational culture
  • Centralized or regionalized policies
  • Available resources

Compensation Dilemma
  • Compensation delivery methods which provide the
    most value, convenience and protection for the
    assignee are typically difficult and expensive
    for the company to administer
  • Split pay programs may work for large population
  • Home country pay often used by mid-sized or small
  • Protect assignees from currency risk
  • Provide assignees with funds transfer methods

Currency Risk
  • Paying an employee in home country while expenses
    are incurred in destination subjects employee to
    foreign exchange risk
  • Decline in the US dollar is problematic for US
    outbound assignees

Currency Risk continued
  • equivalent of rent of 4000 over past two years

Currency Risk continued
  • Methods to mitigate FX risk include
  • FX premiums
  • Guaranteed exchange rate program

Sending Funds Overseas
  • All exchange rates are not equal
  • Interbank rate available for transfers of 1
    million plus
  • Spread over Interbank varies between 1 and 4
  • International wire transfer fees
  • Debited from account or
  • Billed directly to company
  • Costs vary by bank, size of population,
    destination, size of transfer, method used to
    transfer funds

Banking Overseas
  • Banking customs vary by country
  • Limited use of checks overseas
  • Typically strong online banking programs
  • Fees vary
  • Incoming wire fees
  • Account opening requirements vary by country
  • Access to credit varies by country
  • Credit cards
  • International mortgages

For additional information, contact Sally Anne
Hughes, Vice President, Corporate Sales Citibank
Global Executive Banking 212.783.6383 or
  • With the Mortgage Process in 2007

Matt Canfield, CRP Director, National
Accounts GMAC Mortgage, LLC Corporate Relocation
True or False
  • Your salary is included in your credit score.
  • The previous owners insurance claims will not
    affect the new owners premium.
  • Your relocating employees identity is totally
    protected during their move.
  • A mortgage appraisal includes forecasting.
  • Good Faith Estimates are an exact breakdown of
    fees due at closing.
  • It is best to pick the loan product with the
    lowest rate.

Credit Score Case Study
Why isnt my credit score high enough?
Salary  - 300,000      Credit Score  -
560  Reason Denied  - Minimum Credit Score for
Jumbo Loan is 660 Area Moving To/From  - NY to
Detroit  Down Payment 20 Loan Amount  -
925,000 Debt-to-Income Ratio 21
CREDIT SCORE is 1 Reason People are Denied for a
Credit Scores
What is in my credit score?
Insurance Case Study
BACKGROUND Purchase Price 323,000 Loan Amount
290,700 Location Austin, TX
  • Theft during the previous owner's tenure reported
    on a CLUE record
  • Expected to pay about 650 a year (for insurance)
  • First and second company wouldn't insure them
  • Third quoted a 1,200 premium
  • Two days away from closing, in danger of falling
    out of escrow
  • Helped them find a company and it ended up
    costing 900 a year

Does information from your relocating
transferees PREVIOUS property follow them to
their new home?
Insurance Scores
What's On Your Property CLUE Report?
  • General Information
  • Claims History of Property Being Insured (Last 5
  • Claims History of Individual(s)Seeking Insurance
  • Date of Previous Claim
  • Insurance Company(s) involved in Claim
  • Policy Number
  • Claim Number
  • Cause of Claim
  • Amount Paid
  • Status of Claim
  • Identifies who has received the report

Identity Theft Case Study
BACKGROUND Purchase Price 279,900 Loan Amount
195,000 Location Tampa, FL
  • Employee initiated at the beginning of relocation
  • Went through pre-approval process immediately and
    discovered erroneous items showing up on credit
    report turned out to be identity theft
  • Worked with employee and credit agency to correct
  • Provided employee with pre-approval after score
    was corrected
  • Happy Ending Because the employees company
    provides advanced notification to their national
    lender allowing time for errors on credit
    reports to be corrected

And you thought your relocating employee wasnt
vulernable to ID theft
Identity Theft
What can your transferees do to curtail IDENTITY
THEFT while relocating?
  • Secure websites/email transactions
  • Open Houses
  • Mail Collection
  • Packing Information

Appraisal Case Study
BACKGROUND Asking Price 445,000 Loan Amount
425,000 Location New Jersey
  • House didnt appraise out
  • Really wanted the house
  • Slowing market caused property to be listed at
    high end of range
  • Appraiser uses sale data within past 2 weeks to
    reflect current market conditions
  • Buyer renegotiates with seller using the
    appraisal as leverage

What do you mean my property didnt APPRAISE
OUT? Get another appraiser!
  • Lender will request additional comps from selling
  • Underwriting reviews the comps to verify the
    validity of the original appraisal.
  • If the original appraisal is deemed invalid, an
    new appraisal is ordered. The new value is
    used-regardless of price-no averages are used.
  • Transferee is counseled on different options
    including renegotiating the selling price,
    looking at different loan options.

Steps to Follow if a Low Value APPRAISAL is
Subsidy vs. Points
Benefits Drawbacks
Is paying points REALLY the best way to handle
moving to a high cost area?
Good Faith Estimates Case Study
  • Initially, taxes were provided to the lender
  • by the title company at 6,300 annually
  • Lender provides borrower with a GFE based on the
    initial tax quote
  • A day prior to closing, the title company
    provides the lender with a new tax amount of
    9,500 (county records hadnt been updated
  • Higher tax charges of 1600 were due at closing
    to meet escrow requirements
  • Borrower couldnt come up with the additional
    funds overnight
  • During the loan process the lender had approved
    the borrower for a home equity line of credit
  • Borrower was able to use the HELOC that he had
    not planned on
  • utilizing for the additional 1600

BACKGROUND Purchase Price 464,333 Loan Amount
366,823 Location LA to Montclair, NJ
Where do Good Faith Estimates come from?
Good Faith Estimates (GFEs)
Where do the GFE estimates come from?
I. Estimate of Closing Costs
Good Faith Estimates (GFEs) continued
II. Estimated of Prepaid Escrow and Adjustments
Where do the GFE estimates come from?
New Loan Products
Is a 50 year loan a good solution for high cost
of living?
Loan Products Case Study
Jane Smith is moving from Austin, TX to Troy,
MI Purchase Price Loan Amount
240,000 Debt-to-Income Ratio 54 Expects to Own
Home 5 Years Loan Product Which should she
Interest rate only fixed for the first 5 years,
afterwards annual interest rate adjustments will
affect subsequent payments.
For additional information, contact Matt
Canfield, CRP Director, National Accounts GMAC
Mortgage, LLC Corporate Relocation 973.239.3324