MPF Direct Servicing Released (Redwood Trust)

Overview

How it Works

Complete this training and begin taking advantage of the MPF® Direct program!

Tooltip  Indicates helpful hint is available. Click for additional info.

Click here to view eligibility options for MPF Direct products

Your Responsibilities

  • Confirm each loan meets the requirements of the applicable MPF Product guide
  • Originate, process, manually underwrite and close the mortgage loan in accordance with the MPF Direct product guide
  • Sell the loan to MPF
  • Meet MPF quality control requirements

Step 1: Borrower Application

Overview

Congratulations! Your borrower has trusted you to originate their home loan.

With you as their mortgage professional, the Borrower will complete the loan application and provide all requested documentation. Let’s get started!

Your responsibilities

  1. Determine if your borrower’s loan meets the MPF® Direct program requirements found in the MPF Guides.

    View our MPF Direct Loan Eligibility Webinar.

    Obtain a complete borrower application (including all asset accounts), as they are often needed during the underwriting process if applying for an exception.

  2. Assist the borrower in completing the loan application.
  3. Send out initial disclosures (i.e., TIL, Loan Estimate, etc.).

Follow all federal and state regulatory guidelines/requirements.

Step 2: Loan Data Delivery

Overview

Loan data delivery (also known as registering your loan) is your method of providing Redwood Trust with the loan details. Accuracy is essential.

Your Responsibilities

  1. Utilize the MPF Direct portal at FHLBMPFDirect.com.
    • The MPF Direct portal is the system used to facilitate and manage all MPF Direct transactions. MPF Direct loans will not appear in the eMPF website and are only visible through the portal.{Tooltip}
      Click here to access the MPF Portal Demonstration and supplemental guides.
    • MPF Direct portal Security Administrators are assigned based on your existing MPF Resolution & Delegation of Authority. User Administrators can assign specific roles for staff to access the MPF Portal.
      Click here to view the MPF Direct Portal User Set-up Guide.
  2. Create the loan.
    • The MPF Direct process allows for minimal information to be uploaded or manually input into the portal.
    • A loan is considered “unregistered” and may be edited or held until additional information and/or documentation is received.
  3. Register the loan.
    • Basic loan data fields must be completed to allow for registration.
    • Upload the Fannie Mae 3.2 ULDD file or manually enter the data in the portal.
    • Loans must be registered before they can be locked.
    • Once loans are registered, a Shellpoint Mortgage Servicing {Tooltip} loan number will be assigned via the Redwood portal on the “Edit Loan Details” screen. In order to obtain the number, you must exit the loan and re-enter for the loan number field to populate.

Step 3: Processing

Overview

Now's the time to complete the processing steps that ensure your borrower and the property meet the MPF® requirements.

You will process the MPF loan as you would loans for other secondary market investors. 

Want to know more? View our MPF Direct Product Eligibility webinar.

Your Responsibilities

  1. Gather borrower information. 
  2. Validate the information provided by the borrower.
  3. Order an Appraisal.
  4. Order the Title search.
  5. Order a Life of Loan Flood Certification for the property.
    A flood zone determination certificate with life-of-loan coverage from one of the approved vendors is required for each serviced mortgage.{Tooltip}

Step 4: Pricing & Locking

Overview

Determine your borrower's interest rate.

How it works

  1. View live pricing at the MPF Direct Portal.
  2. Define your lock request.
    • All lock requests should be made via the MPF Direct portal between 9 AM and 7 PM CST each business day.
    • In order to lock a loan, a minimum number of data fields are required.
    • You must provide all data fields required to fully evaluate product eligibility and price the loan. 
    • Locks are Best Efforts delivery and loan specific. Once the loan has closed, the lock becomes mandatory delivery.
    • Lock periods range are in 15 day increments (15, 30, 45, 60 & 75).
    • Locks should extend at least 5 business days beyond the closing or disbursement date to allow time for post-closing procedures.{Tooltip}
    • Lock Extensions
      • Lock Extensions may be requested via the MPF Direct Portal.
      • Extension requests must be received prior to 7 PM CST on the date of the current lock expiration date.
      • Extensions can be requested for periods of 5, 10, 15, 20 and 30 days.
      • Extensions are limited to 2 extension requests for a total extension period of 30 days.
      • Extension fees are subject to change by the Investor.{Tooltip}
    • Re-Locks
      • Re-locks are available once the lock has expired.
      • Loans re-locked within 30 days from the original lock expiration are subject to worse-case pricing.
      • A loan has to be cancelled or expired for 30 days to re-lock at the current pricing.
      • Loans may be re-locked only for the original lock term.
      • A closed loan may be extended but cannot be re-locked.
      • Closed loans with rates that expire before the loan is delivered are subject to pair-off fees and may be subject to an administrative fee of .125% of the loan amount.
  3. Apply price adjustments.
    • Loan Level Price Adjustments (LLPAs) are exclusive to the MPF Direct product and are automatically applied when locking within the portal. The MPF Direct product does not use agency LLPAs.
    • Final LLPAs may differ from initial LLPAs if there are changes to the loan characteristics after locking (i.e., a low appraisal value may result in a higher LTV).
  4. Once a loan is locked, a lock confirmation is available on the MPF Direct portal for viewing, downloading or printing.

Step 5: Underwriting

Overview

You're ready to underwrite the loan!

Once a package with all processed verifications and documentation is completed, the file is sent to the underwriter. The underwriter is responsible for determining whether the package is deemed an acceptable loan by analyzing the 5C’s of underwriting:

1. Capacity: How much can the Borrower afford?
Consider: DTI, Cash Flow, Occupation, Employment History, Income Stability, Timing of Repayment, Continuance, etc.

2. Capital: What will the borrower invest and have for reserves?
Consider: Checking/Savings, Investments, Liquidity, Cash for Close, Reserves, Overdraft/Non-sufficient Funds, etc.

3. Collateral: In the event of a default, what is the property worth?
Consider: LTV, Marketability, Appraisal Discrepancies, Liens, Easements, Judgments, etc.

4. Conditions: What are unique factors surrounding the loan?
Consider: Market Conditions, Loan Purpose, Use of Cash Out (if applicable), etc.

5. Character: Will the borrower repay the loan?
Consider: Borrower Attitude, Payment History, Credit Score, etc.

A benefit of this product is the ability to potentially obtain exceptions for loan characteristics that do not fall within the guidelines. For example: If a property is greater than 20 acres and residential in nature, this may be considered for an exception.

Your Responsibilities

  1. Manually underwrite the loan obtaining full documentation.
    • Findings from an Automated Underwriting System (AUS), such as DU, LPA or DO, may NOT be used to support the loan decision.
    • Refer to the MPF Direct Guide for all eligibility guidelines.
    • IRS tax transcripts are required on all loans.
      All loans must meet the Ability to Repay (ATR) and Qualified Mortgage (QM) Rule established by the Consumer Financial Protection Bureau (CFPB).
  2. Submit single loan exception requests (if applicable).
    • Exceptions may be allowed on a case-by-case basis and require strong compensating factors.
    • Exception requests are made via the MPF Direct portal and require completion of the Exception Request Form (Exhibit K-D).
    • The following documents must be uploaded via the MPF Direct portal:
      • MPF Direct Exception Request Form (Exhibit K-D)
      • Borrower Application (Fannie Mae Form 1003)
      • Underwriting and Transmittal Summary (Fannie Mae Form 1008)
      • Credit Report
      • Any additional supporting documentation
    • Any exception granted will typically have a negative price adjustment associated with the exception.
    • Exception requests must be submitted for consideration prior to the loan closing, but can be submitted any time during the origination process. Once submitted, Redwood will review the exception request and send a response via email within 24-48 hours.
  3. You are required to fully underwrite the appraisal.
  4. Submit the appraisal to Redwood Trust via the MPF Direct portal for a value validation.
    Redwood Trust does not re-underwrite the appraisal, they simply validate the value.
    • Prior to submitting the appraisal to Redwood for value validation:
      • Ensure the loan is in either a “Registered” or “Locked” status.
      • Ensure all appraisal concerns have been addressed.
      • If the loan requires 2 appraisals, both appraisals must be completed prior to sending the appraisal review request.
      • Scenarios where 2 appraisals are required:
        • Purchases over $2M
        • Refinances over $1.5M
        • Select 90 QM Rate/term refinances
        • Additional circumstances may require 2 appraisals; refer to the MPF Direct Guide for more details.
      • If 2 appraisals are required, they should be submitted together.
    • Submit a first generation PDF copy of the appraisal. Poorly imaged copies may delay the response time
    • The appraisal value validation results will be emailed to the individual who submitted the request within 5-7 business days. Results may also be viewed within the portal.
      • Value Validation Results:
        • Value Accepted
          • The appraised value is supported.
          • Even if the value is supported, review the report for conditions.
          • May have comments indicating need for final 1004D, inspections, etc.
          • As long as the value was accepted, the additional conditions may be submitted with the closed loan package.
        • Appraisal Review Completed with Conditions
          • Complete an Appraisal Field Review to address areas of commentary included in the initial review.
        • Value Not Accepted
          • The appraised value is not supported.
          • If there are additional requirements, arrangements should be made to meet the requirements and re-submit.
    • The appraisal value must be validated by Redwood Trust prior to closing the loan.
      View our workflow diagram for the appraisal process overview.

Click here to view the MPF Direct portal demonstration.

Step 6: Closing

Overview

It’s the big day for your borrower!

It’s also an important milestone for you, as this is the final step before selling the loan to the MPF® Program. During this stage, we will cover the specific steps you will need to complete to sell your loan.

Your Responsibilities

  1. Prepare closing documents.
    • You may use your Loan Origination System (LOS) loan number for closing documents.
    • There is not a specific document package for the MPF Direct jumbo product. Use the standard Fannie Mae conforming documents as appropriate.
      • Doc Magic has a document package listed as RWTJ Jumbos, which is acceptable
        For all other document preparation systems:
        If a Redwood Trust document package is found, DO NOT use it; it is not approved for this jumbo product.
    • For Fixed Rate Loans, use the following FNMA/FHLMC forms, if applicable:
      • Uniform Security Instrument, 3000 series
      • Multi-state Fixed Rate Note, 3200 series
    • For Adjustable Rate Loans, use the following FNMA/FHLMC forms, if applicable:
      • Uniform Security Instrument, 3000 series
      • Adjustable Rate Note, Form 3528
      • Adjustable Rate Rider, Form 3187
    • Use the following FNMA/FHLMC riders if applicable:
      • Multi-state Condo Rider (FNMA 3140)
      • Multi-state PUD Rider (FNMA 3150)
      • Multi-state 1-4 Family Rider (FNMA 3170)
      • Multi-state Second Home Rider (FNMA 3890)
    • Redwood is identified as the servicer at closing.
      • A servicing transfer does not take place between you and Redwood, so a servicing transfer letter is not required.
      • Shellpoint Mortgage Servicing acts as a sub-servicer for Redwood Trust.
      • Servicing ID numbers (servicing numbers) are automatically assigned in the MPF Direct portal on the Edit Loan Details screen and must be included on the First Payment Letter. A sample of the First Payment Letter (Exhibit P-D) is found in the MPF Direct Selling Guide and must be provided to the borrower at closing.
  2. Close with the borrower.
    • Provide borrower with a first payment letter. Your organization should be named on the first payment letter as the servicer, even if you will never collect any payments from the borrower.
      See first payment letter sample.
  3. Investor fees will be charged on all MPF Direct loans.
    • Delivery Fee: $350.00
    • Tax Service Fee: $70.00

Step 7: Post-Closing

Overview

Congratulations, you've submitted the loan for purchase!

Now that you have closed the loan, you must submit your loan purchase request. You will need to upload your mortgage file in the MPF Direct portal and mail your Custody file to the investor’s document custodian (Wells Fargo).

See the MPF Guide for more details.

Your Responsibilities

  1. Submit your loan purchase request.
    • The loan must be closed and in a “locked” status. Locked loans that are closed with the borrower are considered a mandatory commitment and must be delivered to MPF for purchase.
    • Two files must be delivered:
      1. Custody (Collateral) File
        Must be sent via overnight mail to the Investor’s document custodian (Wells Fargo) on the same day the mortgage file is delivered.
        Wells Fargo Bank, N.A.
        751 Kasota Avenue
        Suite MDC
        Minneapolis, MN 55414
        Attention: PCG-REDW


        Additional Custody Package Requirements:
        • The original Note with any applicable riders bearing all intervening endorsements endorsed in “blank” and all prior, intervening endorsements to show a complete chain of endorsements
        • For MERS members: If MERS® is the original Mortgagee (MOM loan), a certified copy of the Security Instrument showing MERS as the original Mortgagee
        • For Non-MERS members: If loan is not assigned to MERS, an original assignment endorsed to “Blank” is required
        • Originals or a certified copy of all intervening Assignments
        • A copy of the Power of Attorney (if applicable)
        • See the MPF Direct Selling Guide (Chapter 1.8.1) for additional information about co-ops
          Redwood’s loan number must be on all collateral documents.
      2. Mortgage File 
        Must be electronically imaged and uploaded via the Document Center located in the MPF Direct portal on or before the rate expiration date or within 5 business days of the borrower’s closing date (whichever is earlier).
    • Redwood will begin an initial review of the mortgage and collateral files upon receipt.
    • The response time for an initial review is generally 5 business days.
  2. Review Purchase Review Response and address all findings.
    • You will be emailed a Daily Conditions Report detailing any open items, deficiencies or discrepancies.
    • Documentation to clear all mortgage and collateral file conditions must be delivered and cleared within 7 calendar days.
      • Mortgage File conditions are uploaded to Redwood Trust via the MPF Direct portal.
      • Collateral File conditions must be overnighted to Wells Fargo.
      • If more than 7 calendar days are required to clear outstanding item(s), the loan will be subject to a 2 bps per day price adjustment until conditions are cleared.
    • Once all conditions have been met, the loan is cleared for purchase.
    • If there are no issues with the mortgage or collateral files, you will be notified that the loan is cleared for purchase.

Step 8: Selling

Overview

It's time to reap the rewards of selling your mortgage to the MPF® Program.

Now that you have completed your loan purchase request, you must review the funding schedule to finalize the purchase and receive your funds.

Your Responsibilities

  1. Review funding schedule for accuracy.
    • Upon completion of Redwood Trust's due diligence, you will be provided a Funding Schedule (see Exhibit D-D in the MPF Guide) and must determine if the following are correct:
      • Funding data and pricing
      • Scheduled balance
      • Escrow amounts
  2. Approve the funding schedule to initiate the purchase.
    • Approving the Final Funding Schedule available in the MPF Direct portal will initiate the transfer of funds. The requestor must have “MPF Direct Funding Approver” rights determined by the portal’s security administrator.
    • Loan purchase fees are charged on all loans:
      • Tax Service Fee: $70.00
      • Delivery Fee: $350.00
    • Any fees charged for conditions not met within the 7 day time limit will be netted out of the funded amount.
    • Loan Level Price Adjustments (LLPAs) may differ at funding if there are changes to the loan characteristics at the time of purchase.
    • Loans will generally be funded within 2 business days of loan funding schedule being approved for purchase.
    • MPF credits your DDA account in eAdvantage.
    • Funding schedules approved before 8 A.M. CST will fund the same day.
    • Funding schedules approved after 8 A.M. CST will fund the following business day.
  3. Confirm receipt of the net funding amount with the “Transaction Confirmation and Loan Funding Activity Report” from the MPF Provider.
  4. Provide the final/trailing documents to Wells Fargo within 90 days of the borrower’s closing date.
    • All trailing documents should be identified by writing the Redwood Trust loan number (assigned at time the loans is registered in the Redwood Trust portal) and the borrower name in the upper right corner of the document.
    • Overnight the final trailing documents to:
      Wells Fargo Bank N.A.
      751 Kasota Avenue
      Suite MDC
      Minneapolis, MN 55414
      Attn: PCG-REDW
    • If the delivery of all trailing documents is not completed within 90 days of the borrower’s closing date, you may be required to repurchase the loan.
  5. Provide the borrower with the Notice of Servicing Transfer letter (Exhibit U-D) which will name Redwood as the servicer.
    • Must be in accordance to RESPA and applicable laws. 
    • Must be provided no later than 15 days prior to the effective servicing transfer date.
    • The effective servicing transfer date is also noted as the "1st Payment Due to Redwood" found on the Confirmation and Final Funding Schedule. The Servicer ID number assigned in the MPF Direct portal must be reflected on the letter. 
      • The Servicing ID number replaced the PFI loan number and is found on the Edit Loan Details screen.
  6. Notify third-party service providers of a change in servicer.
    • Homeowner’s or Hazard Insurance/Flood Insurance: Update the mortgagee clause within 15 days of the Borrower’s closing date.
    • Life of Loan Flood Certification: Notify the flood determination company of the change of servicer to Shellpoint Mortgage Servicing.
    • Taxes: Forward all tax bills onto Shellpoint Mortgage Servicing. Taxes due within 60 calendar days of the effective servicing transfer date must be paid prior to transfer.

Step 9: Quality Control

Overview

Now it's time to ensure your mortgage production continues to operate at a high level.

You should conduct quality control reviews to evaluate the investment quality of your home loans, as well as detect possible fraud and false representation. 

This step outlines the requirements for a Quality Control (QC) program for Mortgage Loans originated and serviced under the MPF® Program. (Refer to the MPF Program Guide, Chapter 8.) You must perform the QC duties in compliance with the MPF Guide.

There are 2 types of Sample Selections needed:

  • Pre-Closing
  • Post-Closing

Your Responsibilities

  1. Randomly select loans for quality control audit that meet the requirements of the MPF Guide.
    • The MPF Guide states the sample size must be no less than 10 percent. Choose either:
      • 10% of your residential 1-4 family mortgage production;
      • 10% of your secondary market 1-4 family mortgage production; or
      • 10% of all your MPF loans
    • A review appraisal will be required on 10% of the loans selected for QC Audit.
    • Each loan selected for post-closing review must have a new tri-merged credit report. 
    • Two types of reviews are required:
      • Random – full file review (based on the 10% rule)
      • Targeted – review one element of the loan file (these are in addition to the 10% rule)
    • A comprehensive review is required for 2 stages of the closing process:
      • Pre-Closing
      • Post-Closing
  2. Meet the requirements of the MPF Guide for both pre and post-closing reviews.

Redwood Trust's Responsibilities

  1. Conduct Servicing Audit.
  2. Complete Early Payment Default Audits.
  3. Share High Level Concerns.