Nichification

Proliferation in the number of loan, borrower, property, and transaction
characteristics used by lenders to set mortgage prices and underwriting requirements. Nichification
is unique to the U.S. and reflects the importance of secondary markets there. Any characteristic
identified by investors in the secondary market as affecting risk or cost is priced in the secondary
market, and then in the primary market. The following is a partial list of factors used in pricing or
in setting qualification requirements. Transaction Characteristics: Loan Amount; Desired Lock Period
(in days); Down Payment (as percent of property value); Term; Prepayment Penalty (if any). Borrower
Characteristics: Credit Score; Ratio of Borrower Income to Monthly Housing Expense; Ratio of Borrower
Income to Total Housing Expense. Property if Not Single-Family Detached: Two-Family; Three-Family;
Four-Family; Co-op (building is owned by a cooperative association in which members own shares);
Condominium (borrower owns unit in a project in which some facilities are owned in common);
Condominium More than Four Stories High; Manufactured (house was not built on site) Attached ('Twin,'
'Triplex,' 'Row'); Planned Unit Development (house is located in a PUD with a homeowners association
that charges dues)
Loan Purpose if Not Purchase for Permanent Occupancy: Purchase Second Home (Vacation Home);
Refinance; Cash-Out Refinance (loan is larger than old loan balance by an amount larger than the
settlement costs); Investment (home is being purchased to rent out). Documentation if Not Standard:
Alternative Documentation (borrower wants to provide payroll and bank statements rather than wait for
verification of information from employer and bank); Documentation for Self-Employed (borrower wants
to use special documentation requirements available for the self-employed); No Income Verification
(borrower doesn't want reported income to be verified by the lender);  No Asset Verification
(borrower doesn't want reported assets to be verified by the lender);  'No Docs' (borrower doesn't
want reported income or assets to be verified by the lender);No Income Ratios (borrower doesn't want
income to be used in determining qualification); Streamlined Refinance (borrower wants the reduced
documentation requirements available on refinances only). Special Borrower Features: Non-Occupant
Co-Borrower (one of the borrowers won't be living in the house); Subordinate Financing (there will be
a second mortgage on the property when the new loan is made); Non-Permanent Resident Alien (borrower
is employed in U.S. but is not a U.S. citizen or permanent resident); Non-Permanent Non-Resident
Alien (borrower is not a U.S. citizen and is not employed in the U.S.); Waiver of Escrows (borrower
wants to be responsible for payment of taxes and insurance). Generic Price Quotes: Casual mortgage
shoppers who ask loan providers for ' their rate and points' will receive a generic price quote; one
based on a series of favorable assumptions. Here are typical assumptions underlying generic price
quotes: The transaction is a home purchase or no-cash refinance; There will not be a second mortgage
on the property when the loan closes; The property is single-family, detached, and constructed on the
site;  All co-borrowers will occupy the house as their permanent residence;  The FICO score of all
co-borrowers is above some level, often 720-740; The borrowers can document that they have enough
cash for the down payment and closing costs; The borrowers can document that they have sufficient
income to meet the maximum income/expense ratios on the program selected;  The borrowers are U.S.
citizens or permanent resident aliens. Any deviations from these assumptions will call for a higher
price.

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