CITY OF EL PASO LOAN SERVICING & COLLECTIONS MANUAL
G.
UNDERWRITING GROSS MONTHLY INCOME
Gross monthly income includes the following, with respect to the borrower and any co- borrower:
• The gross amount, before any payroll deductions, of wages and salaries, overtime pay, commissions,
fees, tips, bonuses, and other compensation for personal services
• For self-employed borrowers, the net income from operation of a farm, business, or profession;
• Interest, dividends, and other net income of any kind from real or personal property (for example,
investment income and rental income)
• Benefit income, including the full amount of periodic payments received from Social Security (may
be grossed up to a maximum of 125% of non-- taxable income) (including Social Security received by
adults on behalf of minors or by minors intended for their own support), annuities, insurance policies,
retirement funds, pensions, disability or death benefits, and other similar types of periodic receipts
• Alimony and/or child support may be used to qualify, however, it is voluntary and if the income renders
the borrower ineligible, the City is allowed to remove and re-evaluate the borrower income received
by the borrower that is reasonably likely to continue
H.
UNDERWRITING BACK END TOTAL DEBT TO INCOME
The Back-End Ratio (total debt to income ratio) is the ratio of the borrower's total recurring monthly debts
(such as the borrower’s monthly mortgage payment (PITI), payments on all installment debts, monthly
payments on all junior liens, alimony, child support, car lease payments, aggregate negative net rental income
from all investment properties owned, and monthly mortgage payments for second homes) to the borrower's
gross monthly income. This ratio must not exceed 55% after special loan servicing.
The City must validate all monthly installment debt, revolving debt, and secondary mortgage debt. This can
be accomplished by pulling a credit report for each borrower or a joint report for married co-borrowers. The
City must also consider any information obtained from the borrower orally or in writing concerning monthly
obligations not reported on the credit file and document such obligations accordingly.
I.
UNDERWRITING SUBORDINATE FINANCING
Payments on subordinate mortgages are not included in the Front-End Ratio, but they are included in the
Back-End Ratio.
J.
MORTGAGE MODIFICATION WATERFALL
The City must consider the following traditional servicing options before considering special loan servicing:
a written informal payment plan, a special forbearance agreement, and a loan modification plan with a term
on a case-by-case basis from the date of the loan modification.
The City shall calculate the target payment as 31% of the verified gross monthly income. Special Loan
Servicing options shall be used in the following order to bring the borrowers mortgage payment (PITIA) to
as close as possible but not less than 31% with a cap of 36%.
1. Capitalize all delinquency. Capitalization may include foreclosure fees and costs that are associated with
a current foreclosure action, deficits in tax and insurance accounts, past due annual fees imposed by the
City, but not late charges or other City fees.
2. Reduce interest rate to a level at or below the maximum allowable rate as defined by the City.
3. One-eighth of one percent (0.125%)
4. If the target payment is unable to be achieved with rate reduction alone, the City shall extend the term as
necessary to achieve the targeted mortgage payment up to the maximum allowable by the investor but not
to exceed 480 months.
5. If the targeted monthly mortgage payment still cannot be achieved, the City may consider a mortgage
recovery advance in addition to the extension of the terms to achieve the monthly target payment.