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A Guide from MC Customer Support - August 1997

Using MC When Loans Are Sold

How do I go about selling loans from the MC OFFICE Software, and what steps do I follow? Mortgage Computer is asked this question repeatedly as more companies begin selling loans.

Keep in mind, selling a loan has nothing to do with the borrower. It is selling a corporate asset for which the company will receive funds for the sale of the note. The accounting is an internal accounting process and has no bearing on the LS accounting transactions.

LOAN CLOSED AND MOVED TO LOAN SERVICING
Immediately upon closing the loan, the loan should be transferred to the Loan Servicing package using the MB program TRANSFER LOANS (01.15.12.02). If funds for escrows were collected at closing, the funds should be posted and deposited into the LS Escrow Custodial Account. Even if the loan is being sold immediately, move the loan to Loan Servicing. A record is maintained on the sale of the loan, and reporting interest paid to the IRS is done through Loan Servicing.

FOLLOW THE STEPS BELOW TO SELL LOANS FROM MC OFFICE Software:

Set Up a Commitment
Mortgage Computer's design is to sell loans from the Mortgage Banker program. It is to your advantage to sell from Mortgage Banker rather than systems that sell from loan servicing. Why? Loans in the pipeline can be earmarked for sale before they are closed and moved to loan servicing. Set up a commitment to which the loan being sold can be attached. Commitments control what is being sold and report what has been sold. To set up a commitment, follow the path (01.12.08). Refer to the MB's Control the Pipeline section for information on how to set up commitments. Utilize the Stack and Track feature when the commitment is set up.
Assign Loan Being Sold to a Commitment
When you have decided which loan to sell to an investor, attach the loan to the commitment. Attaching the loan to a commitment prevents the loan from being sold twice and keeps the commitment balance up-to-date. Use the option LOAN SALES INPUT FIELDS (01.12.03) to attach the loan to the commitment. Do not attach the loan to a commitment through the Modify Master Record fields. The fields are the same, but more selections have to be made to get to the fields.

Attach the loan to the commitment by entering the commitment number in Field 602. On the same screen, Field 611 shows the Loan Servicing number and Field 612 shows the loan balance.

The loan balance in Field 612 is not updated on a regular basis. To update the loan balance on the MB screen from the menu screen (01.12.01) press <F2>BALANCE ALL. This option will read the loan number in Field 611, then update the loan balance in Field 612 to be equal to LS Master Record Field 21.

Freeze the Loan in Loan Servicing
When the loan has been attached to the commitment, enter a Freeze Code in Loan Servicing Field 86 so payments will not be updated. Enter a Freeze Code of 6 or 7. To set up Freeze Codes in Maintenance, follow the path (03.25.05.01).
Prepare a Loan Sales Worksheet
Prepare a Loan Sales Worksheet. The worksheet should list the loan balance at the time of sale, interest to or from the investor from the interest paid to date (Field 24 in LS) to the date of sale, escrow funds, selling price and the total of funds to be received on the sale of the real estate note. The year end release will have an enhancement for the program to prepare the Loan Sales Worksheet.
Prepare the Documents for Delivery
Data for preparing the assignments and other related selling documents can be entered using the screen (01.12.03) LOAN SALES INPUT FIELDS. Use the MB program to prepare the selling documents instead of typing them by hand.
Deliver the Documents With a Sales Transmittal
Send the documents required together with the sales information to the investor. Use the Loan Sales programs for preparing the sales transmittal information to the investor (01.13.03 etc.). Use the Stack and Track feature to indicate what documents have to be shipped, what has been shipped (01.13.14) and accepted by the investor. Stack & Track is set up when the commitment is set up. Refer to the Pipeline section of the MB Manual for more information.
Receive Check or Funds
A. Balance the funds received to the Loan Sales Worksheet.
B. DO NOT post entries to the borrower loan and treat the sale as a loan payoff. Funds received from the sale of the loan are not funds received from the borrower, but from the sale of a company asset. To treat this as a loan payoff will report the incorrect information to the IRS and the credit bureau.
C. Bank the funds received and pass entries to the General Ledger.
  • Entry to Principal (Note) Receivable
  • Entry to or from Interest Income
  • Gain/loss on sale of loans
  • Transfer Escrow Funds to the new investor
    • Loan is Sold and Servicing Retained
    If the loan is sold and servicing is retained, transfer the loan to the new servicing investor. Use selection (03.24.01) NUMBER CHANGE to transfer the loan. The dollar amount to transfer to the new controls is shown on the report. Enter this amount for the new control and escrow custodial account. The escrow funds have to be physically moved to the new investor's custodial T&I account.

    Print the NOTICE OF SALE/TRANSFER (03.24.05). The loan is not removed from the LS package, only the number is changed.

    LOAN SOLD SERVICING RELEASED
    If the loan is sold servicing released, remove the loan using these selections (03.24.04-09):

      04. LOAN SOLD/TRANSFERRED
      05. NOTICE OF SALE/TRANSFER
      06. CREDIT BUREAU STATUS
      07. PRINT MASTER RECORD
      09. REMOVE LOANS