Conventional Quick Reference

Transcription

Conventional Loan Programs - Quick Reference Guide
Wholesale Lending
LTV/(H)CLTV Matrices
Minimum credit score is determined by LP or DU
Loans with >80% LTV, the credit score must meet the minimum required by the MI provider
Program Highlights
Purpose
Conforming
or High
Balance
Units
1
Eligible Products



10, 15, 20, 25 and 30 year Fully Amortizing Fixed Rate
5/1 ARM with 2/2/5 caps
7/1 ARM with 5/2/5 caps
Primary
Residence
Conventional and Freddie Only Products
Purchase, R/T
Fannie Only Products
Program Features




Fully-Amortized Fixed Rate and ARMs
LP Accept/Eligible or DU Approve/Eligible required
Minimal Overlays
Blended ratios allowed on LP Primary Residence
with a non-occupant co-borrower
Loan Limits


Second
Home
10, 15, 20, 25 and 30 year Fully Amortizing Fixed Rate
Up to the maximum allowed per applicable Conforming
or High Balance loan limit based on property location
and number of units
Investment
Property

Refer to the Loan Limits topic for complete details
1.
2.
3.
4.
Conventional Quick Reference Guide –Wholesale Lending
Conforming
2
3-4
Purchase, R/T
C/O
High Bal
Conforming
Conv
DU Only
Fixed Rate
LTV/(H)CLTV
Fannie
Freddie
DU Only
1
LP Only
2
Conv
DU Only
Freddie
LP only1
95%
1
95%
90%
95%
80%
1
80%
85%
75%
80%
80%
75%
65%
80%
75%
97%
4
ARM
LTV/(H)CLTV
1
90%
1
90%
90%
75%
90%
2-4
75%
1
75%
75%
65%
75%
1
80%
1
80%
75%
80%
2-4
75%
1
75%
75%
65%
75%
80%
3
1
60%
75%
60%
60%
75%
2-4
N/A
65%
N/A
N/A
65%
C/O
High Bal
Purchase, R/T
Conforming
1
85%
1
85%
90%
80%
85%
C/O
Conforming
1
75%
1
75%
75%
65%
75%
Purchase, R/T
High Bal
1
65%
80%
65%
65%
80%
C/O
High Bal
1
N/A
65%
N/A
N/A
65%
1
85%
1
85%
85%
75%
85%
2-4
75%
1
75%
75%
65%
75%
1-4
75%1
75%
75%
65%
75%
Purchase
Conforming
R/T
Conforming
C/O
Purchase
Conforming
High Bal
R/T
High Bal
C/O
High Bal
1
75%
1
75%
75%
65%
75%
2-4
70%
1
70%
70%
60%
70%
1
65%
80%
65%
65%
80%
2-4
65%
70%
65%
65%
70%
1
65%
75%
65%
65%
75%
2-4
65%
70%
65%
65%
70%
1-4
N/A
65%
N/A
N/A
65%
For loans with Secondary Financing, the maximum LTV is 5% lower than the maximum CLTV.
LTV/CLTV and credit score restrictions may apply if the borrower owns 5-10 financed
properties. Refer to Multiple Financed Properties section.
Refer to Cash-out refinance section below.
See LTV >95 to 97% for eligibility requirements.
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12/15/2014
For business and professional use only. Not for consumer distribution. This document is not an advertisement as defined in 12 CFR 226.2 (a) (2). All products are subject
to credit and property approval. Other restrictions and limitations may apply. California DOC CFL 6053971,CRMLA # 4150081, #NMLS-2221, Pacific Union Financial, LLC. Subject
to change without notice. All rights reserved. Equal Housing Opportunity.
Program Overlays and Conventional Comparison
This table highlights Pacific Union Financial restrictions and overlays. In addition, this document identifies how our Conventional programs differ between
investors and provides guidance for several scenarios where we needed to enhance investor guidance to ensure consistent application of credit policy.
Exceptions to these guidelines may be considered only with strong documented compensating factors. Note: This is summary information only. Additional
restrictions may apply on ARM loans, which are only eligible under the Conventional and Freddie Mac Programs. Complete details are outlined in the
Conventional Program Guide.


Loans that are evaluated using Loan Prospector (LP) are eligible only under the Freddie Mac program. These loans must be coded and priced as Freddie
Mac only.
Loans evaluated using Desktop Underwriter (DU) are eligible under the Conventional or Fannie Mae Fixed Rate programs or the Conventional ARM
program and may be coded and priced under the applicable product.
Program O verl ays and Conventional Comparison
Topic
Overview
1031 Tax
Deferred
Exchange
Conventional
 DU Approve/Eligible required.
No manual underwriting.
 Allowed on Second Home and Investment Property
No
manual underwriting. No Caution
or A- approvals.
 DU Approve/Eligible required.
No manual underwriting.

 Same as Conventional
 All files must include an acknowledgement signed by the
 Full appraisal required
 Follow DU requirements with the





purchases only.
The equity from the 1031 Exchange may be used for all or
part of the down payment
Reverse exchanges are not allowed because the borrower is
not on title to the property at the time of closing.
No seller provided secondary financing
The loan closing must be handled by a qualified
intermediary.
File must contain copies of all closing documents and the
Purchase Agreement on the relinquished property must be
obtained. Required documentation includes:
 1031 Exchange Agreement
 Settlement Statement (HUD-1)
 Title Transfer
The Purchase Agreement for both properties must contain
appropriate language to identify the 1031 exchange.
borrower regarding receipt of appraisal prior to closing or
waiver of the right to receive the appraisal.
Appraisal Forms
 LP Accept/Eligible required.
Fannie Mae –Fixed Rate only

Appraisal
Freddie Mac
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following exception: Property
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Topic
Conventional
Freddie Mac
Inspection Waiver (PIW) is not
allowed.
An origination appraisal may be
used for a subsequent Rate/Term
Refinance transaction subject to the
following:
 The borrower(s) and lender on
the new transaction must be the
same as on the origination
transaction. See LP exception
below.
 The appraisal may not be more
than 12 months old on the Note
Date of the new transaction.
 An Appraisal Update (Form
1004D) must be provided if the
initial appraisal will be more than
four months old on the Note Date
of the new transaction.
 The subject property must not
have undergone any significant
remodeling, renovation, or
deterioration, or have been
affected by a disaster to the
extent that the improvement or
deterioration would materially
affect the market value of the
subject property.
Appraisal – Reuse
for a Subsequent
Transaction
An origination appraisal may be used for a subsequent
Rate/Term Refinance transaction subject to the following:
 The borrower(s) and lender on the new transaction must be
the same as on the origination transaction. A borrower may
be removed on the new transaction in the case of a divorce
or legal separation that has occurred since the initial
transaction. The loan file must include documentation of
the divorce or legal separation.
 The appraisal may not be more than 12 months old on the
Note Date of the new transaction.
 The subject property must not have undergone any
significant remodeling, renovation, or deterioration, or have
been affected by a disaster to the extent that the
improvement or deterioration would materially affect the
market value of the subject property.
 The new refinance transaction may not be paying of any
subordinate financing.
 An Appraisal Update (Form 1004D) must be provided
regardless of the age of the initial appraisal.
ARM Closing
Documents
 Note: Fannie Mae Form 3528 or state specific version
 Rider: Fannie Mae Form 3187 - Non-Convertible Fully
 Not applicable
Amortizing 5/1, 7/1 and 10/1 LIBOR Adjustable Rate Rider.
 Acceptable ARM disclosure.
Authorized User
Accounts
 When the repository file used to create the credit report
contains any authorized user accounts, the Loan Prospector
(LP) or Desktop Underwriter (DU( decision is considered
valid if the loan file includes documentation to evidence that
at least one of the following for each authorized user
account:
 Another borrower on the loan owns the tradeline in
question,
 The account belongs to the borrower’s spouse, or
 The borrower has been making the payments on the
account for the last 12 months.
 If at least one of the above requirements is not documented
for each authorized user account, the LP or DU decision may
be considered valid and the loan may be underwritten as an
LP or DU approved loan only if is determined that the
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Topic
Conventional
Freddie Mac
authorized user accounts have an insignificant impact on the
borrower's overall credit history and the information on the
credit report is representative of the borrower's own credit
reputation.
 This determination must be based on the number of the
borrower's own tradelines, as well as their age, type, size
and the payment history, as compared to the authorized
user accounts.
 The determination must be documented on the 1008,
Uniform Underwriting and Transmittal Summary, or another
document in the loan file.
 If it is determined that the authorized user tradelines are not
an accurate reflection of the borrower's credit history and
that the loan would not receive an LP or DU approval without
the authorized user accounts, the loan is not eligible.
Auto Allowance
 Follow Fannie Mae rules
 The full amount of the auto
Auto Allowance may be treated as
addressed in Freddie Program or as
follows:
 If the borrower reports auto
allowances on Employee Business
Expense (Form 2106), or IRS
Form 1040, Schedule C:
 Funds in excess of the
borrower’s monthly
expenditures are added to the
borrower’s monthly income, or
 Expenses in excess of the
monthly allowance are included
in the borrower’s total monthly
obligations.
 If the borrower used Form 2106
and recognized “actual expenses”
instead of the “standard mileage
rate”, the “actual expenses” must
be used to identify the borrower’s
actual lease payments and make
appropriate adjustments.
Borrowers in
Construction
Industry
 When the borrower is acting as his/her own builder and
Borrowers
 The following requirements apply when one or more
 Same as Conventional except the
allowance may be added to the
borrower’s qualifying income.
When calculating the DTI ratio,
the full amount of the monthly
automobile financing expense
must be included in the
calculation of the monthly DTI
ratio.
his/her primary occupation is in the construction industry,
the following restrictions apply:
 Primary Residence only
 Acquisition cost must be documented
 LTV/(H)CLTV is based on the lower of documented
acquisition cost or appraised value
 Borrower may not receive any cash back at closing that is
not a verifiable reimbursement
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Topic
Without a
Useable Credit
Score
Business
Accounts
Business Debt in
Borrower’s Name
Conventional
Freddie Mac
borrowers do not have a usable credit score:
 At least one borrower on the transaction must have a
usable credit score, as determined by DU.
 The transaction must be a Purchase or Rate/Term
Refinance.
 Subject is a one unit Primary Residence.
 All borrowers must occupy the property as a Primary
Residence.
 Borrower with a usable credit score must contribute more
than 50% of the total monthly qualifying income.
 Income from self-employment from any borrower is not
permitted
 For all borrowers without a credit score, any debt that is
not reported must be verified to have a satisfactory
payment history and the payment must be included in the
DTI ratio.
 Loan will be priced assuming a minimum 620 score.
 Business assets may be used for down payment, closing
costs, financing costs, prepaids/ escrows, and/or reserves
provided:
 Assets must be verified per DU documentation
requirements
 Assets must be related to a documented borrower-owned
business.
 The borrower must be listed as an owner of the business
account.
 A cash flow analysis for the borrower’s business must be
documented using individual and/or business tax returns,
as applicable.
 The cash flow analysis may be in any format that allows
the underwriter to determine that the withdrawal of the
funds will not have a detrimental effect on the business.
 The cash flow analysis must be included in the loan file.
 Debt that appears on the borrower’s credit report but is paid
by the borrower’s company may be excluded from DTI ratios
subject to the following:
 The account does not have a history of delinquency, and
 The business provides acceptable evidence that the
obligation was paid out of company funds (such as 12
months canceled checks), and
 The cash flow analysis of the business took the payment
into consideration
 If the debt is included in the DTI ratios, the net income of
the business should be adjusted by the amount of interest,
taxes, or insurance expense, if any, that relates to the
account in order to avoid counting the debt twice.
borrower without a useable credit
score may not be using selfemployment as qualifying income
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Topic
Conventional
Freddie Mac
Cash-out
Refinance –
Fannie Mae
 Not applicable
 Not applicable
Commission
Income
 Borrowers with less than a 24
Condos
Pacific Union allows Condominium Approval based upon the
applicable GSE (Fannie Mae/Freddie Mac) for the subject loan
and Condominium Type. Refer to the Condominium Approval
Method Table in the Conventional program guide for details.
month history of receiving
commission income may be
eligible. Additional requirements
apply.
Effective with loans approved
through DU Version 9.2:
 The maximum LTV/CLTV for a
conforming one unit Primary
Residence cash-out transaction
has been reduced from 85% to
80%.
 85% loans approved through a
previous version of DU must have
been locked on or before
December 12, 2014 and must be
closed on or before April 1, 2015.
 Commission income received less
than 2 years will not be
considered as qualifying income.
 Same as Conventional, except:
Condominium Approval Methods
 Conventional and Freddie products require Freddie approval
types.
 Fannie Only products require Fannie Mae approval types.
 Additional product restrictions are outlined in the
Condominium Approval Method Table below.
Contingent
Liability
The following restrictions apply to attached condos in
Florida:
 Investment Property not allowed
 Minimum 700 credit score
 Maximum 45% DTI ratio
 Miami-Dade-Broward (in addition to Florida restrictions):
 Only minor adjustments (10% net/15% gross for each
comp sale vs. 15%/25% standard).
 No evidence of declining markets on appraisal.
 If the borrower is a Co-signor or Guarantor on any debt
(including mortgage debt), the payment must be included in
the monthly debt-to-income ratio, unless:
 Documentation is provided to show that the other party is
making timely payments on the debt. Twelve months
cancelled checks or a statement from the creditor must be
provided to show that the other party is making the
page 6 of 19
 The underwriter may consider a
payment history less than 12
months on a case by case
basis.
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Topic
Conventional
Freddie Mac
payments.
 Evidence of timely payments may be provided through
verification on the credit report or direct verification with
the creditor.
 If evidence of payments by another party obligated on the
debt cannot be provided, or if the payments have not
been made in a timely manner over the most recent 12
months, the debt must be included.
 If the borrower is listed as the borrower on a mortgage
that has been assumed by another party, the file must
include documents transferring the property and any
assumption agreement by the transferee. As long as the
borrower no longer owns the property, the contingent
liability may be disregarded, without documenting the
most recent 12 month payment history.
Continuity of
Obligation
 Transfer of title from a borrower-
owned LLC does not comply with
Freddie Mac’s continuity of
obligation requirements
 Allows transfer from borrower’s
LLC to borrower.
 Fannie also allows exceptions to
Continuity of Interest if certain
parameters are met. Refer to
Conventional Loan Program
Guidelines.
Court Ordered
Assignment of
Debt
 The contingent liability on a secured debt or Mortgage may
Credit Charges
for Loan Fees
 Credit card may be used to pay
 Credit card may be used to pay
Debt to Income
 DTI: Maximum 50%
 LTV >80%: Must meet MI provider requirements.
 Determined by LP
 LTV >80%: Must meet MI
 Determined by DU
 LTV >80%: Must meet MI
Deferred
Payments
Deferred installment debts, such as deferred student loans,
must be included as part of the borrower’s monthly debt
obligations.
 If the borrower’s credit report does not indicate the monthly
payment amount at the end of the deferment period,
payment letters or forbearance agreements may be
provided.
 Exception: For a student loan, in lieu of obtaining copies of
payment letters or forbearance agreements, a monthly
payment may be calculated using no less than 2% of the
outstanding balance. However, if any documentation is
 Same as Conventional, except
be disregarded and the documentation of the most recent 12
month’s payment history is not required, if the obligation to
make the payments on a debt of the borrower:
 Has been assigned to another party by court order, such
as a divorce decree, and
 The assignment of debt is documented with applicable
pages of the divorce decree or legal separation agreement
transfer of title must be
documented.
for upfront fees up to 2% of loan
or $1500 whichever is higher
provider requirements.
 Same as Conventional
page 7 of 19
for upfront loan fees up to 2% of
the loan amount
provider requirements.
 Same as Conventional
12/15/2014
Topic
Documentation
Conventional
Freddie Mac
obtained that indicates the actual monthly payment, that
figure must be used in qualifying the borrower.
 IRS Form 4506-T - A completed and signed IRS Form 4506-T
is required for all borrowers at application and closing.
Employed by a
Family Member
 If the borrower is employed by a relative, a closely held
Employment
Offers or
Contracts
 If the borrower is scheduled to begin employment after the
 Not eligible
Escrow
Holdbacks
 Allowed for repairs that do not affect the livability, safety or
Escrow Waivers
Flip Properties
family business, the property seller, or any party to the
transaction, the following documentation is required:
 Borrower’s signed and completed personal federal tax
returns for the most recent two years
 Written Verification of Employment, and
 W-2s for the most recent two years
 Current income reported on the VOE or paystub may be used
if it is consistent with W-2 earnings reports on the tax
returns. If the income is not reflected on the tax returns or
the reported income is substantially lower than the income
reflected on the VOE or paystubs, further investigation is
needed to determine whether the income is stable.
loan closes, the borrower’s offer letter or contract for
employment may be used to underwrite and close the loan.
The start of employment and the receipt of the income must
be documented prior to the delivery of the loan.
 The borrower’s employment and income history must be
documented per the DU Findings.
 The file must include a copy of the signed offer or contract
for future employment and anticipated income.
 Loan must be run through DU
structural integrity of the property or affect the ability to
obtain a Certificate of Occupancy on new or proposed
construction.
 Refer to the Escrow Holdback policy for detailed guidelines.
 Partial escrow waivers are not permitted
All transactions must be thoroughly reviewed for red flags that
may indicate the subject property is a flip and to determine
whether a transaction is acceptable. If any characteristics and
/or red flags exist that may be indicative of a potentially
ineligible flip transaction, the following analysis is required:
 A Desk Review/Collateral Desktop Analysis is required when
the seller has owned the property for less than or equal to
180 days or when the property has transferred more than
two times within the most recent 12-month period. The
Desk Review/Collateral Desktop Analysis must represent the
appraised value within a tolerance not to exceed 10%.
 Increases in property value, in whole or part, must be
page 8 of 19
12/15/2014
Topic
Conventional




Foreign Income
Freddie Mac
supported by the appraisal, explained, documented, and
analyzed as follows:
 The appraisal must identify, in detail, any changes made
and include photographs of the rehabilitation or
renovation.
 Improvements and renovations must be documented and
substantiated with receipts, contractor invoices, and
building permits.
 Regardless of length of ownership, Underwriter reserves
the right to obtain a desk review if an unreasonable or
unusually large increase in value has occurred within the
context of the property’s market.
Documentation must indicate that improvements were
completed after the property seller acquired the property.
Confirm that the property seller is the owner of the subject
property.
Ensure that appraisal sufficiently analyzes and provides
detail on all pertinent offerings or listings, includes sufficient
analysis of the contract of sale, and adequate justification
of any significant increase in sales price/value over the
seller’s acquisition costs. The analysis must be detailed
enough to clearly explain the methodology and rationale
used to justify the appraiser’s conclusions on this issue.
Ensure all property flipping impacts as identified in the fraud
detection report are satisfactorily resolved.
 Borrowers who are employed by a foreign corporation or
 Not eligible
 Permitted if primary residence or
 Permitted if primary residence
 If the P&L statement shows an income stream greater than
 Manufactured/ mobile homes
foreign government and are paid in foreign income or foreign
currency are eligible subject to the following:
 The file must include signed copies of the borrower’s
federal tax returns for the most recent two years and the
foreign income must be reflected on the returns.
 Income must be documented per standard income
documentation requirements.
 All income must be translated into U.S. dollars.
 Loan must be run through DU
Geographic
Restrictions
 Texas Cash-Out: Refer to Texas Home Equity Program
Guidelines.
 Refer to Geographic Matrix for additional restrictions.
Gift or Grant from
Agency
Income
Calculations for
Self-Employed
Borrowers
Ineligible
second home
what is supported by the tax returns, and the higher income
is used in the income calculation, the borrower must provide
an audited P&L statement.
page 9 of 19
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Topic
Properties
Conventional
Freddie Mac
 Cooperative properties

Large Deposits
 Except as stated below,





page 10 of 19
documentation of the sources of
unverified deposits for purchase
or refinance transactions is
required. However, when
qualifying the borrower, any
liabilities resulting from borrowed
funds must be considered.
For purchase transactions,
document the source of funds for
any single deposit exceeding 50%
of the total monthly qualifying
income for the mortgage if the
deposit is needed to meet the
requirements for funds to close
and/or reserves.
When a deposit is not
documented and is not needed for
funds to close and/or required
reserves, reduce the funds used
for qualifying purposes by the
amount of the unverified deposit
and enter the reduced amount of
the asset into Loan Prospector.
When a single deposit consists of
both verified and unverified
portions, the unverified portion
may be used when determining
whether the deposit exceeds the
50% requirement.
When the source of funds can be
clearly identified from the deposit
information on the account
statement (e.g., direct payroll
deposits) or other documented
income or asset source in the loan
file (e.g. tax refund amounts
appearing on the tax returns in
the file), additional
documentation is not required.
Document the source of a deposit
of any amount regardless of the
transaction type if there is any
indication that the funds are
borrowed or are not from an
eligible source.
Refinance transactions:
 Documentation or explanation for
large deposits is not required.
 However, if the funds were
borrowed funds, any related
liability must be considered.
When appropriate, evidence that
no new liability has been created
may be required.
Purchase transactions:
 Single deposits exceeding 50% of
the total monthly qualifying
income for the loan must be
documented.
 If the funds are to be used for
down payment, closing costs, or
reserves, document that the
funds are from an acceptable
source.
 If the borrower does not have all
of the documentation required to
confirm the source of a deposit,
use reasonable judgment based
on the available documentation as
well as the borrower’s debt-toincome ratio and overall income
and credit profile.
 Examples of acceptable
documentation include the
borrower’s written explanation,
proof of ownership of an asset
that was sold, or a copy of a
wedding invitation to support
receipt of gift funds.
 Written documentation of the
rationale for using the funds must
be included in the loan file.
 Verified funds must be reduced by
the amount (or portion) of any
undocumented large deposit (as
defined above), and the
remaining funds must be
sufficient for the down payment,
closing costs, and reserves. When
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Topic
Conventional
Freddie Mac
 When using a direct account
a reduced amount (net of the
undocumented large deposit) is
used, the reduced amount must
be used for underwriting
purposes.
 When a deposit has both sourced
and unsourced portions, only the
unsourced portion must be used
to calculate whether or not it
must be considered a large
deposit.
 Leaseholds must comply with
 Leaseholds must comply with
 Not applicable
Eligible effective with the December
13, 2014 DU Version release.
 Allowed only on:
 DU Approve/Eligible
 Fannie Mae only product. Not
allowed on Freddie or
Conventional (CC) product.
 One unit Primary Residence
 Conforming loan amounts
 Purchase transactions:
 Maximum 97%
LTV/CLTV/HCLTV
 At least one borrower must be
a first-time home buyer, as
verification (VOD) include
documentation of the source of
funds when an account is opened
within 90 days of verification
and/or when the current balance
in an account is significantly
greater than the average balance.
 If a portion of the borrower’s
funds were to be saved by the
borrower between the date of the
loan application and the date of
the loan closing, the loan file
must include documents showing
that funds were accumulated and
on deposit prior to closing.
Leaseholds
 Leaseholds must comply with Fannie Mae policies.
Loan Limits
Maximum
Units
Freddie Mac policies.
Maximum and Minimum Loan Amounts
Conforming Balance
High Balance1
Contiguous Alaska and Contiguous Alaska and
States
Hawaii 3
States
Hawaii 3
1
$417,000
$625,500
$625,500
$938,250
2
$533,850
$800,775
$800,775
$1,201,1502
3
$645,300
$967,950
$967,950
$1,451,9252
Fannie Mae policies.
$1,202,9252 $1,804,3752
Maximum conforming loan
Minimum
None
amount plus $1
1 High Balance: Refer to Maximum County Limits (select
Fannie/Freddie in Limit Type field).
2 Conventional and Freddie Mac: Max $1,000,000 loan amount
3 AK and HI are not permitted.
4
LTV >95% to
97% (Fannie Mae
only)
$801,950
$1,202,9252
 Not applicable
page 11 of 19
12/15/2014
Topic
Conventional
Freddie Mac



Minimum
Contribution
Mixed Use
indicated on the loan
application (Form 1003) in
Section VIII., when at least one
borrower responds “No” to
question M regarding
ownership interest in a
property in the last three
years.
Rate/Term Refinance
transactions:
 The existing loan must be
owned by Fannie Mae. The
Fannie Mae Loan Look-Up Table
may be used to determine if
Fannie Mae owns the loan. A
screen print of the results must
be included in the loan file.
 When submitting the loan to
DU, “Fannie Mae” must be
entered in the “Owner of
Existing Mortgage” field in DU.
Loans may be submitted to DU
effective with the December 13,
2014 DU 9.2 release. If the 97%
option is desired on an existing
DU loan, a new casefile must be
created and the loan must be
submitted to DU 9.2 as a new
loan.
Mortgage Insurance
 LPMI is not allowed.
 35% MI coverage is required.
 Refer to the MI Matrix or MI
provider website as some MI
providers have credit score
overlays for 97% LTV loans.
None if 1 unit conforming balance
and primary residence
5% all others if primary residence
or second home
The entire down payment must be
from the borrower’s own funds if
investment property
 5% must be from the borrower’s

own funds if the LTV >80%
 The entire down payment must be
from the borrower’s own funds if
investment property

 Permitted if 1 unit primary
 Same as Freddie except square
residence and the square footage
of the property devoted to
commercial use does not exceed
page 12 of 19

footage that exceeds 20% of the
subject property is permitted
when the primary use of the
12/15/2014
Topic
Conventional
Freddie Mac
20%. Additional guidelines apply.
Mortgage
Insurance
 When LTV exceeds 80%, MI must be obtained through






Multiple Financed
Properties


Essent, Radian, Genworth, United Guaranty, MGIC, or
National.
Loans must comply with all MI provider guidelines
No reduced cost or lower cost MI permitted.
No financed MI permitted.
On Split MI, the upfront MI premium must be paid in whole
by borrower, seller or lender (upfront portion may not be
split between parties).
LPMI is permitted via an adjustment to the price.
LPMI is not allowed on:
 Fannie Mae >95% to 97% LTV.
 Investment properties.
If the subject loan is for a Primary Residence, there is no
limitation on the number of properties that the borrower can
currently be financing.
If the subject loan is for a Second Home or Investment
Property, each borrower individually and all borrowers
collectively may not own more than four 1-4 unit financed
properties, including the subject property.
property is residential.
 If the subject loan is for a Primary
 If the subject loan is for a Primary
Residence, there is no limitation
on the number of properties that
the borrower can currently be
financing.
 If the subject loan is for a Second
Home or Investment Property,
each borrower individually and all
borrowers collectively may not
own more than four 1-4 unit
financed properties, including the
subject property.
 If the subject is an Investment
Property and the borrower owns
more than one Investment
property, the loan type is limited
to Fixed Rate or 7/1 ARM.
Residence, there is no limitation
on the number of properties that
the borrower can currently be
financing.
 If the subject loan is for a Second
Home or Investment Property,
the borrower may own or be
obligated on up to 10 financed
properties, subject to the
following:
 DU is not able to determine the
number of financed properties
that the borrower owns or is
obligated on, but does issue a
message on Second Home and
Investment Property
transactions when the borrower
appears to have other financed
properties. The eligibility and
underwriting requirements
must be applied manually to
each loan.
 Fixed Rate only
 Minimum 720 credit score.
 Six months of reserves
required for each additional
Second Home or Investment
Property owned.
LTV/CLTV Limits (Fixed Rate only):
Subject: Second Home or One Unit
page 13 of 19
12/15/2014
Topic
Conventional
Freddie Mac
Investment Property:
 Purchase or Rate/Term Refinance
 Conforming Balance: 75%
 High Balance: 65%
 Cash-out Refinance (allowed
under Delayed Financing only):
 High Balance: Not allowed
Subject 2-4 Unit Investment
Property:
 Purchase or Rate/Term Refinance
 High Balance: 65%
 Cash-out Refinance (allowed
under Delayed Financing only):
 High Balance: Not allowed
Non-Arm’s
Length
Transaction
 Not permitted on new
construction, all occupancies
 Not permitted on delayed
financing
Non-Occupying
Co-Borrower
Open Ended
Accounts
Pricing/Products
The following programs and features are not eligible:
 Loan amounts >$1,000,000
 Freddie Mac Home Possible
 Affordable Merit Mortgages
 A-Minus Mortgages or Caution Mortgages
 Temporary buydowns
Subject 2-4 unit Investment
Property:
 Cash-Out Refinance (>6 months
since purchase): Not eligible.
 Not permitted if new construction
and occupancy is Second Home or
Investment property
 Not permitted on delayed
financing
 Income from a non-occupying co-
 Income from a non-occupying co-
Same as Conventional except:
 Loans must be evaluated using LP
and must be coded and priced as
Freddie Mac only.
Same as Conventional except:
 Allowed on Fixed Rate only
 Loan amounts >$1,000,000
permitted up to the maximum
permitted by Fannie Mae.
 Loans must be evaluated using
DU and must be coded and priced
borrower may be used as
qualifying income
 Open-end accounts do not have
to be included in the monthly
debt payment if the borrower has
sufficient funds to pay off the
outstanding account balance. The
verified funds must be in addition
to any funds required for the
transaction.
page 14 of 19
borrower may not be used as
qualifying income
 Will not require open 30-day
accounts to be included in DTI
ratios.
12/15/2014
Topic
Conventional
Freddie Mac
Interest-only loans
Construction-to-Perm – Single Closing
Renovation Mortgages
Balloon Mortgages
Loans must be evaluated using DU must be coded and priced
as Conventional
as Fannie Mae.





Primary
Residence
 At least one borrower must
occupy the property as their
primary residence
Principal
Curtailment
 Maximum is the lower of $2,500 or 2% of the loan amount.
 Curtailment must be applied prior to closing.
Property Listed
for Sale
Properties listed for sale are eligible for refinancing subject to
the following:
 The listing must have been cancelled at least one day prior
to the disbursement date of the new loan. A copy of the
MLS cancellation meeting this requirement must be included
in the loan file.
 A signed letter of explanation from the borrower explaining
why property was listed for sale and removed, and if Primary
Residence, statement of intent to continue to occupy the
property.
 A final appraised value lower than lowest previously listed
sale price.
The following scenarios may also be
treated as a Primary Residence even
though the borrower will not occupy
the property:
 Parents wanting to provide
housing for their physically
handicapped or developmentally
disabled adult child. If the child is
unable to work or does not have
sufficient income to qualify for a
mortgage on his or her own, the
parent is considered the
owner/occupant.
 Children wanting to provide
housing for elderly parents. If the
parent is unable to work or does
not have sufficient income to
qualify for a mortgage on his or
her own, the child is considered
the owner/occupant.
 Principal reduction must be
corrected prior to delivery
Additional Requirements for Cash-Out Refinance
Transactions
 A property that was listed for sale within the six months
prior to the disbursement date of the new loan is limited to
the lower of 70% LTV/CLTV/H(CLTV) or the maximum
page 15 of 19
12/15/2014
Topic
Conventional
Freddie Mac
allowed for the transaction.
Qualifying Rate
 Fixed Rate: Qualify at note rate.
 5/1 ARM: Qualify at the greater of the note rate plus 2% or
the fully indexed rate.
 7/1 ARM:
 DU Version 9.1: Qualify at the greater of the note rate or
fully indexed rate.
 DU Version 8.3 or 9.0: Qualify at note rate.
 Note: The following states require qualifying at the fully
indexed rate on all ARM products. For these states, the 7/1
ARM must be qualified at the greater of the note rate or the
fully indexed rate. DU Version 9.1 loans will meet this
requirement without a manual overlay.
 Illinois
 Maryland
 Minnesota
 New Mexico
 Pennsylvania
 Vermont
Rate/Term Lien
Seasoning
 No minimum seasoning requirement if purchase money
Re-entering the
Workforce
 Not eligible
Refinance
 Pacific Union Financial does not allow delinquent taxes or
being paid off
 Fixed Rate: Qualify at note rate
 5/1 ARM: Qualify at the greater
 Fixed Rate: same as
Conventional
of the note rate plus 2% or the
fully indexed rate.
 7/1 ARM: Qualify at the note
rate.
 Note: The following states
require qualifying at the fully
indexed rate on all ARM
products. For these states, the
7/1 ARM must be qualified at the
greater of the note rate or the
fully indexed rate.
 Illinois
 Maryland
 Minnesota
 New Mexico
 Pennsylvania
 Vermont
 Purchase money liens paid off at
closing must be at least 120 days
old.
 ARM: Not allowed. DU loans
 Income from a borrower who is
 Not eligible
re-entering the workforce and has
less than a two year history of
employment and income may be
considered in qualifying income
 Borrower must have been with
current employer for a
minimum of six months, and
 The file must include
documentation of previous
employment prior to the
borrower exiting the workforce.
must be priced and closed under
the Conventional product.
 No minimum seasoning
requirement if purchase money
being paid off
taxes that were due 60 days prior to closing to be added to
the loan amount on refinance transactions.
 All loans must provide a Net Tangible Benefit to the
borrower.
Refinance of
Second Home
with Rental
Income
 Not eligible
Minimal rental income reported on
the tax return may be acceptable
 Tax returns prior to 2011:
 Schedule E, Part I, Question 2
page 16 of 19
 Not eligible
12/15/2014
Topic
Conventional
Freddie Mac
reads “For each rental income
real estate property listed on
Line 1, did you or your family
use it during the tax year for
personal purposes for more
than the greater of 14 days or
10% of the total days rented at
fair market value?”.
 If the response to this question
is “No”, the property must be
treated as an Investment
Property.
 Tax returns from 2011 or later:
 Schedule E requires the owner
to complete the exact number
of days that the property was
used for personal use and the
number of fair rental days.
 To be considered a Second
Home, the property type must
be “Vacation/Short-Term
Rental”, and the number of
personal use days must be
more than 14 or more than
10% of the number of days it is
rented. Note: Rental income
may never be used to qualify
on a Second Home.
Refinance to Buy
Out a Co-Owner
Rent Credits
 Code and price loan as cash-out
 Code and price loan as rate/term
 Rent credit may not be used to
 No min contribution required
 File must contain 12 months
Rent Loss
Insurance
 Not required
 Subject Investment Property:
 Not required
Resale Restricted
Properties
 Not eligible

 Not eligible
Restructured/
Modified
Mortgages
 Restructured: Not allowed.
 Modified: Follow Fannie Mae rules
 Refer to Program Guide for additional definitions and


pay the 5% contribution
cancelled rent checks
requirements.

page 17 of 19
Rent Loss insurance is required
when the rental income is being
used as qualifying income.
Permitted in accordance with
Freddie Mac’s policies. Additional
guidelines are outlined in the
Conventional Program Guidelines.
Restructured: Not allowed
Modified: Allowed with LP
approval
Refer to Program Guide for
additional definitions and
requirements.
 Refinance of a Restructured
Mortgage: Allowed with DU
approval and 24 months paid as
agreed under the new terms.
 Other Restructured Mortgage:
Allowed with DU approval and 0 x
12/15/2014
Topic
Conventional
Freddie Mac
60, 90, 120 or 150 in last 12
months.
 Modified: Allowed with DU
approval and 0 x 60, 90, 120 or
150 in last 12 months.
 Refer to Program Guide for
additional definitions and
requirements.
Retirement Funds
for Assets
 The value of stock, bonds or
 The value of stock, bonds or
Retirement,
Government
Annuity and
Pension Income
 If the retirement income is paid in the form of a distribution
 Same as Conventional except file
 Same as Conventional except only
Revolving Debt
Self-Employed
Income from CoBorrower
mutual funds that have been
discounted at least 30% or the
minimum amount of federal
income tax withholding required
by IRS may be used for cash
reserves
from a 401(k), IRA, or Keogh retirement account, determine
whether the income is likely to continue for 3 years. In
addition:
 The borrower must have unrestricted access without
penalty to the accounts, and
 If the assets are in the form of stocks, bonds, or mutual
funds, 100% of the value (remaining after any applicable
costs for the subject transaction) must be used to
determine the number of distributions remaining.
must contain evidence the income
is expected to continue for 3
years
mutual funds that have been
discounted at least 40% (30% if
59.5 years old) may be used for
cash reserves
if the assets are in the form of
stocks, bonds, or mutual funds,
70% of the value (remaining after
any applicable costs for the
subject transaction) must be used
to determine the number of
distributions remaining.
 If no payment disclosed on credit,
 If no payment disclosed on the
use 5% of outstanding balance
 Revolving debt may be paid off to
qualify.
 Evidence that the account is
closed is NOT required.
 No additional review of income
required
initial application, use 5% of
outstanding balance
 Revolving debt may be paid off to
qualify if the loan is closed.
page 18 of 19
 When a salaried borrower and a
self-employed co-borrower jointly
apply for a mortgage, and the
self-employed co-borrower’s
income will not be used for
qualifying, the self-employed coborrower may provide a copy of
the first page of his or her latest
individual federal income tax
return. This documentation will be
used to determine whether there
was a meaningful business loss.
The underwriter may request
additional information about the
co-borrower’s business income in
12/15/2014
Topic
Conventional
Freddie Mac
 Title may not be taken in the name of a Trust
order to reach a final underwriting
decision
 Proof of receipt of trust funds is
 Proof of receipt of trust funds is
Verbal VOE
 Verbal VOE must be completed by Pacific Union closer within
required if funds used for closing
Verification of
Assets for NonUS Citizen
 Funds that a non-U.S. Citizen recently deposited in a U.S.
Trust
Trust Accounts
not required
five business days of closing.
depository institution are acceptable subject to the following:
 Documented evidence of funds transfer from the country
from which the borrower immigrated, and
 Documentation to evidence that the funds belonged to the
borrower before the date of the transfer, and
 The source(s) of all funds used for closing can be verified
just as they would for a U.S. Citizen.
Product Codes
Product
10 Year Fixed Rate
15 Year Fixed Rate
20 Year Fixed Rate
25 Year Fixed Rate
30 Year Fixed Rate
5/1 ARM (2/2/5 caps)
7/1 ARM (5/2/5 caps)
Conventional
Conforming
High Balance
Balance
CC10
CC10HB
CC15
CC15HB
CC20
CC20HB
CC25
CC25HB
CC30
CC30HB
CC51L
CC51L HB
CC71L
CC71L HB
Freddie Mac
Conforming
High Balance
Balance
CFH10
CFH10HB
CFH15
CFH15HB
CFH20
CFH20HB
CFH25
CFH25HB
CFH30
CFH30HB
CFH51L
CFH51LHB
CFH71L
CFH71LHB
page 19 of 19
Fannie Mae – Data Trac
Conforming
High
Balance
Balance
FNMA 10
FNMA 10 HB
FNMA 15
FNMA 15 HB
FNMA 20
FNMA 20 HB
FNMA 25
FNMA 25 HB
FNMA 30
FNMA 30 HB
N/A
N/A
N/A
N/A
12/15/2014

Conventional Quick Reference

Transcription

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