Meridian Plus Non-QM Program Eligibility Guide

Transcription

1 Meridian Plus Nn-QM Versin 1.0 Effective

2 Table f Cntents Table f Cntents Nn QM Eligibility Matrix... 4 Primary Residence Purchase Rate and Term Refinance... 4 Primary Residence Cash Out Refinance... 4 Secnd Hme Purchase Rate and Term Refinance... 4 Secnd Hme Cash Out Refinance... 4 Investment Purchase Rate and Term Refinance Cash Out Refinance Eligible Prducts... 6 Ineligible Prducts... 6 Underwriting... 6 Eligible Brrwers... 7 Ineligible Brrwers... 8 Eligible Occupancy Types... 8 Dcumentatin... 8 Debt t Incme Rati (DTI)... 9 LTV/CLTV/HCLTV Calculatin fr Refinances... 9 Refinance Transactins... 9 Secndary Financing Texas 50 (a) (6) Refinance (Texas Equity Lans) Cnstructin T Permanent Financing Credit Liabilities Assets Financing Cncessins Seller Cncessins Persnal Prperty Incme / Emplyment Multiple Financed Prperties Prperties Listed Fr Sale Eligible Prperties Nn Warrantable Cndminiums Ineligible Prperties Versin 1.0 Page 2 f 38

3 Table f Cntents Nn Arms Length Transactins Disaster Plicy Escrw Hldbacks Appraisal Requirements Versin 1.0 Page 3 f 38

4 Nn QM Eligibility Matrix Nn QM Eligibility Matrix Fixed Rate and Hybrid ARM Prducts Transactin Type Purchase r Rate and Term Refinance Transactin Type Cash Out Refinance Transactin Type Purchase r Rate and Term Refinance Primary Residence Purchase, Rate and Term Refinance Units 1 2 Minimum FICO Maximum LTV/CLTV/HCLTV Maximum Lan Amunt % 2 $1,000, % $1,500, % $2,000, % $2,000,000 Units 1 2 Primary Residence Cash Out Refinance 3 Minimum FICO Maximum LTV/CLTV/HCLTV Maximum Lan Amunt Maximum Cash Out % $1,000,000 $250, % $1,000,000 $250, % $1,500,000 $500,000 Secnd Hme Purchase, Rate and Term Refinance Units Minimum FICO Maximum LTV/CLTV/HCLTV Maximum Lan Amunt 1 80% $1,000,000 70% $1,500,000 65% $2,000,000 Transactin Type Cash Out Refinance Units Secnd Hme Cash Out Refinance Minimum FICO Maximum LTV/CLTV/HCLTV Maximum Lan Amunt Maximum Cash Out 65% $1,000,000 $250,000 60% $1,500,000 $500,000 Investment 4 Purchase Rate and Term Refinance Cash Out Refinance Transactin Type Units Minimum FICO Maximum LTV/CLTV/HLCTV Maximum Lan Amunt Purchase % $1,000,000 Rate and Term Refinance Cash Out Refinance % $1,000, % $1,000,000 Max cash ut $250,000 1 First Time Hmebuyers are subject t a maximum lan amunt f $1,000,000. Lan amunts up t $1,500,000 allwed in CA, NJ, NY and CT fr First Time Hmebuyers. See Eligible Brrwer sectin fr specific requirements fr First Time Hmebuyers. Versin 1.0 Page 4 f 38

5 Nn QM Eligibility Matrix 2 The fllwing requirements apply fr transactins with LTVs greater than 80%: MI nt required Secndary financing is allwed. See Secndary Financing sectin fr allwable secndary financing Maximum DTI 38% Nn permanent resident aliens nt allwed Escrw/impund accunts required fr LTVs greater than 80% unless prhibited by applicable laws 3 Texas 50 (a) (6) refinance (Texas Equity Lans) nly allwed n 20, 25 and 30 year fixed rate and retail riginatins nly. Additinal restrictins apply, please see Jumb Prgram Eligibility Supplement. 4 The fllwing requirements apply fr Investment Prperty Purchase, Rate and Term Refinance and Cash Out Refinance transactins: Flrida cndminiums limited t 50% LTV/CLTV/ HCLTV Transactin must be arm s length Gift funds nt allwed Appraiser t prvide rent cmparable schedule First Time Hmebuyers nt allwed Nn QM Ntes: Nn QM is a Nn QM lan with any f the fllwing attributes: Interest Only prduct. Debt t incme rati > 43%. Qualifying incme stream using asset depletin calculatin as utlined in the Incme sectin. Prjected incme withut a guaranteed nn revcable cntract. See Prjected Incme requirements. Gaps f emplyment utside f QM requirements (exceptin basis nly). Investment purchase transactin using rental incme with n lease agreement prvided. See Rental Incme requirements. Departure residence excluded frm DTI when the prperty is nt listed fr sale r leased t rent at the time f the subject transactin. See Departure Residence sectin fr requirements. Minimum lan amunt is $1 ver the current cnfrming/high balance limit set by the FHFA. Higher Priced Mrtgage Lans (HPML) are allwed if the fllwing requirements are met: Lan must have an escrw accunt fr a minimum f 5 years. If the prperty was acquired by the seller less than 90 days frm the purchase agreement and the purchase price exceeds the seller s acquisitin price by mre than 10% then a secnd full appraisal is required. If the prperty was acquired by the seller between days frm the purchase agreement and the purchase price exceeds the seller s acquisitin price by mre than 20% then a secnd full appraisal is required. If a secnd appraisal is required fr ne f the abve tw reasns, the brrwer may nly be charged fr ne f the appraisals. Exceptins may be granted n a case by case basis fr lans with terms r characteristics that are utside f the eligibility requirements. Apprval f the exceptin must be granted prir t the delivery f the lan. A lan clsed as a Nn QM lan that was nt lcked n r befre the Nte date is nt eligible fr delivery under the Nn QM prduct. Residual incme calculatin must be prvided and must meet the residual incme requirements indicated in the Incme/Emplyment sectin f this guide. Versin 1.0 Page 5 f 38

6 Fixed Rate: 10, 15, 20, 25, 30 year term fully amrtizing Fixed Rate Interest Only: 30 year term nly. 10 year IO perid. Qualify based n Nte rate with a 20 year amrtizatin. Eligible Prducts ARM Features: 5/1, 7/1, 10/1 ARM Fully Amrtizing, 30 year term 5/1, 7/1, Interest Only, 30 year term with 10 year IO perid Margin: 3.50 Flr: 3.50 Caps 2/2/5 (Initial, Subsequent, Lifetime) 5/1, 7/1, 10/1 ARMs Caps 5/2/5 allwed n 7/1, 10/1 ARMs Index: 1 Year LIBOR Assumable N Cnversin Optin Qualifying Rate: 5/1 ARM, qualify with greater f the fully indexed rate r the Nte rate +2%. 7/1 ARM & 10/1 ARM, qualify with the greater f the fully indexed rate r the Nte rate. Interest Only, qualify based n ARM type abve with a 20 year amrtizatin Ineligible Prducts Underwriting High Cst Lans (Federal, State r Lcal) Nn Standard t Standard Refinance Transactins (ATR Exempt) Ballns Graduated Payments Temprary Buy Dwns Lans with Prepayment Penalties Cnvertible ARMs Manual underwrite is required. AUS findings are nt cnsidered; n dcumentatin waivers are cnsidered. Unless therwise nted in the guidelines, the mre restrictive f the Fannie Mae Selling Guide r Appendix Q (t part 1026 t 12 CFR Chapter X Truthin Lending Regulatin Z) shuld be fllwed. In all cases, the lan file must dcument the eight (8) ATR rules. In sme cases, exceptins t prgram eligibility may be acceptable when strng cmpensating factrs exist t ffset the risk. Prir exceptin apprval required. Versin 1.0 Page 6 f 38

7 Eligible Brrwers First Time Hmebuyer is defined as a brrwer wh has nt wned a hme in the last three (3) years. Fr lans with mre than ne (1) brrwer, where at least ne (1) brrwer has wned a hme in the last three (3) years, first time hmebuyer requirements d nt apply. Maximum lan amunt is $1,000,000. US Citizens Fr transactins lcated in CA, NJ, NY r CT, the maximum lan amunt f $1,500,000 is allwed if the fllwing requirements are met. 680 Minimum FICO scre Primary residence nly Reserve requirements met fr FTHB as specified in the Asset sectin Maximum 80% LTV/CLTV/HCLTV Permanent Resident Aliens with evidence f lawful residency Must be emplyed in the US fr the past twenty fur (24) mnths. Nn Permanent Resident Aliens with evidence f lawful residency are eligible with the fllwing restrictins: Primary residence nly Maximum LTV/CLTV/HCLTV 80% 20, 25, 30 year fixed rate nly Unexpired H1B, H2B, E1, L1 and G Series Visas nly. G Series Visas must have n diplmatic immunity. Credit tradeline requirements must be met, n exceptins. Brrwer must have a current twenty fur (24) mnth emplyment histry in the US. Dcumentatin evidencing lawful residency must be met (see Jumb Prgram Eligibility Supplement fr requirements). Nn Occupant C Brrwers are allwed with the fllwing restrictins: Primary residence One (1) Unit Prperty. Purchase and rate & term refinance transactins nly. Max lan amunt $1,000,000; $1,500,000 is allwed fr prperties lcated in CA, CT, NY and NJ. Max LTV/CLTV 80%. N minimum dwn payment required frm the ccupant brrwer, dwn payment and reserves may be frm the ccupant brrwer r nn ccupant c brrwer. Additinal six (6) mnths reserves required. Nn ccupant c brrwer must be an immediate family member. Blended ratis allwed with a maximum 43% DTI. Transactin must be an arm s length transactin. Illinis Land Trust (see Jumb Prgram Eligibility Supplement fr requirements). Inter Vivs Revcable Trust (see Jumb Prgram Eligibility Supplement fr Versin 1.0 Page 7 f 38

8 Ineligible Brrwers Eligible Occupancy Types Dcumentatin requirements). All brrwers must have a valid Scial Security Number. Freign Natinals Brrwers with diplmatic status Life Estates Nn Revcable Trusts Guardianships LLCs, Crpratins r Partnerships Land Trusts, except fr Illinis Land Trust Brrwers with any wnership in a business that is federally illegal, regardless if the incme is nt being cnsidered fr qualifying Primary residences fr 1 4 units Secnd hme residences fr ne (1) unit prperties Must be a reasnable distance away frm brrwer s primary residence. Must be ccupied by the brrwer fr sme prtin f the year. Must be suitable fr year rund use. Must nt be subject t a rental agreement and brrwer must have exclusive cntrl ver the prperty. Any rental incme received n the prperty cannt be used as qualifying incme. Investment prperties fr 1 4 units All lans must be manually underwritten and fully dcumented. N dcumentatin waivers based n AUS recmmendatins permitted. Incme calculatin wrksheet r 1008 with incme calculatin. The Fannie Mae Frm 1084, Freddie Mac Frm 91 r equivalent is required fr self emplyment analysis. Full incme and asset verificatin is required. All credit dcuments, including title cmmitment must be n lder than ninety (90) days frm the Nte date. All appraisals must be n lder than 120 days frm the Nte date. Recertificatin f value is nt allwed. A new appraisal is required. QM designatin must be prvided in the lan file. Fr the Nn QM prgram; QM designatin is Nn QM/ATR OR QM designatin is Exempt fr investment prperty transactins when the transactin is exclusively fr business purpses. (Refer t (a) and the Official Interpretatin t (a)) Investment prperty transactins require an attestatin frm the brrwer stating the prperty is used 100% f the time fr business purpses in rder fr the designatin t be Exempt. If the brrwer des nt use the prperty 100% f the time fr business purpses, the QM designatin wuld be Nn QM/ATR fr Nn QM lans. Versin 1.0 Page 8 f 38

9 Cash ut refinances f investment prperties must als cntain an attestatin regarding the prceeds frm the cash ut refinance. If 100% f the prceeds are nt used fr business purpses, the lan is subject t ATR and the designatin wuld be Nn QM/ATR. Lan file must dcument the eight (8) Ability t Repay (ATR) rules identified in Part 1026 Truth in Lending (Regulatin Z). Residual incme calculatin must be prvided and meet the residual incme requirements indicated in the Incme/Emplyment sectin f this guide. If subject transactin is paying ff a HELOC that is nt included in the CLTV/HCLTV calculatin, the lan file must cntain evidence the HELOC has been clsed. If the 1003, title cmmitment r credit dcuments indicate the brrwer is a party t a lawsuit, additinal dcumentatin must be btained t determine n negative impact n the brrwer s ability t repay, assets r cllateral. Debt t Incme Rati (DTI) Fixed Rate: 49.99% ARM: 47.00% LTV/CLTV ver 80%: 38.00% Nn Occupant C Brrwers with Blended Ratis: 43.00% LTV/CLTV/HCLTV Calculatin fr Refinances If subject prperty is wned mre than twelve (12) mnths, the LTV/CLTV/HCLTV is based n the current appraised value. The twelve (12) mnth time frame is defined as prir Nte date t subject Nte date. If subject prperty is wned less than twelve (12) mnths, the LTV/CLTV/HCLTV is based n the lesser f the riginal purchase price plus dcumented imprvements made after the purchase f the prperty, r the appraised value. Dcumented imprvements must be supprted with receipts. The twelve (12) mnth time frame is defined as prir Nte date t subject Nte date. Refinance Transactins Rate and Term Refinance: The new lan amunt is limited t pay ff the current first lien mrtgage, any seasned nn first lien mrtgages, clsing csts and prepaid items. If the first mrtgage is a HELOC, evidence it was a purchase mney HELOC r it is a seasned HELOC that has been in place fr twelve (12) mnths and ttal draws d nt exceed $2000 in the mst recent twelve (12) mnths. A seasned nn first lien mrtgage is a purchase mney mrtgage r a mrtgage that has been in place fr twelve (12) mnths. A seasned equity line is defined as nt having draws ttaling ver $2000 in the mst recent twelve (12) mnths. Withdrawal activity must be dcumented with a transactin histry. Max cash back at clsing is limited t 1% f the new lan amunt. Prperties inherited less than twelve (12) mnths prir t applicatin Versin 1.0 Page 9 f 38

10 date can be cnsidered fr a Rate and Term refinance transactin if the fllwing requirements are met: Must have clear title r cpy f prbate evidencing brrwer was awarded the prperty. A cpy f the will r prbate dcument must be prvided, alng with the buy ut agreement signed by all beneficiaries. Brrwer retains sle wnership f the prperty after the pay ut f the ther beneficiaries. Cash back t brrwer nt t exceed 1% f lan amunt. Delayed Purchase Refinancing is allwed with the fllwing requirements: Prperty was purchased by brrwer fr cash within six (6) mnths f the lan applicatin. HUD 1/CD frm purchase reflecting n financing btained fr the purchase f the prperty. Preliminary title reflects the brrwer as the wner and n liens. Funds used t purchase the prperty are fully dcumented and surced and must be the brrwer s wn funds (n gift funds r business funds). Funds drawn frm a HELOC n anther prperty wned by the brrwer, funds brrwed against a margin accunt r funds frm a 401(k) lan are acceptable if the fllwing requirements are met: The brrwed funds are fully dcumented The brrwed funds are reflected n the Clsing Disclsure (CD) as a payff n the new refinance transactin LTV/CLTV/HCLTV fr Rate and Term refinances must be met. The lan is treated as a Rate and Term refinance except fr primary residence transactins in Texas. Investment prperties are allwed if brrwer is nt a builder r in the cnstructin industry and prir transactin was arm s length. Cash Out Refinance Requirements: Brrwer must have wned the prperty fr at least six (6) mnths. If the prperty is wned free and clear and six (6) mnth seasning is nt met, refer t Delayed Purchase Refinancing sectin abve. Maximum cash ut limitatins include the payff f any unsecured debt, unseasned liens and any cash in hand. Inherited prperties may nt be refinanced as a cash ut refinance prir t twelve (12) mnths wnership. See Rate and Term Refinances fr requirements. Cash ut refinances where the brrwer is paying ff a lan frm a pledged asset/retirement accunt lan, secured lan, unsecured family lan r replenishing business funds used t purchase the prperty, the fllwing guidelines apply: Cash ut limitatin is waived if previus transactin was a purchase. Seasning requirement fr cash ut is waived (brrwer des nt Versin 1.0 Page 10 f 38

11 have t have wned fr six (6) mnths prir t subject transactin). Funds used t purchase the subject prperty must be dcumented and surced. HUD 1/CD fr subject transactin must reflect payff r pay dwn f pledged asset/retirement accunt lan, secured lan, unsecured family lan r business asset accunt. If cash ut prceeds exceed payff f lans, excess cash must meet cash ut limitatins. The purchase must have been arm s length. Investment prperties are ineligible. Cntinuity f Obligatin: When at least ne (1) brrwer n the existing mrtgage is als a brrwer n the new refinance transactin, cntinuity f bligatin requirements have been met. If cntinuity f bligatin is nt met, the fllwing permissible exceptins are allwed fr the new refinance t be eligible: The brrwer has been n title fr at least twelve (12) mnths but is nt bligated n the existing mrtgage that is being refinanced and the brrwer meets the fllwing requirements: Has been making the mrtgage payments (including any secndary financing) fr the mst recent twelve (12) mnths, r Is related t the brrwer n the mrtgage being refinanced. The brrwer n the new refinance transactin was added t title twenty fur (24) mnths r mre prir t the disbursement date f the new refinance transactin. The brrwer n the refinance inherited r was legally awarded the prperty by a curt in the case f divrce, separatin r disslutin f a dmestic partnership. The brrwer n the new refinance transactin has been added t title thrugh a transfer frm a trust, LLC r partnership. The fllwing requirements apply: Brrwer must have been a beneficiary/creatr (trust) r 25% r mre wner f the LLC r partnership prir t the transfer. The transferring entity and/r brrwer has had a cnsecutive wnership (n title) fr at least the mst recent six (6) mnths prir t the disbursement f the new lan. NOTE: Transfer f wnership frm a crpratin t an individual des nt meet the cntinuity f bligatin requirement. Secndary Financing Institutinal Financing nly. Seller subrdinate financing nt allwed. Subrdinate liens must be recrded and clearly subrdinate t the first mrtgage lien. If there is r will be an utstanding balance at the time f clsing, the mnthly payment fr the subrdinate financing must be included in the calculatin f the brrwer s debt t incme rati. Full disclsure must be made f the existence f subrdinate financing and the subrdinate financing repayment terms. The fllwing are acceptable Versin 1.0 Page 11 f 38

12 subrdinate financing types: Mrtgage terms with interest at market rate. Mrtgage with regular payments that cver at least the interest due, resulting in n negative amrtizatin. Emplyer subrdinate financing is allwed with the fllwing requirements: Emplyer must have an Emplyee Financing Assistance Prgram in place. Emplyer may require full repayment f the debt if the brrwer s emplyment ceases befre the maturity date. Financing may be structured in any f the fllwing ways: Fully amrtizing level mnthly payments Deferred payments fr sme perid befre changing t fully amrtizing payments Deferred payments ver the entire term. Frgiveness f debt ver time Balln payment f n less than five (5) years, r the brrwer must have sufficient liquidity t pay ff the subrdinate lien. LTV/CLTV/HCLTV guidelines must be met fr lans with subrdinate financing. Texas 50 (a) (6) Refinance (Texas Equity Lans) Retail riginatins nly 20, 25 and 30 year fixed rate nly See Jumb Prgram Eligibility Supplement fr additinal requirements Cnstructin T Permanent Financing Credit The brrwer must hld title t the lt which may have been previusly acquired r purchased as part f the transactin. LTV/CLTV/HCLTV is determined based n the length f time the brrwer has wned the lt. The time frame is defined as the date the lt was purchased t the Nte date f the subject transactin. Fr lts wned twelve (12) mnths r mre, the appraised value can be used t calculate the LTV/CLTV/HCLTV. Fr lts wned less than twelve (12) mnths, the LTV/CLTV/HCLTV is based n the lesser f the current appraised value f the prperty r the ttal acquisitin csts (dcumented cnstructin csts plus dcumented purchase price f lt). Tradeline Requirements: Minimum three (3) tradelines are required. The fllwing requirements apply: One (1) tradeline must be pen fr twenty fur (24) mnths and active within the mst recent six (6) mnths. Tw (2) remaining tradelines must be rated fr twelve (12) mnths and may be pened r clsed. OR Minimum tw (2) tradelines are acceptable if the brrwer has a Versin 1.0 Page 12 f 38

13 satisfactry mrtgage rating fr at least twelve (12) mnths (pened r clsed) within the last twenty fur (24) mnths and ne (1) additinal pen tradeline. Each brrwer cntributing incme fr qualifying must meet the minimum tradeline requirements; hwever, brrwers nt cntributing incme fr qualifying purpses are nt subject t minimum tradeline requirements. Authrized user accunts are nt allwed as an acceptable tradeline. Nn traditinal credit is nt allwed as an acceptable tradeline. Disputed Tradelines: All disputed tradelines must be included in the DTI if the accunt belngs t the brrwer unless dcumentatin can be prvided that authenticates the dispute. Dergatry accunts must be cnsidered in analyzing the brrwer s willingness t repay. Hwever, if a disputed accunt has a zer balance and n late payments, it can be disregarded. Mrtgage Histry Requirements: If the brrwer(s) has a mrtgage histry in the mst recent twentyfur (24) mnths, a mrtgage rating must be btained. The mrtgage rating may be n the credit reprt r a VOM. Applies t all brrwers n the lan. N mre than 1X30 in the last twelve (12) mnths r 2X30 in the last twenty fur (24) mnths. Mrtgage lates must nt be within the mst recent three (3) mnths f the subject transactin. 0X60 and 0X90 required in the mst recent twenty fur (24) mnths. If the mrtgage hlder is a party t the transactin r relative f the brrwer, cancelled checks r bank statements t verify satisfactry mrtgage histry is required. Rental Histry Requirements: If the brrwer(s) has a rental histry in the mst recent twelve (12) mnths, a VOR must be btained. Applies t all brrwers n the lan. N mre than 1X30 in the last twelve (12) mnths. 0X60 and 0X90 required in the mst recent twelve (12) mnths. Rental lates must nt be within the mst recent three (3) mnths f the subject transactin. If the landlrd is a party t the transactin r relative f the brrwer, cancelled checks r bank statements t verify satisfactry rent histry is required; therwise if nt related r a party t the transactin a satisfactry VOR can be prvided. Dergatry Credit: Bankruptcy, Chapter 7, 11, 13 Fur (4) years since discharge / dismissal date Freclsure Fur (4) years since cmpletin date Shrt Sale/Deed in Lieu Fur (4) years since cmpletin / sale date Mrtgage accunts that were settled fr less, negtiated r shrt payffs Fur (4) years since settlement date Versin 1.0 Page 13 f 38

14 Brrwers with credit events listed abve between fur (4) and seven (7) years must meet the fllwing requirements: Tradeline requirements must be met Satisfactry husing histry fr twenty fur (24) mnths required N mrtgage lates since credit event N public recrds since credit event Primary residence purchase r rate/term refinance with a maximum 80% LTV/CLTV/HCLTV r prgram maximum if lwer Exceptins fr credit events will be cnsidered n a case by case basis between tw (2) and fur (4) years with extenuating circumstances subject t the fllwing: Extenuating circumstances are defined as nn recurring events that were beynd the brrwer s cntrl resulting in a sudden, significant and prlnged reductin in incme r catastrphic increase in financial bligatins. Examples wuld include death r majr illness f spuse r child but wuld nt include divrce r jb lss. Dcumentatin must be prvided t supprt the claim f extenuating circumstances and cnfirm the nature f the event that led t the credit event and illustrate the brrwer had n reasnable ptin ther than t default n their bligatins. If the defaulted debt was assigned t an ex spuse and the default ccurred after the brrwer was relieved f the bligatin, the event may be cnsidered n an exceptin basis. Lan Mdificatin Tw (2) years since mdificatin date with n mrtgage lates n any mrtgage in the last twenty fur (24) mnths. Ntice f Default Tw (2) years Multiple dergatry credit events nt allwed. Medical cllectins allwed t remain utstanding if the balance is less than $10,000 in aggregate. Outstanding Judgments/Tax Liens/Charge ffs/past Due Accunts: Tax liens, judgments, charge ffs and past due accunts must be satisfied r brught current prir t r at clsing. Cash ut prceeds frm the subject transactin may nt be used t satisfy judgments, tax liens, charge ffs r past due accunts. Payment plans n prir year tax liens/liabilities are nt allwed, must be paid in full. Credit Inquiries: If the credit reprt indicates recent inquiries within the mst recent 120 days f the credit reprt, the seller must cnfirm the brrwer did nt btain additinal credit that is nt reflected in the credit reprt r mrtgage applicatin. In these instances, the brrwer must explain the reasn fr the credit inquiry. If additinal credit was btained, a verificatin f that debt must be prvided, and the brrwer must be qualified with the mnthly payment. Versin 1.0 Page 14 f 38

15 Cnfirmatin f n new debt may be in the frm f a new credit reprt, pre clse credit reprt r gap credit reprt. Credit Reprts Frzen Bureaus: Credit reprts with bureaus identified as frzen are required t be unfrzen and a current credit reprt with all bureaus unfrzen is required. Liability Requirements: Liabilities The mnthly payment n revlving accunts with a balance must be included in the brrwer s DTI, regardless f the number f mnths remaining. If the credit reprt des nt reflect a payment and the actual payment cannt be determined, a minimum payment may be calculated using the greater f $10 r 5%. If the credit reprt reflects an pen end r net thirty (30) day accunt, the balance wing must be subtracted frm liquid assets. Lans secured by financial assets (life insurance plicies, 401(k), IRAs, CDs, etc.) d nt require a payment t be included in the DTI if dcumentatin is prvided t shw the brrwer s financial asset as cllateral fr the lan. Fr all student lans, whether deferred, in frbearance, r in repayment, a mnthly payment must be included in the brrwer s mnthly debt bligatin. If a mnthly payment is prvided n the credit reprt, the amunt indicated fr the mnthly payment may be used in qualifying. If the credit reprt des nt prvide a mnthly payment r if it shws $0 as the mnthly payment, the mnthly payment may be ne f the ptins belw: 1% f the utstanding lan balance (even if this amunt is lwer than the actual fully amrtizing payment) r A fully amrtizing payment using the dcumented lan repayment terms HELOCs with a current utstanding balance with n payment reflected n the credit reprt may have the payment dcumented with a current billing statement. HELOCs with a current $0 balance d nt need a payment included in the DTI unless using fr dwn payment r clsing csts. Lease payments, regardless f the number f payments remaining must be included in the DTI. Installment debts lasting ten (10) mnths r mre must be included in the DTI. Alimny payments may be deducted frm incme rather than included as a liability in the DTI. If the mst recent tax return r tax extensin indicate a brrwer wes mney t the IRS r State Tax Authrity, evidence f sufficient assets t pay the debt must be dcumented if the amunt due is within ninety (90) days f lan applicatin date. Versin 1.0 Page 15 f 38

16 Cntingent Liabilities: C Signed Lans: The mnthly payment n a c signed lan may be excluded frm the DTI if evidence f timely payments made by the primary bligr (ther than the brrwer) is prvided fr the mst recent twelve (12) mnths and there are n late payments reprting n the accunt. Curt Order: If the bligatin t make payments n a debt has been assigned t anther persn by curt rder, the payment may be excluded frm the DTI if the fllwing dcuments are prvided. Cpy f curt rder. Fr mrtgage debt, a cpy f the dcument transferring wnership f prperty. If transfer f wnership has nt taken place, any late payments assciated with the repayment f the debt wing n the mrtgage prperty shuld be cnsidered when reviewing the brrwer s credit prfile. Assumptin with N Release f Liability: The debt n a previus mrtgage may be excluded frm DTI with evidence the brrwer n lnger wns the prperty. The fllwing requirements apply: Payment histry shwing the mrtgage n the assumed prperty has been current during the previus twelve (12) mnths r The value n the prperty, as established by an appraisal r sales price n the HUD 1/CD results in an LTV f 75% r less. Departure Residence Subject t Guaranteed Buy ut with Crpratin Relcatin: T exclude the payment fr a brrwer s primary residence that is part f a Crprate Relcatin the fllwing requirements must be met: Cpy f the executed buy ut agreement verifying the brrwer has n additinal financial respnsibility tward the departing residence nce the prperty has been transferred t the third party. Guaranteed buy ut by the third party must ccur within fur (4) mnths f the fully executed guaranteed buy ut agreement. Evidence f receipt f equity advance if funds will be used fr dwn payment r clsing csts. Verificatin f an additinal six (6) mnths PITIA f the departure residence. Versin 1.0 Page 16 f 38

17 Departure Residences: Departure Residence t be Rented Optin 1 (N lease) Optin 2 (Lease required) N lease required. Cpy f current lease agreement. Signed letter f intent frm brrwer indicating they intend t rent the departure residence within ninety (90) days f clsing n the subject transactin. Departure residence must have a minimum f 20% equity after deductin f utstanding liens t use rent t ffset the payment. If less than 20% equity, the full payment with n benefit f rent must be included in the DTI. Equity in the departure residence must be dcumented with the prir purchase price, AVM, BPO r 2055 exterir appraisal dated within six (6) mnths f the subject transactin. Cpy f security depsit and evidence f depsit int brrwer s accunt. Departure residence must have a minimum f 20% equity after the deductin f utstanding liens t use rent t ffset the payment. If less than 20% equity, the full payment with n benefit f rent must be included in the DTI. Equity in the departure residence must be dcumented with the prir purchase price, AVM, BPO r 2055 exterir appraisal dated within six (6) mnths f the subject transactin. Market Rent Survey is required by a licensed appraiser. Rent calculatin is 75% f the market rent less PITIA. Any negative amunt must be included in the DTI. Rental calculatin is based n 75% f the lease amunt less PITIA. Any negative amunt must be included in the DTI. Any psitive incme is included as rental incme. Any psitive rental incme is disregarded fr the incme calculatin and can nly be used t ffset the payment Required reserves fr departure residence = 9 mnths PITIA Maximum LTV/CLTV/HCLTV n the subject transactin is 80% Required reserves fr departure residence = 6 mnths PITIA N limit n LTV/CLTV/HCLTV, refer t prgram maximum Versin 1.0 Page 17 f 38

18 Optin 1 (Nt under cntract) N cntract required fr departure residence (nt under cntract r listed fr sale). Signed letter f intent frm brrwer indicating they intend t list the departure residence fr sale within ninety (90) days f clsing n subject transactin. Departure Residence t be Sld Optin 2 (Under cntract) A cpy f an executed sales cntract fr the prperty pending sale and cnfirmatin all cntingencies have been cleared/satisfied. The departure transactin must be clsing within 30 days f the subject transactin. The pending sale transactin must be arm s length. Equity in the departure residence must be dcumented with a 2055 exterir appraisal r full appraisal. Departure residence must have a minimum f 20% equity after deductin f utstanding liens t exclude the payment frm the DTI. If less than 20% equity, the full payment must be included in the DTI. N appraisal required fr departure residence. The brrwer must be netting a psitive number frm the sale f the prperty r assets must be accunted fr t cver any funds the brrwer may have t bring t clsing n the sale f the departure residence. Required reserves fr the departure residence are based n the marketing time indicated by the departure residence appraisal: Required reserves fr the departure residence = 6 mnths PITIA If appraisal indicates marketing time f six (6) mnths r less = 12 mnths PITIA If appraisal indicates marketing time ver six (6) mnths = 24 mnths PITIA Maximum LTV/CLTV/HCLTV n the subject transactin is 80%. N limit n LTV/CLTV/HCLTV, refer t prgram maximum. Versin 1.0 Page 18 f 38

19 Asset Requirements: Beynd the minimum reserve requirements and t fully dcument the brrwers ability t meet their bligatins, brrwers shuld disclse all liquid assets. Large depsits incnsistent with mnthly incme r depsits must be verified if using fr dwn payment, reserves r clsing csts. Lender is respnsible fr verifying large depsits did nt result in any new undisclsed debt. Asset Type % Eligible fr Calculatin f Funds Additinal Requirements Checking/Savings/ Mney Market/CDs 100% Tw (2) mnths mst recent statements. Stcks/Bnds/ Mutual Funds 100% Tw (2) mnths mst recent statements. Nn vested stck is ineligible. Assets Retirement Accunts (401(k), IRAs etc.) If brrwer is >59 ½, then 70% f the vested value after the reductin f any utstanding lans. If brrwer is <59 ½, then 60% f the vested value after the reductin f any utstanding lans. Mst recent statement(s) cvering a tw (2) mnth perid. Evidence f liquidatin if using fr dwn payment r clsing csts. Retirement accunts that d nt allw fr any type f withdrawal are ineligible fr reserves. Cash Value f Life Insurance/Annuities 1031 Exchange 100% f value unless subject t penalties. Allwed n secnd hme and investment purchases nly. Reverse 1031 exchanges nt allwed. Mst recent statement(s) cvering a tw (2) mnth perid. HUD 1/CD fr bth prperties. Exchange agreement. Sales cntract fr exchange prperty. Verificatin f funds frm the Exchange Intermediary. Business Funds 100% fr dwn payment/clsing csts and reserves with additinal requirements met. Cash flw analysis required using mst recent three (3) mnths business bank statements t determine n negative impact t Versin 1.0 Page 19 f 38

20 business. Business bank statements must nt reflect any NSFs (nnsufficient funds) r verdrafts. Brrwer must be 100% wner f the business. Business funds fr reserves r a cmbinatin f persnal/business funds fr reserves will require the ttal amunt f reserves t be 2X r duble the regular requirement fr the subject prperty and any additinal financed REO. Gift Funds Gift funds may be used nce brrwer has cntributed 5% f their wn funds. Gift funds nt allwed fr reserves. Gift funds nt allwed n LTVs >80%. Gift funds nt allwed n investment prperties. Dnr must be immediate family member, future spuse r dmestic partner. Executed gift letter with gift amunt and surce, dnr s name, address, phne number and relatinship. Seller must verify sufficient funds t cver the gift are either in the dnr s accunt r have been transferred t the brrwer s accunt. Acceptable dcumentatin includes the fllwing: Cpy f dnr s check and brrwer s depsit slip. Cpy f dnr s withdrawal slip and brrwer s depsit slip. Versin 1.0 Page 20 f 38

21 Cpy f dnr s check t the clsing agent. A settlement statement/cd shwing receipt f the dnr s gift check. Reserve Requirements (# f Mnths f PITIA) Occupancy Lan Amunt # f Mnths Primary Residence Secnd Hme $1,000,000 with LTV 80% 6 $1,000,000 with LTV >80% 12 $1,000,001 $1,500,000 9 $1,500,001 $2,000, $1,000, $1,000,001 $1,500, $1,500,001 $2,000, Investment Prperty $1,000, First Time Hmebuyer Nn Occupant C Brrwer Interest Only Prducts $1,000,000 with LTV 80% 12 $1,000,000 with LTV >80% 15 $1,000,001 $1,500, Additinal six (6) mnths reserves Reserves based n the qualifying PITIA Additinal 1 4 Unit Financed Residential Prperties Owned (If excluded frm the cunt f multiple financed prperties, reserves are nt required.) Additinal six (6) mnths reserves PITIA fr each prperty Departure Residence please see requirements under Liabilities Departure Residences fr specific reserve requirements. Versin 1.0 Page 21 f 38

22 Financing Cncessins Interested party cntributins include funds cntributed by the prperty seller, builder, real estate agent/brker, mrtgage lender r their affiliates and/r any ther party with an interest in the real estate transactin. The fllwing restrictins fr interested party cntributins apply: May nly be used fr clsing csts and prepaid expenses and may nt be used fr dwn payment r reserves. Maximum interested party cntributin is limited t 6% fr primary and secnd hme transactins with LTVs 80%; 3% fr primary residences with LTVs ver 80%; 2% fr investment prperties regardless f LTV. Seller Cncessins All seller cncessins must be addressed in the sales cntract, appraisal and HUD 1/CD. A seller cncessin is defined as any interested party cntributin beynd the stated limits (as shwn in the prir sectin, financing cncessins) r any amunts nt being used fr clsing csts r prepaid expenses. If a seller cncessin is present, bth the appraised value and the sales price must be reduced by the cncessin amunt fr the purpses f calculatin LTV/CLTV/HCLTV. Persnal Prperty Incme / Emplyment Any persnal prperty transferred with a prperty sale must be deemed t have zer transfer value as indicated by the sales cntract and appraisal. If any value is assciated with the persnal prperty, the sales price and the appraised value must be reduced by the persnal prperty value fr purpses f calculating the LTV/CLTV/HCLTV. Stable mnthly incme must meet the fllwing requirements t be cnsidered fr qualifying: Stable tw (2) year histry f receiving the incme Verifiable High prbability f cntinuing fr at least three (3) years Declining Incme: When the brrwer has declining incme, the mst recent twelve (12) mnths shuld be used. In certain cases, an average f incme fr a lnger perid may be used when the decline is related t a ne time capital expenditure and prper dcumentatin is prvided. In all cases, the decline in incme must be analyzed t determine if the rate f decline wuld have a negative impact n the cntinuance f incme and the brrwer s ability t repay. If declining incme is fr a nn self emplyed brrwer, the emplyer r the brrwer shuld prvide an explanatin fr the decline and the underwriter shuld prvide a written justificatin fr including the declining incme in qualifying. Gaps in Emplyment: A minimum f tw (2) years emplyment and incme histry is required t be dcumented. Nn QM: Gaps mre than sixty (60) days during the past tw (2) years require a satisfactry letter f explanatin and the brrwer must be emplyed with their current emplyer fr a minimum f six Versin 1.0 Page 22 f 38

23 (6) mnths t include as qualifying incme. Exceptins fr gaps in emplyment mre than six (6) mnths and when the brrwer has been emplyed by their emplyer less than six (6) mnths will be cnsidered n the Nn QM prgram nly. General Dcumentatin Requirements: Residual Incme Calculatin required. All lans must meet the residual incme requirements belw. Residual incme equals Grss Qualifying Incme less Mnthly Debt (as included in the debt tincme rati). # in Husehld Required $1550 $2600 $3150 $3550 $3700 Residual Add $150 fr additinal family members Tax transcripts fr persnal tax returns fr tw (2) years are required t validate all incme used fr qualifying and must match the dcumentatin in the lan file. Fr Tax Payer Identity Theft instructins, see Jumb Prgram Eligibility Supplement. Fr cases where the IRS indicates N Recrd Fund see Jumb Prgram Eligibility Supplement T must be signed and cmpleted fr all brrwers. A signatry attestatin bx has been added t the signature sectin f the 4506 T. The IRS will require the latest frm with the check bx and require it be marked. (4506 T Rev Frm) Required n all lans clsed n r after 01/01/2018. Incme calculatin wrksheet r 1008 with incme calculatin. The Fannie Mae 1084, r Freddie Mac Frm 91 r equivalent is required fr self emplyment analysis. Paystubs must meet the fllwing requirements: Clearly identify the emplyee/brrwer and the emplyer. Reflect the current pay perid and year t date earnings. Cmputer generated. Paystubs issued electrnically via r internet, must shw the URL address, date and time printed and identifying infrmatin. Year t date pay with mst recent pay perid at the time f applicatin and n earlier than ninety (90) days prir t the Nte date. W 2 frms must be cmplete and be a cpy prvided by the emplyer. Verificatin f Emplyment Requirements: Requirements belw apply when incme is psitive and included in qualifying incme: Verbal Verificatin f Emplyment (VVOE) must be perfrmed n mre than ten (10) business days prir t the Nte date. The Verbal VOE shuld include the fllwing infrmatin fr the Versin 1.0 Page 23 f 38

24 brrwer: Date f cntact Name and title f persn cntacting the emplyer Name f emplyer Start date f emplyment Emplyment status and jb title Name, phne #, and title f cntact persn at emplyer Independent surce used t btain emplyer phne number Verificatin f the existence f brrwer s self emplyment must be verified thrugh a third party surce and n mre than thirty (30) calendar days prir t the Nte date. Third party verificatin can be frm a CPA, regulatry agency r applicable licensing bureau. A brrwer s website is nt acceptable third party surce. Listing and address f the brrwer s business Name and title f persn cmpleting the verificatin and date f verificatin. Written Verificatin f Emplyment may be required fr a brrwer s incme surced frm cmmissins, vertime and r ther incme when the incme detail is nt clearly dcumented n W 2 frms r paystubs. Written VOEs cannt be used as a sle surce fr verificatin f emplyment, paystubs and W 2s are still required. Tax Returns must meet the fllwing requirements when used fr qualifying: Persnal incme tax returns (if applicable) must be cmplete with all schedules (W 2 frms, K 1s etc.) and must be signed and dated n r befre the clsing date. Business incme tax returns (if applicable) must be cmplete with all schedules and must be signed. Fr unfiled tax returns fr the prir year s tax return, please see the Jumb Prgram Eligibility Supplement. Unacceptable Surces f Incme: Any unverified surce Deferred cmpensatin One time ccurrence incme Rental incme frm primary residence One (1) unit prperty r ne unit prperty with accessry unit Rental incme frm secnd hme Retained earnings Educatin benefits Trailing spuse incme Any incme that is nt legal in accrdance with all applicable federal, state and lcal laws, rules and regulatins. Federal law restricts the fllwing activities and therefre the incme frm these surces are Versin 1.0 Page 24 f 38

25 nt allwed fr qualifying: Freign shell banks Medical marijuana dispensaries Any business r activity related t recreatinal marijuana use, grwing, selling r supplying f marijuana, even if legally permitted under state r lcal law. Businesses engaged in any type f internet gambling. Specific Incme Dcumentatin Requirements Nn Self Emplyment Dcumentatin Requirements: Salaried Incme YTD paystub W 2s r persnal tax returns tw (2) years VVOE Hurly and Part Time Incme YTD paystub W 2s r persnal tax returns tw (2) years VVOE Stable t increasing incme shuld be averaged ver a tw (2) year perid. Cmmissin Incme YTD paystub Tw (2) years W 2s if cmmissins are less than 25% f ttal incme r Tw (2) years tax returns and W 2 frms required if cmmissins are 25% f the ttal incme. VVOE Stable t increasing incme shuld be averaged fr the tw (2) years. Overtime and Bnus Incme YTD paystub W 2s r persnal tax returns tw (2) years VVOE Stable t increasing incme shuld be averaged fr the tw (2) years 2106 Expenses Emplyee business expenses must be deducted frm the adjusted grss incme regardless f the incme type. Versin 1.0 Page 25 f 38

26 Alimny/Child Supprt/Separate Maintenance Cnsidered with a divrce decree, curt rdered separatin agreement, r ther legal agreement prvided the incme will cntinue fr at least three (3) years. If the incme is the brrwer s primary incme surce and there is a defined expiratin date (even if beynd three (3) years) the incme may nt be acceptable fr qualifying purpses. Evidence f receipt f full, regular and timely payments fr the mst recent twelve (12) mnths. Asset Depletin Allwed nly n the Meridian Prime Nn QM and lan prgrams nly. Calculate the depletin f assets using a 3% return ver the life f the lan; the same as calculating a P & I payment fr a mrtgage. Fr brrwers >59 ½ years f age, all pst clsing retirement and liquid assets may be used in the calculatin if the assets are fully vested and unrestricted. Fr brrwers <59 ½, all pst clsing liquid (nn retirement) assets can be included in the calculatin. Minimum liquid pst clsing assets f $500,000 required t include asset depletin fr qualifying incme. Business funds are nt allwed fr incme calculatin. Brrwers Emplyed by Family YTD paystub Tw (2) years W 2s and Tw (2) years persnal tax returns VVOE Brrwer s ptential wnership in the business must be addressed. Capital Gains Must be gains frm similar assets fr three (3) cntinuus years t be cnsidered qualifying incme. If the trend results in a gain it may be added as incme. If the trend results in a lss, the lss must be deducted frm ttal incme. Persnal tax returns three (3) years with a cnsistent histry f gains frm similar assets. Dcument assets similar t the assets reprted as capital gains t supprt the cntinuatin f the capital gain incme. Dividends and Interest Incme Persnal tax returns tw (2) years Dcumented assets t supprt the cntinuatin f the interest and Versin 1.0 Page 26 f 38

27 dividend incme. Freign Incme YTD paystub W 2 frms r the equivalent and persnal tax returns reflecting the freign earned incme. Incme must be reprted n tw (2) years US tax returns. VVOE All incme must be cnverted t US Currency. K 1 Incme/Lss n Schedule E If the incme is psitive, stable and nt used fr qualifying, the K 1 is nt required. If the incme is negative, the K 1s fr the applicable years are required and if wnership is 25% r greater, see self emplyment requirements belw. Nn Taxable Incme (Child supprt, military ratins / quarters, disability, fster care, etc.) Dcumentatin must be prvided t supprt cntinuatin fr three (3) years. Incme may be grssed up by applicable tax amunt. Tax returns must be prvided t cnfirm incme is nn taxable. If the brrwer is nt required t file a federal tax return, grss up t 25%. Nte Incme Cpy f the Nte must dcument the amunt, frequency and duratin f the payment. Evidence f receipt fr the past twelve (12) mnths and evidence f the Nte incme must be reflected n persnal tax returns. Nte incme must have a three (3) year cntinuance. Prjected Incme Nn QM Allws prjected incme with an executed ffer letter with emplyment starting within sixty (60) days f clsing: All cntingencies f the ffer letter must be remved/satisfied. Tw (2) year emplyment histry/schling in the same field prir t the start date. Brrwer must qualify with base pay nly. A paystub r written VOE (nce emplyment has started) frm the new jb must be prvided prir t purchasing the lan. Versin 1.0 Page 27 f 38

28 Rental Incme All prperties (except departing primary residence) Lease agreements must be prvided if rental incme is used fr qualifying purpses. Current lease fr each rental prperty, including cmmercial prperties listed in Part 1 f Schedule E f the 1040s. Rent rlls are nt allwed. If the current lease amunt is less than the rental incme reprted n the tax returns, justificatin fr using the incme frm the tax returns must be prvided and warrant the use f the higher incme. If there is n justificatin, the lease amunt less expenses will be cnsidered fr rental incme/lss. If the subject prperty is a purchase f an investment prperty the requirement fr a lease agreement may nt be required if the fllwing requirements are met: Brrwer(s) have a demnstrated landlrd histry fr the mst recent tw (2) years n tax returns OR Maximum LTV/CLTV is 65% Rent cmparable schedule by the appraiser is required n all investment prperty transactin Persnal tax returns Tw (2) years Fr prperties listed n Schedule E, rental incme shuld be calculated using net rental incme + depreciatin + interest + taxes + insurance + HOA divided by applicable mnths minus PITIA. If rental incme is nt available n the brrwer s tax returns, net rental incme shuld be calculated using grss rents X75% minus PITIA. Net rental incme may be added t the brrwer s ttal mnthly incme. Net rental lsses must be added t brrwer s ttal mnthly bligatins. If the subject prperty is the brrwer s primary residence (ne (1) unit prperty r ne (1) prperty with an accessry unit) and generating rental incme, the full PITIA shuld be included in the brrwer s ttal mnthly bligatins. If the subject prperty is the brrwer s primary residence with 2 4 units, rental incme may be included fr the unit(s) nt ccupied by the brrwer if the requirements fr a lease agreement and/r tax returns abve are met. Rental Incme Departing Primary Residence Please see Liabilities Sectin Departure Residence fr specific requirements. Versin 1.0 Page 28 f 38

29 Restricted Stck and Stck Optins May nly be used as qualifying incme if the incme has been cnsistently received fr tw (2) years and is identified n the paystubs, W 2s and tax returns as incme and the vesting schedule indicates the incme will cntinue fr a minimum f three (3) years at a similar level as prir tw years. A tw (2) year average f prir incme received frm RSUs r stck ptins shuld be used t calculate the incme, with the cntinuance based n the vesting schedule using a stck price based n the 52 week lw fr the mst recent twelve (12) mnths reprting at the time f clsing. The incme used fr qualifying must be supprted by future vesting based n the stck price used fr qualifying and vesting schedule. Additinal awards must be similar t the qualifying incme and awarded n a cnsistent basis. Brrwer must be currently emplyed by the emplyer issuing the RSUs/ stck ptins fr the RSUs/stck ptins t be cnsidered in qualifying incme. Vested restricted stck units and stck ptins cannt be used fr reserves if using fr incme t qualify. Retirement Incme (Pensin, Annuity, 401(k), IRA Distributins) Existing distributin f assets frm an IRA, 401(k) r similar retirement asset must be sufficient t cntinue fr a minimum f three (3) years. Distributin must have been set up at least six (6) mnths prir t lan applicatin if there is n prir histry f receipt OR Tw (2) year histry f receipt evidenced. Distributins cannt be set up r changed slely fr lan qualificatin purpses. Dcument regular and cntinued receipt f incme as verified by any f the fllwing: Letters frm the rganizatins prviding the incme. Cpies f retirement award letters. Cpies f federal incme tax returns (signed and dated n r befre the clsing date). Mst recent IRS W 2 r 1099 frms. Prf f current receipt with tw (2) mnths bank statements. If any retirement incme will cease within the first three (3) years f the lan, the incme may nt be used. Versin 1.0 Page 29 f 38