SNL Direct - 5 Year Balloon Stated Income Retail and Wholesale

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1 SNL Direct - 5 Year Balloon Stated Income Retail and Wholesale Overview Life Company Portfolio loans should be processed the same as any other loan. Disclosures should be completed and sent to the borrower. Document the loan as you would any other file. The file must comply with all regulatory agencies. Choose the correct template in Encompass which is SNL-Direct. Register the loan with SNMC s Secondary Department. A minimum of 5 points must be charged; 2 points must go to the Life Company, 1 point must go to the branch and 2 points can go towards loan officer compensation. Loan officers must cover their BPS. Normal underwriting and processing fees apply. These updated guidelines are effective with applications taken on or after June 18, Product Code SNL-Direct5S Interest Rate 8.99% Loan Amount Maximum loan amount is $417,000 exceptions must be approved by Paul Christensen or Cheryl Gray. Minimum loan amount is $40,000. Maximum of 10 SNL-Direct loans for one borrower. Loan Term 30 year amortization with a five year balloon payment. No prepayment penalty. LTV Parameters 65% LTV - Purchase 60% LTV - Rate/Term Refi 60% LTV - Cash Out Refi SNMC Page 1 June 11, 2015

2 Underwriting DU or LP is not required. 30 year amortization with a five year balloon payment. No prepayment penalty. The 1003 should reflect a usable and correct mailing address for the borrower on investment property transactions for correspondence such as the billing statement. Always document the borrower s primary residence expense and add to the debt calculation. There is no limit on seller contributions. Exceptions to any of the program guidelines must be approved by Paul Christensen or Cheryl Gray. A condition should be added by the underwriter and signed off by Paul or Cheryl. In the Encompass ATR/QM eligibility screen, mark Transaction is Exempt from Reg Z Ability to Repay Requirements and mark Credit Type - Credit Being Extended Is Not Primarily For Personal, Family, or Household Purposes. A lease agreement is required on the subject property for refinances. If a lease agreement is available for a purchase transaction, it must be provided. Assets Assets must be documented with a bank statement or VOD showing sufficient funds to close in the borrower s account. Large deposits should be sourced. If asset statements are in another language, the statements need to be translated into English by a licensed translator. Funds to close must run through a United States bank so we comply with the Patriot Act. If funds are wired to closing, a bank statement or VOD is still required to evidence funds are from borrower. Gift funds should be documented as per FNMA guidelines, including a gift letter. Gift of Equity is not allowed. No reserves are required. Borrower Eligibility A credit report should be pulled to check OFAC. Underwriters should run FraudGuard on all loans. If you receive an OFAC match on your FraudGuard, credit report, or Encompass compliance report, the loan number and borrower name to Closing.Policy@snmc.com. We will complete the necessary research to determine if the borrower is an exact match to the OFAC SDN list and respond to you via . In order to document SNMC compliance with OFAC procedures, the response should be uploaded into the Encompass efolder under SNMC Internal QC. Foreign National borrowers who do not have social security numbers are eligible. A Foreign National is someone who is not a citizen or permanent resident alien and does not reside in the US. A credit report is not required for these borrowers. The Social Security field in Encompass should be left blank. The loan officer will need to complete the Verification of Foreign National Form indicating he/she has verified the borrower has no Social Security number. The form is included in these guidelines (see last page). Documentation required for Foreign Nationals: Proof of Identity Proof of address Government issued Visa SNMC Page 2 June 11, 2015

3 Borrower Eligibility (cont d) If a borrower is a Foreign National, they must sign the closing documents before a U.S. Notary at a U.S. Consulate or Embassy or close at a US title company. If using a POA, it must be loan specific and must be signed before a Notary. If the Notary is not a US Notary, an Apostille Form must be completed to authenticate the Notary. The Patriot Act form must be completed on the borrower prior to closing at a U.S Consulate or Embassy if using a Power of Attorney. An attorney or CPA could complete the Patriot Act form for the borrower as well but evidence must be provided of the attorney or CPA s name, business name, address, phone number and address. Closing In The Name Of An LLC Closing in the name of an LLC is acceptable with the following guidelines: Loan must be documented and underwritten for the borrower as an individual (1003, credit, income, etc. in borrower s name). Obtain organizational documents of the LLC for review by the underwriter. An LLC may be composed of one or more members. Verify that borrower is authorized to sign for the LLC. All members of the LLC must sign the closing documents. The LLC must be a U.S. Company and not a foreign entity. Foreign entities are not allowed. Closing docs should reflect the LLC s TIN number, not the borrower s social security number. A personal guarantee letter for the borrower to sign at closing is included in the closing package. Closing In The Name Of A Trust (Living Inter Vivos Trust) An SNL Direct loan can close in the name of a Trust. Follow all guidelines in Credit Policy 3.1-I for reviewing Trusts and required Trust documentation. There is no seasoning requirement for taking title out of the name of a Trust if the borrower wants to close as an individual. Credit Minimum credit score is 600. Foreign Nationals with no credit scores are allowed. All other borrowers must meet the minimum credit score requirement. Max DTI is 50%. All tax liens and judgments must be paid off prior to or at closing. Impound Accounts Property tax and insurance escrows are required. Income Stated income Do not provide income documentation, but the income on the initial 1003 and final 1003 should be the same. A pre-note VVOE is required on all loans (except on Foreign Nationals) as per SNMC guidelines for W-2 and self-employed borrowers. Provide a CPA letter or business license for selfemployed borrowers. SNMC Page 3 June 11, 2015

4 Occupancy The SNL-Direct program is for investment property/non-owner occupied (business purpose) loans only. The initial 1003 and final 1003 must show the borrower does not intend to occupy the property. The borrower s mailing address should be the borrower s primary residence. The borrower s primary residence expense must be documented and added to debt. The purchase contract should indicate that the borrower does not intend to occupy the property. Hazard insurance cannot show the borrower s mailing address is the same address as the subject property. Documentation in the file should indicate that the borrower does not intend to occupy the property. A lease agreement on the subject property is required on refinance transactions. An occupancy notice is included in the initial disclosures package and an occupancy disclosure is included in the closing package. Funders must verify the occupancy disclosure has been signed by the borrower and returned in the closing package prior to funding. The branch manager, or branch personnel designated by the branch manager, will the borrower to verify that the property is an investment property, on every loan. The following loan scenarios will be considered only on a case-by-case basis. The exception must be approved by Paul Christensen or Cheryl Gray. Borrowers currently living with family or with no verifiable primary residence expense. Borrowers currently in a bankruptcy, foreclosure or pre-foreclosure sale process. Borrower is purchasing a property with larger square footage and increased value over current residence. Property 1 or 2 unit properties only. 3 or 4 unit properties may be considered on a case-by-case basis and must be approved by Paul Christensen or Cheryl Gray. Modular Homes are allowed No Manufactured homes Condos are allowed with the following guidelines: o Must be a minimum of 400 square feet. o o Cannot be a condotel, offer nightly rentals, or offer daily maid service. Projects in current litigation may be allowed on a case-by-case basis and must be reviewed by Paul Christensen or Cheryl Gray. Rent loss insurance is not required. Property flips cannot be non-arm s length transactions. Flips must be at least 180 days from the seller s acquisition date to the date of the purchase contract on the subject transaction. The seller must address renovation to the property. SNMC Page 4 June 11, 2015

5 Property (cont d) Appraisal The appraisal should be strong with similar comps to support value. The property should be of good quality construction with no major repairs required. Condition rating of C5 or C6 and Quality rating of Q6 are not acceptable. A transferred appraisal is not acceptable. Appraisals must be ordered through Select Appraisal Management (SAM). The appraiser must provide the 216 and 1007 forms. If using rental income to qualify, it must be from the appraiser s estimated rent with the normal 25% vacancy factor taken into account, or lease agreement if provided. See Corporate Operations Bulletin for details on ordering an SNL-Direct appraisal through SAM. Below is the website to order an appraisal through SAM. On the dropdown under other form type is SNL Direct FNMA 1004 with forms 216 and If you are new to SAM, please , appraisals@snselectappraisalmanagement.com to obtain login credentials. When ordering an appraisal include the SNMC office you are in or the name of the Wholesale Broker. The phone number for SAM is For a direct contact please Destiny Bailey at destiny.bailey@securitynational.com or call at (ext. 1365) SNMC Page 5 June 11, 2015

6 Verification of Foreign National Status Borrower: Address: Loan Number: I have verified that the Borrower and/or Co-Borrower is a Foreign National who is not a Citizen or Permanent Resident Alien of the United States, and therefore does not have a social security number. Loan Officer Signature