STANDARD ELIGIBILITY REQUIREMENTS FOR DU Excludes: DU Refi +, Homestyle Renovation, Manufactured Housing, Co-Ops and HomeReady PRINCIPAL RESIDENCE

Transcription

1 STANDARD ELIGIBILITY REQUIREMENTS FOR DU Excludes: DU Refi +, Homestyle Renovation, Manufactured Housing, Co-Ops and HomeReady TRANSACTION TYPE # OF UNITS MAX LTV, CLTV, HCLTV Purchase & Limited Cash-Out Refinance Cash-Out Refinance Purchase & Limited Cash-Out Refinance PRINCIPAL RESIDENCE 1 Unit 95% 2 Units 85% 3 4 Units 75% 1 Unit 80% 2 4 Units 75% SECOND HOMES 1 Unit 90% Cash-Out Refinance 1 Unit 75% Purchase INVESTMENT PROPERTY 1 Unit 85% 2 4 Units 75% Limited Cash-Out Refinance 1 4 Units 75% Cash-Out Refinance 1 Unit 75% 2 4 Units 70% te: There may be limiting exceptions to the above requirements for certain transactions. See page 2 for these exceptions TERMS 10, 15, 20, 25, 30 Year Fixed Rate FOR REFERENCE: FNMA Eligibility Matrix: Page 1 of 13

2 EXCEPTIONS TO LTV, CLTV, HCLTV ELIGIBILITY (See FNMA guidelines for Reference) FEATURE Cash-out refinances Employmentrelated assets Florida condos Multiple financed properties RESTRICTION If the property was purchased within the prior six months, the borrower is ineligible for a cash-out transaction unless the loan meets the delayed financing exception in the Selling Guide (B , Cash-Out Refinance Transactions). If the property was listed for sale in the past six months, the LTV, CLTV, and HCLTV ratios for a cash-out transaction are limited to the lower of 70% or the maximum allowed per the matrices. Exceptions to the eligibility requirements apply if this type of asset is used as qualifying income. See B , Other Sources of Income. Lower LTV, CLTV, and HCLTV ratios may be required for certain mortgage loans depending on the type of project review the lender performs for properties in condo projects in Florida. See B , Geographic-Specific Condo Project Considerations. Borrowers of second homes or investment properties who own five to ten financed properties are subject to lower LTV, CLTV, and HCLTV ratio limits and additional reserve requirements. See B2-2-03, Multiple Financed Properties for the Same Borrower. See Page 8 for more information. LINK TO FNMA GUIDELINES: Page 2 of 13

3 ISRL OVERLAYS TO FNMA GUIDELINES Appraisals ITEM Assets as a Basis for Mortgage Qualification Asset 1031 Tax Deferred Exchange AUS Borrowers Citizenship Condo Construction-to-Permanent Loans Co-Ops College Accounts Credit DAP s, UCAPs, and HAPs OVERLAY / POLICY Transfer of appraisals from another lender is not permitted. All appraisals must be AIR compliant FNMA/FHLMC external-only appraisal report forms 2055/2055, 1075/466, 2095 and 2075 are not permitted. Investment property purchase transactions only Required DU Approve/Eligible. Manual Underwriting Maximum 4 borrowers on a loan Each borrower must have a valid Social Security Number ITIN (IRS Tax Identification Numbers) are not allowed. A copy of the Green Card is required for all permanent resident aliens. A copy of the front and back of the card must be included in the file. All non-permanent resident aliens must provide evidence of a valid, acceptable visa or an Employment Authorization Document (EAD). A copy of the visa or EAD must be included in the file. n-permanent resident aliens require a minimum 2 year residency, credit and employment See Page 7 for eligible visa classes Loans to foreign nationals & individuals with diplomatic immunity are not permitted Lender Full or Limited review only. must use specific investor guidelines and be sent for prior approval. College accounts, such as 529c are not an acceptable source of funds n-traditional credit / manual underwriting is not permitted All significant derogatory credit items follow FNMA for financial mismanagement waiting periods only. Extenuating circumstances waiting periods are not allowed Page 3 of 13

4 Escrow Holdbacks Exceptions Fee Limitations Flood Insurance HELOC Qualification Income Verification / 4506-T Interest Credits Investment Properties Life Estates Living inter Vivos Trusts CONFORMING FIXED-RETAINED Exceptions to these guidelines must be submitted to capital markets via the exception form and priced as FNMA released products. Maximum real estate commissions limited to 8% of the sales price QM points & fees thresholds required on all (non-owners as well) The minimum amount of flood insurance coverage for individual insurance must be equal to the lesser of: 100% of the insurable value of the improvements (with losses to be paid at replacement cost) as determined by the hazard insurance provider, or National Flood Insurance Program (NFIP) maximum for the particular type of building, or The maximum that may be required under applicable state law. te: An escrow/impound account must be established for payment of the flood insurance premiums on all loans regardless of the LTV and/or federal exemptions To qualify a borrower for a new piggyback HELOC, use the fully indexed rate plus 2% at the full line amount, amortized over the repayment term. te: Existing lines use the payment as per the credit report. IRS transcripts must be provide for all income used to qualify per AUS T is required for each borrower & each business tax return W-2 IRS Transcripts are required for borrowers with only W-2 income used to qualify; 1040 IRS Tax Return Transcripts are required for borrowers with non W-2 income used to qualify Allowed up to the 10 th day Evidence of gross monthly rent for each non-owner occupied unit must be included in the Closed Loan Package (Operating Income Statement Form 998/216, Loan Application, appraisal, or other documentation). Borrowers which do not own a primary residence, and are purchasing an investment property require the following: 6 Month PITI Reserves Must Qualify without the benefit of rental income Loan Amount Minimum $50,000 Manufactured Homes Minimum Credit Score Mortgage Credit Certificates t Permitted Must use specific investor guidelines and be sent for prior approval 620 regardless of DU t allowed Page 4 of 13

5 Mortgage Insurance n-arm s Length & At-Interest Transactions Power of Attorney (POAs) Property REO Properties Rent Backs Resale-Deed Restrictions Borrower paid monthly MI (BPMI) or Lender Paid/Borrower Paid Single Premium (upfront) ONLY t allowed: Financed MI, Lender Paid Monthly/Annual, Reduced, Custom, Split Premiums Acceptable Companies: Arch, Essent, Genworth, NationalMI, Radian Must be specific and only in hardship & emergency situations t permitted on Cash-Out transactions Must identify property on POA Must have ISRLS POA form in file All properties must be residential in nature, have market acceptance and be compared with like properties of similar size/acreage. t Permitted: Land trusts, Indian leased land, manufactured homes, mobile homes, Co-op, exotic & unique properties (dome home), multi-dwelling unit condos, assisted living or board & care facilities, condotels, hotel Condos any property that includes a registration services and the rental of units, boarding houses, bed & breakfast, working and/or hobby farms or ranches, properties that share facilities with a hotel or motel or projects that have services typically provided in a hotel or motel such as maid service, management desk, bellman, etc. water filtration systems on title Maximum 15 Acres for full eligibility More than 15 Acres limited to 80% LTV/CLTV/HCLTV or lower per guides. Maximum 40. Truncating acreage for appraisal purposes in not allowed Subject property with unit size less than 650 Sq. feet not allowed Condo projects with any units less than 400 Sq. feet not allowed Property Condition: Minimum C4 (C5 & C6 not acceptable) Property Construction Quality: Minimum Q5 (Q6 not acceptable) Purchase contract must have no financing restrictions LTV is based on the lesser of appraised value, sales price, auction/foreclosure bid value, or auction/foreclosure sales price Full appraisal required, irrespective of AUS findings Maximum 45 days from closing t Permitted outside of age restrictions. Must use specific investor guidelines otherwise. Page 5 of 13

6 Sales Contract Changes/Renegotiated Purchase Agreements Section 8 Housing Subsidies Separated Borrowers Temporary Buydowns & Payment Abatement Programs Texas Refinance CONFORMING FIXED-RETAINED Re-negotiated purchase agreements that increase the sales price are not permitted. t allowed If the borrower is legally separated, a copy of the legal separation agreement must be provided to determine the division of assets, liabilities, and potential obligations. If there is no legal separation, a letter from the attorneys of both parties involved specifying the proposed settlement terms must be provided. If no documentation can be obtained to verify the division of assets and liabilities, the Loan will generally be considered an unacceptable risk. If the borrower states there are no plans for a legal separation, no further documentation is necessary; he/she is legally married and qualified accordingly. For rate/term refinances secured by Owner Occupied, Homestead properties in the state of Texas see Pages 9-11 Cash-out refinances in Texas are not permitted. Use Specific Investor Page 6 of 13

7 NON-PERMANENT RESIDENT ALIENS All non-permanent resident aliens must provide evidence of a valid, acceptable visa or an Employment Authorization Document (EAD). A copy of the unexpired visa or EAD must be included in the Loan file. If Less than 12 months remaining on the document, the Borrower must demonstrate the likelihood of approval via prior history of receiving it. (Past renewals) Eligible Visa Classes E-1 Treaty Trader and E-2 Treaty Investor This visa is essentially the same as an H-1 or L-1; the title refers to the foreign country's status with the U.S. G series (G-1, G-2, G-3, G-4) These visas are given to employees of international organizations that are located in the U.S. Some examples include the United Nations, Red Cross, World Bank, UNICEF, and the International Monetary Fund. Verification that the applicant does not have diplomatic immunity must be obtained from the applicant s employer and/or by the viewing the applicant s passport. H-1 (includes H-1B and H-1C), Temporary Worker This is the most common visa given to foreign citizens who are temporarily working in the U.S. L-1, Intra-Company Transferee An L-1 visa is given to professional employees whose company's main office is in a foreign country. TN, NAFTA visa Used by Canadian or Mexican citizens for professional or business purposes. TC, NAFTA visa Used by Canadian citizens for professional or business purposes. Page 7 of 13

8 B2-2-03: MULTIPLE FINANCED PROPERTIES FOR THE SAME BORROWER If the mortgage is secured by the borrower s principal residence, there are no limitations on the number of properties that the borrower can currently be financing. If the mortgage is secured by a second home or an investment property, the borrower may own or be obligated on up to ten financed properties (including his or her principal residence). Fannie Mae's standard eligibility and underwriting policies apply if the borrower is financing a second home or investment property and will have one to four financed properties; however, if the borrower will have five to ten financed properties, the mortgage loan must comply with the eligibility and delivery requirements described herein. The financed property limit applies to the borrower's ownership of one- to four-unit financed properties or mortgage obligations on such properties and is cumulative for all borrowers. These limitations apply to the total number of properties financed, not to the number of mortgages on the property or the number of mortgages sold to Fannie Mae. The following table describes how to apply the limitations based on the type of property ownership: Type of Property Ownership (See Examples of Situations in FNMA guidelines) Joint ownership of residential real estate. (This is considered to be the same as total ownership of an individual property.)te: Other properties owned or financed jointly by the borrower and co-borrower are only counted once. Ownership of commercial real estate. Ownership of a multifamily property consisting of more than four dwelling units. Joint or total ownership of a property that is held in the name of a corporation or S corporation, even if the borrower is the owner of the corporation and the financing is in the name of the corporation or S corporation. Joint or total ownership of a property that is held in the name of a corporation or S corporation, even if the borrower is the owner of the corporation; however, the financing is in the name of the borrower. Ownership in a timeshare. Obligation on a mortgage debt for a residential property (regardless of whether or not the borrower is an owner of the property). Ownership of a vacant (residential) lot. Ownership of property that is held in the name of a limited liability company (LLC) or partnership where the borrower(s) have an individual or combined ownership in the LLC or partnership of 25% or more, regardless of the entity (or borrower) that is the obligor on the mortgage. Ownership of a property that is held in the name of an LLC or partnership where the borrower(s) have an individual or combined ownership in the LLC or partnership of less than 25% and the financing is in the name of the LLC or partnership. Ownership of a property that is held in the name of an LLC or partnership where the borrower(s) have an individual or combined ownership in the LLC or partnership of less than 25% and the financing is in the name of the borrower. Ownership of a manufactured home and the land on which it is situated that is titled as real property. Ownership of a manufactured home on a leasehold estate not titled as real property (chattel lien on the home). Property Subject to Limitations? Yes Yes Yes Yes Yes Yes Transaction Type Number of Units Second Home or Investment Property Maximum LTV/CLTV/HCLTV Purchase & Limited Cash-Out Refinance 1 Unit 75% 720 Cash-Out Refinance (only if within 6 months of purchase and all delayed financing exception requirements are met See B , Cash-Out Refinance Transactions) 1 Unit 70% 720 Cash-Out Refinance (> 6 months since purchase) 1 Unit Ineligible N/A Investment Property Purchase & Limited Cash-Out Refinance 2-4 Units 70% Cash-Out Refinance (only if within 6 months of purchase and all delayed financing exception requirements are met See B , Cash-Out Refinance Transactions) Credit Score 2-4 Units 65% 720 Cash-Out Refinance (> 6 months since purchase) 1 4 Units Ineligible N/A 1 See B5-4-03, Loans Secured by HomePath Properties for an exception to this limit for purchase transactions. Page 8 of 13

9 TEXAS: OWNER OCCUPIED, HOMESTEAD PROPERTY (Pages 9-11) CONFORMING FIXED-RETAINED GENERAL REQUIREMENTS The following guidelines apply to all first mortgages secured by owner occupied, homestead properties in the state of Texas: Transactions in the state of Texas are defined four ways depending on investor and state law requirements: Purchase: Acquiring or buying a property (therefore exempt from Section 50(a)(6) provisions*). Rate/Term Refinance: The transaction is considered a rate/term refinance by both the investor and the state of Texas (therefore exempt from Section 50(a)(6) provisions*). Agency Cash-out Refinance: The transaction is considered a cash-out refinance by the investor, but a rate/term refinance by the state of Texas (therefore exempt from Section 50(a)(6) provisions*). Home Equity/Cash-out Refinance: The transaction is considered a cash-out refinance by both the investor and the state of Texas, therefore ineligible. te: Transactions with subordinate financing subject to Section 50(a)(6) provisions are limited to a maximum LTV/TLTV/CLTV of the lesser of 80 percent or the maximum allowed by product or loan amount. PURCHASE REQUIREMENTS Purchase transactions that include subordinate financing subject to Section 50(a)(6) provisions are limited to a maximum LTV/TLTV/CLTV of the lesser of 80 percent or the maximum allowed by product or loan amount. REFINANCE REQUIREMENTS: To determine the type of refinance the transaction is considered, review the following: Home Equity/Cash-out Refinance Transactions under Section 50(a)(6) are not eligible. Once the borrower has executed a home equity/cash-out refinance on an owner occupied, homestead property under Section 50(a)(6), Article XVI of the Texas Constitution, all subsequent transactions are considered home equity-cash-out refinances until title is transferred. In other words, once a cash-out, always a cash-out. Therefore, a rate/term refinance originated to pay off an existing home equity/cash-out mortgage is ineligible. Must provide documentation (commitment for title insurance, mortgage/deed of trust and/or HUD-1/Closing Disclosure) in each Loan package to verify that a home equity/cash-out loan under Section 50(a)(6) has not previously been originated against the subject property. If the purpose of the loan is not clearly identified on the commitment for title insurance, it will be necessary to provide previous mortgage/deed or trust or HUD-1/Closing Disclosure for each transaction originated on or after January 1, 1998, to verify the purpose of the existing loan. Lien Being Paid off or Down with New Mortgage Conforming Policy To Ensure Valid First Lien, Must Be Closed As Home Improvement Lien, regardless of seasoning Agency Cash-out Rate/Term Purchase Money Lien, regardless of seasoning Rate/Term Rate/Term Section 50(a)(6) Lien, seasoned less than 12 months t Permitted N/A Section 50(a)(6) Lien, seasoned at least 12 months t Permitted N/A Federal Tax or Owelty Lien Agency Cash-out Rate/Term Page 9 of 13

10 TEXAS: OWNER OCCUPIED, HOMESTEAD PROPERTY (continued) CONFORMING FIXED-RETAINED RATE/TERM REFINANCES In addition to the guidelines set forth above, the following apply to all rate/term refinances secured by owner occupied, homestead properties in the state of Texas: Total financed closing costs are limited to 10% of the new loan amount. 10% is deemed reasonable. Special title insurance coverage must be obtained when impounds for prepaid expenses* are included in the new loan amount. The following must be included as an exception: o Possible defect in lien of the insured mortgage because of the Insured s inclusion of reserves or impounds for taxes and insurance in the original principal of the indebtedness secured by the insured mortgage. ISRL recommends, but does not require the title policy include the following P-39 Express Insurance Coverage endorsement: Company insures the Insured against loss, if any, sustained by the Insured under the terms of this Policy by reason of a final, non-appealable judgment of a court of competent jurisdiction that divests the Insured of its interest as Insured because of this right, claim or interest. Company agrees to provide the defense to the Insured in accordance with the terms of this Policy if suit is brought against the Insured to divest the Insured of its interests as Insured because of this right, claim or interest. Prepaids are defined as funds collected for the payment of: o real estate taxes (includes non-delinquent taxes which are due and payable, as well as reserves) o hazard insurance premiums o monthly MI premiums covering any period after the settlement date Incidental Cash Back: Incidental cash back to the borrower at closing is not allowed. Options When POCs are credited to Closing Costs The amount of paid outside closing (POC) costs up to $1,000 may be applied as a principal reduction at closing. However, the principal and interest payment on the loan may not be adjusted and the loan may not be reamortized. If the amount to be credited exceeds $1,000 the loan amount must be reduced and the closing documents redrawn. The amount of the POC may be applied as a credit towards closing costs reducing the amount of cash needed to close. The borrower s POC items may be applied as a credit to closing costs resulting in reimbursement to the borrower of not more than the amount paid prior to closing. Please note this is the only circumstance when the HUD-1 or Closing Disclosure may reflect any cash back to the borrower on rate/term refinance transactions of Homestead property in Texas. Although not mandatory, ISRL recommends a certification be obtained from the borrower acknowledging that any refund received at settlement is reimbursement of funds paid prior to closing and does not constitute proceeds from the new loan. Subordinate Liens Certain restrictions apply to Rate/Term refinance transactions that include subordinate liens. Including: Only one loan subject to Section 50(a)(6) provisions may be secured by the subject property at any given time, regardless of lien position. When the subordinate lien is subject to Section 50(a)(6) provisions, the maximum LTV/TLTV/CLTV is the lesser of 80% or the maximum allowed by product or loan amount. Page 10 of 13

11 TEXAS: OWNER OCCUPIED, HOMESTEAD PROPERTY (continued) Pay Off of Subordinate Lien(s) Subordinate liens used entirely to purchase the subject property may be eligible for payoff as a rate/term refinance, subject to the following requirements: The HUD-1 Settlement Statement or Closing Disclosure from the transaction must be provided evidencing all funds were used to purchase the subject property. The commitment for title insurance may not reflect that the loan was originated as a home equity/cash-out Section 50(a)(6) loan. The financing may be paid off, paid down or re-subordinated with the refinance. The borrower may not have received any cash back from the subordinate financing. If the borrower received cash back and the loan is being paid off or paid down, the lien is subject to Section 50(a)(6) provisions and considered a home equity/cash-out transaction, and therefore, ineligible for purchase. AGENCY CASH-OUT REFINANCES In addition to standard cash-out refinance guidelines and those set forth in General Requirements above, the following apply to all Agency Cash-out refinances secured by owner occupied, homestead properties in the state of Texas. Incidental Cash Back: Incidental cash back to the borrower at closing is not allowed. Maximum LTV/TLTV/CLTV Agency Cash-out refinances must be treated as cash-out refinances for LTV/TLTV/CLTV, minimum Loan Score and pricing purposes. However, the state of Texas defines this as a rate/term refinance and therefore eligible, subject to the requirements listed in this section. Subordinate Lien Certain restrictions apply to Agency Cash-out refinance transactions that include subordinate financing. These restrictions include: Only one lien subject to Section 50(a)(6) provisions may be secured by the subject property at any given time, regardless of lien position. When the subordinate lien is subject to Section 50(a)(6) provisions, the maximum LTV/TLTV/CLTV is the lesser of 80% of the maximum allowed by product or loan amount. Pay Off of Subordinate Lien(s) If the subordinate lien was used for home improvements, it must have been originally closed using the entire amount for home improvements as evidenced by a Mechanic's lien contract on the commitment for title insurance. Documenting home improvements by obtaining canceled checks, invoices, receipts, lien waivers, etc., is not acceptable. If loan proceeds are being used to pay off a federal tax lien or a co-owners' interest in the subject property (known as an owelty lien), the lien must be recorded and appear on the commitment for title insurance. The commitment for title insurance may not reflect that the subordinate lien was originated as a home equity/cash-out Section 50(a)(6) loan. The borrower may not have received any cash back from the subordinate lien. If the borrower received any cash back from the subordinate lien, and the loan is being paid off or paid down, the lien is subject to Section 50(a)(6) provisions and, therefore, ineligible. Page 11 of 13

12 STATE SPECIFIC INFORMATION Arizona Community property state California Community property sate rthern CA has many areas with sewer lateral requirements Smoke & c.o. detectors, along with water heater straps are all required Connecticut surveys- waiver will need to be provided Attorney state Florida FNMA will not accept new or newly converted projects in FL unless they are PERS approved Lower LTV max for use of the limited review condo form (75% for own occ and 70% for second home) Nevada Existing properties, taxes transfer from the current owner at the same rate. New construction, 1% of the sales price. Plat map (no survey) Community property state New Jersey Properties owned by LLC s are very common in this area. Look and evaluate DOM. Title reports are not available until after appraisals are reviewed and commitment is issued. Must have a fully signed commitment letter 3 business days before closing. Must disclose commitment fee. Pennsylvania Survey/plat not required. party/common wall requirements for attached properties Puerto Rico properties owned Crimm document to show property taxes and current ownership Hazard insurance is not required in PR Puerto Rico income requirement if living in PR 4506 needs to be processed to indicate no record found, however, need to obtain a Modelo sc 2907 translated into English Page 12 of 13

13 STATE SPECIFIC INFORMATION (CONTINUED) Texas Utah Doc department will need an additional 24 hours for review n-disclosure state no public records of previous purchase prices Community property state Refinances review with compliance for conformity to 50(a)(6). n-disclosure state no public records of previous purchase prices Virginia Commonwealth state Sales contract contains escape clause/ re cert Washington Community property state counteroffers on purchase contracts, any counters are noted on the original contract by being crossed out New York Attorney state. Must have a commitment letter issued signed at approval. Must disclose a NY interest rate lock agreement at time of lock. Must disclose a notice of lock/commitment expiration between days prior to expiration Page 13 of 13