USDA Standard Product Guidelines

Transcription

1 Min Max DTI Max Loan Occupancy Credit Ratio Amount CONFORMING & HIGH BALANCE Transaction Type Max LTV Max CLTV Mortgage Rating Purchase 100%** 100% 0x30 for 12 mos prior to application date*** Based on income Rate/Term 100% 100% 0x30 for 12 mos prior to application date*** Primary Residence 620* 29/41 eligibility Streamline 100% 100% 0x30 for 12 mos prior to application date*** Refinance Please refer to the DTI section of this matrix for additional information on ratio limitations *Credit scores below 640 require additional analysis and documentation for approval. **New construction not meeting all required plan certification, inspections, and warranty document requirements are limited to 90% LTV ***Mortgages must remain current through the month prior to disbursement. If less than 12 months of history on the mortgage, all mortgage payments must be made within the month due. Eligible Borrowers Ineligible Borrowers Eligibility Ineligible Minimum Loan Amt Guarantee Fees Maximum Interest Rate Qualification Net Tangible Benefit ARM Loan Term $75,000 The rate may not exceed 1% over the current Fannie Mae yield for 90-day delivery (actual/actual) for 30-year fixed rate conventional loans, rounded up to the nearest one-quarter of 1 percent. The Fannie Mae website to confirm acceptable interest rates is: Rate/Term and Streamline refinance must have a perceived benefit to the borrower. The interest rate on the new mortgage cannot exceed the interest rate on the existing lien. 30 year fixed rate only General Eligibility U.S. Citizen, Permanent Residents, and qualified Non-Permanent Residents with valid documentation to support legal residency. All non US Citizens must be run through SAFE in GUS to determine eligibilty based on residency documentation. Maximum of 4 borrowers per transaction. Borrowers must not qualify for conventional financing to be eligible for USDA financing (see "Qualification"). Borrowers without a valid SSN, borrowers with a history of utilizing a SSN that was not legally obtained, borrowers with no credit score, Borrowers classified under Diplomatic Immunity, Temporary Protected Status, Deferred Enforced Departure, or Humanitarian Parole. GUS Approve/Eligible, and manual underwriting permitted in accordance with these guidelines. The subject property must be in an "eligible" location, and borrowers Annual Income must be below the established "moderate-income level" based on the property location. Property and Income eligibility can be determined at Temporary rate buy downs, escrow waivers, Energy Efficient Mortgages (EEM), Mortgage Credit Certificates (MCC), leased equipment, PACE Obligations. Upfront Fee: 1% of loan. When the fee is to be financed in the loan amount, calculate as: (loan amount / 0.99) - loan amount. When not financed, calculate as: loan amount x 1%. Annual Fee: 0.35% The following criteria are used to determine if a borrower will qualify for conventional financing: 1) Sufficient liquid assets for 20% down payment and closing costs (assets subject to withdrawal penalties are not considered), 2) DTI of 28/36 or less with the 20% down payment considered, & 3) otherwise meet conventional credit requirements. 1 01/01/2018

2 Subordinate Financing Land Contracts Living Trusts Power of Attorney E-signature 4506T Occupancy Non-Occupant Co- Borrower Cash Back to Borrower Social Security # Credit Report Credit History Subordinate finanacing not permitted. Transactions involving land contracts are not eligible. A copy of the trust agreement is required, and subject to review and acceptance by JMAC Lending Acceptable for military or incapacitated borrowers only. For military borrowers, a POA may only be used on either the initial or the final application & disclosures, not both; the borrower must be on overseas duty or unaccompanied tour. For incapacitated borrowers, sufficient evidence of their inability to sign must be provided. The POA in both cases must provide specific authority to encumber the property and obligate the borrower. See HB for full requirements. E-signatures acceptable. E-signature must be validated with some type of authentication, tracking, or independent verification. Copy and pasted PDF signatures are NOT acceptable. E-sign vendor must be on JMAC's approved list: T authorization form required on all transactions for borrowers only. Full 1040 transcripts are verified to validate the documentation used for the annual income calculation. All borrowers must occupy (refinance), or intend to occupy (purchase) the subject property as their primary residence. Borrowers may only receive cash back at closing up to the amount the borrower paid out of pocket for costs such as a deposit, earnest money, an appraisal, or other allowable items that may be financed with the loan being guaranteed. The borrower must document that funds used for these items came from personal funds, and not paid by credit card. Credit SSN must be fully validated on income documents. Discrepancies require processing of SSA-89. Full trimerge credit report is required. Non-borrowing spouse credit report is also required in community property states. GUS Approved: Per AUS, provided that the borrowers credit score has been validated. Manual Underwriting: the borrower should not have any indicators of unacceptable credit as defined in HB An LOE for all derogatory credit in the last 2 years is required along with documentation to support the explanation. Borrowers with a credit score less than 640 require documented extenuating circumstances for credit exception request. Indicators of unacceptable credit are: foreclosure/short sale/deed in lieu within 3 years, Ch. 7 BK discharged within 3 years, CH. 13 BK still in repayment or completed in the most recent 12 months, any housing late payments (rent or mortgage) in the last 12 months. Validating the Credit Score In order to determine the validity of the borrowers credit score, borrowers must have a minimum of two or more eligible tradelines. An eligible tradeline is a credit account (installment, revolving, etc.) with at least 12 months of repayment history reported on credit. At least one applicant whose income or assets are used for qualification must have a valid credit score. The tradeline may be open, closed, and/or paid in full. The following may not be considered an eligible tradeline: public records, authorized user accounts (unless borrower can document 12 months payments), disputed accounts, or deferred loans. Extenuating Circumstances Required for borrowers with credit score < 640, and on all manually underwritten transactions when the borrowers credit history reflects significant derogatory credit. A detailed LOE for derogatory credit indicating the specific extenuating circumstance with supporting documentation is required. Extenuating circumstances cannot be used for bankruptcy, foreclosure, DIL, or short sales that do not meet the standard seasoning requirement. Valid extenuating circumstances are situations that were temporary in nature, out of the borrowers control, and if the loan would significantly reduce the borrowers housing expense. Divorce is not considered an extenuating circumstance. Refer to HB for details. 2 01/01/2018

3 Housing Rating Payment Shock Collections Charge Offs Disputed Accounts Judgments Liens Government Debt Modifications Mortgages that are not rated on the credit report require a VOM to document an acceptable housing rating. GUS Approved: There can be no lates in the last 12 months, lates greater than 12 months are accepted per AUS. Manual Underwriting: There can be no mortgage or rental lates in the last 12 months. A VOR, or cancelled checks are required for the most recent 12 months is required for borrowers who are currently renting. A VOR is not required if the borrowers credit score is 680 or higher. GUS Approved: Per AUS. Manual Underwriting: Payment shock in excess of 100% is considered a significant risk factor when the front end (housing) ratio exceeds 29%, and must be analyzed by the underwriter to determine if the borrower is an acceptable credit risk. Excessive payment shock may be a factor for denial if the transaction contains other layered risks, and do not have strong compensating factors. If the housing ratio is 29% or less payment shock is not considered a risk layer. RD calculation of payment shock is: (New Principal Interest Taxes and Insurance (PITI) / Previous Housing Expense) 1 All open collctions must be listed on the application as a liability. Collections with an active balance require capacity analysis: If the aggregate balance of all open (non-medical) collections exceed $2000, they must be paid in full, be in an established reapyment plan with satisfactory payment history, or a 5% payment will be included in qualifying ratios. GUS Approved: Per AUS approval, the underwriter must explain their reason for approval in GUS in the "assets and liabilities" page next to each open collection. Manual Underwriting: There can be no new collections opened in the most recent 24 months, unless extenuating circumstances have been documented. An LOE is required with supporting documentation for each open collection regardless of the age. All charge offs must be listed on the application as a liability. GUS Approved: Per AUS approval. Manual Underwriting: All charge offs must be explained by the borrower, with documented extenuating circumstances for credit exception. Disputed accounts require an LOE from the borrower, and documentation to support the basis of the dispute. GUS Approved: Must be downgraded to manual underwriting unless any of the following apply to the disputed tradeline: (1) the tradeline has a $0 balance, (2) The tradeline is marked "paid in full" or "resolved", or (3) The tradeline has a balance of < $500 and is more than 24 months old. Manual Underwriting: The underwriter must analyze the explanation for consistency with other credit information. If it appears that derogatory accounts were disputed for the purpose of artificially inflating the borrowers credit score, the underwriter may require removal of the dispute, and credit rescored. Non-Federal Judgments may remain unpaid if the borrower documents an existing repayment plan with at least 3 months of payments made prior to the date of the application. Payments cannot be prepaid to meet the 3 month requirement. Borrower must have a satisfactory repayment history. Otherwise judgments must be paid in full, and all funds used to satisfy the account must be sourced. Any lien corresponding to the judgment must be subordinated if remaining in a repayment plan. Any Federal (non-tax) judgment must be paid in full. Manual Underwriting: In addition to the aforementioned requirements, the borrower must provide an LOE regarding the debt that lead to judgment. The underwriter must consider this in the borrowers overall repayment history and final credit decision. Federal Tax Liens may remain unpaid if the borrower documents an existing repayment plan with at least 3 months of payments made prior to the date of the case number assignment. Payments cannot be prepaid to meet the 3 month requirement. Borrower must have a satisfactory repayment history. If the lien is reporting on title it must be subordinated to the new first mortgage. All other liens must be paid in full and satisfied. Manual Underwriting: In addition to the aforementioned requirements, the borrower must provide an LOE regarding the debt that lead to judgment. The underwriter must consider this in the borrowers overall repayment history and final credit decision. Borrowers cannot have any outstanding delinquent Federal Debt or Obligation including IRS debt that has not yet become a lien. Subject property: Eligible with 0x30 in the last 12 months, and no previous reduction in principal. Manual Underwriting: Modifications are subject to the above mentioned criteria, however additional analysis is required to determine the borrowers overall credit worthiness. Refer to the "Layered Risk" section below. 3 01/01/2018

4 Foreclosure/Short Sale/Deed in Lieu Bankruptcy Credit Counseling Non-Traditional Student Loans Downgrades GUS Approved: 3 years from the date of title transfer due to foreclosure, short sale, or deed in lieu. Manual Underwriting: 3 years from the date of title transfer due to foreclosure, or deed in lieu. No seasoning requirement for short sales as long as the borrower was current on the mortgage, and all other installment debt for the 12 months preceeding the short sale. Borrowers with prior foreclosure, DIL, or short sale must provide an LOE regarding the circumstances that lead to the event. GUS Approved: Chapter 7 & Chapter 13: Per AUS approval; if borrower is in an active Ch. 13 the requirements following for manual underwriting must be met, but does not require a credit exception. Manual Underwriting: Chapter 7: 3 years from the date of discharge. When a mortgage is discharged through a Ch. 7, any subsequent foreclosure activity is not considered, and the BK discharge date is used for seasoning. Chapter 13: At least 12 payments must have been made under the BK plan. The borrower must obtain approval from the court to enter into a new mortgage, and the monthly payment for the BK plan must be considered in the DTI. Documented extenuating circumstances are required for credit exception is required if the borrower is still in repayment or has less than 12 months from the date of discharge. All BK papers must be provided. Derogatory credit after a BK is not permitted. At least 1 year under the payout period has elapsed, all payments must have been made on time, and borrower must receive written permission from the counseling agency to enter into a new mortgage. Manual Underwriting: The underwriter must also consider the participation in credit counseling, and any delinquent payments reporting in the final credit decision. Non-traditional credit is not permitted. Borrowers must have at least 1 valid credit score. Student loans must be considered in the DTI regardless of payment type, or status of payments. The monthly payment is calculated as either; A) the greater of 1% of the outstanding balance, or the monthly payment on credit; Or B) The actual documented payment from the servicer as long as it will fully amortize the loan over it's term. Income Based Repayment plans (IBR) are not acceptable. GUS findings may be invalidated if any downgrade reason per HB In those cases, the loan must be manually underwritten in accordance with HB , and any additional requirements located in this matrix. Downgrade reasons include, but are not limited to: undisclosed debt/manually entered liabilities, invalid credit score, certain disputed accounts, certain authorized user accounts, any derogatory or contradictory information not analyzed by GUS, and short sales within 3 years of the application. Layered Risk - Manual Underwriting Income Self-Employment Non-Taxable Income Verification of Employment Manual underwriting is a comprehensive review of the overall transaction utilizing sound judgment, critical thinking, and requires justification for the final decision. All manual underwrites will be reviewed for adherance to guidelines, supporting documentation for explanations, as well as other factors that contribute to the overall risk of the loan. Such risk factors include, but are not limited to: payment shock, limited or no savings, lack of housing history, NSF activity, high DTI, low residual income, job gaps or frequent job changes with no apparent advancement, etc. If multiple risk factors exist, the loan may be subject to denial for layered risk. Income & Assets Full income documentation is required for all adult household members. Income calculations to determine eligibility for the GRH program are based on the adjusted annual income of all adult household members. Calculations for repayment of the mortgage (DTI) are based on the stable and reliable income from applicants only. For methedology guidance on each income calculation, refer to HB Borrowers with 25% or greater ownership interest in a business must provide signed personal, and business tax returns for the most recent 2 years. A profit & loss, and balance sheet are required when more than a calendar quarter has elapsed since the last tax filing. A 2 year history of self employment is required for consideration in the repayment calculation. Non-taxable income may be grossed up by 25% for repayment income, but should not be grossed up for the annual income calculation. Verbal re-verification of employment required for all wage earners within 10 days of the note. Self employed borrowers must be verified by an acceptable third party within 30 days of the note. 411.com, Manta, Chamber of Commerce, or other website where business owners add their own information are not acceptable sources of verification. 4 01/01/2018

5 DTI Assets Joint Accounts GUS Approved: Per GUS approval Manual Underwriting: 29%/41%; a ratio waiver may be provided up to a maximum of 32%/44% provided that the borrower has a credit score of 680 or greater, and at least one compensating factor acceptable to RD is present. Refer to the chart at the end of this matrix for acceptable compensating factors. A two month average monthly balance of liquid assets most accurately represents the true value of the account since accounts, such as checking accounts often fluctuate significantly during the month from deposit to average monthly balance. The lesser of the two month average balance or actual balance (as reported on the most recent statement) will be used. Assets for all members of the household must be disclosed, and analyzed for the annual income calculation. Access letter for all joint accounts where any account holder is not a borrower on the loan. Unacceptable Assets Cash for which the source cannot be verified, funds from any party to the transaction other than eligible gift donors, unsecured borrowed funds. Gift Funds Reserves VOD Business Funds Concessions Permitted; must be documented in accordance with standard RD guidelines. Cannot be used for reserves. Donors bank statement always required. Funds cannot come from an unallowable source, including a business account unless the donor is a sole proprietorship, or the borrowers employer; cash is not an acceptable source of gift funds. Only 60% of the vested balance of retirement assets may be considered; accounts that restrict withdrawals to circumstances involving the borrowers employment separation, retirement, or death may not be considered. A VOD obtained directly from the financial institution may be used, and must reflect the current and 2 month average balance. Two months consecutive bank statements may be used in lieu of a VOD. CPA letter indicating the use of business assets will not materially affect the daily business operation. Borrower must have 100% ownership interest in the business. Interested party contributions for closing costs and prepaid expenses up to 6%. Concessions exceeding 6% are not eligible. Collateral Eligible Properties Ineligible Properties Land Subsidence Lava Zones Hazard Insurance Property Flipping Defective Paint Leased Equipment SFR, PUD, 2-4 Units or Condos within an FHA, or VA Approved project or that are acceptable to Fannie Mae or Freddie Mac. Condos without a current and valid Condo Project Approval, or with pending litigation. Manufactured or mobile homes, Co-Ops, commercial or industrial properties, unique or irregular properties (dome/log/etc.), working farms, marijuana producing properties, properties secured by Community Land Trusts, properties located in a designated Coastal Barrier Resource System (CBRS), properties located in Wrightwood, CA, or properties located on Indian Reservations or Tribal Lands. The property must not include buildings typically used for income-producing purposes. Properties with evidence of land subsidence (sinkholes, or equivalent activity) are ineligible. Lava Zones 1 & 2 are ineligible. Hazard insurance coverage (dwelling limit plus any extended replacement) must be sufficient to cover the "estimated cost new" on appraisal. Condo's and attached PUD's must provide master policy, and evidence of "walls-in" coverage, otherwise a separate HO-6 policy is required. Value must be strongly supported when a significant increase between sales occur when resold within 12 months. The lender must perform a thorough review of the appraisal report to validate and support the property s value and protect the applicants from possible predatory real estate lending. Properties with defective paint surfaces built prior to 1978 require correction by an EPA certified contractor. A copy of the contractors EPA certification is required. If homeowner will be completing the repairs, a letter from the homeowner is required stating that they completed all the work. Exterior exposed surfaces (wood) must be sealed, painted, or otherwise treated regardless of the year built. Any type of lease or financing agreement must be reviewed by the underwriter for acceptability under FHA guidelines. The agreements cannot contain ANY restrictions on conveyance, or hinder first lien position. Payments must be included in DTI. Leased equipment may not be valued in the appraisal. 5 01/01/2018

6 PACE Private Water Source Deed Restrictions Repair Escrow/ Holdbacks Purchases All Refinances Rate/Term (Non- Streamline) Streamline Refinance Cash Out Texas Max Qualifying Ratios 29%/41% Purchase 32%/44% Private wells, and community water systems required a water test completed by a state licensed EPA certified lab to confirm that the water quality meets local standards for potable (drinking) water. Private well tests must be dated within 120 days of note date, and community tests must be most recent available. Properties subject to deed restrictions, or any type of restriction on conveyance other than acceptable age restricted communities (55+), are not eligible. Transaction Specific Seller must be owner of record at the time of purchase contract execution. At least one borrower on the application must hold title at the time of application. Properties listed for sale at the time of application not eligible. Must be paying off an existing USDA mortgage. The interest rate of the new loan may not exceed the interest rate of the loan being refinanced. The new loan may include the principal and interest of the existing Agency loan, reasonable closing costs and lenders fees to extent there is sufficient equity in the property as determined by an appraisal. The appraised value may be exceeded by the amount of up-front guarantee fee financed. The new loan amount may never exceed the balance of the loan being refinanced including accrued interest, the guarantee fee, and reasonable closing costs. The appraised value may be exceeded by the amount of up-front guarantee fee when financed No appraisal is required. Fully credit qualifying transaction. Must meet all standard credit, income and asset guidelines. Payoff of Section 502 Direct Loans is not permitted, existing mortgage must be a Section 502 Guaranteed Loan. The new loan amount cannot include any accrued interest, closing costs or lender fees. The refinance up-front guarantee fee can be included in the loan to be refinanced to the extent financing does not exceed the original loan amount. If prelim indicates any prior Texas 50(a)(6) refinances, property is ineligible for refinance. Cash out not permitted in Texas, borrower may not receive ANY funds back at closing (not even $0.01). Any existing secondary financing must be subordinated with a recorded subordination agreement (automatic subordination not permited). Rural Development (USDA) Approved Compensating Factors Chart No Compensating factors are required Acceptable Compensating Factors At least one compensating factor from the following list for PURCHASE: ~ Proposed PITI is less than or equal to the borrower's current verified housing expense for 12 months preceding the application date. A VOR must be provided, and canceled checks required for private party landlords. There may be no delinquencies in the past 12 months. ~ 3 months of PITI reserves after closing. ~ All borrowers have been continuously employed at their current employer for a minimum of 2 years. A WVOE is required for all applicants. This compensating factor may not be considered for self-employed borrowers. Sufficient compensating factors from the following list (based on overall risk) for REFINANCE: ~ Credit score of 680 or higher. Credit scores of 680 and higher can be documented as a standalone compensating factor for a debt ratio waiver request, if no additional risk layers are present. 6 01/01/2018

7 Refinance 32%/44% ~ ~ ~ The borrower has successfully demonstrated the ability to pay housing expenses equal to or greater than the new proposed PITI for the past 12 months. Cash reserves post-closing. The borrower(s) has demonstrated an ability to accumulate savings comparable to the difference between current housing costs and projected costs. Continuous employment with the current primary employer. ~ The borrower has demonstrated a conservative attitude toward the use of credit. 7 01/01/2018