Introduction to Fannie Mae HomeReady Product Mix. Title goes here. Credit Policy 12/14/2015 1

Transcription

1 Introduction to Fannie Mae HomeReady Product Mix Title goes here Credit Policy 12/14/2015 1

2 Bookmarks/ Favorites Once you receive a copy of this presentation, you will want to bookmark and/or save the following links to your Favorites or create shortcuts to your desktop as these links include important materials you will use regularly for HomeReady: Fairway s HomeReady Site on the intranet Product Matrix Resource Library FNMA Form Non-Borrower Household Income Worksheet & Certification Fannie Mae s HomeReady Site Census Tract Search Site Income Limits Report FrameWork Coupons Site FrameWork Homeownership Education site Fannie Mae s HOME mobile app TIP Don t forget to add these links in your Encompass setups as well! 2

3 What is HomeReady? HomeReady is a Fannie Mae lending program designed for creditworthy, low- to moderate-income borrowers, with expanded eligibility for financing homes in designated low-income, minority, and Disaster-impacted communities. HomeReady is available as a Fannie Mae Direct product in Optimal Blue for pricing and rate locks effective beginning on Monday, December 14 th. Product Features DU will automatically identify potentially eligible loans. Underwriting flexibilities include: Offers an innovative new feature that supports extended family households: will consider income from a nonborrower household member as a compensating factor in DU to allow for a debt-to-income (DTI) ratio >45% to 50%. Allows non-occupant borrowers, such as a parent. Permits rental income from an accessory dwelling unit (such as a basement apartment). Allows boarder income (updated guidelines provide documentation flexibility). Financing up to 97% LTV (DU is required for LTVs >95%). Borrower is not required to be a first-time buyer; purchase of one-unit principal residence (limited cash-out refi up to 95%). Lower MI coverage requirement than standard (25% for LTVs >90% to 97%). Allows for nontraditional credit. BIG PICK-UP Fairway will be allowing no fico nontraditional credit for those borrowers who lack traditional credit history!! 3

4 VERY IMPORTANT! There will be a slight delay to our ability to offer the no score non-traditional underwriting feature of the HomeReady product due to an issue with Optimal Blue that is being worked on. We will advise as soon as this option is available and ready! 4

5 2 Important Aspects There are 2 very important requirements & restrictions for this program that you MUST address up front on day one: 1. Income Limits. 2. Homeownership education requirement 5

6 Income Eligibility The chart below gives an idea of what percentage of income tracts are technically eligible for HomeReady. 6

7 Income Limits- 2 ways to determine 2 ways to determine income eligibility for the subject property area: 1. Run the loan through DU. At least 1 borrower must have a qualifying credit score. The following screens/fields in Encompass must be completed prior to running DU so DU can determine HomeReady eligibility: FNMA Streamlined 1003 screen DU findings will message to state whether the entered income is within the area limit. 7

8 DU Eligibility Note: We are in the process of verifying with Fannie Mae exactly WHERE this FIPS Code is supposed to be entered because they have no provided this information! 8

9 Income Limits 2. Manually Determine the income limits for the area. Go to sults.xhtml?ref=addr&refresh=t#none Enter the subject property address to generate a report that will include the census tract number needed to determine actual income limits. Example: 9

10 Income Limits A report of census info is generated which includes the census tract number. Next, refer to Fannie Mae s excel spreadsheet report that provides income limits by state, county and tract number. 10

11 Income Limits Find the census tract income limit by referring to Income Eligibility by Census Tract Lookup. Search by state, then country, then by census tract number. Refer to last column for income limit. In this case, based on the subject property address, the maximum annual income limit for the transaction is $66,

12 Homeownership Education is REQUIRED At least one borrower on the loan must provide a certification of completion prior to the note date on all loan types. (purchase and LCOR). Available online through Framework $75 fee must be paid by borrower credit card when registering OR originator can purchase Framework coupons for your borrowers! There are various coupon rates you can purchase and then simply provide the coupon to your borrower! The borrower can enter the coupon code when they register for the Framework course. You can credit them $75 credit toward closing costs to offset their out-of-pocket expense. Approximately 4 hours total investment needed Borrower must pass a final test with a score of at least 80% Borrower can download completion certificate upon completion and we must save in our file 12

13 Homeownership Education If borrower lacks access to internet and/or credit card, borrower may contact Framework Support Center for referral to a HUD-approved counseling agency in their area. Borrower can also choose a HUD-approved counselor of their choice. The counseling agency must provide a certificate of completion, and the lender must retain a copy of the certificate in the loan file Note: In rural areas, there may be lack of local counseling agencies. You may need to offer to assist the borrower by allowing them use of a PC in your office so they can complete the online course! Refer to FAQs re: Homeownership Education Counseling for more information on Framework 13

14 Homeownership Education Has your borrower already complete a HUD-approved homeownership education course? 14

15 Landlord Education is REQUIRED for 2-4 Units When the subject property is a 2-4 unit, certificate of completion of Landlord education required in addition to certificate of completion of homeownership education. Landlord education is not available through Framework. Resources for Fannie Mae Accepted Landlord Education: Genworth Register a borrower for Landlord Education Landlord Education Guide (Fannie Mae s Guide) MGIC: 15

16 Product Standards 16

17 Amortization Terms, Areas Standard Loan Limits: 30, 20, 15, 10 year fixed High Balance Loan Limits: 30 year fixed. Geographic Eligibility & Restrictions: Eligible: All states except West Virginia. Ineligible: West Virginia, U.S. territories such as Guam, Puerto Rico, U.S. Virgin Islands 17

18 Ineligible Characteristics The following characteristics are not/will not be eligible under our Fannie Mae HomeReady product : Adjustable Rate Mortgages (ARMS) (check investor-specific options) Assumptions Borrowers with traditional credit scores under 620 Boarder Income for 2-4 unit property Buydowns Cash on Hand Community Land Trusts (check investor-specific options) Community 2nds (check investor-specific options) Construction financing Construction to Permanent Mortgage Program Concurrent Short Sales Cooperative Properties Deed restricted properties (check investorspecific options) Down-Payment Assistance / Community Seconds (check investor-specific options) DU bankruptcy with extenuating circumstances EEM - Energy Efficient Mortgage Gifts, Grants from Non-profit Organizations (check investor-specific options) High balance manual underwriting High Cost (Section 32) Loans HomeStyle Renovation Investment Occupancy Manufactured Housing Military Impact Area Loans Minimum MI Coverage with LLPA New Secondary Financing Resale Restrictions (check investor-specific options) Restructured Mortgage Payoff Second Home Occupancy Supplemented credit for borrowers with traditional credit scores under 620- Special Feature Code 818 Sweat Equity Temporary Buydowns Texas 50 (a)(6) Unexpired foreclosure redemption 18

19 Loan Amounts/Loan Limits Minimum: No minimum required. Maximum: DU Approve/Eligible to 97% Conforming manual underwriting to 95% High balance requires DU Approve/Eligible up to LTV to 95%. High balance loan amounts are not eligible for manual underwriting. See charts on the following pages for more specifics. 19

20 DU Approve/Eligible Loan Purpose, LTV/CLTV & Minimum Score Requirements DU Approve/Eligible Loan Purpose Number of Units Maximum LTV Maximum DTI Minimum Credit Score Minimum Reserves Purchase 1 97% per DU Limited Cash- Out Refinance Purchase or Limited Cash- Out Refinance 1 95% per DU 2 units 85% per DU 3-4 units 75% per DU Loans are eligible for DU if at least one borrower has traditional credit and contributes more than 50% of qualifying income. Minimum Credit Score for borrowers with scoring = 620 Non-occupant borrowers permitted to maximum 95% LTV w/ Approve/Eligible. DU will apply a maximum allowable DTI of 45%, with flexibilities offered up to 50% DTI with non-borrower household income. Accessory unit income is eligible when meets guidelines. (on 1 unit property only) Boarder income is eligible when meets guidelines- up to 30% of total income. (on 1 unit property only). 20

21 Loan Purpose Purchase & Limited Cash Out Refinance Number of Units DU Refer/Manual Underwrite Loan Purpose, LTV/CLTV & Minimum Score Requirements DU Refer/Manual Underwriting Maximum LTV 1 95% 2 units 85% 3-4 units 75% Maximum DTI Minimum Credit Minimum Score Reserves No score. Non-Traditional Credit. 680 if >75% LTV 0 Up to 36% 660 if >75% LTV up to 75% LTV if >75% LTV if >75% LTV 2 Up to 45% 640 up to 75% LTV up to 75% LTV 2 Up to 36% 680 if > 75% LTV up to 75% LTV if > 75% LTV 6 Up to 45% 680 if > 75% LTV up to 75% LTV up to 75% LTV 12 Up to 36% 660 up to 75% LTV 6 Up to 45% 680 up to 75% LTV up to 75% LTV 12 Accessory unit income is eligible when meets guidelines. (on 1 unit property only) Boarder income is eligible when meets guidelines. Up to 30% of total income. (on 1 unit property only) Non-borrower household income is NOT eligible for manual underwriting as a compensating factor. (DU Approve/Eligible only) Non-occupant co-borrower income is eligible to 90% LTV and occupant borrower must have a DTI ratio no higher than 43%. Up to 30% of qualifying income may come from a borrower for which no traditional or nontraditional credit profile can be established. 21

22 Occupancy Eligible: Primary Residence ONLY Ineligible: Second home, investment. Occupant borrower(s) may not have an ownership interest in any other residential property at the time of closing. Non-occupant co-borrowers are not restricted to number of property interests 22

23 Private Mortgage Insurance 23

24 Private Mortgage Insurance Helpful table to assist with MI options. Company Tips References Essent Essent will not manually underwrite HomeReady loans Will follow Agency guidelines for DU Approve/Eligible Genworth No score is acceptable under nontraditional credit guidelines (5.4) Nontraditional parameters (5.7): Primary residence only, purchases only (refinances on a case-by case basis), 1-unit with a maximum 95% LTV/CLTV only and max 41% DTI. Scores begin at 620 for manual underwriting (traditional credit), at least 1 borrower must score. Specific overlays to minimum tradelines and delinquency. Minimum 2 months PITI, regardless of agency requirements. MGIC MGIC will not manually underwrite HomeReady loans Therefore no score and nontraditional credit is not permitted. Scores 660+ with Approve/Eligible only, at least one borrower must score. Minimum 2 months PITI, regardless of agency requirements. Radian Manual underwriting and no score permitted. Minimum score 620 for DU Approve/Eligible. Minimum 2 months PITI, regardless of agency requirements. (Except R/T Refi w/payment reduction). Minimum score TBD for manual underwriting. Specific overlays to minimum tradelines and delinquency. Essent hasn t posted HR specific guides Rate Cards UW Guide Rate Cards UW Guide Radian hasn t posted HR specific guides United Guaranty No scores are ineligible. Non-traditional credit is ineligible. Scores 620+ manual underwriting (traditional credit), 3 scores required. Minimum 2 months PITI, regardless of agency requirements on manual underwrite. UG hasn t posted HR specific guides 24

25 Assets, Downpayment, Funds to Close, Reserves 25

26 Assets, Downpayment, Funds to Close, Reserves Minimum Borrower Contribution Requirements: LTVS >80%: 1 Unit: $0 Own Funds 2-4 Unit: 3% Own Funds. LTVs <=80%: No minimum contribution required from own funds. Interested Party Contributions (standard IPCs): Occupancy Type LTV/CLTV Ratio Max IPC Principal residence or second Greater than 90% 3% home 75.01% - 90% 6% 75% or less 9% Investment Property All CLTV ratios 2% 26

27 AUS & Underwriting 27

28 Underwriting Eligibility At least one borrower on the loan must have a qualifying fico score of at least 620 and must contribute more than 50% of total qualifying income. DU Approve/Eligible 9.3 is REQUIRED for: % LTV High balance loan amounts Loans needing non-borrower household income as a compensating factor for approval of DTI %. DU will message if the loan is eligible as a HomeReady mortgage but has not been run as a HomeReady mortgage. If DU determines the income is above the area limit, findings will ready ineligible. Manual Underwriting is permitted for: DU Refer/Eligible when the ONLY reason for the Refer is the result of documented/proven inaccurate credit that cannot be cleared up/resolved prior to closing. Also refer to the following scenarios. 28

29 Underwriting Eligibility 29

30 Underwriting Eligibility 30

31 Underwriting Eligibility 31

32 Underwriting Eligibility 32

33 Underwriting Eligibility 33

34 Special Feature Codes All HomeReady loans require SPC 900 SFC 818 must be used to identify loans with supplemented thin files (for manually underwritten loans only). Fairway not offering this option. 34

35 Borrowers & Participants 35

36 36

37 HomeReady Non-Occupant Borrowers Non-Occupant Borrowers Maximum Allowed LTV DU Approve/Eligible: 95% Income DTI DU Refer/Manual Underwriting: 90% Non-occupant co-borrower income must be counted in both the DTI qualifying income as well as the income limits income. DU Approve/Eligible: The DTI ratio is calculated using the income and liabilities of all borrowers; there is no separate DTI ratio requirement for the occupant borrower. DU Refer/Manual Underwriting: The occupant borrower must have a DTI ratio no higher than 43%, based solely on their own qualifying income and liabilities. Note- Non-occupant borrowers do not have to be relatives on HomeReady! See FNMA s HomeReady Non-Occupant Co-Borrower Flyer for examples. 37

38 Credit Requirements 38

39 Credit Score Requirements Refer to slides #16 & #17 for the consolidated charts indicating score requirements based on whether DU Approve/Eligible or Manual Underwrite. No Score/Non-Traditional Credit Manual Underwrite: No scores required. Borrowers must meet non-traditional credit requirements. Please note: Fairway is not allowing/accepting supplemented credit history from borrowers with sub-620 scores as is offered by HomeReady. SPC #818 39

40 VERY IMPORTANT!!! **IMPORTANT** Pricing for No-Score Borrowers: Depending upon the credit vendor you use to request credit reports, differing data will be imported in the fico score fields in the Borrower Summary Screen in Encompass when a credit report is returned with no credit scores reflected. You will need to manually change the fico score fields and save the file changes prior to requesting pricing from Optimal Blue or you will not receive valid pricing for a no score/non-traditional credit/manual underwrite borrower. There must be a single 0 in each of the fico score fields in order to default a single 0 in the Credit Score for Decision Making field: 40

41 Credit Received With No Scores EXAMPLE CBC Test borrower in Encompass: Lucky Knowscore th Ave. Las Vegas, NV Once credit is received back, be sure to import even if no liabilities in order for the reference number and fico score fields to import. 41

42 Non-Traditional Credit Requirements For HomeReady mortgage loans, Fannie Mae permits flexibility by requiring a minimum of three rather than four sources of nontraditional credit that have been active for at least 12 months. Non-Traditional Source Requirements REQUIRED- at least one housing related; i.e., rental housing payments. REQUIRED- At least one utility company REQUIRED- Remaining source(s) may represent any reasonable service or purchase (e.g., auto insurance, medical insurance, school tuition, daycare, gym, life insurance, etc.) as long as the repayment terms are in writing, and the borrower can provide canceled checks or money order receipts that show the creditor as the payee to document the payments. Payment History Requirements No history of delinquency on rental housing payments within the past 24 months (or since inception, if less than 24 months). Only one account may have had a 30-day delinquency in the past 12 months. 42

43 No Score Borrowers- Credit History Requirements No collections or judgments (other than medical collections) filed within the past 24 months. Any/all judgments must be satisfied. Collection accounts (including medical) in excess of $250 per individual account or $1,000 in the aggregate must be paid in full. If a borrower with no credit score has a prior bankruptcy or foreclosure in his or her credit history, he or she must have reestablished credit that satisfies standard requirements of Selling Guide section B , Significant Derogatory Credit Events Waiting Periods and Re-establishing Credit. If one or more HomeReady borrowers is underwritten with nontraditional credit, the mortgage loan must also meet the requirements in Selling Guide section B , General Requirements for Credit Scores. 43

44 Non-Traditional Credit Requirements How to add non-traditional tradelines to the credit report. CBC- How to Request Non-Traditional Tradelines CIS- How to Request Non-Traditional Tradelines Credit Plus How to Request Non-Traditional Tradelines Factual Data - How to Request Non- Traditional Tradelines 44

45 Tips for Non-Traditional Credit Files Put together a well-documented loan file that tells the borrower story in all areas. WHY doesn t the borrower have a traditional credit history? Does the borrower have a sufficient enough non-traditional credit history with which to make a credibility decision? Since traditional credit history is lacking, are there other compensating factors present to offset that risk? Is the housing expense increasing? Saying same? Very close to current? Are the basics there to help the underwriter facilitate judgment? Experience managing payment of housing expenses Personal savings which demonstrates money management No NSFs/overdrafts etc. in bank statements Stable employment Steadily increasing income 45

46 DTI, Debts & Liabilities 46

47 Max Qualifying Ratios Refer to the Loan Purpose/LTV/Credit Score/DTI/Reserve chart on slide #10 for complete DTI details. Follow Fannie Mae standard guidelines for debts & liabilities. 47

48 Employment & Income 48

49 1. DTI Qualifying Income 2 Types of Income on HomeReady Loans 2. Household Qualifying Income (considered in income restrictions) Consider: All occupant borrower qualifying income All non-occupant borrower qualifying income. Do not consider: Non-borrower household income. For loans run through DU, as long as all income has been coded properly through page 2 of the 1003, DU will analyze and determine if income falls within the area income limits and meets all applicable guidelines (such as for those cases where a certain percentage of income is allowed/required). 49

50 Accessory Unit Income Only eligible for 1 unit property with accessory unit rental (basement apartment, in-law suite, garage or attic apartment) Accessory unit rental income may be underwritten in DU or manually. Follow Selling Guide section B , Rental Income for instruction on calculating rental income for the accessory unit. See FNMA s HomeReady Rental Income Flyer for example of Accessory Unit Income 50

51 Boarder Income Permitted from renters who reside in the subject property have history of paying rent for at least 12 months on 1-unit properties Boarders may not be obligated on the mortgage in any way. Boarder income may be underwritten in DU or manually Document shared residency (i.e. driver s license, utility bill, bank statement, etc.) Borrower must provide documentation for at least 9 of the most recent 12 months (averaged over 12 months). This flexibility on HomeReady is to provide support in instances where the boarder has lived with the borrower for 12 months, but is unable to provide a full 12 months worth of documentation. (example- maybe paid cash a month or two or worked off their rent versus paying it out for a month or so). Payment of rent paid from boarder to a third party is not acceptable. Must have been paid to the borrower(s). Up to 30% of qualifying income can come from boarder income. See FNMA s HomeReady Rental Income Flyer for examples. 51

52 52

53 Non-Borrower Household Income DU Approve/Eligible only. May only be entered to serve as a compensating factor to allow for DTI ratio % - There is no benefit to non-borrower household income if the DTI isn t %. Must equal at least 30 percent of the total monthly qualifying income being used by the borrower(s). When the income is entered into DU, the amount will be truncated to two digits and rounded to the next whole number. For example, if the income represents percent, this amount will be rounded up to 30 percent by DU to determine eligibility. Non-borrowers must sign FNMA Form 1019 which includes statement of intent to reside with the borrower for a minimum of 12 months. Documentation is only required if DU determines the nonborrower income will provide a benefit. May not be used for DU Refer or manual underwriting. Is not included as qualifying income for DTI OR income limits. Compensating factor in DU only. May come from more than 1 individual and come from relative(s) or non-relative(s) living in the household. 53

54 Non-Borrower Household Income Must be documented in the exact same manner as standard qualifying borrower incomes in DU. (see Selling Guide section B : Income and Employment Documentation for DU based on the income type t is not required for non-borrower household income Cannot come from individuals already contributing boarder or rental income for qualifying purposes. Verbal VOE requirement does not apply for non-borrower household income. HomeReady does not require any prior history of shared residency for a non-borrower household member. Note- The situation MUST make sense, however. Remember that having an individual sign FNMA Form 1019 stating intent to occupy would be considered as fraud if not true. We cannot just toss people s income in to qualifying under household income if they aren t truly going to occupy the property and contribute to the mortgage payment. 54

55 What have you learned about HomeReady? 55

56 Test Your Knowledge Yes or No. Maggie is purchasing a new primary residence in Virginia. Her Uncle Joe, who lives in another state, wants to support her dream of homeownership by being a borrower on her loan to assist with qualifying. Should Uncle Joe s income be included for DTI qualifying on Maggie s HomeReady Loan? Yes or No. Should Uncle Joe s income be included in the income limit calculations on Maggie s HomeReady loan? Multiple Choice. Chloe is purchasing a 2 unit property using HomeReady for financing. Which of the following courses must she complete prior to closing? 1. Homeownership Education 2. Landlord Education 3. Both of the Above. 4. Neither of the Above. 56

57 Answers for Prior Page Question 1: Yes. Question 2: Yes. Question 3: 3-Both of the Above. 57

58 Test Your Knowledge True or False: Up to 30% of the borrower s qualifying income can come from a boarder. True or False: Rental income can be considered as qualifying income when the subject is a 1 unit property with basement apartment. True or False: High balance loans can be manually underwritten to a 90% LTV. 58

59 Question 1: True. Answers for Prior Page Question 2: True. Question 3: False. High balance loans are not eligible to be manually underwritten, regardless of LTV. 59

60 Helpful Contacts 60

61 Helpful Contacts Product guideline questions: Scenario Questions: Registration/Rate Questions: 61