Fannie Mae HomeStyle Conforming and High Balance Fixed Rate and Adjustable Rate Mortgage

Transcription

1 Fannie Mae HomeStyle Conforming and High Balance Fixed Rate and Adjustable Rate Mortgage General Eligibility Requirements Loans must fully comply with all requirements of this Product Guide, Desktop Underwriter Findings, Fannie Mae Selling Guide, Freedom Mortgage Corporation Seller Guide and Freedom Mortgage Corporation Conventional Overlay Matrix. Overlays are highlighted in yellow in the Product Guide content below. Fixed Rate Mortgage and Transaction Type Number of Units Adjustable Rate Mortgage Maximum LTV/CLTV/HCLTV Principal Residence Fixed Rate Mortgage Adjustable Rate Mortgage Purchase Limited Cash Out Refinance Cash Out Refinance Second Home Purchase Limited Cash Out Refinance Cash Out Refinance Investment Property Purchase Limited Cash Out Refinance Cash Out Refinance 1 (Conforming) 1 (High Balance) 97%* *See Page 2 for details 95% 95% 95% 2 85% 85% % 75% 1 1 Not Permitted Not Permitted 90% 85% 2 4 Not Permitted 1 75% 2 4 Not Permitted Not Permitted May 07, 2018 Page 1

2 *LTV, CLTV, and HCLTV ratios greater than 95%: These ratios are not permitted for high balance loans, or loans with a non occupant co borrower. At least one Borrower on the loan must have a credit score. For purchase transactions, at least one Borrower must be a first time home buyer. For limited cash out refinances, Fannie Mae must be the owner of the existing mortgage. In addition: For purchase transactions, the LTV is determined by dividing the original loan amount by the lesser of the as completed appraised value of the property or the sum of the purchase price of the property and the total rehabilitation cost. o The cost of the renovation is limited to 75% of the lesser of acquisition plus renovation costs or the as completed appraised value. For refinance transactions, the LTV is determined by dividing the original loan amount by the as completed appraised value of the property. o The cost of the renovation is limited to 75% of the as completed appraised value of the property. Repairs or improvements must be completed within nine (9) months of closing date. Products Amortization ARM Index Loan Program Overview FNMA HomeStyle 5/1 ARM FNMA HomeStyle 7/1 ARM FNMA HomeStyle 10/1 ARM FNMA HomeStyle 10 Year Fixed Rate FNMA HomeStyle 15 Year Fixed Rate FNMA HomeStyle 20 Year Fixed Rate FNMA HomeStyle 30/25 Year Fixed Rate Fixed Rate 10, 15, 20, 25, and 30 year terms ARM 30 year only Odd terms for FRM down to 8 years 1 year LIBOR The initial index is based off an available index in effect during the 45 days prior to consummation. The index is the average of interbank offered rates for one year U.S. dollar denominated deposits in the London market ( LIBOR ), as published in The Wall Street Journal. The most recent Index figure available of the date 45 days before each Change Date is called the Current Index. May 07, 2018 Page 2

3 ARM Plans (DU) ARM Cap Structure ARM Margin and Floor 2.25% ARM Convertibility Not Applicable Loan Amount Maximum (Conforming and High Balance) Occupancy Properties (Eligible) Properties (Ineligible) 5/1 GEN05 7/1 GEN07 10/1 GEN10 5/1 ARM 2% initial, 2% annual, 5% lifetime 7/1 & 10/1 ARM 5% initial, 2% annual, 5% lifetime Standard Conforming and High Balance Agency Loan Limits are available at limits. Primary Residence 1 4 Units for traditional credit transactions 1 unit only for nontraditional credit transactions Second Home 1 unit only; must be suitable for year round use No rental income may be used when qualifying. Not permitted with nontraditional credit transactions Investment Property 1 unit only Rent loss insurance coverage is not required. Regardless of whether rental income from the subject investment property is being used to qualify, the Gross Monthly Rent for each 1 unit Investment Property must be obtained. Not permitted with nontraditional credit transactions 1 4 units Primary Residence for traditional credit transactions 1 unit Primary Residence only for nontraditional credit transactions 1 unit Second Homes and Investment Properties for traditional credit transactions only Warrantable Condominium*, PUD, Townhouse *Proposed renovation work must be permissible under the bylaws of the homeowners association. The renovation work is limited to the interior of the dwelling unit, including the installation of fire walls in the attic. Written approval must be documented in the loan file. Manufactured Housing, permanently and non permanently affixed Non warrantable Condominium Timeshare Cooperative Condo/PUD Hotel Commercial Property Working Farms May 07, 2018 Page 3

4 Repairs (Eligible) Repairs (Ineligible) Texas Section 50(a)(6), Texas Section 50(a)(4) Historical Properties Properties with Resale Deed Restrictions Properties located in Lava Zones 1 & 2 Properties that have been assumed Life Estates Mixed Use There are no required improvements or restrictions on the types of renovations. However, renovations must be permanently affixed to the real property. Generally, improvements should be permanently affixed to the real property (either dwelling or land), excluding certain appliances installed with kitchen and utility room remodels. The Borrower may use HomeStyle Renovation to purchase appliances as part of an overall remodeling project that includes substantial changes or upgrades to the rooms in which the appliances are placed. HomeStyle Renovation may be used to complete the final work on a newly built home when the home is at least 90% complete. The remaining improvements must be related to completing non structural items the original builder was unable to finish. Such work may include installation of buyer selected items such as flooring, cabinets, kitchen appliances, fixtures, and trim. HomeStyle Renovation may be used to construct various outdoor buildings and structures when allowed by local zoning regulations. These buildings or structures must be in compliance with any applicable building codes for the local area. Examples of acceptable structures include, but are not limited to, accessory units, garages, recreation rooms, and swimming pools. Do It Yourself or self help repairs (Borrower completed repairs or acting as the General Contractor) are not permitted. HomeStyle Renovation may not be used for complete tear down and reconstruction of the dwelling. Any renovation that would take greater than nine (9) months to complete. For purchase transactions, renovation(s) that exceeds 75% or the purchase price plus renovation costs. For refinance transactions, renovation(s) that exceeds 75% of the as completed appraised value. Conversions are not permitted. Exceptions are allowed for downward conversions (e.g., 2 Unit converted into a 1 Unit), when ALL permits are in place prior to closing. Not eligible May 07, 2018 Page 4

5 Allowable Fees and Costs Disbursed at Closing Appraisal Requirements Bid Requirements Co Mortgagors Underwriting Overview The following fees/costs may be disbursed at closing: With paid receipts or invoices: Prepaid architectural or engineering fees Prepaid Consultant fees Permit fees (permits must be obtained before work commences) Draw Management Fee ($500) Freedom Mortgage Corporation Allowable Costs Released at Closing form may be used to identify which costs and fees have been disbursed at closing (optional). Regardless of Desktop Underwriter Findings, Fannie Mae standard interior/exterior appraisal is required. For properties in attached condominium projects, the appraisal must contain two comparable sales from projects outside of the subject s project, in addition to the current comparable sale requirements, as outlined in Fannie Mae Selling Guide, Section B Appraisal must provide an as completed appraised value that estimates the value of the property after completion of the renovation work. Appraisal should be ordered when the Borrower or the Seller receives the Contractor s Bid. The Contractor s Bid must be attached to the appraisal report. Appraisals may be no more than 4 months old as of the date of the Note and Mortgage. Transferred appraisals are not permitted. An as is appraisal is not required. Fully describe the work being performed and provide the itemized cost estimate with labor and materials broken out. Provide an indication of when various jobs or stages of completion will be scheduled (start and completion dates). Bid must be in the Borrower s name and reference the subject property address. Bid must reference the Contractor s name, contact information, and license number when required. Non occupant co borrowers are allowed. When income from a guarantor, co signer, or co borrower who will not occupy the subject residence is used for qualifying purposes, the maximum LTV/CLTV, and HCLTV ratio may not exceed 95%. No separate calculation of the DTI ratio for the occupying Borrower will be required, as the DTI will be based on the income and liabilities of all borrowers on the mortgage loan. May 07, 2018 Page 5

6 Condominiums Contingency Reserves Project must be Fannie Mae approved project or warrantable under Fannie Mae guidelines. Proposed renovation work must be permissible under the bylaws of the homeowners association. The renovation work is limited to the interior of the unit, including the installation of fire walls in the attic. Written approval must be documented in the loan file. Limited review is not permitted. A full review is required. Freedom Mortgage Corporation will only accept new projects that meet the following requirements: 1028/PERS unexpired Final Approval Required insurance coverage Seller Warranty acknowledging unawareness of any change in circumstances since the project approval was issued that would result in the project not meeting Fannie Mae eligibility criteria The project may not be in litigation. Refer to Section for additional information on condominium requirements. Contingency Reserves must equal a minimum of 10% of the total costs of the repairs and renovation work and must be established and funded for all transactions. The reserve may be increased to 15% if a larger reserve is needed. The reserve may be considered as part of the total renovation costs, or the Borrower may fund it separately. Unused contingency funds, unless they were received directly from the Borrower, must be used to reduce the outstanding balance of the loan after all work has been completed and the certification of completion has been documented on the Appraisal Update and/or Completion Report (Form 1004D). The Borrower may use the remaining contingency reserve funds for making improvements or repairs that are permanently affixed to the real property and add value to the property provided: Prior written approval is obtained from Freedom Mortgage Corporation; Freedom Mortgage Corporation warrants the work scheduled and described in the plans and specification was completed, and the contingency reserve funds have already been reduced by any cost overruns; and Freedom Mortgage Corporation must ensure o Reserve funds used for additional improvements or repairs were used to improve the real property, and o The file is documented with paid receipts for the additional improvements or repairs from the Borrower s own funds. May 07, 2018 Page 6

7 Credit Information Debt to Income and Qualifying Rate Documentation Requirements (HomeStyle Renovation Specific) Traditional Credit: Per Desktop Underwriter, with a minimum 620 representative FICO Tri Merged credit report required for all Borrowers. Refer to Fannie Mae Seller Guide Section B3 5 for requirements surrounding derogatory credit. Nontraditional Credit: The use of nontraditional credit history is permitted with eligible borrowers and acceptable transactions for Fannie Mae Desktop Underwriter transactions only. Refer to Freedom Mortgage Corporation Seller Guide Section for nontraditional credit guidelines. Desktop Underwriter Approve/Eligible recommendation is required. More restrictive of Desktop Underwriter or 50% Maximum DTI when all Borrowers have nontraditional credit must be Less 40%. 5/1 ARM qualify at the greater of the fully indexed rate or the Note rate plus 2.0%. 7/1 & 10/1 ARMs qualify at the greater of the fully indexed rate or the Note rate. Approval Documents: Maximum Mortgage Worksheet (Form 1035, ) Draw Management Fee is $500. A Consultant must be used on all HomeStyle transactions with hard costs over $50,000 or any structural repairs being done. Seller can select the Consultant from the HUD Consultant Roster, or use a certified General Contractor, renovation Consultant, or architect, with preference given to a HUD Consultant. Freedom Mortgage Corporation Contractor Profile Form, Correspondent Seller s equivalent form, or Contractor Profile Report (FNMA Form 1202) Freedom Mortgage Corporation Contractor Acceptance Checklist or Correspondent Seller s equivalent form Freedom Mortgage Corporation Rehabilitation Loan Permit Certification form HomeStyle Renovation Consumer Tips (FNMA Form 1204, ) Construction Contract (FNMA Form 3734) or Homeowners Contractor Agreement Freedom Mortgage Corporation Pre Review Submission Checklist (required) May 07, 2018 Page 7

8 Down Payment Draw Disbursements Escrow Waivers General Contractor Requirements Closing Documents: Construction Loan Agreement (FNMA Form 3735) Construction Loan Rider to Security Instrument (FNMA Form 3737) Investor Rider to Security Instrument (FNMA Form 3738) Document in accordance with Section of Freedom Mortgage Corporation Seller Guide Sellers may release material draw at the beginning of the project for acquiring materials that are identified in the project estimate assuming the material draw is fully documented as such: Up to 50% of the total upfront material costs, A portion of this 50% may be used to pay expenses associated with architect fees, design, and permits. Inspections must occur before escrow draws are made to ensure work is being completed in accordance with plans and specifications. Funds are released to the Borrower and contractor only when any given renovation work has been completed per Fannie Mae Selling Guide, section B , HomeStyle Renovation Mortgages: Costs and Escrow Accounts. Contractor to identify number of draws needed, payable upon completion of work. Inspection fees should account for the number of draws required by contractor. A ten percent (10%) holdback will apply to all progress, or interim, draws. Final draw will be paid in full, and will include all previously withheld ten percent (10%) holdbacks, along with any outstanding contingency requests or change orders. Consultant or appraiser inspects property to identify the percentage of work complete to date for each draw request. Appraiser or Consultant may complete final inspection. All checks must be made payable to the Borrower(s) and contractor. Permitted with LTVs 80% or less (subject to state law). Refer to rate sheet for applicable adjustment. Self help or Do It Yourself is not allowed, and the Borrower may not act as the General Contractor. Borrower must choose their own contractor. Licensed contractors or subcontractors must be used when licensing is required per state or local regulations for the specific trade or type of renovation being completed. Contractors must meet all state and jurisdictional requirements. May 07, 2018 Page 8

9 Insurance Requirements Mold Multiple Financed Properties Non Arm s Length and/or Identity of Interest General Contractor Documentation Requirements: Profile/resume References Proof of licensing, if required by municipality or state Liability insurance coverage with a preferred minimum of $1 million in coverage Worker s Compensation insurance, when required Homeowner s: Valid Homeowner s insurance policy must cover the lower of the loan amount or the after improved full replacement cost of the home. Builder s Risk: Not required if the Homeowner s coverage remains intact during the construction period. HO 3 or HO 5 policies do not satisfy Builder s Risk Insurance requirements. May be required if the property will be vacant during the time of renovations to cover theft or vandalism. Must be disclosed to the agent that the renovation loan is fully disbursed. May be paid by the Borrower or the Contractor. If paid by the Borrower, it must be disclosed as a separate line item to be paid at closing. Insurance premium may not be included in escrow impounds. Specific Homeowner s insurance quote is required to determine PITI and escrow impounds. Specialized mold remediator must indicate if the scope of the project will or will not require a final, clearance test (i.e., air quality and/or surface testing). If air quality and/or surface testing is required, the cost of the testing must be included in the contractor s bid and Work Write Up (if applicable) and must also be disclosed on the LE/CD. Freedom Mortgage Corporation will not purchase more than four financed properties for one individual. There is no limitation on the number of properties the Borrower has financed when subject loan is secured by the Borrower s primary residence. A maximum of ten residential properties may be financed when the HomeStyle Renovation mortgage is a Second Home or Investment property in accordance with Fannie Mae Selling Guide Section B Second Home and Investment Property transactions that include non arm s length and/or identity of interest characteristics are not eligible. May 07, 2018 Page 9

10 Payment Reserve Permits An escrow for mortgage payments (PITI) that will become due during the renovation period generally may be included as part of the total renovation costs for a principal residence property if the property cannot be occupied during the renovation period. Maximum PITI to be held in escrow is six (6) months. Permit costs vary as determined by the local municipality and must be documented. Print outs from the municipality s website, confirming permit costs, are acceptable. Building permits for all aspects of the renovation project must be in place prior to the acquisition/ delivery of materials and commencement of work and before the release of any escrow funds. Unpermitted work may result in fines and penalties to the Borrower and may not be reimbursed from the renovation escrow account. If permits are not required by the local jurisdiction, a certification or other documentation stating no permits are required for the project must be obtained in lieu of the permit. Planned Unit Development (PUD) Private Mortgage Insurance (Coverage Requirements) Utilize Freedom Mortgage Corporation Rehabilitation Loan Permit Certification form to validate permits required or substantiate permits are not required. Eligible PUD must be a Fannie Mae warrantable PUD (refer to Fannie Mae Selling Guide Section B ). The project must comply with all applicable state and local laws. The HOA must own the common elements, and unit owners must have right to their use. The project must meet all applicable property insurance requirements; refer to Fannie Mae Selling Guide Sections B7 3 and B7 4. Private mortgage insurance is required for all loans with an LTV greater than 80%. Fixed Rate 25 & 30 Year Amortization and ARM 30 Year Amortization LTV Standard MI 95.01% 97% 35% 90.01% 95% 30% 85.01% 90% 25% 80.01% 85% 12% Fixed Rate 10, 15, & 20 Year Amortization LTV Standard MI 95.01% 97% 35% 90.01% 95% 25% 85.01% 90% 12% 80.01% 85% 6% May 07, 2018 Page 10

11 Arch Private Mortgage National Essent Insurance Radian Genworth (Eligible Providers) United Guaranty MGIC Private Mortgage Standard coverage is required. Insurance Borrower Paid Monthly and Single Premium (Eligible Programs) Non Refundable Lender Paid Single Premium Agency Minimum Coverage Private Mortgage Lender Paid Monthly Premium Insurance Split Premium (Ineligible Programs) Financed Single Premium Property Listed for Sale (Subject Property) When the subject property was previously listed for sale, Sellers must comply with the listed for sale requirements established by Fannie Mae for Limited Cash Out Refinance transactions B Refinance (Cash Out) Not permitted Limited cash out transactions may include the following to the maximum permitted LTV and CLTV ratios: Amount required to satisfy the existing mortgage, Amount required to satisfy any outstanding subordinate mortgage lien(s) that was used in whole to acquire the property, Closing costs, prepaids, discount points, and the total renovation Refinance (Limited Cash Out) costs, including allowable renovation related costs, for the home improvements. Borrower must not obtain any other funds from the transaction including those that are generally allowed for a limited cash out transaction (i.e., the lesser of 2% of the loan amount or $2,000 in cash back at closing). Refer to Section for complete details on Limited Cash Out Refinances. Eligible subordinate financing permitted. Refer to the LTV/CLTV/HCLTV chart if subordinate financing exists. Subordinate Financing Community Seconds and other flexible sources of down payment are not eligible. Refer to Section for complete details on subordinate financing. Correspondent Seller must ensure validity of the first lien on the property. Interim Draws Title updates or lien waivers are appropriate, based Title Requirements upon local lien draws. Final Draws An endorsement to the title policy extending the effective date through the completion of the renovation and assuring first lien position is required. A lien waiver is not a substitute for an endorsement to the title policy for a final draw. May 07, 2018 Page 11

12 Underwriting Requirements Approve/Eligible Recommendation required from Desktop Underwriter (DU) for traditional and nontraditional credit transactions. Manual Underwriting is not permitted with traditional credit or nontraditional credit transactions. Loans must be underwritten and approved by staff underwriters of the approved Correspondent Seller, as well as a pre closing underwriting review by Freedom Mortgage Corporation. Contract Underwriting is not permitted. Reference Freedom Mortgage Corporation Seller Guide and Section 700 for all conventional guideline requirements. This document is not all encompassing. It is a summary reference tool to be utilized in conjunction with Agency guidelines and applicable FMC credit and compliance policies. Where these documents are silent, refer to Fannie Mae guidelines. May 07, 2018 Page 12

13 Appendix A Fee Chart Fee Description Architectural Fee Engineering Fee Consultant Fee Inspection Fees Title Update Fee(s) Permits Draw Management Fee Fee Amount Varies per loan, according to architect s fee schedule. Varies per loan, according to engineer s fee schedule. Varies, according to Consultant s fee schedule. $165 each $95 flat for all states, except OH and VA. In OH and VA, $95 times number of draws. Varies, according to municipality s fee schedule. $500 May 07, 2018 Page 13

14 Appendix B TRID Guidance Loan Costs for Renovation Loans The grid below shows how to transfer renovation costs/fees from either the FHA 203(k) or Fannie Mae HomeStyle Renovation Maximum Mortgage Worksheet to the LE/CD. LE CD Renovation Escrow Item 203(k) MMW Step 1 HS MMW Line # APR Y/N H H Total Cost of Repairs A.1. C 1a No H H Contingency Reserve B. C 1b No B B Inspection Fees A.4. C 1e Yes B B Title Update Fees A.5. C 1f No H H Mortgage Payments Escrowed C C 1h No B or C 1 B or C 1 Architectural & Engineering Fees A.2. C 1c No B or C 1 B or C1 1 Consultant Fee A.3. C 1d No H H Permits A.6. C 1g No H H Other N/A C 1i No A A Origination Fee or Draw Management Fee D.1. C 1i Yes A A Discount Points Financed D.2. N/A Yes 1 Disclose in section C if Borrower is given the option to shop and the vendor is listed on the Settlement Providers List ( SPL ). Otherwise, disclose section B. Fannie Mae HomeStyle is a registered trade mark of Fannie Mae. Freedom Mortgage Corporation is a mortgage lender licensed in all 50 states. NMLS # Corporate office located at 907 Pleasant Valley Avenue, Suite 3, Mt.Laurel, NJ 08054, (800) Please visit our website at licensing for our complete list of state licenses. This communication is sent only by Freedom Mortgage Corporation and is not intended to imply that any of our loan products will be offered by or in conjunction with HUD, FHA, VA, the U.S. government or any federal, state or local governmental body. This information is intended for use by mortgage brokers and other industry professionals. This is a business to business communication and is not an advertisement to or solicitation of a consumer. For additional information about Freedom Mortgage Corporation, please visit the NMLS Consumer Access page at: nmlsconsumeraccess.org. Equal Housing Lender Freedom Mortgage Corporation. All rights reserved. May 07, 2018 Page 14