Gold Jumbo HLTV Underwriting Guidelines

Transcription

1 Gold Jumbo HLTV Underwriting Guidelines Full Documentation Only Published & effective as of 8/01/16

2 Gold Jumbo HLTV Program Underwriting Guidelines TABLE OF CONTENTS Program Summary Overview Product Highlights Product Descriptions Eligibility Matrix Minimum Loan Amount Locking Policy Geography Appraisal Requirements Ineligible Property Types Acreage Limitations Property Flipping Declining Markets Title Vesting & Ownership Texas Properties Assumable Maximum Financed Properties Eligible Borrowers First Time HomeBuyers A Permanent Resident Alien Ineligible Borrowers Occupancy Eligibility Ineligible Occupancy Elibile Transactions Purchase Rate/Term Refinance Ineligible Transactions Credit Report Requirements Housing History Credit Scores Credit History /1/16 i

3 Income Documentation Tax Transcriptions Asset Documentation Gift Funds Reserves Requirements Qualifying Ratios Interested Party Contributions Appendix Q/ATR Documentation Loan Review Form - Exhibit A ii

4 Underwriting Philosophy LSM takes a common sense approach to underwriting a borrower s creditworthiness to determine the willingness and ability to repay the loan. Each applicant has a different situation and each loan is weighed on its own merits. Our goal is to help good borrowers with their financing needs while mitigating risk for the company. LSM will only approve loans for which the company has a reasonable belief that the borrower has the ability to repay the subject loan. This reasonable belief is based upon information provided by or independently verified by an independent third party. Any irregularity in borrower profile, documentation provided, or property used to support the debt may be cause for denial of the loan. NOTE: Loans that are eligible for sale to a government-sponsored enterprise (GSE) the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) are ineligible for any Gold Jumbo Series programs. Guideline Overview Loans meeting the parameters outlined in these guidelines are consistent with the Dodd Frank Wall Street Reform and Consumer Protection Act s requirement that a borrower have the Ability to Repay the mortgage loan. Documentation standards are designed so that loans are made to borrowers who have demonstrated the ability and have the wherewithal to repay the debt. This program requires review and verification of documentation to ensure that the loan meets Ability-to-Repay standards. Program Qualifications This program offers fixed rate mortgage options for borrowers with jumbo loans and conforming loans limit. Loan in this program must not be able to qualify for a Fannie Mae DU Approve/Eligible recommendation. All loans must be designated as Qualified Mortgages and must adhere to the standards set forth in the C All loans must be manually underwritten. All loans must be designated as Qualified Mortgages and must adhere to the standards set forth in the CFPB s Reg Z, Section (e). If any aspect of these overlays related to income and/or obligations is less than the minimum required under Appendix Q, refer to Appendix Q for the ultimate resolution. All loans must include a third party fraud detection report. Report findings must cover standard areas of qualify control including but not limited to borrower validation, Social Security Verification, property information including other real estate owned. 8/1/16 Page 1 of 10

5 Program Highlights Eligible Products Product Description Full Amortizing Product Codes Fully Amortizing 30 year fixed rate, fully amortizing Fixed Rate 30 YR ARM Product Code Gold Jumbo HLTV 30 YR Fixed AUS All Full Doc loans are required to be submitted through either Desktop Underwriter (DU) or Loan Prospector (LP) underwriting systems. Full Doc: "Refer" or "Approve/Ineligible" and Underwriter to complete Loan Review Form, Exhibit A. Eligibility Matrix Loan Amount & LTV Limitations Primary Residence - Purchase and Rate & Term Refinance Property Type Occupancy Credit Score LTV CLTV Primary Residence % 90% SFR, Condo, Townhouse & PUD Maximum Loan Amount $1,500,000 Minimum Loan Amounts $417,001 or $1 above the conforming limit based on number of units Locking Forward locking is not allowed Loan approval is required prior to lock Cannot lock until the loan is approved and the appraisal has been received and reviewed by an LSM underwriter. 8/1/16 Page 2 of 10

6 Eligibility Requirements Geography The following US States and territories are not eligible: West Virginia, Mississippi, Nebraska, Arkansas, Connecticut, Michigan, Minnesota, New Hampshire, Vermont. Guam, Puerto Rico, American Samoa, Northern Mariana Islands and the U.S. Virgin Islands. Eligible states are as follows: Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Massachusetts, Nevada, New Mexico, Oklahoma, Oregon, Texas, Utah, Washington and Wisconsin. Appraisal Requirements Loan Amount Appraisal Requirement $417,001-1,500,000 Two Full Appraisals Each appraisal must be performed by two separate appraisal management companies and 2 separate licensed appraisers. The appraisal must be ordered from one of the following providers: Pro Teck Valuation Services Clear Capital Rels Appraisals are good for 120 days. Any appraisal seasoned greater than 120 days will require a recertification of value completed by the original licensed appraiser. A recertification of value will be permitted up to 180 days. Condos and PUDs must meet FNMA requirements. See the Property Types section for additional information. Note: The ECOA Valuations Rule requires copies of appraisals and other written valuations be delivered to borrower promptly upon completion, or three (3) business days before consummation, whichever is earlier. Full Interior/Exterior appraisal required. Fannie Mae/Freddie Mac Form 1004/70, 1025/72, 1073/465 or 2090 must be used. All Fannie Guidelines apply to appraisal process, value determination. Legal nonconforming zoned properties must indicate that the subject property can be rebuilt Properties for which the appraisal indicates condition rating of C5 or C6 or a quality rating of Q6, each as determined under the Uniform Appraisal Dataset (UAD) guidelines is not acceptable. Properties for which the appraisal indicates condition rating of C5 or C6 or a quality rating of Q6, each as determined under the Uniform Appraisal Dataset (UAD) guidelines is not acceptable. Internal appaisal review is required. 8/1/16 Page 3 of 10

7 Ineligilbe Property Types Mixed Use Properties; Vacant land or land development properties; Properties not readily accessible by roads that meet local standards; Properties not suitable for year-round occupany regardless of location; Agricultural properties including: farms, ranches, orchards; Manufactured, Mobile or Modular Homes; Co-op/timeshare hotels; Condotel; Cooperartive share loans; Boarding houses or bed/breakfast properties; Properties with zoning violations; Assisted living facilities; Dome or geodesis homes; Homes on Indian reservations ; Log Homes; Hawaii properties located in lava zones 1 and/or 2; Houseboats. Eligilbe Property Types Attached or Detached Single Family Residences Attached or Detached PUD Warrantable Condominiums Townhouse Acreage Limitations Maximum 5 acres; No truncating allowed. Property Flipping Not Allowed Declining Markets Properties located in a declining market as designated by the appraiser are subject to a 5% LTV reduction. Title Vesting & Ownership Ownership must be fee simple. Title must be in the Borrower's name at time of application for refinance transactions and on closig date for all transactions. Acceptable forms of vesting are: Individuals Joint tenants Tenants in common Land trusts and IRA's are not allowed. Texas Properties Cash out Refinance transactions in Texas are not eligible. 8/1/16 Page 4 of 10

8 Assumable Not Permitted Maximum Financed Properties The maximum number of financed properties to any one borrower is limited to 2. Eligible Borrowers U.S Citizens First Time Home Buyer Permanent Resident Aliens Inter-Vivos Revocable Trusts First Time Homebuyers First Time Homebuyer are individuals that have not owned a home or had a residential mortgage in the last 3 years. 740 Minimum FICO Maximum loan amount $1,500,000 Maximum Debt Income Ratio 38% Rental history evidenced by Institutional VOR or 24 months proof of payment to verify 0x30. Additional three months reserves required. A Permanent Resident Alien Permanent Resident Aliens are individuals who permanently reside in the United States o A legible front and back copy of the borrower(s) valid Green Card. Ineligible Borrowers Foregin Nationals Non-Permanent Resident Aliens Irrevocable or Blind Trusts Non-Occupant Co-Borrower Limited partnerships, general partnerships, corporations. Occupancy Eligibility Primary Residence Ineligible Occupancy Second Homes Investment Properties 8/1/16 Page 5 of 10

9 Eligible Transactions Purchase Rate/Term Refinance Purchase No property flipping, prior owners must have owned the property greater than six months. (Bank owned REO are eligible and not considered a flip transaction). Rate/Term Refinance A Rate/Term Refinance transaction is when the new loan amount is limited to the payoff of the present first lien mortgage, any seasoned non-first lien mortgages, closing costs and prepays. A seasoned non-first lien mortgage is a purchase money mortgage or a closed end or HELOC mortgage that has been in place for more than 12 months and not having any draws greater than $2,000 in the past 12 months for HELOC's. Withdrawal activity must be documented with a transaction history from the HELOC. Limited cash to the borrower must not be greater than 1% of the principal amount of the new mortgage to be considered a Rate/Term refinance (Delayed Financing is permited in accordance with Fannie Mae). If the property is owend less than six months, the LTV/CLTV will be based on the lesser of the original purchase price plus improvements or current appraised value. The prior HUD-1 will be required for proof of purchase price. Proof of improvements is required. Properties that have been listed for sale within the past 6 months from the loan application date are not eligible for a rate/term refinance transaction. Inherited properties may not be refinanced prior to 12 months of ownership. The rate/term refinance of a construction loan is eligible with the following conditions: o o If the lot was acquired 12 or more months before applying for the construction financing, the LTV/CLTV/HCLTV is based on the current appraised value of the property. If the lot was acquired less than 12 months before applying for the construction financing, the LTV/CLTV/HCLTV is based on the lesser of i) the current appraised value of the property and ii) the total acquisition costs. Ineligible Transactions Construction to Perm Cash out Refinances Non Arm's Length Transactions Texas Equity a (6) Temporary Buydowns Builder Bailout 8/1/16 Page 6 of 10

10 Credit Report A tri-merged in file credit report from all three repositories is required. Requirements Credit report is good for 90 days from application to closing. A written explanation for all inquiries within 90 days of application is required. Additional confirmation that there is no new debt may include a new credit report, pre-close credit score soft-pull or gap report. The DTI should be recalculated based on any new debt, and any new credit scores must be reviewed for qualifications. Housing History Mortgage or Rental history must be 0x30 over prior 24 months. Rental history evidenced by Instituional VOR or 24 months proof of payment. Credit Scores The representative credit score is the lowest middle of the three scores for each borrower. If fewer than three scores are returned, the lesser of two will be used. Credit History Each Borrower's credit profile must include a minimum of 3 open trade lines that have a 24 month history, 1 of the tradelines must have had activity within the last 6 months. If a borrower can t meet the minimum of 3 tradelines but has a minimum of 1 open tradeline with 12 months or more reporting, it could be considered without exception if the borrower meets the following criteria: 8 or more tradelines reported with at least one being a mortgage tradeline and having a minimum of 7yrs of established credit history or having 3 or more prior mortgage trades reporting 0x30 for 7yrs. The new loan amount can be no more than the actual documented amount of the borrower's initial investment in purchasing the property + the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to the maximum LTV, CLTV and HCLTV ratios for the cash-out transaction based on the current appraised value). Any Borrower not employed, or employed but not using their income to qualify does not need to meet the minimum tradeline requirements listed above. All tradelines with delinquency history in the past 12 months requires a written explanation. No prior bankruptcies, foreclosure, short-sale, deed-in-lieu or modifications are allowed within 7 years of application date. All Judgments or liens affecting title must be paid. Non-title charge-offs and collections exceeding $1,000 (either individually or in aggregate) must be paid. All past due accounts must be brought current prior to closing. Borrowers with a history of collection accounts should be required to pay off derogatory accounts. No authorized user accounts will be used to satisfy minimum trade line requirements. 8/1/16 Page 7 of 10

11 Income Documentation Requirements Wage Earners: Most Recent Paystub including year-to-date earnings (covering minimum of 30 days); Two years W-2's; and A Written Verification of Employment (if needed for the analysis of overtime, bonus or commission). A Verbal Verification of Employment required for all wage earner borrowers and must be completed within 10 calendar days prior to closing date. o Wage Earners VVOE should include name of contact at place of employment, phone number and title along with company name, address and borrower's job description and title. Self-Employed Borrowers: Two years personal returns (along with all schedules, including K-1 s) and business tax returns from any businesses where borrower has 25% or more ownership interest. Year to date P&L and balance sheet. Self-employed borrowers income will be considered only from a business that s been in existence for more than 2 years. Verbal Verification of Employment required for all wage earner borrowers and must be completed within 10 calendar days prior to the closing date. o Self-Employed Borrowers should include verification of a phone listing and address for the borrower s business AND verification through a third party such as a CPA, regulatory agency or applicable licensing bureau. If contact is made verbally, the loan file must be documented to identify both the source of the information obtained and the name & title of the person who obtained the information. Tax Transcripts IRS Form 4506T is required to be executed and all transcript documentation obtained for the most recent two years must be provided in the closed loan file for review. The 4506-T must be obtained at application and closing. For self- employed borrowers, this is required for both personal returns and business returns where borrower has 25% or more ownership of a business. In the case where taxes have been filed and the tax transcripts are not available from the IRS, the IRS response to the request must reflect No Record Found and be present in the loan file. Evidence of any IRS filing extensions must also be present in the loan file. 8/1/16 Page 8 of 10

12 Asset Documentation Full Asset Documentation is required for both funds to close and reserves. For most asset types, this would include all pages of the most recent two months statements or the most recent quarterly statement. All Assets from the borrower(s) must be disclosed No business accounts may be used to meet reserve or down payment requirements unless the borrower(s) are 100% owners of the business. A letter from the businesses accountant or cash flow analysis (Per FNMA) must be obtained to confirm that the withdrawal will not negatively impact the business. Vested Retirement Accounts - 60% may be considered for reserves (certain eligible plans can use 70% if borrower > 59 ½ - i.e. 401k) Assets being used for income may not be used to meet reserve requirements If needed to close, verification that funds have been liquidated (if applicable) is required. Third Parties VOD is required. Grant funds, Pooled funds, Cash Gifts are not allowed. Builder profits are not allowed. Gift of Equity is allowed. Gift Funds Not Allowed Reserves Requirements 1st Time HB 15 months PITI All others 12 months PITI Qualifying Ratios First Time Home Buyers Maximum DTI 38% All Others Maximum DTI 43% Interested Party Permitted up to 3%. Contributions Appendix Q/ATR Documentation All loan files must contain Appendix Q/ATR underwriter worksheets which detail the income and debt obligations considered in the evaluation. LSM does not originate high-cost mortgage loans (12 CFR ) All loans are subject to Reg Z Ability to Repay and therefore must include an executed borrower(s) certification attesting to the following: (i) (ii) (iii) They have fully disclosed their financial obligations They have reviewed and understand the loan terms They have the ability to repay the loan. 8/1/16 Page 9 of 10

13 - Exhibit A Loan Review Form Borrower Name: Loan Number: o Borrower DOES NOT qualify for FHA/FNMA/FHLMC loan programs o Borrower DOES qualify for FHA/FNMA/FHLMC loan program (Borrowers who qualify not eligible for LoanStream programs) Please list reasons the loan is not eligible for FHA/FNMA/FHLMC loan program (Attach DU/ LP Findings for support as applicable): Underwriter Name: Underwriter Signature: Date of Review: 8/1/16 Page 10 of 10 Rates, fees and programs are subjected to change without notice. Other restrictions may apply. Information is intended solely for mortgage bankers, mortgage brokers and financial institutions. Not intended for distribution to consumers, as defined by Section of Regulation Z, which implements the Truth-In-