Specialty Products Underwriting Guidelines

Transcription

1 Specialty Products Underwriting Guidelines Non-Warrantable Condos SE Bank Solutions Foreign Nationals Recent Housing Event Investor Loan

2 SPECIALTY PRODUCT UNDERWRITING GUIDELINES (INCLUDES: NON-WARRANTABLE CONDOS, NON-QM, 203K, DOCTOR LOANS AND HELOC/SECONDARY FINANCING 1.01 Table of Contents 1.02 Program Overview Non Warrantable Condo Loan Credit Score and LTV Matrix Underwriting Guidelines Foreign Nationals Credit Score-LTV Matrix Underwriting Guidelines Recent Housing Events Credit Score-LTV Matrix Underwriting Guidelines Real Estate Investor Loans Credit Score - LTV Matrix Underwriting Guidelines Table Of Contents Underwriting Guidelines Page 2 of 15

3 Section 1.02 Program Overview 1.02 Program Overview First Community Mortgage is proud to offer a Non-Agency Specialty Lending Portfolio. These loans are processed and underwritten through the Structured Lending Desk. When general underwriting criteria is not specifically addressed in this guide it will default to Fannie Mae guidance. Final eligibility determination and underwriting approval is reserved to the structured loan desk personnel. All files will be required to have a SLD Eligibility Review completed prior to lock and underwriting submission. The Structured Loan Desk does have expanded eligibility authority - loan scenarios falling outside these stated guidelines should be submitted to Structuredloan@fcmpartners.com for eligibility review and exception approval. Section 1.02 Program Overview Underwriting Guidelines Page 3 of 15

4 Section 1.03 Non Warrantable Condo Loan 1.03 Non Warrantable Condo Loan The non-warrantable condo loan provides a lending solution for those borrowers who wish to purchase or refinance in a project that doesn t meet FNMA standard warrantable requirements. The following factors may deviate from FNMA s requirements: Commercial Space 35% Non-Owner Occupied/Rental Ratio* 35% Single Entity Concentration 20% *Unlimited when transaction is a primary residence Only 1 factor may deviate from Fannie Mae guidelines all other condo project attributes must meet Fannie Mae Warrantable Condo Project guidelines. The following documentation must be submitted for project approval: Condo Questionnaire Condo Budget Master Deed Master Policy and Borrower HO-6 Policy Evidence of Fidelity Bond (if not listed on Master Policy) Credit Score and LTV Matrix Minimum Credit Score Maximum LTV % Underwriting Guidelines Transaction Terms Products 5/1 ARM, 7/1 ARM, 15 Fixed, 30 Fixed Maximum Loan Amount $1,000,000 Minimum Loan Amount $150,000 Eligible Loan Purpose Purchase and Rate and Term, Cash Out Eligible Occupancies Primary, 2 nd Home and Investment Age of Documents Credit, Income and Asset Documentation may by no greater than 90 days old. Appraisal may be 120 days old Escrows Taxes and Insurance must be escrowed Section 1.03 Non Warrantable Condo Loan Underwriting Guidelines Page 4 of 15

5 Section 1.03 Non Warrantable Condo Loan Seller Concessions Limited to 4% Credit Minimum Trade Line 3 Trade lines: 1 Trade line with 12 months history and 2 trade lines with Requirements at least 6 months history. 1 must be open and active. Authorized User accounts may not be used to fulfil this requirement. Verification of 1x30x12 VOR or Mortgage History is required. Rent/Mortgage Bankruptcy Waiting Period Discharged for a minimum of 24 months. A Chapter 13 must be settled; dismissal will render the borrower ineligible. Foreclosure 24 month waiting period from foreclosure date Deed In Lieu/Short Sale, 12 month waiting period from the disposition of the property/deed date. Collections/Charge-Offs Collection accounts greater than $250 individually and $2000 cumulative must be paid off prior to closing. Medical collections may remain open with a max balance of $10K. Liens, Garnishments and Are required to be paid off. Judgements Employment and Income Substantial Increases and Any increases greater than 10% will need to be explained and Decreases in Income documented. Declining income will not be accepted. Job Gaps Gaps of 1 month or more must be explained SS Income SSA Award Letter AND 2 Months most recent bank statements evidencing current receipt Retirement or Pension All of the following are required: Income Verification from prior employer or federal tax returns Copy of Awards Letter or 1099 Rental Income from Converted Residence Required Residual Income Debt Ratios and Payment Shock Installment Debt Most recent one month bank statement evidencing current receipt Rental income from departure residence may only be included in qualifying income if the borrower had 25% documented equity in the property. Qualifying income will be calculated at 75% of gross lease. $2500 base plus $125 per dependent Liabilities Housing Ratio: 35% Total Debt Ratio Maximum: 40% Payment Shock Maximum: 125% Installment debt with less than 6 months payments may be excluded from DTI with evidence the borrower has the reserves (in addition to required Loan Program reserves) to pay off remaining debt balance. Section 1.03 Non Warrantable Condo Loan Underwriting Guidelines Page 5 of 15

6 Section 1.03 Non Warrantable Condo Loan 2106 Expenses Auto Loan and Lease Payments reported on the 2106 Expense form are treated as liabilities. All other expenses reported on the 2106 are treated as reductions to income. Assets and Reserves Earnest Money Regardless of amount earnest money deposits must be sourced and seasoned. Deposit Accounts Most recent 2 months statements or a VOD that includes both the current balance and a 60 day average balance Large Deposits Deposits greater than 25% of qualifying income require explanation and supporting documentation. Required Reserves 12 Months Reserves for subject PITIA + 2 months PITIA for each other financed property Retirement Accounts 60% of the Vested amount minus any outstanding loans will be used to calculate amount available for reserves Other Certifications Occupancy Certifications are required for every loan. ATR Borrower Confirmation Form Underwriter Explanation of FNMA Deviations Refinances: Net Tangible Benefit Form Property Minimum Square Footage 600 sq ft State Eligibility FCM Approved Lending Territory. The following states require a FICOM Minimum Credit Score of 660: DC, MD, NJ & NY. Ineligible Properties Studios (Units without a clearly defined bedroom away from main living area) Property Flipping Any property acquired by a seller within 1 year of contract date will be considered property flipping and will be ineligible. Section 1.03 Non Warrantable Condo Loan Underwriting Guidelines Page 6 of 15

7 Section 1.04 Foreign Nationals 1.04 Foreign Nationals For borrowers who are non-us citizens but is authorized to live in the US on a temporary basis but does not meet the definition of a Non-Permanent Resident Alien. The following visas are acceptable under this program: B-1 and B-2 H-2 and H-3 I J-1 and J-2 O-2 P-1 and P-2 TN NAFTA Laser Visa The following are required as evidence the borrower is in the US legally: Copy of valid and unexpired passport (including photograph) Copy of the borrower s valid and unexpired passport OR an from with valid extension dates and I-94. Borrowers from countries participating in the State Department s Visa Waiver Program (VWP) are not require to provide a valid visa Credit Score-LTV Matrix 2 nd Home and Investment Properties FICO Loan Amount Purchase and Rate & Term Max LTV/CLTV Cash Out Max LTV 680+ <=1,000,000 75% 70% <1,000,000 70% 70% <= 800,000 65% 65% Foreign Credit <=800,000 65% 60% Primary residences are not allowed under this program as borrower will not have legal permanent residence in the US Underwriting Guidelines Section 1.04 Foreign Nationals Underwriting Guidelines Page 7 of 15

8 Section 1.05 Recent Housing Events Transaction Terms Products 30 Year Fixed Rate Prepayment Penalty applies Age of Documents Credit, Income and Asset Documentation may by no greater than 90 days old. Appraisal may be 120 days old Escrows Taxes and Insurance must be escrowed Seller Concessions Up to 3% Credit Minimum Trade Line 3 open and open and active for 24 months evidenced by: Requirements US Credit Report International Credit Report Credit Reference Letter from a verified financial institution in the borrower s country of origin Verification of 1x30x12 VOR or Mortgage History is required. Rent/Mortgage Bankruptcy Waiting Period Chapter 13: Settled Other: 24 Months Deed In Lieu/Short Sale, Minimum of 12 months from property disposition date. 120 day late, forebearance/modification Foreclosure Minimum of 24 months from date of foreclosure deed. Employment and Income Maximum DTI 50% Substantial Increases and Decreases in Income Any increases greater than 10% will need to be explained and documented. Declining income will not be accepted. Job Gaps Gaps of 1 month or more must be explained SS Income SSA Award Letter AND 2 Months most recent bank statements evidencing current receipt Retirement or Pension Income All of the following are required: Verification from prior employer or federal tax returns Copy of Awards Letter or 1099 Rental Income from Converted Residence Required Residual Income Debt Ratios and Payment Shock Most recent one month bank statement evidencing current receipt Rental income from departure residence may only be included in qualifying income if the borrower had 25% documented equity in the property. Qualifying income will be calculated at 75% of gross lease. $2500 base plus $125 per dependent Liabilities Total Debt Ratio Maximum: 41% Section 1.05 Recent Housing Events Underwriting Guidelines Page 8 of 15

9 Section 1.05 Recent Housing Events Installment Debt Installment debt with less than 6 months payments may be excluded from DTI with evidence the borrower has the reserves (in addition to required Loan Program reserves) to pay off remaining debt balance Expenses Auto Loan and Lease Payments reported on the 2106 Expense form are treated as liabilities. All other expenses reported on the 2106 are treated as reductions to income. Assets and Reserves Earnest Money Regardless of amount earnest money deposits must be sourced and seasoned. Gift Funds Not Allowed Deposit Accounts Most recent 2 months statements or a VOD that includes both the current balance and a 60 day average balance Large Deposits Deposits greater than 25% of qualifying income require explanation and supporting documentation. Required Reserves 12 Months Reserves for subject PITIA + 2 months of subject property PITIA for each other financed property not to exceed 24 months. Other Certifications Occupancy Certifications are required for every loan. ATR Borrower Confirmation Form Underwriter Explanation of FNMA Deviations Refinances: Net Tangible Benefit Form Ineligible Borrower Non Occupant Borrowers Property Minimum Square Footage 600 sq ft State Eligibility FCM Approved Lending Territory. The following states require a FICOM Minimum Credit Score of 660: DC, MD, NJ & NY. Ineligible Properties Studios (Units without a clearly defined bedroom away from main living area) Section 1.05 Recent Housing Events Underwriting Guidelines Page 9 of 15

10 Section 1.05 Recent Housing Events 1.05 Recent Housing Events The Recent Housing Events loan is for borrowers who have experienced a recent significant derogatory housing event but who have re-established credit history and whose circumstances which led to the housing event have been resolved Credit Score-LTV Matrix Primary Residence FICO Loan Amount Purchase and Rate & Term Max LTV/CLTV Cash Out Max LTV 600 <=1,250,000 80% 75% 580 <=1,250,000 75% 75% Second homes and investment properties may be eligible, contact SLG for LTV and Credit Score requirements Underwriting Guidelines Transaction Terms Products 30 Year Fixed, 15 Year Fixed, 5/1 ARM, 7/1 ARM Maximum Loan Amount $1,000,000 Minimum Loan Amount $100,000 Eligible Loan Purpose Purchase, Rate and Term and Cash Out Age of Documents Credit, Income and Asset Documentation may by no greater than 90 days old. Appraisal may be 120 days old Escrows Taxes and Insurance must be escrowed Seller Concessions Limited to 6% Credit Minimum Trade Line 3 Trade lines: 1 Trade line with 12 months history and 2 trade lines with Requirements at least 6 months history. 1 must be open and active. Authorized User accounts may not be used to fulfil this requirement. Verification of 1x30x12 & 0x60x24 Rent/Mortgage Bankruptcy Waiting Period Minimum of 24 Months from discharge date. A Chapter 13 must be discharged/settled; dismissal will render the borrower ineligible. Foreclosure Minimum 24 months waiting period from date of foreclosure deed. Deed In Lieu/Short Sale Minimum of 12 months waiting period from the disposition of the property/deed date. Collections/Charge-Offs Collection accounts greater than $250 individually and $2000 cumulative must be paid off prior to closing. Medical collections may remain open with a max balance of $10K. Section 1.05 Recent Housing Events Underwriting Guidelines Page 10 of 15

11 Section 1.05 Recent Housing Events Liens, Garnishments and Judgements Substantial Increases and Decreases in Income Job Gaps SS Income Retirement or Pension Income Rental Income from Converted Residence Required Residual Income Debt Ratios and Payment Shock Installment Debt Are required to be paid off. Employment and Income Any increases greater than 10% will need to be explained and documented. Declining income will not be accepted. Gaps of 1 month or more must be explained SSA Award Letter AND 2 Months most recent bank statements evidencing current receipt All of the following are required: Verification from prior employer or federal tax returns Copy of Awards Letter or 1099 Most recent one month bank statement evidencing current receipt Rental income from departure residence may only be included in qualifying income if the borrower had 25% documented equity in the property. Qualifying income will be calculated at 75% of gross lease. $2500 base plus $125 per dependent Liabilities Housing Ratio: 35% Total Debt Ratio Maximum: 43% Payment Shock Maximum: 125% Installment debt with less than 6 months payments may be excluded from DTI with evidence the borrower has the reserves (in addition to required Loan Program reserves) to pay off remaining debt balance Expenses Auto Loan and Lease Payments reported on the 2106 Expense form are treated as liabilities. All other expenses reported on the 2106 are treated as reductions to income. Assets and Reserves Earnest Money Deposit Accounts Large Deposits Required Reserves Retirement Accounts Certifications Regardless of amount earnest money deposits must be sourced and seasoned. Most recent 2 months statements or a VOD that includes both the current balance and a 60 day average balance Deposits greater than 25% of qualifying income require explanation and supporting documentation. 12 Months Reserves for subject PITIA + 2 months PITIA for each other financed property 60% of the Vested amount minus any outstanding loans will be used to calculate amount available for reserves Other Occupancy Certifications are required for every loan. ATR Borrower Confirmation Form Section 1.05 Recent Housing Events Underwriting Guidelines Page 11 of 15

12 Section 1.05 Recent Housing Events Minimum Square Footage State Eligibility Ineligible Properties Underwriter Explanation of FNMA Deviations Refinances: Net Tangible Benefit Form Property 600 sq ft FCM Approved Lending Territory. The following states require a FICOM Minimum Credit Score of 660: DC, MD, NJ & NY. Studios (Units without a clearly defined bedroom away from main living area) Section 1.05 Recent Housing Events Underwriting Guidelines Page 12 of 15

13 Section 1.06 Real Estate Investor Loans 1.06 Real Estate Investor Loans The Real Estate Investor Loan is for well qualified borrowers who already own more than 10 Financed Properties as allowed by Fannie Mae. These loans are for borrowers purchasing or refinancing additional investment properties. Borrowers may have a total of 20 financed properties Credit Score - LTV Matrix Investment Property Only FICO Loan Amount Purchase and Rate & Term Max LTV/CLTV Cash Out Max LTV 640 <=1,000,000 70% 65% 600 <=1,000,000 65% 65% Underwriting Guidelines Transaction Terms Products 5/1, 7/1, 15 & 30 Yr Fixed Age of Documents Credit, Income and Asset Documentation may by no greater than 90 days old. Appraisal may be 120 days old Escrows Taxes and Insurance must be escrowed Seller Concessions Up to 2% Financed Properties Up to 20 financed properties Limitation Credit Minimum Trade Line 3 Trade lines: 1 Trade line with 12 months history and 2 trade lines with Requirements at least 6 months history. 1 must be open and active. Authorized User accounts may not be used to fulfil this requirement. Verification of 1x30x12 VOR or Mortgage History is required. Rent/Mortgage Bankruptcy Waiting Period Minimum of 24 Months from discharge date. A Chapter 13 must be discharged; dismissal will render the borrower ineligible. Foreclosure Minimum of 2 years from date of foreclosure deed. Deed In Lieu/Short Sale, Minimum of 2 years waiting period from the disposition of the property/deed date. Collections/Charge-Offs Collection accounts greater than $250 individually and $2000 cumulative must be paid off prior to closing. Medical collections may remain open with a max balance of $10K. Liens, Garnishments and Are required to be paid off. Judgements Section 1.06 Real Estate Investor Loans Underwriting Guidelines Page 13 of 15

14 Section 1.06 Real Estate Investor Loans Substantial Increases and Decreases in Income Job Gaps SS Income Retirement or Pension Income Rental Income from Converted Residence Required Residual Income Debt Ratios and Payment Shock Installment Debt Employment and Income Any increases greater than 10% will need to be explained and documented. Declining income will not be accepted. Gaps of 1 month or more must be explained SSA Award Letter AND 2 Months most recent bank statements evidencing current receipt All of the following are required: Verification from prior employer or federal tax returns Copy of Awards Letter or 1099 Most recent one month bank statement evidencing current receipt Rental income from departure residence may only be included in qualifying income if the borrower had 25% documented equity in the property. Qualifying income will be calculated at 75% of gross lease. $2500 base plus $125 per dependent Liabilities Total Debt Ratio Maximum: 41% Installment debt with less than 6 months payments may be excluded from DTI with evidence the borrower has the reserves (in addition to required Loan Program reserves) to pay off remaining debt balance Expenses Auto Loan and Lease Payments reported on the 2106 Expense form are treated as liabilities. All other expenses reported on the 2106 are treated as reductions to income. Assets and Reserves Earnest Money Deposit Accounts Large Deposits Required Reserves Certifications Minimum Square Footage Regardless of amount earnest money deposits must be sourced and seasoned. Most recent 2 months statements or a VOD that includes both the current balance and a 60 day average balance Deposits greater than 25% of qualifying income require explanation and supporting documentation. 12 Months Reserves for subject PITIA + 2 months PITIA for each other financed property Other Occupancy Certifications are required for every loan. ATR Borrower Confirmation Form Underwriter Explanation of FNMA Deviations Refinances: Net Tangible Benefit Form Property 600 sq ft Section 1.06 Real Estate Investor Loans Underwriting Guidelines Page 14 of 15

15 Section 1.06 Real Estate Investor Loans State Eligibility Ineligible Properties FCM Approved Lending Territory. The following are ineligible regardless of FCM Approved Lending Territory: DC, MD, NJ, AK, HI, NY, WV, MA Studios (Units without a clearly defined bedroom away from main living area) Section 1.06 Real Estate Investor Loans Underwriting Guidelines Page 15 of 15