MEGA ALT ARM (MA5/1)

Transcription

1 MEGA ALT ARM (MA5/1) Product Description General Loan Production Descriptions (Asset Qualifier) Product Description Eligible Property Type Eligible States Index Term Margin/Floor/Caps Income/Employment Verification Qualifying Rate Prepayment Penalty Assumable Loan Amounts Cash Reserves Minimum FICO Score 700 Interim/Hybrid ARM with an initial fixed period of 5 (5/1) years, and then adjusts to the relevant index plus margin on the first change date and every 12 months thereafter, with adjusted rate never being less than the floor. SFR, Condo, PUD or 2-4 units CA only Maximum DTI 50% Interim/Hybrid ARM s are tied to the One-Year LIBOR (average of London Interbank Offered Rate for one-year U.S. dollar deposits in the London market, based on quotations of major banks). Amortization term is no greater than 30 years. For current rate, margin, floor and interest rate caps, consult the Daily Rate Sheet. Validation of disclosed income and verification of disclosed employment Greater of Note Rate + 2% or Fully Indexed Rate No Prepayment Penalty Not Assumable Minimum Loan amount $400, Maximum Cash Out $500,000 See below for LTVs and loan amounts. 24 Months PITI(A) for Subject Additional 6 Months PITI(A) required for other real estate financed properties. Self-Employed Business Restrictions All businesses must have physical location. The following self-employed business types are ineligible: Home-based businesses Real Estate Investors Real Estate Agents Actors 1099 Contractors Self-Prepared Tax returns Co-Mingled personal and business bank statements Mega Portfolio ARM Update: 6/2/2017 1

2 PRIMARY RESIDENCE 1-4 UNITS PURCHASE/RATE & TERM CASH OUT LOAN AMOUNT LTV / CLTV CREDIT SCORE LTV / CLTV CREDIT SCORE $650, $1,000, $1,500, $2,000, SECOND HOME 1 UNIT PURCHASE/RATE & TERM CASH OUT LOAN AMOUNT LTV / CLTV CREDIT SCORE LTV / CLTV CREDIT SCORE $650, $1,000, $1,500, $2,000, INVESTMENT 1 4 UNITS PURCHASE/RATE & TERM CASH OUT LOAN AMOUNT LTV / CLTV CREDIT SCORE LTV / CLTV CREDIT SCORE $650, $1,000, $1,500, Combined Loan-to-Value (CLTV) limitations For a mortgage loan, the Combined Loan-To-Value (CLTV) is determined by combining the unpaid balances of the mortgage loan and the maximum credit limit on the home equity line of credit or any other subordinate financing (i.e. seller held liens), then dividing that sum by the lower of the purchase price or the subject property's appraised value. The above mentioned LTV s will be the CLTV limits. See above charts for the allowable LTV by transaction type. Mortgage Loans Subject to Subordinate Financing The Bank will allow subordinate financing held by another lender provided the junior lien combined with the requested financing meet the Bank s LTV and CLTV requirements. On purchase transactions, subordinate financing must be disclosed to the Bank and repayment terms must be acceptable to the Bank. Mega Portfolio ARM Update: 6/2/2017 2

3 The repayment terms for subordinate financing must provide for regular payments that cover at least the interest due; and a balloon payment, if any, must not occur prior to 5 years. Other repayment terms of the subordinate financing, including interest rate, are subject to review by the Bank. If, in the opinion of the Underwriter, repayment terms add risk to the Bank, the application for primary financing may be declined. Multiple Mortgage Loans to Same Borrower The Bank will allow a maximum of five (5) mortgage loans and five (5) financed properties to one borrower. LOAN DOCUMENTATION REQUIREMENTS Age of Documents Appraisal, income and credit documents may become less reliable as they age. A borrower s situation can change, with new debt taken on, loss of employment, or changes in the value of property. Assets/Credit/Income Collateral Credit documents used for verification (paystubs, bank statements, credit reports, etc.) should be no more than 90 days old. The age of the documents is measured from the date of the document to the date of the Note. The Appraisal used for property valuation is valid for 120 days. If the original appraisal is more than 120 days old at the date of the Note, a recertification is required regardless of whether the property was appraised as existing or as a new construction. A recertification of value is acceptable for an additional 60 days. If the property has declined, a new full appraisal with interior and exterior inspection is required. In no case can the appraisal be older than 180 days old at the Note date. Sources Documents used for verification may be original, copies, or computer generated; they may be received in person, by mail, by fax, or . The Bank will determine if the documentation contains all the required information. If a document appears questionable, the Bank will determine if an inappropriate situation exists and if it requires further investigation. Documentation downloaded from the internet or employer intranet sites must meet all requirements and must also clearly identify the name and source of the provider. For example, a paystub document downloaded from an Intranet site should show the name of the employer and source of information (URL address). General Requirements Alternative documentation is acceptable for self-employed, salaried, or commissioned income borrowers with strong mitigating factors. All mitigating factors must be fully documented. Mitigating factors include situations where the borrower(s) have substantial liquid reserves or assets; low debt-to-income ratio; and, a strong credit reputation that demonstrates repayment capacity. Income must be disclosed accurately to allow for underwriting the borrower s ability to repay the mortgage. The Bank must confirm that the income disclosed in the loan application is reasonable based on the borrower s occupation, type of business, tenure, and title. Mega Portfolio ARM Update: 6/2/2017 3

4 Self-Employed Business Restrictions- All businesses must have physical location. The following self-employed business types are ineligible: Home-based businesses Real Estate Investors Real Estate Agents Actors 1099 Contractors Self-Prepared Tax returns Co-Mingled personal and business bank statements A minimum of 2 years in the same business is required for self-employed borrower(s). Acceptable sources of income are self-employment income including income from sole proprietorships, corporations, limited liability or S corporations, partnership income, alimony/child support income, and investment income. For self-employed borrowers and for borrowers who receive alimony/child support, investment income, notes receivable income, military or government assistance income or VA benefits income, the income disclosed on the loan application will be used for qualification and must be supported by the borrower s bank statements, showing 2 months receipt of these types of income. INCOME ANALYSIS All businesses must separately manage their finances as indicated from business transfers to the borrower s personal bank accounts. The use of co-mingled back statements is not permitted under this program. Income will be calculated based on the lower of the 1003 income or a two month average of business deposit/transfers to the borrower s personal account. All business deposits must be sourced using a cancelled check or business bank statement(s). Verbal verification of employment Letter from CPA or a tax preparation firm indicating length of borrower s business (minimum of 2 years), business address, and percentage of ownership is required for self-employed borrowers. Rental income for current properties: 12-month lease or rental agreement, which must be current at application and fully executed (i.e. signed by the property owner, manager, or whoever leases or rents the units) must be provided. If lease has expired, and a new lease agreement is not available, documentation that current tenants are month to month with verification of current rent must be provided. Current PITI(A) documents must also be provided. Required on rental properties. Special Underwriting Considerations for Subject Investment Property Borrower must own a principal residence; Borrower may not be affiliated with or related to the builder, developer, or property seller for newly constructed homes; Mega Portfolio ARM Update: 6/2/2017 4

5 Borrower must demonstrate at least a 2-year history managing 1-4 unit investment properties if rental income is used to qualify; The actual rents being collected must be supported by the market rents as listed on the appraisal. 12-month lease or rental agreement, which must be current at application and fully executed (i.e. signed by the property owner, manager, or whoever leases or rents the units) must be provided. If lease has expired, and a new lease agreement is not available, documentation that current tenants are month to month with verification of current rent must be provided. 75% of rent on lease agreement or market rent supported by Form 1007/1025, whichever is less, can be used for rental income. TRANSACTION TYPES Purchase-Money Transactions Purchase-money transactions are generally defined as those in which the property is currently not vested in the borrower's name, and: The proceeds are used to finance the purchase of the subject property Refinance Transactions For a refinance transaction, if the subject property was purchased within the last 12 months (as determined from the date title was acquired to the application date of the current loan), the LTV is based on the lesser of the original purchase price or appraised value. The cost of capital improvements that have been documented by the borrower may be used to support the new appraised value, if appraisal is higher than purchase price. Listed properties: A written explanation is required for properties previously listed for sale within the last 12 months of the new application date. For a principal residence transaction, borrowers must confirm their intent to occupy the subject property as a primary residence and property must be withdrawn prior to the initial loan application date. For a cash out refinance, the subject property must be taken off the market 3 months prior to the initial loan application date. Seasoning Requirement: At least one borrower must have owned the property to be refinanced for at least 6 months prior to the initial loan application date. Rate and Term (No Cash Out) Refinance To be considered a rate and term refinance, the following conditions are acceptable in conjunction with a Rate/Term Refinance Transaction: Paying off of the unpaid principal balance of the existing first lien on the subject property, including closing costs, prepaid items and points; Paying off any purchase money second; Paying off any subordinate lien or equity line of credit (HELOC) seasoned more than 12 months that has not had draws > $2,000 in the past 12 months. Maximum cash out amount to the borrower does not exceed the lesser of $2,000 or 2.0% of the principal amount of the new loan. Mega Portfolio ARM Update: 6/2/2017 5

6 Cash proceeds used to pay non-mortgage liens (e.g., tax liens) and other liabilities (e.g., installment and revolving debts); and / or paid directly to the borrower is considered cash out; in addition, any portion of mortgage proceeds used to pay off the unpaid principal balance of an existing mortgage on any property other than the subject property is considered cash out. For all rate and term refinance transactions where there have been prior, multiple or recent refinancing, Underwriters will review the benefit of the proposed subject refinancing to ensure that the borrower is obtaining a benefit from the new loan. Cash-Out Refinance A loan is considered a cash-out refinance if the mortgage amount includes the unpaid principal balance of an existing first mortgage (on the subject property), closing costs, prepaid, points, the amount required to satisfy any outstanding subordinate mortgage liens, and additional cash exceeding the lesser of $2,000 or 2.0% of the principal amount of the new mortgage. Cash out Seasoning: 6 months ownership required unless Delayed Financing Exception terms are met. Delayed Financing Exception is allowed if the subject property was purchased within the past 6 months (measured from the date on which the property was purchased to the disbursement date of the new mortgage loan), was an arms-length transaction, and the source of funds used for the purchase transaction was borrower s own funds. Multiple cash out transactions are not allowed within the last 12 months prior to the loan application date. BORROWER ELIGIBILITY Eligible Borrowers United States Citizen; Permanent Resident Alien; Non-Permanent Resident Alien; and Inter Vivos Revocable Trust; Non-Occupant Co-Borrower Parties wishing to assist borrowers in qualifying for a loan typically do so as co-borrowers on the note. Non-occupant co-borrowers are not allowed. Resident and Immigration Status Residential mortgage loan applicants other than United States citizens must be permanent or nonpermanent resident aliens as subsequently described to be eligible for financing. Permanent Resident Aliens Permanent resident aliens are eligible for a mortgage loan on the same terms as a United State citizen. The permanent resident alien must hold acceptable evidence of permanent residency issued by the Immigration and Naturalization Service (INS). Non-Permanent Resident Aliens Non-permanent resident aliens are eligible for a mortgage loan on the same terms as a Unites States citizen only if co-borrowing with one of the following who is the primary borrower: Mega Portfolio ARM Update: 6/2/2017 6

7 A United States Citizen A Permanent Resident Alien Temporary Residence status may be established by any of the following: An unexpired Employment Authorization Document issued by the INS which contains a photograph (Form I-766). Other evidence of temporary residence status should be submitted to the Legal Department for review. Requirements: Borrower(s) must have been living and working in the United States for at least 2 years, must have a valid Social Security Number(s), have established credit history, have filed tax returns in the United States for past 2 years and meet all other portfolio guidelines. LEGAL ENTITIES An entity may be a natural person. A borrower/co-borrower may only be a natural person or an Inter Vivos Revocable Trust. Power of Attorney A Power of Attorney (POA) is a written instrument by which an individual (principal) assigns authority to another individual (agent or attorney-in-fact) to act on the principal's behalf. The agent may or may not be a party to the real estate transaction. The use of a POA is permitted on closing documents for purchase transactions only. The Bank allows the use of a Limited Transaction-Specific Power of Attorney on mortgage related transactions, as required per FNMA guidelines. The Underwriter will review the POA to ensure it grants the agent only specific legal power to act on behalf of the principal. The agent is subject to the limitations and terms set forth in the POA document. To be acceptable, the POA document must permit the agent to complete a specific real estate transaction on behalf of the principal and contain a termination date beyond the date of close of that transaction. The Limited Transaction-Specific Power of Attorney is accepted for natural persons only and is not accepted for Trustees or Entities. If a Power of Attorney is used, the original or typed Loan Application (FNMA Form 1003) must bear the live full signature of the Borrower(s). Trusts An Inter Vivos Revocable Trust (or Living Trust) is a trust that an individual creates during his or her lifetime that becomes effective during his or her lifetime, but which can be changed or canceled at any time for any reason during its creator s lifetime. A trust involves three parties: Grantor/Trustor (the person or entity giving property to the trust); the Trustee (the person or entity which holds legal title to and manages the trust property); and the Mega Portfolio ARM Update: 6/2/2017 7

8 Beneficiary (the person who receives the benefit of the income or principal from the trust). Legally, the assets of the trust are liable for the obligations of the trust and, in the case of a revocable trust, are subject to claims of the creditors of the Trustor, but the Trustee and Beneficiary are not personally liable for the obligations of the trust unless the Trustee and/or Beneficiary execute a personal guarantee pledging their personal assets to the trust s obligations or sign the loan documents as individuals. The Bank will lend to Inter Vivos Revocable Trusts, which meet the requirements of the Bank CREDIT HISTORY Traditional Credit History Fico credit scores for each borrower from each of the 3 major credit repositories are required on a 3 in-file merged credit report. 2 years credit history is required for each borrower with a minimum of 3 trade lines, with 2 of which must reflect activity within the most recent 12 months (active is defined as last activity date less than or equal to 12 months from the current date). Mortgage payment: 0x30 in the last 24 months prior to the initial application date. Housing payment: 0x30 in the last 12 months prior to the initial application date. Revolving/Installment payment: 1x30 the last 12 months prior to the initial application date. All judgments, tax liens, or collections must be satisfied, released, or paid off. No Bankruptcy, foreclosure, deed-in-lieu, short sale, mortgage charge offs, modification, consumer credit counseling, or repossession. Written explanation for adverse or derogatory credit information that appears to have a significant effect on the borrower s creditworthiness will be required. Student Loans All student loans must be included in the debt ratio regardless of deferment status. If a monthly payment is not indicated on the credit report, documentation to support the verified payment amount must be obtained and included in the monthly debt calculation. Bank will calculate a monthly payment using 1.0% of the outstanding balance as the borrower s recurring monthly debt obligation. However, if documentation is provided by the borrower that indicates the actual monthly payment that will fully amortize the loan, documented actual monthly payment may be used in qualifying the borrower. HELOCS Bank will utilize the payment reflected on the credit report. If no payment is reflected and there is an outstanding balance, Bank will use 1.0% of the outstanding balance amount to determine the HELOC monthly payment used for debt ratio calculations, unless monthly payment can be documented from the current lien holder. Mega Portfolio ARM Update: 6/2/2017 8

9 Interested Party Contributions 3% of purchase price regardless of LTV/CLTV for primary residence or second home. 2% of purchase price regardless of LTV/CLTV for investment property. ASSETS Most recent 2 months bank statements for all assets listed on the 1003 (i.e. checking, savings, certificate of deposit, money market funds, stocks, bonds, etc.). The latest bank statement must be dated no earlier than 45 days prior to the initial loan application date. All large deposits exceeding 50% of borrower s monthly qualifying income must be documented. Retirement and Investment Accounts 100% value of investment accounts, such as stocks, bonds, and mutual funds (publicly listed and traded). 100% value of retirement account s vested balance. Acceptable terms/conditions of withdrawal must be provided for 401K retirement accounts. Gift Funds Purchase transactions only. Borrower must contribute a minimum of 10% of his/her own funds. Gifts are allowed only from immediate family members, future spouse, or registered domestic partner living with borrower for down payment and closing costs. Gift funds are not permitted for second home or investment property transaction. Gift funds may not be used to meet reserve requirements. An executed gift letter by donor(s) and borrower(s) with the gift amount, date of gift, donor s name, address, telephone number, relationship to borrower, subject property address, and a statement from the donor that no repayment is expected. Business Assets Borrower must be a sole proprietor or 100% owner of the business. Maximum 50% of 2 months average ending balance can be used for down payment, closing costs, and reserves. Appraisals All appraisals must be completed by a state certified appraiser. The Lender requires an Administrative Review of all appraisals regardless of loan amount. Mega Portfolio ARM Update: 6/2/2017 9