FNMA vs FHLMC Guideline Comparisons

Transcription

1 FNMA vs FHLMC Guideline Comparisons Table A: Guidelines for Maximum LTV and Loan Amounts Max LTV/ Loan Amount FANNIE MAE FREDDIE MAC Primary Residence 1 Unit Max LTV Max ARM LTV Max Loan Amount* Max LTV Max Loan Amount 97%** 95% $424,100 95% 2 Unit 85% 85% $543,000 80% Same as FNMA 3 Unit $656,350 80% 4 Unit Vacation/ 2 nd home $815,650 1 Unit 90% 90% $424,100 85% Same as FNMA 80% Investment Property 1 Unit 2-4 Units 85% Same as Primary Residence 85% Same as Primary Residence * This table does not include high-balance or super-conforming loan limits. ** FNMA will allow up to 97% LTV for purchase transactions where at least one borrower is a first-time homebuyer (has not owned a home in the last 3 years), and for limited cash-out refinances where FNMA owns the current mortgage.

2 Table B: Loan Type Guidelines Loan Type FANNIE MAE FREDDIE MAC Fixed Rate Max LTV: 97% Ratios: Determined by DU Max DTI of 50% Max 45% for manually loans underwritten Max LTV: 95% Ratios: Determined by LPA Max DTI of 45% Max 28%/36% for manually underwritten loans Fixed Rate w/buydown ARM ARM w/buydown Max LTV: 97% Ratios: Same as Fixed Rate Max Buydown: 36 months 300 bp Qualifying Rate: Note Rate Max LTV: 1 Unit: 95% 2 Units: 85% 3-4 Units: Ratios: Same as Fixed Rate Qualifying Rate: 6-month, 1-year, 3-year & 5-year greater of note rate plus 2% or the fully-indexed rate 7-year to 10-year greater of note rate or fully-indexed rate Annual Cap: 2% Life Cap: 6% Max LTV: 95% 3-year & 5-year ARMs Max Buydown: 36 months 200 bp 60 months 300 bp Qualifying Rate: Same as ARMs Annual Cap: 1% Max LTV: 1 Unit: 95% 2 4 Units: 80% Ratios: Same as Fixed Rate Qualifying Rate: 6-month, 1-year, 3-year, 3/1, 5-year, 5/1 greater of the note rate plus 2% or the fully-indexed rate 7/6 month, 7/1, 10/6 month, 10/1 note rate Annual Cap: 2% Life Cap: 6% Max LTV: 95% 3/1, 5/1, 5-year, 7/1, 10/1, 7/6, 10/6 Max Buydown: 36 months 200 bp 60 months 300 bp Qualifying Rate: Same as ARMs Annual Cap: 1% Remember FNMA and FHLMC have different ratio guidelines. FNMA cares only about the back-end ratio, while FHLMC looks at both the front-end ratio and the back-end ratio. They also vary within each of the programs.

3 Table C: Refinance Guidelines Transaction Type FANNIE MAE FREDDIE MAC Rate & Term Refinances (FNMA: Limited Cash-Out FHLMC: No Cash-Out ) Equity Buyouts Cash-Out Refinances 1 Unit Max 97%* LTV (ARM 95%) 2 Units Max 85% LTV (ARM 85%) 3-4 Units Max LTV (ARM ) 1 Unit Max 90% LTV (ARM 90%) 1-4 Unit Max LTV (ARM ) Max Cash to Borrower: Lesser of 2% or $2,000 of the appraised value. Jr. Liens: May be included in payoff if the lien (subordinate financing) was used in whole to acquire the property. Otherwise, it will be considered a cash-out refinance. Max LTV: 97%* Limited Cash-Out Refinance Buyout-Divorce: No cash back to occupant borrower Property Settlement documentation must be obtained Buyout-Domestic Partner or Fiancé: The property was jointly owned at least 12 months, and Evidence of occupancy as their principal residence by both parties, and A signed written agreement that states the terms of the property settlement, and No cash back to occupant borrower, and Remaining borrower must qualify to Fannie Mae s standard underwriting guidelines 1 Unit Max 80% LTV (ARM 80%) 2-4 Units Max LTV (ARM ) 1 Unit Max LTV (ARM ) 1 Unit Max LTV (ARM ) 2-4 Unit to Max 70% LTV (ARM 70%) Max Cash-Out: Equal to Max Loan Amount 1 Unit Max 95% LTV 2-4 Units Max 80% LTV 1 Unit Max 85% LTV 1-4 Units Max LTV Max LTV: 80% Special Purpose Cash-Out Refinance Buyout Ex-Spouse, Joint Heir, or Joint Devisee: 1 Unit Max 80% LTV 2-4 Units Max LTV 1 Unit Max LTV 1 Unit Max LTV 2-4 Unit Max 70% LTV *FNMA will allow up to 97% LTV for limited cash-out refinances where FNMA owns the current mortgage.

4 Remember FNMA and FHLMC offer different LTV s for refinances. Also, FNMA calls a rate & term refinance a limited cash-out, while FHLMC calls it a no cash-out. Table D: Co-Borrower Guidelines Co-Borrowers FANNIE MAE FREDDIE MAC Non-Occupying Trailing Co-Borrowers Max LTV: 90% Occupant Ratios: 43% Combined Ratios: 36% Borrower Funds: For LTV > 80% Occupant borrowers must have the first 5% from their own funds. Trailing Secondary Wage Earner s Income: Not allowed Max LTV: 95% Occupant Ratios: 35/43% Combined Ratios: 28/36% Trailing Secondary Wage Earner s Income: Not allowed

5 Table E: Guidelines for Minimum Equity from Gifts or Reserves Minimum Equity Gift/Reserves FANNIE MAE FREDDIE MAC Borrower Equity Borrower Reserves Min Borrower Down Payment: >80% LTV - 0% < 80% LTV - 0% All LTVs - 5% No gifts or grants allowed : Determined by DU 2-6 months PITI per property if borrower s current principle residence is pending sale or changing original occupancy status Up to 12 PITI months per property for manually underwritten files Second Home: Determined by DU and up to 6 months PITI per property depending on how many others are owned by borrower Up to 12 months PITI per property for manually underwritten files Determined by DU and up to 6 months PITI per property depending on how many others are owned by borrower Up to 12 months PITI per property for manually underwritten files Min Borrower Down Payment: >80% LTV - 0% < 80% LTV - 0% All LTVs - 5% No gifts or grants allowed : Determined by LPA Up to 6 months per property if the borrower s current principle residence is pending sale or changing original occupancy status Second Home: 2 months PITI for subject property and each additional investment property if applicable 6 months PITI for subject property and 2 months for each additional property (except for primary residence)if applicable Remember FNMA and FHLCM do not require a borrower to have any of their own funds for down payment all funds for closing can all be paid with a gift. Typically, borrowers do not need reserves, but if they are purchasing a second home or investment property, they will need reserves based on the chart above.

6 Table F: Guidelines for Gifts and Maximum Seller Contributions FANNIE MAE FREDDIE MAC Gifts Maximum Seller Contributions Gifts must be from a relative as evidenced by a gift letter signed by the donor with the following information: Specify the dollar amount of the gift Indicate the donor s name, address, telephone number and relationship to the borrower, and Documentation must include evidence of receipt of funds Include the donor s statement that no repayment is expected Indicate the date the funds were transferred Provide the source of the gift funds 90.01% = 3% 75.01% - 90% = 6% < = 9% 90.01% = 3% 75.01% - 90% = 6% < = 9% All LTVs = 2% Note: You must consider the CLTV when determining the allowable seller contributions.

7 Table G: Condominium Guidelines Attached Housing FANNIE MAE FREDDIE MAC Condominiums See FNMA and lender/investor guidelines specific See FHLMC and lender/investor guidelines specific Table H: Guidelines for Mortgage Insurance Coverage FANNIE MAE These are the current standard coverage requirements, and are subject to change. FREDDIE MAC These are the current standard coverage requirements, and are subject to change. Mortgage Insurance Coverage Fixed-rate loans LTV yr yr % 35% 35% % 30% 25% % 25% 12% % 12% 6% Non-fixed-rate loans LTV all loan terms % 35% % 30% % 25% % 12% Fixed-rate loans LTV yr yr % 30% 25% % 25% 12% % 12% 6% Non-fixed-rate loans LTV all loan terms % 30% % 25% % 12% Remember These are the standard coverage rates for all conventional loans. Sometimes automated underwriting systems will give you reduced coverage due to the strength of the loan. However, your company may decide to use the standard coverage rate no matter what the findings conclude.

8 Table I: Credit Guidelines FANNIE MAE FNMA requires a 620 minimum credit score except in the case of manually underwritten loans where the borrower has nontraditional credit, or manually underwritten MyCommunityMortgage loans, or HARP loans. The lender must determine the borrower has demonstrated a willingness to meet credit obligations and draw a logical conclusion about the borrower s commitment to repay the mortgage. To do this, FNMA encourages the use of credit scores in the overall evaluation of a borrower s credit history. However, the lender should not use the score as the sole determining factor in the decision-making process. FNMA recommends that a lender obtain at least two FICO Bureau Scores from each borrower then select a representative score to use in underwriting the borrower. The lower score should be used when two FICO Bureau Scores are obtained; the middle score when three are obtained. A strong credit score can be a compensating factor to offset other risks in the credit file. The lender should be careful not to layer other risk factors with a weak credit score. The score factors included with each score should be reviewed to gain insight about which factors most influenced the score. Lenders should also ensure that the information provided in the credit file accurately reflects the borrower s credit history; if not, the score should be disregarded. Lenders should use the following guidelines on scores: 620 minimum credit score for loans submitted through DU 620 minimum credit score for manually underwritten fixed rate loans 640 minimum credit score for manually underwritten ARM loans FREDDIE MAC The lender must determine the borrower is creditworthy by either submitting the loan to LPA, or by manually underwriting the entire file. An acceptable credit reputation for one borrower cannot offset an unacceptable reputation of another. When the borrower(s) lack(s) a credit score, the mortgage must: Be a purchase or a "no cash-out" refinance mortgage Be secured by a 1-unit property, and all borrowers must occupy the property as their primary residence Have a loan-to-value (LTV), total LTV (TLTV) and Home Equity Line of Credit (HELOC) TLTV (HTLTV) ratio that does not exceed 95% Be a fixed-rate Mortgage Eligibility Exclusions When the borrower(s) lack(s) a credit score, the mortgage must not be: Secured by a manufactured Home A super conforming mortgage if the borrower(s) without a usable credit score contributes 50% or more of the total monthly income, then each borrower without a usable credit score must meet the same credit history requirements that apply to accept and A-minus mortgages when no borrower on the mortgage has a credit score (e.g., at least two payment references). The Loan Product Advisor Feedback Certificate will include a feedback message to alert the seller when these requirements must be met. For credit reputation, the lender must evaluate: Type and amount of credit How long credit has been established How the borrower uses credit Recent changes in number of opened accounts or overall credit outstanding Payment history and status Recent inquiries Public records and collections A low score influenced by temporary extenuating

9 circumstances may be allowed when the event was beyond the borrower s control, the borrower had an excellent credit record before the event, the event is thoroughly documented, and the borrower has reestablished an acceptable credit history. The lender cannot offset unacceptable credit with: Lower ratios Extra reserves Lower TLTV Ability to carry debt load Or any combination of the above Significant derogatory credit due to extenuating circumstances requires: Circumstances beyond the borrower s control Reduced income/increased expenses Rendered borrower unable to pay Third party confirmation Two year re-establishment No evidence of prior credit problems All credit current

10 Notes COURSE V: UNDERSTANDING CONVENTIONAL LENDING