Know Your Products Marc Kaplan, Sr. VP Retail Sales 1
Product Overview Agenda 1. Fannie Mae Federal National Mortgage Association (FNMA) 2. Freddie Mac Federal Home Loan Mortgage Corp. (FHLMC) 3. FHA Federal Housing Administration (FHA) 4. Why Fannie/Freddie vs. FHA? 5. VA Veterans Administration 6. USDA United States Dept. of Agriculture 7. MI Mortgage Insurance 8. Alternate Options Correspondent, Hybrid & Broker 9. FNMA Warrantable vs. Non-Warrantable Condos 10. Glossary 11. Who to Contact for Underwriting/Product Questions 2
FNMA Home Style Renovation Rehab Loan Similar to FHA/203K Run through DU (Desktop Underwriter for FNMA) vs. LP Loan set up Purchase Price + Rehab Costs = Total Value Rehab costs are limited to no more than 50% of the FINAL appraised value Consultant required LTV is calculated off of the Total Value 85% LTV Single Family Investment (NO Multi-Family with MI) 95% LTV Owner Occupied Single Family 80%LTV Owner Occupied 2 Family Follow standard MI guidelines Click here for FNMA Home Style Renovation Max Worksheet 3
FNMA Home Ready FNMA Home Ready Purchase Only Low to moderate income borrowers while keeping MI & rates low Great rates 97% LTV MI premiums are based on 90% LTV = lower premiums Check Click here for FNMA Home Ready Income Matrix for maximum household income 95% LTV with a non-owner occ (Boarder) co-borrower; 9 months occupancy to use income (not credit) Mandatory pre-purchase education to qualify DTI Limits Borrower under 50% & use of boarder Allows seller s concession 4
FNMA 97% LTV FNMA 97% LTV Similar to FNMA Home Ready No Income Restrictions (Unlike FNMA Home Ready) 5
FNMA HARP FNMA HARP Home Affordable Refinance Program If the customer has an existing loan prior to 5/31/2009, FNMA & will allow a refinance to the current rates, no appraisal needed Click here for FNMA lookup tool to confirm they have a FNMA loan 6
FHLMC Federal Home Loan Mortgage Corporation Run all FHLMC loans through LP (Loan Prospector) vs. DU Debt-to-Income ratios same as FNMA (49%) FHLMC Relief Similar to FNMA refi plus/harp FHLMC Relief does not allow more than $5K or 2% (whichever is lower) to add back closing costs. If you use lender credit, raise rate FHLMC loves assets ($$ in the bank & low LTV) Click here for FHLMC lookup tool to confirm they have a FHLMC loan 7
FHA - Federal Housing Administration Purchase or Refinance Must be Owner-Occupied/Primary Residence 96.5% LTV on 1-4 Family Allows either LP & DU (Loan Prospector & Desktop Underwriter) However, FHA does allow a UW refer if loan does not clear LP or DU 6% seller s concession: (set dollar amount or % of the purchase price that a seller agrees to contribute towards the closing costs) All down payment $$ can be a gift Allows a non-owner occupied co-mortgagor Ex Single-Family with non o/o Co-Mortgagor max LTV 96.5% Ex Multi Family with non o/o Co-Mortgagor max LTV 75% Debt servicing requirement on a 3-4 Family: PITI = 75% of rental income on appraisal--mandatory calculation regardless of DTI 3-4 Family properties require 3 months of PITI reserves Must live 100 miles away from rental property in order to use rental income on FHA purchase loan (i.e. customers owns home with a non- FHA and want to use rental income to qualify for new FHA loan on new primary residence). 8
Exceptions to FHA Rule: Only (1) FHA loan per borrower EXCEPT: 1. Relocation for employment and new residence is 100+ miles away 2. Increase family size and there is 25% equity in previous property 3. Vacating jointly owned property as long as one stays in property 4. Non occupant co-borrower now wants their own FHA loan 9
FHA-203K Streamline & FULL Loan Set Up -- Purchase Price + Rehab Costs = Total Value 203K Refinance loans require (2) appraisals Same Appraiser 1 st Appraisal as is 2 nd appraisal after final rehab is completed Complete Maximum worksheet--click 203K Calculator to calculate max loan FHA 203K Streamline (Rehab) $35K Maximum Rehab costs (includes all fees) No Architectural Changes No FHA Consultant Required. However, you must have 50% up front if only using contractor s estimate FHA 203K FULL (Major Renovations/Additions) -- No Limit on Rehab Costs Must have FHA Consultant estimate itemized (Material + Labor) Do not need to keep any exiting walls but you must use the existing foundation Contractor estimate is no longer needed as long as contractor signs Consultant report with the rehab costs; the Contractor will still need to provide liability insurance, etc. 10
FHA Streamline Checklist MLO Responsibilities: Copy of note and HUD-1 of loan being refinanced Most recent mortgage statement of loan being paid off MIP calculator printout reflecting previous MIP factor Copy of ID s for any/all borrowers 2 months most recent bank statements with all pages attached. Any large deposits must be fully documented. Only need to verify funds to close - current PITI payment. (ex: funds to close $2000 and current PITI of $1800, we only have to verify $200) 3 months PITI reserves required for all 3-4 unit properties. Mortgage only Credit report with FICO score of no less than 620 Processor Responsibilities: Order New Case number reflecting the following: Streamline refinance without an appraisal Old Case number (must match current note) UFMIP (Upfront MI premium) refund (if any) Appraised value in encompass must match the appraised value from Refi Auth Payoff statement from current mortgage servicer Verbal VOE with 411.com search LDP/GSA searches for all parties CPA letter with 411.com search for CPA (S/E only) Flood cert with page 2 signed 11
Why FNMA vs. FHLMC vs. FHA Why Fannie/Freddie vs. FHA Multiple family houses FHA Rehab loans FHA or FNMA Homestyle MI FNMA (MI will drop after 10 yrs. or <80% LTV) MI FHA 90% LTV will drop after 11 yrs. DTI FHA (i.e.-55% DTI with compensating factors like spouse living in house with income/paystubs, job longevity, assets, etc.) Check with the state s specific guidelines 12
VA Veterans Administration VA Veterans Administration 100% LTV (NO $$ Down) Great Rates Must have 2 yrs. Employment history (same line of work) Click here for VA Residual Income --discretionary income after borrower has paid all monthly debt. This will vary based on geography and household. A valid Certificate of Eligibility to verify benefits Applicable service documents Certification that borrower will occupy the home Upfront funding fee (2.15%) waived if veteran disabled 13
VA Local Requirements for Specific Utilities Examples of a few state specific requirements for VA: NJ Properties with individual sewerage disposal services requires clearance certificate from local health authorities or an authorized VA source FL OK with no heat PA Springs or cisterns are not acceptable water supply (Check with your state s VA specific requirements) 14
USDA US Dept. of Agriculture Income Driven Loan--Limits based on county Household/Family Income 100% LTV (NO $$ Down) Must be located in an eligible rural area Click here for the USDA Eligibility Website Lower MI Premiums (.35 vs.50) As of 10/1/16, the upfront guarantee fee is down to 1% (was 2.75%) Seller s Concession Allowed 15
MI Mortgage Insurance Mortgage Insurance VERY IMPORTANT errors in MI calculations can require you to re-disclose and start over from the beginning Be sure loan is entered in encompass accurately before MI pricing MI premiums will auto populate in encompass LTV & DTI Max usually follows FNMA/FHLMC Lender-Paid Premiums Borrower Paid Premiums Monthly Premium Split Premium 16
MI Mortgage Insurance Cont d. The monthly mortgage insurance premiums will drop off at different times depending on the loan. FNMA & FHLMC: 78% LTV Automatic Drop Off 80% LTV Drop Off per borrower request with a valid appraisal OR 10 yrs. of timely payments FHA: MI stays FOREVER if 90% > LTV MI drops off after 11 yrs. if < 90% LTV Factor varies based on LTV.80 @ Less than 95% LTV.85 @ 95.01-100% LTV 17
Alternate Options Correspondent, Hybrid & Brokers Correspondent Lenders: Pricing through MPS RHF underwrites, closes and then sells in secondary market Hybrid Lenders: The hybrid bank underwrites loan & clears it to close Loan closes in RHF name Check with your Mgr. regarding any state mortgage programs (Ex.--NJHMFA, SONYMA, PHFA, FHFC, CHFA, SCSHFD, NCMAP, etc.) Broker Lenders: Check with your Mgr. for best broker niches/scenarios Yield spread premium is disclosed to client 18
Condominium: Warrantable vs. Non-Warrantable REMINDERS: Warrant ability -- Only an issue if selling to FNMA/FHLMC FNMA allows a waiver for litigation issues Condo Questionnaire must be completed by HOA Limited Review for owner occupied Full review for investment &/or budget/reserve issues Warrantable: A condo loan that can be sold to Freddie Mac or Fannie Mae. The warrantability of a condominium development is the deciding factor for many lenders and can have a large impact on whether or not the loan will be approved. Non-Warrantable: A condo loan that is not eligible to be sold to Freddie Mac or Fannie Mae, and as such, they are considered by most banks to be more risky. Freddie Mac and Fannie Mae have established criteria when it comes to evaluating condominium developments. Examples: Less than 50% owner occupancy on a investment property If one person (or entity) owns more than 10% of a development If 15%+ of its owners are more than 30 days delinquent on the HOA dues Must have 10% Cap Reserve -- $$ for Capital Reserve Fund NOTE: FHA mandates FHA approval for all condos NO EXCEPTIONS Click here for the FHA Approved Condo List 19
Glossary DEBT SERVICE PITI = 75% of documented rental income DTI Debt-to-Income Ratio DU Desktop Underwriter (FNMA loans) FICO Fair Isaac Corporation (credit scoring model) Minimum FICO 620 for FNMA/FHLMC IRRRL Interest Rate Reduction Refinance (VA Loans) LP Loan Prospector (FHLMC loans) LTV Loan-to-Value MI Mortgage Insurance MPS Mortgage Pricing System (Built into Encompass) MRI Mortgage Reference Inc. (Agency Guidelines) PITI Principle + Interest + Taxes + Insurance = PITI SELLER s CONCESSION Allows closing costs to be financed WARRATBILITY Data collected from condo questionnaire determines if loan qualifies for a FNMA/FHLMC program 20
Who to contact for your UW questions 1. Always check with your Sales Mgr. first. 2. E-mail uwsupport@rhfunding.com with the loan specifics (Example-LTV, FICO, income, etc.) to determine if RHF can approve the loan in-house as a banker. Be sure to include the uw Support response e-mail when you submit the loan so uw knows it was already reviewed. If loan cannot be approved inhouse as a banker, refer to investor list & contact the account executive directly. (See broker list) 3. Lastly, If you are not sure which broker/investor will approve your scenario, ask your Mgr. first and then e-mail scenarios@rhfunding.com for possibly broker options. 21