CORRESPONDENT LENDING ANNOUNCEMENT AIG Correspondent Lending Guideline Update Summary April 12, 2018 The following is a summary of the updates to AIG Correspondent Lending s Seller s Guide, Conforming Underwriting Guidelines, Jumbo Underwriting Guidelines and Quick Reference Guide (QRG). This summary, as well as the updated individual guides can be found at www.aig.com/correspondentlending under View Seller Resources. The updates reflected in this document will be effective for loans locked with AIG Correspondent Lending on or after April 16, 2018. If you have additional questions, please reach out to Shane Larscheid, Vice President of Sales, for assistance. Correspondent Lending Seller s Guide Section 1.11 Quality Control (update) The guide has been updated throughout to indicate Quality Control plans must meet those specifications set forth by Fannie Mae (Additional updated Sections include: 1.18, 2.1, 2.3). Section 3.10 Delivery of Loan documents to AIG Investments, Expiration Dates, and Late Delivery (update) The first paragraph under Expiration Date has been updated to address current procedures. The Seller shall deliver documentation conforming to AIG Investments standards on or before the time period set forth above and shall clear any conditions or funding requirements, including documentation issues, on or before the Rate Lock Expiration Date. If the conditions or funding requirements are not cleared on or before the Rate Lock Expiration Date, AIG Investments will extend the lock in increments of 7 days at a cost of -0.125 until an underwriting decision is provided. Section 3.11 Suspended Mortgage Loans Subsequent to Loan Closing The following has been added to this section: Notification in the form of an email must be sent to AIG Investment Pricing Desk to inform AIG of any errors, omissions, or inconsistencies provided to AIG throughout the course of the process (see additional purchase advice information in Section 7 of these guides). 1
Section 4.7 Jumbo Mortgage Loan Appraisal Review Process The appraisal policy has been updated to read: AIG requires all jumbo appraisals to be accompanied by a desk review or field review. The Desk Review products acceptable to satisfy this requirement must be from one of the three providers listed below: Clear Capital Collateral Desktop Analysis (CDA ). Summit Valuations (SVR). Pro Teck Valuation Services Appraisal Risk Review (ARR). A value variance within 10% (higher or lower) of the full appraisal report value is acceptable. The value used to determine the LTV/HCLTV would be that of the full appraisal. When a Desk Review variance exceeds 10% below the value reported on the full appraisal report, a Field Review should be obtained to support the full appraised value. When a Field Review variance exceeds 10% below the value reported on the full appraisal report, a second full appraisal should be obtained. The lower value of the two full appraisal reports will be the value used to calculate LTV/HCLTV. The AMC may remain the same for the varying report types, however the Field Review or second full appraisal report may not be provided by the Appraisal Company who completed the initial full appraisal. Section 8.5 Servicing Transfer (update) Effective January 1, 2018, Cenlar will require a copy of the Notice of Servicing Transfer (NST) be delivered in the New Loan Setup Package for all new loans boarded. This change is being made based on direction from our legal and compliance teams in order to evidence compliance with Regulation X 12 CFR 1024.21(d). While the NST document will be tracked with our image vendor, (Notice of Servicing Transfer document type code ASIDL22), it will not delay the New Loan Quality Assurance review. The document will, however, remain on the Missing Document report until it is satisfied Sellers shall provide AIG Investments a copy of the borrower s Notice of Servicing Transfer Letter or Goodbye Letter 15 days prior to the Servicing Transfer Date indicated on the purchase notification. Section 9.2 Representations, Warranties and Covenants Regarding Individual Mortgage Loans Each Investment Property Mortgage Loan satisfies all applicable criteria and documentation and disclosure requirements for an Investment Property Mortgage Loan as set forth in the Underwriting Guidelines [and the Seller Guide, as applicable,] and all such documentation is complete, true, and correct. 2
Glossary Section (15) Appraised Value In the case of a Jumbo Refinanced Mortgage Loan, such value of the Mortgaged Property is based on the appraisal report when supported (10% tolerance allowable) by a Desk Review, Field Review, or second full appraisal report. Please see Jumbo Appraisal requirements and Seasoning requirements in this Seller s Guide and the Correspondent Lending s Jumbo Underwriting Guidelines. Glossary Section (73) Investment Property Mortgage Loan Any Mortgage Loan (i) identified on the related Mortgage Loan Schedule as a non-owner-occupied property loan or similar designation, (ii) that does not constitute consumer credit within the meaning of 12CFR 1026.2 (12), (iii) with respect to which the related Mortgage Property is being used for residential purposes and not for any commercial purposes, and (iv) that is not a Cooperative Loan. Correspondent Lending Conforming Underwriting Guidelines Matrix Section Product Section (update) Loan limits updated based on Fannie Mae loan limit change. Section 3.02 Ineligible Property Types (m) (clarification) The following guidance was added to Ineligible Property Types section: Properties which are unique in nature (dome, berm and octagon homes etc.). Section 3.05 Ineligible Asset and Down Payment Options (update) The following guidance was added to the Ineligible Asset and Down Payment Options section: Assets derived from cryptocurrencies such as bitcoins. 3
Correspondent Lending Jumbo Underwriting Guidelines Matrix Section-Loan Products (update) All references to mortgage insurance and loan LTVs exceeding 80% have been removed from the Jumbo Underwriting Guideline. Matrix Section-Loan Products (update) The minimum loan amount has been updated based on Agency one-unit conforming limits. Matrix Section-Loan Products (update) The maximum loan amount was updated from $1.0M to $1.5 M when the subject property is a primary residence or second home (additional requirements for credit score, LTV, and product apply). The loan limit for first-time homebuyer loans remains at $1M. Matrix Section-Gift Fund Eligibility Gift funds are eligible on loan amounts up to $1.5M. Matrix Section Ineligible Loan Attributes (update) Loans with more than four borrowers has been added to the list of ineligible loan attributes. Section 1.03 Loan Application (clarification) The initial loan application must be signed and dated by the Loan Originator and all Borrowers. Section 1.07 Miscellaneous Closing and Servicing Procedures (A) Leaseback Option (clarification) The terms of a leaseback option must be clearly specified in the purchase contract. Section 1.07 Miscellaneous Closing and Servicing Procedures (F) Escrow for Postponed Improvements (update) Escrow holdbacks for new construction properties are no longer specifically limited to weather delays. The delayed improvement must be exterior in nature and may be related to any of the following reasons: o Weather. o Shortage of building material. o Water shortage. 4
o o Labor shortage. Third party contracts. Escrow holdback periods of 180 calendar days from closing are acceptable with the exception of in-ground pool installation which is limited to 120 calendar days from the closing date. Section 1.07 Miscellaneous Closing and Servicing Procedures (G) Right of Rescission Period (clarification) If the rescission period is re-opened post-closing for any reason, the loan would be ineligible for purchase by an Approved Buyer. Section 2.02(C) Loan Purpose Eligible Refinance Mortgage Transaction Attributes (clarification) When paying-off or subordinating a PACE loan; follow applicable Agency requirements if not addressed within these guides. Section 2.08 Ineligible Transaction Types (P) Loans exceeding 80% LTV/HCLTV. Section 2.18 Non-Arm s Length Transactions (update) Follow applicable Agency requirements for non-arm s-length transactions. Section 3.02 Ineligible Property Types (clarification) Properties deemed unique or consisting of unique characteristics are ineligible. Section 3.11 Condominium Owner s Association Obligation (update) Requirements related to Homeowner s Association information has been removed from this section. Section 4.03 Appraisal Report Requirements (update) The appraisal policy has been updated as follows: AIG requires all jumbo appraisals to be accompanied by a desk review or field review. The Desk Review products acceptable to satisfy this requirement must be from one of the three providers listed below: Clear Capital Collateral Desktop Analysis (CDA ). Summit Valuations (SVR). Pro Teck Valuation Services Appraisal Risk Review (ARR). 5
A value variance within 10% (higher or lower) of the full appraisal report value is acceptable. The value used to determine the LTV/HCLTV would be that of the full appraisal. When a Desk Review variance exceeds10% below the value reported on the full appraisal report, a Field Review should be obtained to support the full appraised value. When a Field Review variance exceeds 10% below the value reported on the full appraisal report, a second full appraisal should be obtained. The lower value of the two full appraisal reports will be the value used to calculate LTV/HCLTV. The AMC may remain the same for the varying report types, however the Field Review or second full appraisal report may not be provided by the Appraisal Company who completed the initial full appraisal. Section 4.04 Documentation Age and Standards (update) All appraisal reports must be in the name of the originating lender and prepared for the current transaction. No transfers or assignments allowed. Section 4.06 Disaster Policy (clarification) Added the following language to our existing policy Loan fundings may be delayed as a result of properties located in a disaster area as declared by an individual state or by Federal authority such as FEMA. Section 5.05 Ownership Interest (clarification) Title held by a LLC must meet continuity of obligation requirements. Section 5.07 Power of Attorney (clarification) A Power of Attorney is acceptable on transactions with an individual borrower. Section 6.01 Documentation Quick Reference (clarification) Quick reference points have been added to this section of the Employment and Income Chapter. Section 6.03 Employment Gaps (clarification) Borrower s new employment must be documented with a WVOE and paystub, employment contract and paystub, or 30 days of paystubs. A verbal verification of employment must be provided. 6
Section 6.04 Extended Absences (clarification) It is acceptable to measure the length of employment from the date a borrower began or returned to work to the date of closing or loan consummation. Section 6.06 Projected Income from New Job (Executed Employment Contracts) Verbal verification of employment to support the borrower s employment has begun must be provided. Section 6.09 Income Types A through I (clarification) Check each section for updated clarifying verbiage. Additionally the rental income and self-employment income sub-sections have been updated to refer the user to Chapter 10. Section 6.11 Retirement Income (update) Retirement income must be verified by the former employer or from Federal Tax returns. Section 6.12 Retirement Distribution Income (update) Account distribution income must have already begun, and must continue for a minimum of three years from the Mortgage Loan closing. File must contain evidence of the most recent retirement income distribution. Section 6.14 Self-employed Co-borrower Income/Loss Co-borrowers jointly applying for a Mortgage Loan whose income is not being used for qualifying must still provide the most recent two years signed tax returns, Profit & Loss, and Balance Sheet; any losses must be included in the ratios. Section 6.15 Net Loss from a Trust (update) Income loss or negative income reported from a trust must be factored into the qualifying ratios for a borrower. Section 6.17 Unacceptable Income Sources (clarification) Rental income from the subject investment property on a purchase transaction was added. Rental income from an accessory unit associated with the subject property was added to this section. 7
Section 7.03 Credit Report Requirements (clarification) Late payments unrelated to the mortgage, which occurred in the previous 12 months require a letter of explanation from the borrower. Section 7.09 Minimum Trade Line Requirement (clarification) The required minimum credit standard of three trade lines reporting a minimum of 12 months history each has been clarified by adding must reflect a satisfactory payment history. Section 7.15 Collections/Charge-offs/Liens/Judgments/Settled Debts (updated) All settled debts reported in the previous 24 months must be fully explained and taken into consideration in the full credit review. Section 7.16 IRS Installment Plans (update) The requirement of a 12 month pay history has been updated to read Document a satisfactory payment history (account must be in good standing). The borrower having sufficient reserves to cover the remaining balance of a debt has been removed and is now considered ineligible. Section 7.17 Housing and Rental Payment History (update) For qualification purposes first time homebuyer s rental documentation requires at least one borrower has a 24 month rental history. Peer to peer payment methods can be considered if properly documented with monthly statements or pay histories. Section 7.20 Paying off Debt (clarification) Revolving debt must be documented as paid in full in order for the monthly obligation to be removed from the qualifying DTI. Paid in full revolving accounts may remain open with a zero balance at consummation. Section 7.28 30 Day Open Accounts (update) It is not acceptable to retain the balance of the 30 day open account in asset reserves in an effort to exclude the payment from the debt to income ratios. Appendix Q dictates that a payment equal to 5% of the current outstanding balance must be included in the qualifying ratios for any 30 day open account reflecting a zero payment amount or a payment equal to the current outstanding balance on the credit report. 8
Section 7.32 Qualifying Payment (HELOC) (new) This section is new to the guide. Section 7.33 Credit Freeze (new) This section is new to the guide. Section 7.34 Re-scored Credit Reports (new) This section is new to the guide. Section 8.14 Retirement Accounts (clarification) Evidence of liquidation must be fully documented when accessing retirement funds for closing. Section 8.16 Additional Reserve Requirements (update) The borrower having sufficient reserves to cover the remaining balance of a debt has been removed and is now considered ineligible. Section 8.20 Stocks, Bonds, and Mutual Funds (clarification) Stocks, Bonds, and Mutual Fund asset liquidation must be fully documented when used for closing or down payment. Section 8.22 Acceptable Assets (update) Cryptocurrencies such as Bitcoins are considered ineligible assets for reserves, closing costs, and down payment. Funds Not Yet Drawn from an Existing HELOC has been updated to read Funds Drawn from an Existing HELOC, and is now considered acceptable. Section 10 Ability to Repay Requirements-Introductory paragraph (update and clarifications) In compliance with Appendix Q, it is important to note that all income documentation must be received and verified prior to the consummation date. Documentation received at consummation or post-consummation cannot be considered as verified in the credit decision. Chapter 10 has been updated to reflect all overlays and language existing or added to Chapter 6. 9