Conv. Product Profiile

Transcription

Third Party Originations Conventional Product Profile
Matrices
FANNIE MAE (DU) STANDARD ELIGIBILITY MATRIX
*95.01% - 97% LTV is only available for FNMA First Time Homebuyers purchasing a 1-unit property. The loan must score Approve/Eligible through
DU.
FREDDIE MAC (LP) STANDARD ELIGIBILITY MATRIX
TPO Conventional Product Profile
FANNIE MAE (DU) HIGH BALANCE ELIGIBILITY
FREDDIE MAC (LP) SUPER CONFORMING ELIGIBILITY MATRIX
/
Information is accurate as of the date of publishing and is subject to change without notice. The overlays outlined in this matrix apply to agency loans submitted to DU/LP. In addition to applying these NPF
specific overlays, All loans submitted to DU must comply with the DU Findings and Fannie Mae requirements and that all loans submitted to LP comply with the LP Findings and Freddie Mac requirements. This
document should not be relied upon or treated as legal advice. Guidelines subject to change without notice; Printed copies may not be the most current version.
For the most current version, always refer to the online version.
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Quick Links
Matrices
Quick Links
Section 1: Program Summary
1.1 Program Summary
1.2 Underwriting
1.3 Ineligible Programs
Section 2: Transaction Details
2.1 Loan Limits
2.2 Eligible Terms and Programs
2.3 ARM Adjustments
2.4 Eligible Transactions
2.5 Principal Curtailments/Reductions
2.6 Loans Securing HomePath Properties
2.7 Refinances (General)
2.8 Cash-out Refinances
2.9 Payoff Demands
2.10 CEMA
2.11 Texas 50(a)(6) loans
2.12 Subordinate Financing
Section3: Borrower Eligibility
3.1 Borrower Eligibility
3.2 Occupancy
3.3 Non-Occupant Co-Borrowers
3.4 Power of Attorney
3.5 Living Trust (Inter Vivos Revocable Trust)
3.6 Non-Arm’s Length Transactions
3.7 Ineligible Borrowers
3.8 Maximum # of Financed
3.9 Multiple Mortgages to the Same Borrower
Section 4: Collateral
4.1 Eligible Properties
4.2 Condos
4.3 Hobby Farms
4.4 Ineligible Properties
4.5 Properties Previously Listed for Sale
4.6 Appraisals
4.7 Disaster Areas
4.8 Geographic Restrictions
Section 5: Income
5.1 Income
5.2 Verification of Employment
Section 6: Credit
6.1 Credit
6.2 Qualifying Ratios
6.3 Borrowers Retaining their Current Residence
6.4 Conversion of Primary Residence
6.5 Current Principal Residence Pending Sale
Section 7: Assets
7.1 Assets
7.2 Cash Reserves
7.3 Gifts
7.4 Seller/Interested Party Contributions
7.5 Downpayment Assistance Programs
7.6 Ineligible Assets
Section 8: Procedures
8.1 Age of Documentation
8.2 Electronic Signatures
8.3 Escrows (Taxes and Insurance)
8.4 Escrow Waiver Grid
8.5. Escrow Holdbacks
8.6 Excluded Parties- LDP/GSA Searches
8.7 Interest Credit Hardships
8.8 Mortgage Insurance
8.9 Process to Add or Remove Borrowers
(Wholesale & Mini-Correspondent)
8.10 Rent Loss Insurance
8.11 Title Insurance
Section 9: References
9.1 References
Section 10: Recent Product Profile Updates
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Section 1: Program Summary
1.1 Program Summary
Program Summary
1.2 Underwriting
This Program Guide serves as a comprehensive summary of New Penn Financial’s
Conventional Underwriting Overlays. Refer to applicable agency’s Selling Guide (FNMA or
FHLMC) for any information not specified in this Product Profile.
Automated Underwriting:
Loans underwritten by Desktop Underwriter (DU) may follow the DU Underwriting
Findings Report, except as outlined in this manual. Loans underwritten by Loan Prospector
(LP) may follow LP Feedback Certificate, except as outlined in this manual.
Regardless of underwriting method, additional information may be requested at the
discretion of the underwriter.
Loan with LTV’s > 80% require approval through an MI company. Additional guidelines and
restrictions may apply. Refer to MI company specific guidelines.
Underwriting
DU Findings:
An Approve/Eligible finding is required; if DU issues a warning for excessive DU runs, a
written explanation must be provided by the originator.
LP Determination:
A Risk Classification of Accept is required
Manual Underwriting:
Manual underwriting Is not permitted. All loans must be approved through DU/LP.
1.3 Ineligible Programs
Ineligible Programs
With the exception of the overlays listed in this manual, agency guidelines should be
followed.
•
•
•
•
•
•
Mortgage Credit Certificates (MCC)
Temporary Buydowns
Land trusts are not eligible
Leaseholds secured by Indian/Tribal lands
FNMA Homestyle
1031 Reverse Exchange
Section 2: Transaction Details
2.1 Loan Limits
Loan Limits
https://www.fanniemae.com/singlefamily/loan-limits
http://www.freddiemac.com/sell/selbultn/limit.htm
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2.2 Eligible Terms and Programs
Eligible Terms &
Programs
Custom Loan Terms between 10 and 30 years are available on our standard fixed rate
products.
2.3 ARM Adjustments
ARM Adjustments
2.4 Eligible Transactions
•
•
•
Purchase
Rate & Term (Limited Cash-out) Refinance
Eligible Transactions
Cash-out Refinance
o Delayed financing is permitted subject to agency requirements
2.5 Principal Curtailments/Reductions
Principal
• Permitted; follow agency guidance
Curtailments/Reductions
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2.6 Loans Securing HomePath Properties
• Effective with sales contracts signed on or after October 7, 2014, follow standard Selling
Loans Securing Home
Guide eligibility policies, except as described in B5-4-08, Loans Securing HomePath
Path Properties
Properties; New Penn’s standard Conforming DU Product Codes should be used
2.7 Refinances (General)
• For LP refinance transactions when the mortgage being refinanced was a purchase
money transaction, the mortgage being refinanced must be seasoned for at least 120
Refinances (General)
days. This is calculated from Note date to Note date.
• A Net Tangible Benefit Worksheet must be completed on ALL refinance transactions
2.8 Cash-out Refinances
Loan is defined as cash out if the cash out amount exceeds the lesser of $2,000 or 2% of the
loan amount. Non-Purchase money seconds are considered cash out.
Cash-out Refinances
• Texas 50 (a)(6) Cash-out refinances are permitted in the Wholesale Channel only
2.9 Payoff Demands
Payoff demands are required to ensure the current lien is paid in full prior to closing. The
expiration date of the payoff demand must be reviewed. A loan may not move to closing if
the payoff will expire prior to funding. If the payoff demand contains an expiration date, the
underwriter/lender must verify the date is after the funding date.
Payoff Demands
If the payoff demand does not contain an expiration date, the underwriter/lender must
verify a per diem amount is listed. The per diem should be applied to the payoff amount to
cover proceeds through the funding date; it can be used for an unlimited number of days;
unless otherwise specified in the payoff letter.
A payoff is considered expired when:
• The document instructs the associate to void after a specified date; or
• The interest accrued amount on the statement signals the borrower will be past-due
when the new loan funds;
o The borrower must make a mortgage payment prior to closing to avoid a late
payment on the credit; and
o The borrower must provide evidence the payment has been made and the updated
payoff demand must reflect that a payment has been made.
2.10 CEMA
CEMA
2.11 Texas 50(a)(6) loans
A CEMA Approved Attorney must be used; please see the CEMA Process Flow in the Portal
for more information.
A new lien on a TX borrower’s homestead becomes an (a)(6) loan if the current lien is an
(a)(6) and/or the new loan amount pays off an existing lien and:
• Provides any proceeds to the borrower (even $1)
• Pay off/down an existing TX(a)(6) lien (with or without cash back to the borrower)
Refer to the Texas 50(a)(6) Product Profile for details.
2.12 Subordinate Financing
New, Modified, and existing subordinate liens are permitted within the max CLTV tolerances
noted in the Conventional matrix. A copy of the subordinating Note, Mortgage/Deed and
Subordination Agreement is also required.
Texas 50(a)(6) loans
(Approved AE’s and
Brokers ONLY)
Subordinate Financing
Fannie Mae DU: Eligible Subordinate Financing is allowed per the LTV/CLTV tables.
Freddie Mac LP: Loans with eligible secondary financing require a 5% LTV reduction from the
maximum LTV’s listed in the matrix.
Section3: Borrower Eligibility
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3.1 Borrower Eligibility
There can be no more than 4 borrowers per loan.
Borrower Eligibility
Eligible Applicants:
All borrowers must have valid and verifiable Social Security Numbers, as well as a valid
driver’s license, state-issued ID or passport. Other forms of taxpayer identification are
not allowed.
3.2 Occupancy
Eligible occupancy types include:
• Primary residences for 1-4 unit properties
• Second home residences for 1-unit properties
Occupancy
• Non-Owner Occupied/Investment for 1-4 unit properties
o See Conversion of Residence and Income from Rental Properties for additional
details and requirements
3.3 Non-Occupant Co-Borrowers
• Due to guideline variations between the agencies, Non-Occupant Co-Borrower loans
should be run through LP using an LP Product Code.
• New Penn Financial applies the following overlay to when the occupant borrower’s
ratios are greater than 45%: The use of the non-occupant co-borrower’s income must
reduce the ratios to below 45%; Cash-out is not permitted.
o For LTV’s greater than 80% LTV, the occupant borrower must make the first 5%
down payment from the occupant borrower’s own funds. Funds that are owned
Non-Occupant Cojointly by the occupant borrower and the non-occupying borrower are considered
Borrowers (LP Product)
the funds of the occupant borrower.
o The non-occupant co-borrower must be an immediate family member and may not
be an interested party to the sales transaction, such as the property seller, builder,
or real estate broker.
o Non-occupant co-borrowers may not be added to a mortgage secured by a primary
residence under the LP Open Access loan program.
• Non-occupant co-borrowers are not required to be on title
The use of a Power of Attorney is permitted on Purchase and Rate & Term Refinances and
must be approved by New Penn’s Underwriting and Legal teams. Generally, a Power of
Attorney may be used for closing in the following scenarios:
• Incapacitated Borrower - the borrower is incapacitated and therefore unable to sign
documents due to disability, legal incapability, or he/she lacks the physical ability;
o Incapacitated borrowers must occupy the property as their primary residence; the
underwriter must validate occupancy and review for red flags within the loan file;
o Example: verify the signer of the POA is not acting as a straw buyer or purchasing an
investment property utilizing the incapacitated borrower’s credit.
• Military Personnel - the borrower is currently deployed or stationed overseas and is
unable to sign documents or attend closing;
Power of Attorney
• Hardship Circumstance - the borrower is unable to attend closing because he/she is out
of the state or country for an extended period of time, bedridden, in the hospital with a
serious illness, or the borrower is incarcerated.
o POA will not be permitted for borrowers that are on vacation
• Government Contractor – the borrower is employed by the government and currently
working overseas
o A letter from the borrower’s employer is required to verify overseas travel
•
Business Reasons – permitted on Purchase and Rate/Term Refinance transactions
when the spouse has Power of Attorney for the unavailable borrower
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There are 4 acceptable types of power of attorney. The following persons may sign security
instruments on a borrower’s behalf:
• Attorney-in-fact - he/she may sign the security instruments as long as NPF obtains a
copy of the POA. In some jurisdictions the POA must be recorded with the security
instrument; in this case, NPF must confirm the document has been recorded. The person
acting as the attorney-in-fact must have a familial, personal or fiduciary relationship
with the borrower and can’t have any type of financial interest in the transaction or be
involved in the transaction in any capacity such as the closing agent / attorney, broker or
realtor;
• Specific - this type of POA is specific to the mortgage transaction; therefore the POA
must specify the legal description, property address, and transaction type within the
body of the document. It must be recorded at closing;
• Durable - traditionally a POA becomes ineffective upon the disability of the principal but
the POA must remain valid even if the borrower becomes incapacitated or disabled prior
to closing. In order for the POA to be acceptable it must contain the following language
‘This POA shall not terminate on the disability of the principal’ or ‘This POA is not
affected by the subsequent disability of incapacity of the borrower’;
• General Military - this type of POA is generally used in situations where a borrower or
his/her spouse may be deployed or is on active duty.
All loan files wishing to utilize a power of attorney require the following:
• A Letter of Explanation from the borrower advising why the loan is closing with a POA
• Completed and Signed POA Form
3.5 Living Trust (Inter Vivos Revocable Trust)
A living trust is an eligible mortgage borrower if it meets the following requirements as well
as State requirements. All trusts must be approved by NPF legal prior to closing/purchase.
Living Trust (Inter Vivos
Revocable Trust)
To determine whether or not the Trust meets all the criteria required by State and investor
standards, one of the following will be required:
•
•
A copy of the trust document must be included in the file
Exception: California, where a current (less than 1 year old) trust certification completed
by the borrower may be provided in lieu of the full trust document. If this certification is
incomplete or contrary to title results, the full trust documentation may still be required.
3.6 Non-Arm’s Length Transactions
Follow agency guidelines with the following exceptions:
Non-Arm’s Length
• Regardless of loan program, shortsale transactions and flips are not permitted.
Transactions (At• Transactions where the loan originator is acting in another real-estate related role (ex.
Interest Transactions)
listing agent) are prohibited with the exception of instances where the mortgage
broker/originator is acting as the buyer’s agent; this will be permitted.
3.7 Ineligible Borrowers
• Borrowers without a valid SSN as an ineligible borrower (ITIN’s are not accepted)
• Co-Signers/Guarantors
• Non-Revocable Trusts or Guardianships
• Foreign Nationals
Ineligible Borrowers
• Borrowers with Diplomatic Immunity
• Employees/Principals/Owners NPF Third Party Originators; related parties (family
members) are eligible so long as they are not employed, in any capacity, by the
submitting broker/correspondent
• Individuals on the LPD/GSA exclusionary lists
3.8 Maximum # of Financed
Maximum # of
• Borrowers financing their Primary Residence may have up to 10 properties (financed or
Financed
free & clear). Borrowers with greater than 4 financed properties must have a minimum
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12 month history of landlord experience.
Borrowers financing a second home or investment property may have a maximum of 4
financed properties; however the borrower may not own more than 10 total properties.
o When financing a second home or investment property, the primary residence
should be considered in the financed property total (if it’s not free and clear)
These limitations apply to the borrower’s ownership in one-to four unit properties or
mortgage obligations on such properties and are cumulative for all borrowers. This
limitation includes properties financed abroad. These limits may be exceeded, as permitted
by the agencies, with a second sign from Underwriting.
3.9 Multiple Mortgages to the Same Borrower
• NPF will finance no more than 4 properties for any one borrower
Multiple Mortgages to
• NPF limits its maximum exposure to one borrower at $1.5M
the Same Borrower
• Maximum of 2 financed units in a single condo project or PUD
•
Section 4: Collateral
4.1 Eligible Properties
•
•
•
•
•
•
Eligible Properties
4.2 Condos
Condos
Attached/Detached SFRs
Attached/Detached PUDs
Low/Mid/High-Rise Condos and site Condos
2-4 Unit Properties
Modular Homes (these are not considered to be manufactured and are eligible under
the guidelines for 1-unit properties)
Hobby Farms as defined below
Mixed Use Properties:
For mixed use properties, originators may follow agency guidelines with the exception that
the square footage of commercial part of the property cannot exceed 25% of the total
square footage
Deed Restricted Properties:
All deed restricted properties must be reviewed and approved prior to loan approval; all
agency requirements must be met.
Condominiums must be either:
1) Fannie Mae approved: https://www.efanniemae.com/sf/refmaterials/approvedprojects/
or
2) DU/DO Findings must provide for a limited review, CPM Expedited or Full Lender Review
(which is required for new construction projects)
• On CPM approved condos, NPF will allow up to 10% lender exposure. A Condo Project
Manager certification is valid for 90 days; after 90 days an updated Dec Page and
Questionnaire must be provided.
• NPF will allow financing on 100% of the units of a PERS fully-approved condo with the
following limitation: Loans that are sold to FNMA/FHLMC and held within our servicing
portfolio cannot exceed 25% of the project. All loans within a project must be registered
with the Condo Review Department
• FNMA Special Designation- FNMA approved condos with unexpired special designation
codes will be permitted for primary residences and 2nd homes only. Investment
properties are not permitted. Project must be eligible and reviewed with either a limited
or full review based on the AUS findings; FNMA Special Designation is not eligible with
LP Findings
• Leasehold not permitted
*Correspondent lenders are permitted to complete expedited or full reviews, as long as they
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have access to CPM and submit a copy of the CPM Certification with the loan file for prepurchase audit. If the lender doesn’t have access to CPM or would like to have New Penn
Financial review the project prior to closing then they can send an e-mail to
[email protected]. The e-mail should contain the borrower’s
name, NPF loan #, project name and include all the required documents which are located
on the conventional condominium project submission checklist. A $150 fee will be assessed
for project reviews completed by NPF.
NPF will accept a FNMA CPM approval from the correspondent lender as long as they have
not expired or NPF will issue if the lender doesn’t have access to CPM. Please note loans
must be registered with NPF before we can complete the review.
Condos- Florida:
• New and newly converted condo’s require PERS approval (Section B4-2.2-12)
• PERS approval or a Lender Full Review may be used on established condo projects up to
the matrix maximum LTV’s
• CPM or Limited review on Existing Condos- LTV max is 75% primary/70% Second Home
(Section B4-2.2-12)
Short-Term Rentals:
A Short Term Rental (generally a rental period less than 30 days) doesn’t disqualify a project
from approval as long as the home owner’s association has absolutely no involvement in the
facilitation of renting of units on a short term basis.
Typically, units that are being advertised for nightly or weekly rentals through any of the
following sources are acceptable:
• Rental Agency
• Vacation Club
• Third Party Management Company
• VRBO
• Individual Unit Owners
Ineligible projects:
• Hotel or motel conversions (or conversion of other similar transient properties)
• Projects that are managed & operated as a hotel or motel, even though the units are
individually owned
• Projects that included the word “hotel” or ‘motel”
• Projects that include registration services, registration desks and offer rentals of any
units on a daily basis
• Timeshares or segmented ownership
• Projects where units are advertised for short term rentals or registration can be
completed on the HOA website
The project is also ineligible if the Homeowner Association’s budget shows income from
non-incidental business operations such as:
• Restaurants / Bars
• Spas
• Leasing Pool Passes
• Dock / Marina
• Valet Parking / Garage Fees
• Maid Services (daily cleaning)
• Room Service
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•
Beach Shuttles
Established projects where the budget shows less than 5% of the overall income from nonincidental business operations may be eligible for a loan level exception from FNMA. The
condo review team will submit the project through CVAS for an exception review. The cost
for each review is $200 regardless of the outcome and the process takes approx. 48-72 hours
to complete.
4.3 Hobby Farms
The appraisal report, condo questionnaire or sales contract may identify characteristics that
would make the project ineligible. These items do not definitively determine the condo is a
condo hotel; however it provides evidence that would require additional research. These
characteristics are red flags and warrant further investigation but are not limited to:
• Central telephone system
• Room Service
• Units that don’t contain full-sized kitchen appliances
• Daily Cleaning Services
• Advertising of rental rates
• Registration Services
• Restrictions on interior decorating
• Franchise Agreement
• Central Key System
• Location of the project in a resort area
• The occupancy of the project (The project may have few or even no owner occupants)
• Projects converted from a hotel or motel
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New Penn will accept properties that may have an additional use as a “hobby farm”.
Examples of this would be a semi-rural or rural property, residential in nature, where some
of the acreage is used to grow grapes, have a small orchard, or a small barn and riding rings,
etc. The requirements for the property to be considered are:
•
•
•
Hobby Farms
•
•
•
•
•
•
Property must be residential in nature, and an owner occupied SFR only
Appraiser must state property’s highest and best use is as Residential and supply photos
of the non-residential use
Property must be appraised as residential real estate, with commercial/agricultural
value not included in the appraiser’s market value; appraiser must comment on any
affect the commercial/agricultural use has on marketability and compatibility with the
subject’s neighborhood; the market value of the property is primarily a function of its
residential characteristics rather than of the business use
Agricultural use should generally not exceed 20% of the total acreage
Minimal outbuildings, such as small barns or stables, that are of relatively insignificant
value in relation to the total appraised value, provided the outbuildings are typical of
other residential properties in the subject area, and the appraiser can demonstrate (via
comparable sales) that there is an active, viable market
Significant outbuildings, such as silos, large barns, storage areas, or facilities for farmtype animals may indicate that property is agricultural in nature, and regardless of
whether the appraiser assigns a value, would be ineligible for financing
Income generated (gross, not net) should be minimal. (this is more telling than a loss,
because any loss is probably a write-off of more than just the hobby itself) Any loss must
be considered in the DTI
Commercial use should not result in any significant alterations
The commercial/agricultural use must be allowed by zoning and the subject must
conform to zoning.
4.4 Ineligible Properties
• Co-ops
• Condotels
• Manufactured Homes
• Geodesic Domes, Berms, Earth homes
Ineligible Properties
• Properties / land held in a life estate
• Properties encumbered with private transfer fee covenants
• Properties which are subject to a right of redemption (permitted in retail)
• Properties appraised with a property condition of C5 or worse
4.5 Properties Previously Listed for Sale
• Rate/Term refi – listing must have been cancelled or expired prior to the application
date, and the borrower must confirm their intent to occupy the subject for Owner
Occupied
• Cashout refi – Properties listed for sale in the six months preceding the disbursement
date of the new mortgage loan are limited to 70% LTV/CLTV/HCLTV ratios (or less if
mandated by the specific product, occupancy, or property type)
Properties Previously
Listed for Sale
In all instances, careful consideration should be given to the listing price and appraised value
to be sure the value is supported
4.6 Appraisals
Note: The definition of properties listed for sale includes non-owner occupied properties
where the current tenants have a lease-to-own provision in their lease; these transactions
are ineligible.
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Appraisals
4.7 Disaster Areas
All appraisals must be ordered and processed in compliance with Appraiser Independence
Requirements (AIR).
• All loan files require a full appraisal or PIW (as permitted by the AUS)
o A field review is required on FHLMC Super Conforming loans when the appraised
value is equal to or greater than $1,000,000 and the LTV/CLTV is greater than 75%
• New Appraisals must be completed by a Certified appraiser from an NPF approved AMC;
appraisal transfers may be accepted in the Wholesale Channel in accordance with the
NPF Appraisal Transfer Policy. See your AE for details.
• Copy of the appraiser’s licensee must be included in all funded loan files
• The re-use of an appraisal is not permitted
Refer to the list of affected counties published by FEMA at the following link:
http://www.fema.gov/news/disaster_totals_annual.fema
New Penn will require recertification from the appraiser on all loans located in the affected
Counties prior to closing. If the county is indicated as being in a declared disaster area, the
policy must be adhered to
• The Disasters are referenced with both an incident start date and an incident ending
date. The property is considered potentially impacted for 120 days from the incident
END date;
• If a full appraisal was obtained on the property prior to the declared disaster, the
inspection must verify the property is sound and habitable and in the same condition as
when it was appraised. Any of the following options are acceptable to satisfy this
Disaster Areas
requirement:
o A 1004D Final Inspection or Appraisal Update signed by the original appraiser
o FNMA 2075 – Desktop Underwriter Property Inspection Report
o DAIR – Disaster Area Inspection Report
• Full appraisals obtained after the declaration need to indicate the property has not been
impacted by the disaster;
• If the loan qualified for a non-standard appraisal (PIW) and a Disaster has been declared
prior to funding or purchase, a full appraisal with interior and exterior inspection dated
after the incident period end date is required. The non-standard appraisal product is
not permitted for 120 days after the disaster incident period end date;
• TPO clients will be required to furnish New Penn with the proper recertification prior to
loan closing/purchase.
4.8 Geographic Restrictions
At this time, New Penn Financial cannot finance or purchase loans secured by properties
Geographic Restrictions located in Utah, Alaska or Hawaii. For more information on licensing, please visit NPF's
NMLS Consumer Access page (www.nmlsconsumeraccess.org/)
Section 5: Income
5.1 Income
Income
Income Documentation
• VOE as standalone documentation is not permitted- most recent paystub and most
recent year W2 is required regardless of AUS findings
• In instances where LP allows for only 1 year tax returns on a self-employed borrower,
the tax returns must be for the most recent tax year. A current year extension and the
previous year’s tax returns will not be accepted.
• Borrowers who are changing or starting new jobs can be approved with a signed offer
letter or contract documenting the anticipated income, but the loan cannot close
without a paystub, unless a delayed sale exception has been approved
• A fully complete and signed 4506T for each borrower is required
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o
o
Transcripts are required for all loans; the type of transcripts is determined by the
required income documentation listed in the AUS
Transcripts cannot be used in place of the actual income documents required for
qualification
Income from 1-4 Unit Investment (NOO) Rental Properties
• Borrowers approved through LP require a two-year-history of managing rental
properties, regardless of reserves.
5.2 Verification of Employment
With the exception of instances where the borrower is employed by a relative or participant
to our loan transaction, follow agency guidelines. In instances where the borrower is
employed by a relative or participant to our loan transaction the following documentation
must be obtained (in addition to standard program guides):
• Borrower's signed and completed personal federal income tax returns for the most
recent two-year period, and
Verification of
• Verbal Verification of Employment
Employment
• YTD paystub documenting at least 30 days of income
• W2s for the most recent two years.
Current income reported on the pay stub may be used if it is consistent with W2 earnings
report on the tax returns. If the tax returns do not include W2 earnings or income is
substantially lower than the current pay stub, further investigation is needed to determine
whether income is stable.
Section 6: Credit
6.1 Credit
•
•
•
•
Credit
•
6.2 Qualifying Ratios
Qualifying Ratios
(Qualifying Interest
A tri-merge credit report is required; Non-Traditional/Alt Credit is not permitted
Revolving debt may be paid off to qualify when proof of the debt being paid and closed
prior to CTC is available, except in the case of a cash-out refinance, where the debt must
be closed prior to loan closing, but may be paid-off at closing with loan proceeds and
shown on the HUD-1
All credit inquiries within 120 days of the credit report are required to be addressed by
the customer.
Derogatory Credit
o If Mortgage is reported to the credit bureau then max delinquency is 0x60x12; if
mortgage is not reported to the credit bureau then max 2x30x12.
o The refinance of a modified mortgage is permitted on a standard conventional loan
if 24 months have passed since the modification and the borrower has a 0x30x24
mortgage history
o Follow AUS findings as to any debt that should be paid
o All judgments and liens must be paid at or before closing
o For forgiveness of debt, modifications, bankruptcies, foreclosures, and short sales,
follow agency guidelines; extenuating circumstances are not permitted
Disputed Accounts
o If the AUS identifies a disputed account on the credit report, it has not been
considered in the risk assessment. Therefore the borrower must contact the
creditor to have the status updated accordingly. An updated credit report is
required and must reflect that the account is no longer being disputed. A new DU
submission is required and the findings must be reviewed accordingly. Manual
underwriting is not permitted.
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Rate)
•
Transactions resulting in significant payment shock should always be considered by the
underwriter. The borrower’s income must clearly support the borrower’s ability to make
the higher monthly payment. It is always at the underwriter’s discretion to require
additional verification of assets or a larger down payment as a compensating factor for a
loan with high payment shock.
6.3 Borrowers Retaining their Current Residence
When a borrower is purchasing a new home and retaining his/her current residence, it is
often a source of concern for occupancy fraud and potential risk to the company. The
Borrowers Retaining
underwriter/lender must review the application and supporting documentation to
their Current Residence determine if any red flags are present and that the reserve/equity requirements are met.
The borrower(s) must sign the Occupancy Affidavit Form prior to closing.
6.4 Conversion of Primary Residence
• BPO (Broker Price Opinion) is not permitted – 2055E or 1004 required to establish equity
Conversion of Primary
position; an AVM may be used on loan files approved through DU
Residence
• See agency guidelines for specific requirements on qualifying ratios and reserve
requirements.
6.5 Current Principal Residence Pending Sale
• In instances where the borrower’s current primary residence is pending sale, but the
sale will not be finalized prior to the new loan’s closing, the PITIA of the current principal
Current Principal
residence must be included in the borrower’s debt ratios, except in instances where
Residence Pending Sale
agency reserve guidelines are met.
• BPO (Broker Price Opinion) is not permitted – 2055E or 1004 required to establish equity
position; an AVM may be used on loan files approved through DU
Section 7: Assets
7.1 Assets
Assets
7.2 Cash Reserves
Cash Reserves
Assets must be verified as noted by the AUS. Written Verifications of Deposit (VOD) are not
acceptable. Only system generated Verifications of Deposit from the financial institution are
acceptable.
With the exception of the scenarios below, transactions should follow the DU Findings in
terms of cash reserves.
• Purchase transactions of owner occupied 2-4 unit properties are subject to the
following: Borrowers with a FICO less than 680 require the greater of 6 month's reserves
or as required by agency guidelines
nd
Note: The agencies have specific cash reserve requirements for 2 Homes and Investment
properties; including a requirement of specific reserves for each property where the
borrower has multiple financed properties.
7.3 Gifts
Gifts
Follow Agency Guidance
7.4 Seller/Interested Party Contributions
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Seller/Interested Party
Contributions
7.5 Downpayment Assistance Programs
Down Payment Assistance programs are considered an Interested Party Contribution (IPC)
Downpayment
and are permitted; Wholesale and Mini-Correspondent DAPs must be approved by the NPF
Assistance Programs
prior to closing; ask your AE for details.
7.6 Ineligible Assets
• UTMA/Custodial Accounts for Minors (cannot be used by account custodian)
Ineligible Assets
Section 8: Procedures
8.1 Age of Documentation
Age of Documentation
Follow Agency Guidelines
8.2 Electronic Signatures
New Penn Financial will accept electronic signatures on third party documents in accordance
with Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform
Electronic Transactions Act (UETA), as applicable.
Third party documents are those that are originated and signed outside of the NPF’s direct
control, such as sales contracts. The electronic signature and date must be clearly visible
when viewed electronically and in a paper copy of the electronically signed document.
Electronic Signatures
In addition, with prior approval, TPO partners can submit initial disclosures signed by both
the TPO and borrower. To become approved for e-signature, please send the following to
your AE:
•
Appropriate e-sign questionnaire (Wholesale or Correspondent/Mini Correspondent)
•
E-sign authorization to release supporting documentation,
•
Sample e-sign audit trail from document vendor
•
Copy of signed vendor agreement with “acceptable” vendor listed on questionnaire
Once approved, e-signed initial disclosures can be submitted as long as the e-sign audit log
for the specific transaction is supplied.
NPF employees may also use electronic signatures on NPF Verbal Verifications of
Employment.
8.3 Escrows (Taxes and Insurance)
Escrows may be waived when the borrower’s LTV is less than 80% and
• the borrower is not a first time homebuyer
o FTHB’s will be considered on a case-by-case basis with a demonstrated ability to
save (reserves) and strong residual income.
• the borrower does not exhibit recent signs of delinquency
Escrows
For Rate & Term Refinance Transactions the following restrictions also apply:
• the borrower may not finance the payment of real estate taxes for the subject property
in the loan amount and waive escrows
• the borrower may not finance the payment of real estate taxes that are more than 60
days delinquent for the subject property in the loan amount, regardless of whether or
not they waive escrows
For Cash-out Refinance Transactions the following restrictions also apply:
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•
8.4 Escrow Waiver Grid
The new loan amount may not include the financing of real estate taxes that are more
than 60 days delinquent, unless requiring an escrow account is not permitted by
applicable law or regulation. For example, if a particular state law does not allow a
lender to require an escrow account under certain circumstances, the loan would be
eligible for sale to Fannie Mae without an escrow account.
In all states, except CA, no exceptions are permitted if the LTV is > 80% (see waiver eligibility
grid below).
Escrow Waiver Grid
8.5. Escrow Holdbacks
Permitted on primary residences up to a maximum of $5,000. Prior approval by NPF
Underwriting is required; ask your AE for details.
8.6 Excluded Parties- LDP/GSA Searches
Agency loans require confirmation that companies or individuals involved in the origination
or underwriting of a mortgage transaction are not on the Freddie Mac Exclusionary List,
General Services Administration (GSA) excluded party list or the HUD Limited Denial
Participation (LDP). Regardless of the reason for the party being excluded, any party to the
transaction included on either list will result in the loan being ineligible for delivery.
Escrow Holdbacks
All name variations found throughout the loan file must be run when performing the
searches. The search must be run on the following parties in the transaction:
• Borrowers
Excluded Parties• Seller
LDP/GSA Searches
• Builder
• Loan Officer
• Broker/Correspondent
• Listing Agent & Listing Company
• Selling Agent & Selling Company
• Title Agent
• Title Company
• Closing Attorney
• Appraiser and Appraisal Company
8.7 Interest Credit Hardships
th
Interest Credit
Permitted on Conventional loans, both purchases and refinances; must fund by the 5
Hardships
calendar day
8.8 Mortgage Insurance
Mortgage Insurance companies may additional overlays other than those established by
New Penn. A valid MI Commitment or Certificate must be obtained prior to CTC or loan
purchase by New Penn.
Mortgage Insurance
Approved MI Companies: Essent, Genworth, MGIC, Radian, and United Guaranty
• Monthly policies should be deferred or require zero initial premium (ZIP/ZOMP)
• Policies may be refundable or non-refundable; all single premiums, regardless of
refundability, must be included in points and fees testing.
• Split-Premium, Annual (lender or borrower paid) and lender-paid monthly policies are
not permitted.
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•
New Penn accepts only standard coverage amounts. Reduced, lower cost, and minimum
MI as approved by DU/LP are not eligible.
8.9 Process to Add or Remove Borrowers (Wholesale & Mini-Correspondent)
Adding Borrowers
• Adding a borrower to a loan at any time during the loan process, unless the loan has
received an adverse credit decision, is acceptable. When this occurs a new RESPA
package will be sent out and cool off period will be 7 days. File should be submitted
back to UW for review of additional borrower’s information.
Removing Borrowers
• Removing a borrower from a loan is allowed only in the following scenarios
o No credit decision has been made on the loan and borrower expresses desire to
withdraw their name from the application
o Loan has been approved with both borrowers as submitted and one borrower
Process to Add or
expresses desire to withdraw their name from the application.
Remove Borrowers
 In both of the above scenarios - Request in writing from borrower should be
(Wholesale & Miniretained in the file, supporting their desire to withdrawn their name from the
Correspondent)
application.
 Detailed notes should also be placed in the file to eliminate any possible
confusion with the file.
• Removing a borrower from a loan is NOT allowed in the following scenarios
o Loan is declined by underwriting
 In this scenario the loan would need to be adversed and a new application
would need to be taken with only the 1 borrower.
Exceptions
• Any exceptions to the above rules or scenarios not explained above should be submitted
to your Account Manage for compliance review.
8.10 Rent Loss Insurance
Rent loss insurance covers rent losses that are incurred during the period that the property is
being rehabilitated following a casualty. The coverage must be for at least six months’ rent
loss.
Rent Loss Insurance
Rent loss insurance must be maintained for :
• 2-4 Unit primary residences and 1-4 unit investment properties when rental income
from the subject property is used to qualify the borrower.
Rent loss insurance may be waived when:
8.11 Title Insurance
Title Insurance
• Rental income from the subject property is not used for qualifying, and
PITI and operating expense from the subject is included in the borrower’s qualifying ratios
The title policy must be in the lender’s name and/or its assigns. Title must be vested in the
borrower’s name, in the name of an eligible inter vivos trust (if permitted per program
guides), or, in the case of a purchase, be currently vested in the seller’s name with a
requirement for a deed to be recorded transferring title to our borrower’s name at closing.
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The insured amount of the policy must be at least for the gross loan amount and the policy
must be dated within 45 days of closing. A minimum of a twelve month title chain must be
provided on each policy. The chain of title will be reviewed for flips as part of the
underwriting process.
Section 9: References
9.1 References
References
•
•
•
•
Fannie Mae Guidelines
Freddie Mac Guidelines (see The Guide and Forms on the left-hand side)
Limited Denial of Participation (LDP) List
General Services Administration (GSA) Exclusionary List
Section 10: Recent Product Profile Updates
Matrix Grid
Updated to include expanded LTV offering for FNMA FTHB
Definition of business travel was changed to cover “business reasons”
/
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Section 11: Appendix
Underwriting Topic
FNMA Selling Guide Locations
Appraisal- Age
Click Here
Assets- Retirement
Accounts
Click Here
Authorized Users
Click Here
Condo – Project
Eligibility
Click Here
Condos - Florida
Click Here
Credit and Tradeline
Requirements
Click Here
Delayed Financing
Click Here
Departure
Residence
Click Here
Derogatory Credit –
Waiting Periods
Click Here
Disputed Credit
Click Here
Flip Policy
Click Here
Gifts
Also see Minimum
Borrower
Contribution
Click Here
Freddie Mac All-Regs Location
Use the Single Family Seller/Servicer Guide, Vol. 1
Chs. 39-45: Property Eligibility
Chapter 44: Property and Appraisal Requirements
Chapter 44.10 - Age of Appraisal Reports and Appraisal
Updates
Ch. 22-28: General Mortgage Eligibility
Chapter 26: Borrower Funds
Chapter 26.2 - Eligible Source of Borrower Funds
Chs. 37-38: Credit Underwriting
Chapter 37: Underwriting the Borrower
Chapter 37.4 - Establishing Borrower Credit Reputation
Chapter 37.5 - Credit Scores
Chapter 42: Special Requirements for Condominiums
Chapter 42: Special Requirements for Condominiums
Chapter 42.3,42.4,42.9
Chapter 37.4 - Establishing Borrower Credit Reputation
Chapter 37.5 - Credit Scores
Chs. 22-28: General Mortgage Eligibility
Chapter 24: Refinance Mortgages
Chapter 24.5 - Requirements for "no cash-out"
refinance mortgages
Chapter 24.6 - Requirements for cash-out refinance
mortgages
Chapter 37.16.2- Sale or Conversion of Primary
Residence
Chapter 37.7 - Evaluating the Borrower Credit
Reputation (b)
Chapter 37.5 Credit Scores
Chapter 37.7 - Evaluating the Borrower Credit
Reputation
No Flip Policy but use this for guidance:
Archive of Single-Family Seller/Servicer Guide - Bulletins
and Industry Letters
Bulletins and Industry Letters for 2013 and Prior Years
Bulletins and Industry Letters for 2012 and Prior Years
2009 Bulletins and Industry Letters
Bulletin 2009-24: Credit and Property Eligibility
Attachment A: Best Practices for Loans involving
Possible Property Flips
Chapter 26:2 - Eligible Sources of Borrower Funds (b)
/
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Gifts of Equity
Click Here
Chapter 26:2 - Eligible Sources of Borrower Funds (b)
Glossary
Income Sources
(including nontaxable)
Click Here
See: Glossary (not in Volume 1 of the Selling Guide)
Click Here
Judgments,
Garnishments,
Collection Accounts
Click Here
Maximum Number
of Financed
Properties
Click Here
Minimum Borrower
Contribution
Click Here
Non-Arm’s Length
Transactions
Click Here
Non-Occupant CoBorrowers
Use LP
Non-Permanent
Resident Aliens /
Permanent
Resident Aliens
Click Here
Paying-off Debt to
Qualify
Click Here
Rental Income
Click Here
Reserve
Requirements
Click Here
Self-Employed (less
than 2 years)
Click Here
Chapter 37:13 - Stable Monthly Income
Chapter 37:7 - Evaluating Borrower Credit Reputation
(b) Adverse or derogatory credit information
Chapter 22.22: Second Home Mortgages (section b)
Chapter 22:22.1 Investment Property Mortgages
(section c)
Chapter 26:7 - Occupant Borrower Contribution
also see Chapter 26:1 Required Borrower Funds
Chapter 44: Property and Appraisal Requirements
Chapter 44.15 - Property Description and Analysis
Chapter 26.7 - Occupant Borrower Contribution
Chapter 22: General Mortgage Eligibility
Chapter 22.10.1 Permanent and Non Permanent
Resident Alien
Chapter 37.16 - Monthly debt payment-to-income ratio
Chapter 37.14 - Rental Income
Chapter 26.5 - Reserves
Chapter 37.13 - Stable Monthly Income
(b) Self-employed Income
/
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