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COVID-19: Quick Reference Guide Flipbook PDF
COVID-19: Quick Reference Guide V12.23
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Quick Reference Guidelines
Contents Appraisal/Property....................................................................................................................................... 3 Alternative Appraisal - Conventional, High Balance, FHA, VA & USDA..................................................... 3 1004D Final Inspection & Escrow Hold Back Guidance ............................................................................ 5 Product Overlay Matrix ................................................................................................................................ 6 Product Overlay Matrix Contd. .................................................................................................................... 7 Verbal Verification of Employment ............................................................................................................. 7 Income .......................................................................................................................................................... 8 Self Employed Applicants: All Loan Types................................................................................................. 8 Other Income ............................................................................................................................................ 9 Assets .......................................................................................................................................................... 12 Liquidation of Assets for Closing and Percentage of Marketable Securities for Reserves ..................... 12 Credit .......................................................................................................................................................... 13 Forbearance Policy (Applies to Wholesale and Non-Delegated).......................................................... 13 Age of Income and Asset Documentation ................................................................................................. 18 Conventional ........................................................................................................................................... 18 Lock Extension Policy ............................................................................................................................... 199 Elevated Risk Industries ........................................................................................................................... 199
V10.30.20 The information provided in this document is for dissemination to real estate and financial business entities only and is not intended for use as an advertisement for the extension of credit to consumers. © 2020 Stearns Lending, LLC, All Rights Reserved. 2|P a g e
Appraisal/Property Alternative Appraisal - Conventional, High Balance, FHA, VA & USDA
Due to the potential of appraisal issues associated with the COVID-19 outbreak, we are allowing the following Alternative Appraisals for Fannie Mae, Freddie Mac, High Balance, FHA, VA and USDA loan transactions where a traditional Interior/Exterior appraisal cannot be obtained by the appraiser. COVID-19 Conventional and High Balance Appraisal Alternative Purchase Transactions
Desktop Appraisal
New Construction / Construction to Perm
Full Appraisal
Fannie Mae Refinance Limited Cash Out (Underlying Mortgage Must be Owned by Fannie Mae) Fannie Mae Look Up
Exterior Only
Freddie Mac Refinance Limited Cash Out (Underlying Mortgage Must be Owned by Freddie Mac) Freddie Mac Look Up
Exterior Only
Conventional Cash Out Transactions
Full Appraisal
Note: • • •
Any loan not owned by FNMA/FHLMC would require a Full Appraisal. It is preferable to utilize PIW/ACE waivers when authorized by AUS. Any transaction with an LTV over 80% Stearns will consult with the Mortgage Insurance company to ensure they will allow the specific Alternative Appraisal type allowed by the agencies.
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COVID-19 FHA Alternative Appraisals FHA Purchase (no new construction)
Exterior Only
FHA New Construction / Construction to Perm
Full Appraisal Required
FHA Non-Cash Out
Exterior Only
FHA Cash Out and 203k
Full Appraisal Required
COVID-19 USDA Alternative Appraisals USDA Purchase (no new constructions) Exterior Only USDA New Construction / Construction Full Appraisal Required to Perm USDA Non-Streamline Refinances
Exterior Only
COVID-19 VA Alternative Appraisals *at the discretion of VA Appraiser VA Purchase (no new constructions)
Exterior Only
VA New Construction / Construction to Perm
Full Appraisal Required
VA Non-Streamline Refinances
Exterior Only
V10.30.20 The information provided in this document is for dissemination to real estate and financial business entities only and is not intended for use as an advertisement for the extension of credit to consumers. © 2020 Stearns Lending, LLC, All Rights Reserved. 4|P a g e
1004D Final Inspection & Escrow Hold Back Guidance
When a final inspection (1004D) is required to validate the completion of work and not able to be completed, Stearns will utilize the following guidance.
VA Loans For existing or new construction properties, UWs will condition for a Lender Certification of repairs, especially repairs performed by licensed personnel, in lieu of an appraiser certification(1004D). Repair certifications which involve lead-based paint must be completed by the fee appraiser. Lender certification should include the following: • Photos of the completion work • Paid invoices / receipts
FHA, USDA, Fannie Mae and Freddie Mac Fannie Mae, Freddie Mac, FHA and USDA will accept a letter signed by the borrower stating that the work was completed along with evidence which may include the following: • Photos of the completion work • Paid invoices • Occupancy permit or • Other substantially similar documentation These flexibilities are not permitted for FHA New Construction, Construction to Perm , Building on Own Land and 203(k). Fannie Mae and Freddie Mac will allow these flexibilities on any appraisal completed “subject to” completion.
Escrow Holdbacks The following should be followed if allowable outstanding repairs are being placed in Escrow Holdback:
VA Loans Stearns Lending will not allow for any escrow holdbacks on VA loans, all outstanding repairs must be completed prior to closing.
FHA, USDA, Fannie Mae and Freddie Mac Clients should follow our current Escrow Holdback Policy located in the Stearns Underwriting Guidelines for the specific agency.
Bond and Jumbo Loans programs should follow the specific Bond and Jumbo investor guidelines. V10.30.20 The information provided in this document is for dissemination to real estate and financial business entities only and is not intended for use as an advertisement for the extension of credit to consumers. © 2020 Stearns Lending, LLC, All Rights Reserved. 5|P a g e
Product Overlay Matrix This grid should be used as an overlay matrix to our current guideline set. Loan Type
Loan Purpose
Attribute
Previous
Current for COVID -19
Conventional
All
Minimum FICO
660
• •
640 Purchase & Rate/Term Cash Out 660
All
Maximum DTI
45%
• •
50% Purchase & Rate/Term Cash Out- Max DTI 45%
Purchase or R/T**
LTV Second Home
90%
*Overlay removed
R/T Refinance or Cash Out Refi
LTV Investment
75%
*Overlay removed
Purchase
LTV Investment
85%
*Overlay removed
No Score
Product
Allowed
*Overlay removed
Loan Type
Loan Purpose
Attribute
Previous
Current for COVID -19
FHA
All
Minimum FICO
•
640 Purchase, Rate/Term Streamline 660 Cash Out
•
Cash Out - Max DTI 45%
• •
• All
Maximum DTI
•
620 Purchase, Rate/Term Streamline, Cash out < 45% DTI 640 Purchase, Rate/Term Streamline, Cash out < 50% DTI 45% DTI > 620 Credit Score 50% DTI > 640 Credit Score
V10.30.20 The information provided in this document is for dissemination to real estate and financial business entities only and is not intended for use as an advertisement for the extension of credit to consumers. © 2020 Stearns Lending, LLC, All Rights Reserved. 6|P a g e
Product Overlay Matrix Contd. Loan Type
Loan Purpose
Attribute
Previous
Current for COVID -19
VA
All
Minimum FICO
•
640 Purchase, Rate/Term IRRRL Cash Out 660
•
50% >= 680 Credit Score 45% 620 Credit Score 50% DTI > 640 Credit Score
IRRRL
Minimum FICO**
640
620
All
Manual UW
Allowed
Not Allowed
Loan Type
Loan Purpose
Attribute
Previous
Current for COVID -19
USDA
All
Minimum FICO
640
620
All
Maximum DTI
•
•
Purchase
Manual UW
50% >= 680 Credit Score • 45% PITIA, so $1,500 included as income; ($1,500) included as debt
*Landlord experience defined as one year of rental income on the tax returns used V10.30.20 The information provided in this document is for dissemination to real estate and financial business entities only and is not intended for use as an advertisement for the extension of credit to consumers. © 2020 Stearns Lending, LLC, All Rights Reserved. 10 | P a g e
to qualify. If tax returns are not part of the qualifying income documentation, borrower would need to provide 12 months receipt of rent. New Primary Residence – 2 to 4 Unit property w/o landlord experience
Rental Income on Existing Property based on Schedule E (subject) – Refinance of an existing investment property that appears on tax returns Rental Income on Existing Property based on Schedule E (non-subject) – Financing different property for applicant who owns rental properties that report on tax returns Rental Income on Existing Property based on a lease (nonsubject) – Financing different property for applicant who
Rent Schedule (1025).
-Two most recently filed 1040’s ( Schedule E) -Copies of long term leases on property -evidence of receipt of rent for the most recent three months
-Two most recently filed 1040’s ( Schedule E) -Copies of long term leases on property -evidence of receipt of rent for the most recent three months
-Copies of long term leases on property -evidence of receipt of rent for the most recent three months
50% of the amount of the lease may be added to income. The amount added to income may not exceed the PITIA of the subject 100% of net rental amount from Schedule E may be added to income if supported by recent receipt of rents
Example: Rental amount $3,200, Subject PITIA $1,500 • 50% of rental amount > PITIA, so $1,500 included as income; ($1,500) included as debt
Amount of net rental amount minus nonsubject property PITIA added to income if positive or debts if negative with proof of receipt of rents for previous three months
Example 1: Net Rental amount $3,200, Non-subject PITIA $1,500 • Net rental amount = $3,200 minus $1,500 = $1,700 included as income; $0 included as debt
Use 75% of rental amount from lease for calculation with proof of receipt of rents for previous three months
Example: Net rental amount $3,200, Subject PITIA $1,500 • 100% of net rental amount = $3,200 included as income; ($1,500) included as debt
Example 2: Net Rental amount $1,200; Subject PITIA $1,500 • Net rental amount = $1,200 minus $1,500 = ($300) added as debt. $0 included as income Example 1: Rental amount $3,200, Non-subject PITIA $1,500 • 75% of rental amount = $2,400 minus $1,500 = $900 included as income; $0 included as debt Example 2: Rental amount $1,200; Subject PITIA $1,500
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•
owns rental properties that do not appear on tax returns (property purchased after last tax year)
75% of rental amount = $900 minus $1,500 = ($600) added as debt. $0 included as income
FHA Rental Income/Departing Residence Transaction type Departing Residence FHA
Documentation Requirements • • •
•
Executed lease Evidence of deposit of security deposit and/or first month’s rent Explanation/documentation of how home marketed for rent (e.g., advertisements, who found renter) Documentation to support reasonability of lease amount (UW to use online resources to validate)
Calculation Take 75% of rental amount and take another 75% to reduce the amount of rent by an additional 25% per FHA ML 2020-23.
Examples Example: Departing residence meeting requirements (100 miles away, 25% equity, etc.) with lease amount $1,000 • •
Old rule: $750 (75% of lease amount) New Rule: $562.50 (old calculation discounted by an additional 25%)
Does not allow positive income for qualification
Projected Income - Income begins after note date •
Not allowed
Alimony / Child Support •
Satisfactory evidence of most recent six months receipt of income prior to Note date. Must match payment terms of divorce decree/separation agreement.
Assets Liquidation of Assets for Closing and Percentage of Marketable Securities for Reserves
Due to the continuing market volatility of certain asset types, we are implementing the following requirements applicable to accounts with stocks, stock options and mutual funds: V10.30.20 The information provided in this document is for dissemination to real estate and financial business entities only and is not intended for use as an advertisement for the extension of credit to consumers. © 2020 Stearns Lending, LLC, All Rights Reserved. 12 | P a g e
•
Evidence of liquidation, including Borrower receipt of funds, is required when using any funds from these accounts for Down Payment and/or Closing Costs • The Seller must use no more than 70% of the balance in the accounts in order to meet the reserves requirements
Credit Forbearance Policy (Applies to Wholesale and Non-Delegated)
Conventional Loans Fannie Mae and Freddie Mac have provided temporary eligibility requirements for those borrowers with mortgage payment histories impacted by COVID-19. With this update Fannie Mae and Freddie Mac are providing eligibility guidelines for purchase and refinance transactions. Available for all conventional loans.
Borrowers who requested forbearance and are current on all mortgage obligations The underwriter will validate all payments on all mortgages are “current” as of the note date of the new transaction, including co-signed and loans not on the subject property. Borrowers who have requested forbearance and are “current” on all mortgage obligation are eligible for financing. “Current” means the borrower has made all mortgage payments due in the month prior to the note date of the new loan by no later than the last business day of that month. Underwriters may condition for any of the following documentation to validate all mortgages are “current”: • • • •
A loan payment history from the servicer or third-party verification service A payoff statement (for mortgages being refinanced) The latest mortgage account statement from the borrower A verification of mortgage
Missed Mortgage Payments Due to COVID-19 – Resolved Prior to Note date A borrower who is not current or has missed payments on any existing mortgage loan due to COVID-19 is eligible for a new mortgage loan if those missed payments were resolved and documented as follows: • Borrower has resolved the missed mortgage payment(s) and the mortgage(s) have all been brought “current” • Borrower(s) have documented the funds used to bring all mortgages “current” from an acceptable source of funds as defined by Fannie Mae or Freddie Mac in their standard guidelines. • Proceeds from a refinance may not be used to bring any mortgage “current”
Borrowers Under Repayment Plan, Loan Modification Trial Period Plan or Payment Deferral Any borrower who is not current as of the Note Date on any existing mortgage or is under a repayment plan, loan modification trial period plan or has a payment deferral agreement on any existing mortgage will only be eligible for financing if the following additional eligibility requirements have been met: V10.30.20 The information provided in this document is for dissemination to real estate and financial business entities only and is not intended for use as an advertisement for the extension of credit to consumers. © 2020 Stearns Lending, LLC, All Rights Reserved. 13 | P a g e
If any existing Mortgage
Eligibility requirements
Is not current as of the Note Date OR is in a The new Mortgage is ineligible unless the amounts outstanding on repayment plan, loan any existing Mortgage(s) are resolved by meeting the applicable modification Trial additional eligibility requirements below Period Plan or Payment Deferral Additional eligibility requirements
Use of proceeds if the subject transaction is a “no cash-out” or cash out refinance
N/A
The Borrower must either:
Is subject to a repayment plan
In connection with the Mortgage i. Have successfully completed the repayment plan, OR being refinanced, ii. Be performing under the plan (i.e., has not missed any payments proceeds may be due used to pay off the under the plan) and must have made at least three payments remaining payments under Note: All three payments must be made according to plan the repayment schedule. Prepayment is plan not allowed.
The Borrower must have made at least three consecutive timely payments following the approval of the payment deferral Is subject to a Payment agreement Deferral Note: All three payments must be made according to plan schedule. Prepayment is not allowed.
Is subject to a modification Trial Period Plan
The Borrower must have successfully completed the Trial Period Plan Note: All three payments must be made according to plan schedule. Prepayment is not allowed.
The Borrower must either: i. Have successfully completed the loss mitigation program, OR Is subject to a loss ii. Be performing under the program (i.e. has not missed any mitigation program not payments due under the program) and must have made at least mentioned above three consecutive full monthly payments Note: All three payments must be made according to plan schedule. Prepayment is
In connection with the Mortgage being refinanced, proceeds may be used to pay off the deferred amount under the Payment Deferral In connection with the Mortgage being refinanced, proceeds may be used to pay off the modified Mortgage In connection with the Mortgage being refinanced, proceeds may be used to pay off the remaining payments under the program
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If any existing Mortgage
Eligibility requirements
Use of proceeds if the subject transaction is a “no cash-out” or cash out refinance
not allowed.
FHA Loans HUD has announced the following criteria in the attached Mortgagee Letter 2020-30 regarding borrowers who chose to go into forbearance as afforded by the CARES Act on both government and non-government mortgage debt. These parameters would apply to Purchase and all Refinance transactions including Streamlines. To provide financing for a borrower who has gone into forbearance the borrower must establish the following: • All outstanding mortgage obligations must be current • The borrower is no longer under a Forbearance Plan • Borrower must provide a letter explaining the reason for forbearance • Borrower must provide documentation to establish the reason for forbearance has been corrected and is no longer an issue impacting the ability to repay Note: FHA Underwriters should reference the attached Mortgage Letter 2020-30 for all documentation requirements and details associated with borrower’s having gone into Forbearance and are now seeking financing. Below is a summary of the guidance provided by HUD.
Borrower’s Made Regularly Schedule Payments While in Forbearance Any borrower who continued to make regularly scheduled payments while in Forbearance is eligible for a new FHA insured mortgage regardless of the loan purpose.
Borrower Sells Property in Forbearance • A borrower who was granted forbearance due to COVID-19 may be eligible for a new FHA insured mortgage provided the borrower has completed the Forbearance Plan prior to the sale or with the payoff at the consummation of sale. • If the borrower has made less than 3 consecutive monthly housing payments post forbearance, the new FHA- insured loan must be downgraded to a Refer and manually underwritten following Manual Guidelines in Handbook 4000.1 Section II.A.5. • COVID-19 overlays currently do not permit for FHA manual underwrites or FHA downgrades, exceptions may be considered if the borrower has received a Total Scorecard approval.
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Borrower’s DID NOT Make Regularly Schedule Payments While in Forbearance Any borrower who was granted Forbearance and did NOT make regularly scheduled payments must meet the following: ● Cash Out Refinance Borrower has completed Forbearance Plan and made at least 12 consecutive monthly payments post forbearance. Manual downgrades for less than 12 consecutive monthly payments is NOT allowed. Purchase and No Cash Out Refinance (Simple or Rate and Term) Borrower has completed Forbearance Plan and made at least three consecutive monthly payments post forbearance. Manual downgrades for less than three payments is NOT allowed. ●
Non-Credit Qualifying Streamline Refinance At the time of case assignment Borrower has completed Forbearance Plan and made at least three consecutive monthly mortgage payments post forbearance. (When the FHA insured mortgage has been modified after forbearance, the borrower must have made at least six payments under the modification). ●
Note: Missed mortgage payments during Forbearance and added to the principal balance to complete the Forbearance Plan will be considered a modification. Credit Qualifying Streamline Refinance At time of case assignment Borrower is still in Forbearance or has made less than three consecutive monthly payments post forbearance and the borrower must have completed the following: ▪ Made all mortgage payments within the month due for the six months prior to forbearance and had no more than one 30-Day late payment for the previous six months. ▪ The borrower has made at least six payments on the FHA insured mortgage being refinanced. (When the FHA insured mortgage has been modified after forbearance, the borrower must have made at least six payments under the modification) ●
Note: Missed mortgage payments during Forbearance and added to the principal balance to complete the Forbearance Plan will be considered a modification.
FHA Streamline Maximum Mortgage Calculations – All Streamline Refinances The maximum base loan amount is the lessor of: • The outstanding principal balance of the underlying mortgage as of the month prior to mortgage disbursement plus the following: • Interest due on the existing mortgage • Late charges • Escrow shortages • MIP due on existing mortgage or • The original principal balance of the underlying mortgage (including financed UFMIP), less any refund of UFMIP
FHA Streamline Seasoning – All Streamline Refinances As on the date of the case assignment the borrower must have completed the following: V10.30.20 The information provided in this document is for dissemination to real estate and financial business entities only and is not intended for use as an advertisement for the extension of credit to consumers. © 2020 Stearns Lending, LLC, All Rights Reserved. 16 | P a g e
•
• •
Made at least six payments on the FHA insured mortgage that is being refinanced (where the FHA insured mortgage has been modified, the Borrower must have made at least six payments under the Modification Agreement) At least six full months must have passed since the first payment due date of the mortgage that is being refinanced At least 210 days must have elapsed since the closing date of the underlying mortgage
Note: Missed mortgage payments during Forbearance and added to the principal balance to complete the Forbearance Plan will be considered a modification.
VA Forbearance Purchase, Cash-out Refinance Loans and VA IRRRL’s To provide financing for a borrower who has gone into forbearance the borrower must establish the following: • • •
All outstanding mortgage obligations must be current including the subject property on a cash out refinance or VA IRRRL Borrower must provide a letter explaining the reason for forbearance Borrower must provide documentation to establish the reason for forbearance has been corrected and is no longer an issue impacting the ability to repay
VA IRRRL Determining Maximum Loan Amount Maximum Loan Amount calculation may include the following: •
• • • •
Borrower may not include bringing the underlying mortgage current as part of the maximum loan amount calculation. Allowable late charges, consistent with the note, the CARES Act, and all other applicable laws, plus The cost of any energy efficiency improvements, plus Allowable closing costs and discount points, plus The VA funding fee
Loan Seasoning 1.
If a loan being refinanced met seasoning requirements before a Veteran invoked a CARES act forbearance, the seasoning requirement remains satisfied.
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NOTE: A loan being refinanced is seasoned if both of the following conditions are met as of the date the borrower closes the refinance loan: •
•
The borrower has made at least six consecutive monthly payments on the loan being refinanced. For example, in a case where a borrower made five consecutive payments before invoking a CARES act forbearance, such borrower would now need to make an additional six consecutive payments, post forbearance in order to meet the seasoning requirement. The date of the closing for the refinance loan is 210 or more days after the first payment due date of the loan being refinanced.
Age of Income and Asset Documentation Conventional
All income documentation must be dated no more than 60 days and asset documentation must be dated no more than 60 days prior to the Note Date, except as follows: • If an asset account is reported on a quarterly basis, the Seller must obtain the most recently issued quarterly statement. •
For electronic income verifications obtained from third-party verification service providers, the information from the electronic data base reflected on the third-party verification must now be dated no more than 30 days prior to the Note Date
•
Standard documentation age requirements continue to apply to the following income types: o Military income documented on Leave and Earnings Statements o Retirement income o Survivor and dependent benefit income o Long-term disability income o Social Security Supplemental Security Income (SSI) o Public assistance income o Homeownership Voucher Program payments o Foster-care income o Trust income (fixed) o Royalty payments o Mortgage Credit Certificates (MCC)
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Lock Extension Policy Lock extensions on programs impacted by Stearns COVID overlays will be considered an exception and reviewed on a case by case basis.
Elevated Risk Industries • • • • • • • • •
Travel Tourism Leisure Hospitality Entertainment Automotive Sales Personal Care Restaurant Retail Sales
•
Fitness
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Stearns Wholesale Lending remains steadfast in our support of our client, the Mortgage Broker, through this challenging time.
Please contact your Account Executive with any questions.
V10.30.20 The information provided in this document is for dissemination to real estate and financial business entities only and is not intended for use as an advertisement for the extension of credit to consumers. © 2020 Stearns Lending, LLC, All Rights Reserved. 20 | P a g e