Catalina

Underwriting Guidelines

 

As of 01/07/03

 

 

 

Link to Underwriting Options

 

 

Borrower Eligibility

 

 

title requirements

Inter Vivos Trusts

 

 

residency

Permanent Resident Aliens

Non-U.S. citizens who are lawful, permanent residents of the United States are eligible under the same terms available to U.S. citizens. Permanent resident aliens must have any of the following:

Non-Permanent Resident Aliens

 

Restrictions

Non-Conforming and

Non-Conforming Expanded Criteria

Eligible Property Types

Single unit owner-occupied primary residence.

Eligible Finance Type

Purchase or Rate and Term refinance only.

Maximum LTV

Refer to the individual loan program.

Credit/Employment 1

1 )LTV >75% and all reduced documentation loans, borrower (s) must have established 2-year credit and employment history in the U.S.  Borrowers must also be able to verify the probability of maintaining employment in the U.S. for an additional 2 years.

2) LTV < 75%, borrowers must have established a 2-year credit and employment history in the U.S. or a foreign country. A foreign or international credit report is required to document a credit history outside the U.S.

Residency 1

1) LTV >75% and all reduced documentation loans require minimum 2 year U.S. residency.

2) LTV < 75% requires minimum 2-year

residency history in U.S. or a foreign country.

Funds

For LTV >75% and all reduced documentation loans, funds must be in U.S. institutions. If funds are transferred from a foreign country, borrower must provide proof of ownership.

(1) Loans for non-permanent resident aliens who do not have the required 2-year credit, employment or residency history must be originated and closed under the Foreign National programs.

 

 

Foreign Nationals

Non-United States citizens, who are not permanent or non-permanent resident aliens, and do not have full or partial diplomatic immunity must meet the standard requirements of an eligible borrower.  Foreign Nationals must provide:

 

 

ineligible borrowers

 

 

multiple loans to one borrower

The number of loans the investor will extend to one borrower is limited to no more than four (4).  For example:

Exception

The number of loans Investor will extend to one borrower may be increased up to eight (8) provided the transaction meets the following criteria:

 

Property Type

Loan Type

Transaction

Maximum LTV

One Unit

Fixed Rate

Purchase or Rate/Term

60%

 

 

number of properties owned

Note: Some loan programs may be more restrictive. Refer to the individual loan program guidelines.

 

Occupancy

Conforming

Non Conforming

Non Conforming Expanded Criteria and Non-Conforming Expanded Criteria Conforming Loan Balance

Owner-Occupied

No restrictions

No restrictions

No restrictions

Second Home

10 1

4

  • Full and Alt Doc: Unlimited 1

  • Reduced, No Ratio or NINA: 4

Investment Property

10 1

No restrictions

No restrictions

1) Borrower may not be affiliated with the builder, developer, or seller of the subject property.

 

 

non-occupant co-borrowers

 

 

non-arm's length transaction

Non-arm’s length transactions with non-family members will only be considered if it is a bona fide sales transaction and the borrowers will occupy the property as their primary residence.

 

 

occupancy

Primary Residence

Second Home

Investment Property

Exception (Conforming loans only): The two-year history managing rental properties and six- months' rent loss insurance coverage requirements may be waived if the borrower qualifies for the mortgage based on the full payment (PITI) for the subject property without having to rely on the rental income.

 

 

 

non-purchasing spouse

 

 

 

purchasing from builder

If borrowers are purchasing a property from a builder who is purchasing the borrower's existing residence, it is considered a non-arm's length transaction and is not permitted

 

 

Credit Requirements

 

 

credit history

When evaluating the borrower's credit history, the following factors should be considered to determine if the borrower's Credit is acceptable:

 

A borrower whose income or assets are used for qualification must have at least the following for:

 

 

minimum credit score

See Product Matrices

 

 

age of report

 

 

 

Representative credit score

A single, representative credit score can be selected for each borrower. A representative score is then designated for the borrower and the loan, as follows:

Borrower Representative Score:

Loan Representative Score:

Equity Loans

Note: If the borrowers' incomes are equal, the lowest score, or lowest middle score of all the borrowers should be used.

Note: Some non-conforming loan programs may have more restrictive guidelines for determination of the credit score. Refer to the appropriate loan program for information.

 

Usable Credit Scores

For a credit score to be considered valid and usable, it must be based on a minimum amount of information. Generally, a usable credit score is based partially upon a minimum number of trade lines that have been open for a minimum length of time. The following standard guidelines should be used when reviewing the borrowers credit history. Refer to the appropriate loan program guidelines for specific credit score requirements.

Requirements

Conforming Loan Programs (except Fast & Easy)

Conforming  Fast & Easy, Non-Conforming, Non-Conforming Expanded Criteria, and Non-Conforming Expanded Criteria Conforming Loan Balance

Minimum Credit History

2 years

2 years

Minimum Number of Tradelines*

N/A

(as long as there is a credit score and the required minimum credit history)

3

(At least one trade  line must be currently open and not be a collection or charge-off)  

Note: All 3 trade lines need not have been open for 2 years

Recent Activity

N/A

(as long as there is a credit score and the required minimum credit history)

At least one trade line must have had activity in the last 6 months

 

Credit Score Not Available

If a credit score is not available or if the credit score is not usable, the borrower may not be eligible, depending on the loan program.

 

Conforming Loan Programs

Non-Conforming,

 Non-Conforming Expanded Criteria, and Non-Conforming Expanded Criteria Conforming Loan Balance

If the borrower does not have a credit score, a non-traditional Mortgage credit report is required

If the borrower does not have a credit score, they are ineligible under these loan programs (Exception: Foreign Nationals)

 

Non-traditional MCR

Exception: The Foreign National Program allows the use of a non-traditional mortgage credit report.

Credit Score Review

Credit scores should be used to assist in determining the borrower's willingness to repay a mortgage. During the underwriting process, the following chart should be used to determine the level of review required for the loan:

 

Credit Score

Property Type

Level of Review Required

Over 660

1 unit

BASIC

Over 680

2 units

Over 700

3-4 units

620 to 660

1 unit

COMPREHENSIVE

640 to 680

2 units

660 to 700

3-4 units

Less than 620

1 unit

CAUTIOUS

less than 640

2 units

less than 660

3-4 units

 

Basic

The loan should be underwritten to confirm the borrower's willingness to repay the mortgage as agreed.

Comprehensive

All aspects of the borrower's credit history should be underwritten to establish the borrower's willingness to repay the mortgage as agreed

Cautious

 

 

 

business credit reports

 

 

bankruptcy

 

 

foreclosure

 

 

judgments/collection/tax liens/adverse credit

When reviewing derogatory credit, the following general guidelines apply.

Conforming and Non-Conforming Loans:

Any outstanding judgments and/or tax liens, as well as any other derogatory items appearing in the title policy (e.g., delinquent taxes, tax liens, mechanics’ liens, and collections) must be paid/released to the satisfaction of the title company.

Conforming Loans Only:

Refer to the individual loan program for more restrictive requirements.

 

 

 

Financial Mismanagement

 

 

payoff debt to qualify

Revolving Debt

If any portions of the loan proceeds are being used to pay off debts for qualification purposes, the underwriter must count a minimum $10 per month payment for revolving debts and include these debts in the total debt ratio.

Installment Debt

Note: Student loans with more than three (3) years' deferment do not have to be included in the calculation of the borrower’s liabilities.

 

 

 

divorce

See "Financial Mismanagement" section above

 

 

credit counseling

Active Participant

Only sub-prime loans with an LTV less than or equal to 90% are eligible for purchase by Investor when borrowers are currently participating in a credit counseling program. All other loan programs are not eligible.

Previous Participant

When a borrower's credit report reflects they have been in credit counseling, there must be a minimum of 12 months' seasoning on credit re-established since the credit counseling was terminated. The re-established credit may not include accounts paid through credit counseling.

Note: Credit bureaus generally do not actively track credit counseling history in the borrower's credit file. If a completion date is not shown on the credit report, the borrower must submit verification from the counseling agency establishing the date of completion.

 

 

 

upgrading credit

Not available

 

 

 

Alternative credit

When verifying non-credit payment references, sufficient information must be obtained to establish:

 

 

Income Requirements

 

 

acceptable income

 

 

unacceptable income

Any income or compensation for qualifying borrowers whose source of income cannot be verified by the Seller is not allowed.

 

 

 

Employed by relatives

 

 

employment history

 

 

documentation type

Full Doc

Note: Documents must be legible and free of any alterations, erasures, white-outs, or similar indications that changes have been made.

Alt Doc

Alternative Documentation is available for owner-occupied primary residences, second homes and investment properties. Refer to the individual loan program guidelines for eligibility.  General requirements are:

Reduced Doc

Non Conforming Loan Programs

Non Conforming Expanded Criteria and Expanded Criteria Conforming Balance Loan Programs

Passive or Unearned Income

If the primary source of income is unearned or passive income, then the source must be verified. An income amount must be stated and the file must contain reasonable documentation that the income exists. Verification may be obtained verbally and should be obtained from a third party source, such as a CPA, attorney, or trust administrator. Examples of passive or unearned income include:

Verification of Assets

Assets must be disclosed and verified through Full or Alternative documentation subject to the following requirements:

 

 

Stated Income

Income is disclosed on 1003

 

 

Stated Income/Stated Asset

Both income and assets are disclosed, but not verified, under the Stated Income Stated Asset documentation type

 

 

No Ratio

The No Ratio Documentation requires that the borrowers source of income be verified, but the amount of income received is not disclosed nor verified. Verification documentation includes:

Salaried Borrowers (includes borrowers receiving commissioned or bonus income) .

A full two (2) year history with the same employer or

in the same line of work must be documented by a verbal Verification of Employment (VOE), however, income may not be disclosed. The VOE must include:

Self-Employed Borrowers

Two (2) years self-employment in the same line of work must be documented through:

Or

Unearned, or Passive Income

Employment must be documented as being received for two (2) years, and reasonable documentation that this income exists must be obtained through a third party such as a trust administrator, CPA or an attorney

 

 

No Income/No Asset

The borrower's employment, income, or assets are not disclosed or verified

 

 

 

No Doc

Not available

 

 

 

Fast & Easy documentation

 

 

self-employed

Documentation Requirements

 

 

tax returns

Standard FNMA/FHLMC guidelines

 

 

 

IRS form 4506

 

 

fixed income

Social Security

Grossing up

 

 

Rental Income

Generally, rent from boarders in a single-family property that is also the borrower's primary residence or second home may not be considered acceptable income. However, rent received for other properties is acceptable, even when the borrowers occupy one of the units of a multiple-unit property.  Rental income may be acceptable in certain Affordable Housing Programs.  Refer to individual programs for guidelines.  Investor requires

Monthly Operating Income

Monthly operating income may be considered stable income only if the borrowers have sufficient remaining reserves after closing that could be used to pay monthly housing expenses for at least six (6) months, or make necessary regular and emergency repairs to the property.

No Rental Income History

When the rental income relates to the security property and the borrower has no history of receiving rental income from the property,

The gross rental income from the property will be equal to the lesser of the market rent established by the appraiser or the current rent based on the existing lease agreements.

Calculation of Rental Income

There is no restriction as to the length of time the income has been received.  A monthly average income should be developed from the Net Rental Income from Schedule E of the borrower’s most recent two (2) years tax returns.  Appropriate adjustments include:

If the property does not appear on the tax returns due to a current purchase or a recent purchase, then gross income may be calculated from a fully executed lease by multiplying the gross monthly rent on each of the leases by 75%. The sum is the average monthly income that should be included as income in the calculation of debt ratios.  If there is no executed lease, use the income shown on the Operating Income Statement (Fannie Mae Form 216),

Income From Owner-Occupied 2-4 Unit Property

In cases where the borrower occupies one unit of the 2-4 unit property, do not include income or expenses from the owner-occupied unit. In addition, anticipated income from any units that are not occupied by the borrowers must be verified. A copy of the prior year’s Schedule E or current lease must be obtained and included in the loan file. Generally, 2-4 unit properties present a greater default risk. Sellers should perform more conservative underwriting for these properties.

Income from Investment Properties

Boarder Income

Rent from boarders in a single family property that is also the borrower’s primary resident or second home may not be considered as income as this is not a typical situation. The only exception may be in certain Affordable Housing programs. Refer to individual programs for eligibility.

 

 

TRAILING SPOUSE INCOME

Standard FNMA/FHLMC Guidelines

 

 

alimony/child support

 

 

non-traditional income

Seasonal Employment and Frequent Job Changes

 

Part Time

Foster Care

Adoption

Not allowable

Worker's Comp

Allowable, with proof it will continue

 

 

Asset Requirements

 

 

acceptable assets

Source of Funds

Conforming

Non-Conforming

Non-Conforming Expanded Criteria

Liquid Assets in bank account

Allowed

Allowed

Allowed

Retirement Accounts, Securities, Gov't Bonds

Allowed

Allowed

Allowed

Individual Development Account

Allowed

Not allowed

Not allowed

Secured Loans (borrowed funds)

Allowed

Not allowed

Not allowed

Sale Proceeds from Real Estate

Allowed

Allowed

Allowed

Gift Funds

Allowed

Allowed

Allowed

Grants

X

Not allowed

X

Pooled Funds

Owner-occupied only

Not allowed

Not allowed

Bridge (Swing) Loans

Allowed

Allowed

Allowed

Trust Account

Allowed

Allowed

Allowed

Rent Credit

Allowed

Allowed

Allowed

Land Equity

Allowed

Allowed

Allowed

Trade Equity

Allowed

Allowed

Allowed

1031 Exchange

Investment property only

Not allowed

Investment property only

Disaster Relief Grants/Loans

Allowed

Not allowed

Not allowed

Cash on Hand

May be used on certain House America Loans

Not allowed

Not allowed

 

 

Unacceptable assets

The following are unacceptable sources of funds:

 

 

 

Eligible Sources of funds

Depending on the type of funds received, eligible sources include:

Some loan programs may have stricter criteria or different guidelines on eligible sources of funds. Refer to the individual program guidelines for complete details.

 

 

down payment requirements

Gift Funds:

Gift Funds: Conforming Loans

Gift funds may be used for down payment with the following restrictions:

Gift Funds: Non-Conforming and Non-Conforming Expanded Criteria Loans, and Non-Conforming Expanded Criteria Conforming Loan Balance Loans:

Generally 5% of the sales price is required as a minimum cash investment from the borrower, with the following exceptions:

Note:

Individual programs may have additional restrictions. Refer to the individual program guidelines for details.

Donor's Statement for Gift Funds

Gift funds must be documented by a letter signed by the donor stating the following:

Gift Funds from a Municipality or Non-profit Community Organization:

Secured Loans/Borrowed Funds

Trade Equity

Sweat Equity

Not acceptable

 

 

1031 Exchange

Lease Option Rent Credits

Subsidy Programs

 

 

reserve requirements

Click here for further guidelines.

Acceptable Sources of Reserves

Reserves are generally in the form of cash or a cash equivalent (stocks, bonds, etc). However, reserves may also be in the form of certain retirement accounts such as IRA's and tax-favored retirement savings accounts like 401(k)s. The amount of eligible reserves is calculated based on the type of asset used.

 

Refer to the following table for details:

 

Asset

Calculation for Reserves

Stocks, bonds, mutual funds, U.S. government securities, and other securities that are traded on an exchange or marketplace general available to the public (such as NYSE, NASDAQ, Midwest SE, CBOT, or OTC) whose price can be readily verified through financial publications.

100%

Cash value life insurance (rather than face value) that is verified. The borrower must be the owner of the policy and not the beneficiary.

100%

Personal IRA and SEP-IRA accounts that are owned by the borrower and verified.

100%

The borrower's portion of undistributed trust funds.

100%

401(k), KEOGH, 403(b) and other IRS-qualified employer plans may be counted as reserves; however, to account for withdrawal penalties and estimated taxes, 70% of the vested amount of the account should be used to determine the borrower's available reserves.

The borrower will be required to provide documentation that the funds are accessible for withdrawal. If the retirement account only allows for withdrawals in the event of the borrower's employment termination, retirement, or death, these funds should not be considered as reserves.

70% of the vested amount of the account.

Savings bonds may be counted at 100% of face value if mature. If the bonds are not mature, the amount counted towards reserves is based on the redeemable value at the time of underwriting.

 

Mature: 100%

or

Pre-maturity Date: Redeemable value.

 

Refer to the individual loan program guidelines for the cash reserves

requirement.

 

 

Contributions

Seller Contributions

Occupancy

LTV

Maximum Seller Contributions

Owner Occupied

> 90%

3%

< 90% and > 75%

6%

< 75%

9%

Second Home

> 90%

3%

< 90% and > 75%

6%

< 75%

9%

Investment

All LTV's

2%

Occupancy

LTV

Maximum Seller Contributions

(Non-conforming Loans)

Maximum Seller Contributions (Non-conforming Expanded Criteria Loans)

Owner Occupied

> 90%

3%

< 90%

6%

Second Home

> 90%

Not allowed

< 90% and > 80%

3%

< 80%

6%

3%

Investment

> 80%

Not allowed

3%

< 80%

Not allowed

6%

 

Other Contributions

Contributions made by a non-participant to the sales transaction, such as the borrower's employer or a family member, have no limitations

 

 

Transaction Type

 

 

Purchase

 

 

Rate and Term

Lien Seasoning: Conforming Loans Only.

Texas Rate and Term Refinances

Installment Land Contract Refinances

 

 

Cash Out

Lien Seasoning

Equity Take Out Refinance

For an equity take-out refinance transaction for a seasoned mortgage, the LTV ratio is determined by comparing the mortgage balance to the current appraised value of the property.

Existing Subordinate Financing

 

 

lease option

Standard FNMA/FHLMC Guidelines

 

 

land contract

Click here for guidelines

A land contract, also known as an installment land contract or a contact for deed, is a real estate agreement between a buyer and seller, whereby the buyer may use and occupy the property.  However, the grant deed from the property seller to the buyer is not recorded until all or a specified part of the sales price has been paid.  The buyer does not obtain the transfer of title until the land contract is paid; however, if the land contract is recorded, it should be reflected in the chain of title in the title report.

 

Purchase vs Refinance

The transaction must be defined as either a purchase or refinance based on the following criteria:

 

 

Criteria

Purchase

Refinance

LTV

Conforming Loans:  The lesser of current appraised value or total acquisition cost.

Note: If the land contract was executed more than 12 months prior to the date of the loan, it must be considered a refinance.  It may not close as a Purchase.

Rate and Term

The LTV is based on current appraised value.

 

Cash Out

Conforming Loans: LTV is based on current appraised value.

 

Non-Conforming & Non-Conforming Expanded Criteria loans:

  • If the land contract has been in place less than 1 year, the LTV is based on the lesser of the current appraised value or the total acquisition cost.

  • If the land contract has been in place more than 1 year, the LTV is based on the current appraised value.

Note: If the land contract is not recorded, use the date signed by all parties as the in place date.

Acquisition Cost

Total acquisition cost is calculated as:

--Purchase price as indicated in the original land contract, plus

--Any documented costs for rehabilitation, renovation, refurbishment, or energy conservation.

Required for Non-Conforming and Non-Conforming Expanded

Criteria loans only:

Total acquisition cost is calculated as:

--Purchase price as indicated in the original land contract, plus

--Any documented costs for rehabilitation, renovation, refurbishment, or energy conservation.

Cash Proceeds

No loan proceeds may be disbursed to the borrower unless they are for documented costs for completed rehabilitation, renovation, refurbishment or energy conservation.

Cash out proceeds may be disbursed within the loan program guidelines. Refer to the individual loan program guidelines for cash out limitations.

 

Requirements

Loans with land contracts submitted to Investor for purchase must include the following documentation:

 

Criteria

Purchase

Refinance

Land Contract

A copy of the land contract is required. The land contract does not have to be recorded.

Payment History

Verification must show the borrower has been making the payments.

 

Conforming loans:

--When the lender is a private party, 12 months cancelled checks are required.

--A verification of mortgage (VOM) is acceptable with institutional lenders or if the loan received a CLUES Accept recommendation.

 

Non-Conforming and Non-Conforming Expanded Criteria loans:

Non-arms length transactions require that the payment history be verified by cancelled checks.

Verification must show the borrower has been making the payments

Cash Proceeds

No loan proceeds may be disbursed unless they are for reimbursement of costs for rehabilitation, renovation, refurbishment or energy conservation and can be documented with receipts.

RATE & TERM:

Paid receipts for costs that exceed the purchase price in the land contract must be provided.

 

CASH OUT:

Allowed within the program guidelines. Refer to the individual loan program for cash out limitations.

Completion of Improvements

If the appraisal is made subject to the completion of any improvements, then a Certification of Completion and Value (Form #442) is required.

 

 

 

Construction-to-permanent

Involves the granting of a long-term mortgage to a borrower to replace interim construction financing used for the construction of a new home.

Purchase

Note: The borrower may use the cash investment in the land, provided it was acquired at least 12 months prior to the date of the application for construction financing. Acceptable documentation includes the final HUD-1, a copy of the warranty deed showing no liens, or a copy of a release of the lien.

 

If the purpose of the long-term mortgage is to allow the borrower to make a single disbursement to a builder/contractor for the purpose of a completed property, then the transaction must be considered a purchase.

LTV Determination for purchase

The LTV for purchase transactions is determined based on how long the borrower has owned the land.

Ownership of Land

LTV is based on:

Borrower has owned the land less than 12 months

LTV is based on the lesser of the:

Current appraised value

Or

Sales price of the land plus any documented improvement costs.

Borrower has owned the land for at least 12 months

Or

Borrower received the land as a gift

LTV is based on the lesser of the:

Current appraised value

Or

Appraised value of the land plus any documented improvement costs.

 

Refinance

LTV Determination for refinance

The LTV for Conforming loan refinance transactions is based on the requirements in the following table:

Ownership of Land

LTV is based on:

Borrower has owned the land less than 12 months

Current appraised value

Or

Sales price of the land plus any documented improvement costs.

Borrower has owned the

land for at least 12 months

LTV is based on the Current appraised value

Borrower received the land

as a gift

LTV is based on the lesser of the:

Current Appraised value

Or

Appraised value of the lot plus any documented improvement costs.

 

Borrower Requirements

To be considered a construction-to-permanent financing transaction, the following borrower conditions must be met:

Conforming

Non-Conforming and

Non-Conforming Expanded Criteria

The borrower is the primary obligor on the construction financing which is obtained through a legitimate financial institution.

And

The borrower is the owner of the lot on which the residence is constructed.

The borrower is the primary obligor on the construction financing which is obtained through a legitimate financial institution.

Or

The borrower is the owner of the lot on which the residence is constructed.

 

 

 

All construction to permanent loans must adhere to these requirements:

Conforming Loans only .

Land Acquisition

The cost of the land acquisition is determined by a certified copy of the closing statement (HUD-1) from the purchase of the land.

Calculation of Acquisition Cost

The total acquisition cost will be based on:

Note: If the borrower is also the builder, or an employee, relative, domestic partner or fience/fiancee of the builder, the builder's profit is not considered an allowable cost, and may not be included in the acquisition cost.

Construction Costs Not Included

Labor performed by the buyer, also referred to as sweat equity, or the trade of any labor or goods from the buyer to the builder cannot be included in the construction costs.

Using a General Contractor

If the borrower employs a general contractor, the following documentation is required to verify the cost of construction:

General Contractor is Not Used

If a general contractor is not used to construct the building, the construction costs must be documented with copies of receipts or invoices and cancelled checks for materials, supplies and/or labor.

 

 

LTV Calculation for Conforming Loans

The LTV for Conforming loan refinance transactions is based on the requirements in the following table:

 

Transaction

Ownership of Land Conforming Loans

Non-Conforming and Expanded Criteria Loans

Rate and Term

There is no time limitation on the borrower's ownership of the land.

The LTV is based on the current appraised value.

Cash Out

Borrower has owned the land less than 12 months.

The LTV is based on the lesser of the:

Current appraised value

Or

The sales price plus any documented improvement costs.

Borrower has owned the land for at least 12 months

The LTV is based on the current appraised value.

Construction Modification

Program Options

The Seller may originate the construction modification with one of the following options:

OR

Note: This option would provide for less than 30 years' of permanent financing.

Documentation

The following documents must be used when originating a construction loan that will be modified:

 

 

 

Spot relocation

A spot relocation mortgage is a mortgage that meets the all of the following requirements:

Trailing and/or Secondary Wage Earner

A trailing and/or secondary wage earner is:

Note: Self-employed borrowers are not eligible under the spot relocation enhancement.

Refer to the individual loan program for eligibility.

Note: Spot relocation mortgages are not eligible for Expanded Criteria or Equity loan programs.

Eligible Finance Types

Purchase transactions only.

Lien Type

First mortgage only.

Documentation Type

Full and Alternative documentation only.

Occupancy

Owner occupied primary residence only.

Eligible Properties

One unit SFRs, PUDs and condos only.

Eligible Borrowers

Conforming: Existing employee transfers and new hires.

Non-Conforming: Existing employee transfers.

Property Location Conforming:

Non-Conforming: The borrower's commute to work must increase by at least 35 miles.

 

Maximum Loan Amount

Conforming: Conforming loan limits apply.

Refer to Seller guide for any additional requirements for  Loan Amounts, Ratios and Eligible Transactions.

Non-Conforming: $1,000,000.

Minimum Non-Conforming Loan Amount:

The minimum loan amount for non-conforming loans is $322,701, unless specifically modified in the individual loan program guidelines.

Maximum LTV Conforming:

The lesser of 90% or the maximum LTV as shown in the individual loan program.

Maximum LTV Non-Conforming:

Reserves

Conforming: Borrowers must have cash reserves after closing of at least:

Or

Non-Conforming: Borrowers must have cash reserves after closing of at least six (6) months principal, interest, tax and insurance payments for the mortgage. No exceptions will be allowed.

Buydowns

Qualifying Ratios

28% / 36%*.

* Conforming only - Higher qualifying ratios may be used when strong compensating factors exist, in addition to the potential use of trailing wage earner’s income.

Exceptions to Qualifying Ratios

Conforming:

To omit the PITI or bridge loan payments from the qualifying ratios, document using one of the following two options:

company takes responsibility of the outstanding mortgage

Or

Non-Conforming: Not allowed.

Contributions

Contributions in connection with an employer’s relocation program may include:

Non-Conforming Loans: Verification of employee’s relocation sponsorship is required for fixed rate loans.

Trailing Wage Earner Income

The Seller must document that the trailing wage earner was a salaried, hourly wage, or commissioned employee in the same profession for the previous 2 years. Self-employed may not be considered “trailing wage earners.”

Income

Conforming Loans  

LTVs of 80.01% to 90.00%

Up to 100% of the trailing wage earner’s anticipated income may be used to qualify for the loan, providing the trailing wage earner’s income used does not exceed 40% of the total income of both wage earners needed to qualify.

Example:

Trailing wage earner: $1,500 @ 100%

Primary wage earner: + 2,000

Total income to qualify: $3,500

$3,500 ÷ $1,500 = 42.86% (over 40%)

$3,500 x 40% = $1,400 = allowable trailing income

$1,400

+2,000

$3,400 = allowable total qualifying income

LTVs of 80.00% or less

Up to 50% of the trailing wage earner’s anticipated income may be used to qualify for the loan.

Example:

Trailing wage earner: $1,500 @ 100%

Primary wage earner: +2,000

Total income to qualify: $3,500

$1,500 x 50% = $750 = allowable trailing income

$ 750

+2,000

$2,750 = allowable total qualifying income

OR

Up to 100% of the trailing wage earner’s anticipated income may be used to qualify for the loan, providing the trailing wage earner’s income used does not exceed 40% of the total income of both wage earners needed to qualify.

Example: Refer to the example above for LTVs of 80.01% to 90.00%.

Note: The loan file should be documented showing a reasonable employment market for positions that are the same or similar to the trailing wage earner’s previous employment. This may include:

Non-Conforming Loans

The percentage of trailing wage earner’s income earned in the previous location is limited by  LTV and may be used to qualify on the following loan product types, as indicated:

The maximum anticipated income that may be utilized is as follows:

Fixed-Period ARMs:

The maximum anticipated income that may be utilized is as follows:

Additional Documentation

The following additional documentation is required in loans submitted for purchase:

Non-Conforming: Verification of employer relocation sponsorship is required on fixed rate loans only.

Underwriter Responsibilities

 

 

 

Financed Single Premium Mortgage Insurance

The use of financed single premium mortgage insurance (FSPMI) requires two different calculations of the loan-to-value (LTV) ratio.

 

 

Property Eligibility

 

 

Allowable States

Please Click here for the Allowable States page

 

 

geographic restrictions

Please Click here for the Geographic Restrictions page

 

 

Acceptable properties

Note: 3-4 unit properties in California are not eligible for purchase unless the loans are being delivered under the expanded criteria investment property or sub-prime underwriting guidelines.

 

 

unacceptable properties

 

 

appraiser requirements

 

 

appraisal requirements

Note: Black and white photos, produced by photography or electronic imaging, are acceptable provided the appraiser notes in the report and information not apparent in the photos that may adversely affect the market value of the property. All photographs must be appropriately identified, and must be originals produced by photography or electronic imaging

Electronically Transmitted Appraisals

Investor  will only accept electronically transmitted appraisals (sent via fax machines and Internet connections) if the appraisal report meets all of the following conditions:

Otherwise, standard FNMA/FHLMC guidelines with the exception of the following:

Appraisal Requirements for Factory Built Homes

The appraiser must address the following items in the appraisal report:

Comparable Sales Requirements

Review Requirements

Age of Appraisal

 

 

condo requirements

Investor follows standard FNMA/FHLMC guidelines

Required Documentation

Investor follows standard FNMA/FHLMC guidelines

Non-Warrantable Condos

Occupancy Ratios

At least 60% of the total number of units within the project must have been conveyed to purchasers who are occupying the units as a primary residence or second home.

Exception: There is no owner occupancy requirement if the loan is a:

 

 

Condotels

 

 

 

Cooperatives

If the restrictions shown here differ from what is stated in the individual loan program, the more restrictive of the guidelines apply.

 

Criteria

Conforming Loan Requirements

Non-Conforming Expanded Criteria

requirements

Eligible Occupancy

Owner occupied primary residence only.

Owner-occupied primary residence and second homes.

Ineligible Borrowers

Non-occupant co-borrowers.

Non-owner co-borrowers.

Maximum LTV

Purchase and Rate and Term:

90% - Loans underwritten through Investor AUS or DU may be approved for higher LTVs.

 

Cash Out: Eligible only with an Investor AUS "Accept"or DU "Approve/Eligible" recommendation.

Purchase and Rate and Term: 80%

 

Cash Out: Not allowed.

Secondary Financing

Not allowed.

Not allowed.

Documentation Type

Refer to individual loan program guidelines.

Full and Alternative documentation.

Term

30 years.

30 years.

Construction Modification

Not allowed.

Not allowed.

Energy Efficient Mortgages

Not allowed.

Not allowed.

 

 

High-Rise Condominiums

 

Loan Program

Guidelines

Conforming

LTV/CLTV and cash out guidelines for high-rise

Condominiums are the same as for low-rise condominiums. Refer to the individual loan program for condominium eligibility.

Non-Conforming,  Non-Conforming Expanded Criteria, Non-Conforming Expanded Criteria Conforming Loan Balance.

Refer to the individual loan program for LTV/CLTV and

cash out guidelines for high-rise condominiums.

 

 

 

Two-to-Four Unit Condominium Projects

 

Number of Units

Number of Units sold as

Principal Residence/Second Homes

2

1

3

2

4

3

Project Requirements

 

 

MANUFACTURED HOMES (See factory built housing)

 

 

Factory Built Housing

 

All Factory-Built Housing must meet the criteria listed in the following table:

CHARACTERISTIC

REQUIREMENTS

ZONING

The property must be zoned 1-4 family residential

and conform to all applicable zoning and use restrictions.

CONDOMINIUM PROJECTS

Manufactured or modular homes in condominium projects and any manufactured or modular home subdivision with an HOA must meet agency guidelines.

TITLE

The property must be owned fee simple or be an acceptable leasehold.

LOCATION

The property may not be located in a mobile home park.

• Vehicular access to the property must enter and exit via an abutting all-weather public or private street.

• In case of a private road, there must be a permanent easement and provisions for road maintenance.

SITE

The property must take on all the characteristics of a “site built” single family home.

• Full utilities must be installed and meet all local health and safety standards including:

√ Continuing supply of potable water.

√ Public sewer or certified septic system.

√ Public electricity.

• The unit must be attached to a permanent foundation designed by an engineer to meet the soil conditions of the site.

• The foundation must have an acceptable perimeter wall of concrete, masonry, or treated wood (under code) with proper perimeter and interior footings located below the frost line.

• If piers are used in lieu of the foundation, they should be placed where the unit manufacturer recommends.

• If state law requires anchors, they must be provided.

• Materials and construction of the unit must be typical and acceptable in the subject’s market area.

LAND

The purchase of the land and the unit must represent a single real estate transaction under applicable state law.

FINANCING RESTRICTION

The mortgage amount cannot include the financing of

furniture, mortgage life insurance, property damage

insurance, or any form of insurance, except mortgage

insurance.

TITLE INSURANCE

The following requirements apply to manufactured homes only:

• The mortgage must be covered under a standard real estate title insurance policy that identifies the unit as part of the real property, and insures or indemnifies against any loss, if the manufactured unit is determined not to be part of the real

property.

• The ALTA 7 Manufactured Housing Endorsement must be obtained in all cases.

• The property must be insured as a single family residence with all the appropriate title endorsements, including the merging and elimination of any vehicle or U.C.C. filing.

• A “Notice of Manufactured Home Installed on a Permanent Foundation” should appear on the title.

NOTE: If the manufactured home is not deemed to be part of the real property, the loan is not eligible for purchase.

NEW CONSTRUCTION

A Certificate of Completion or Certificate of Occupancy from the local building authority is required.

HOLDBACKS

Escrow holdbacks are not allowed.

NOTE: Please refer to Texas Refinance Requirements in the Geographic Restrictions for additional requirements.

 

 

 

Manufactured Homes

Note: Only a manufactured home will have a HUD factory tag that includes manufacturer model, year built, and serial number information.

Note: The presence of a steel undercarriage is the primary distinguishing feature of this type of factory-built housing.

Note: Only a manufactured home will have a HUD factory tag that includes manufacturer model, year built, and serial number information.

 Note: Manufactured homes are not eligible for Non-Conforming loan programs.

Comparable Sales Requirements

The comparable sales used for manufactured homes must meet the following

additional requirements:

Documentation Requirements

Note: A notice of intent to file a Title Elimination is not sufficient.

 

 

 

Mobile Home

 

 

 

Modular Home

Modular Homes are characterized by being:

 

 

 

Panelized Home

Panelized Homes are characterized by being:

 

 

 

Prefabricated Home (Pre-Cut)

Prefabricated Homes are characterized by:

 

 

rural property

Rural area properties are eligible only under some loan programs, and must meet the following criteria:

 

 

acreage/square footage

% of Total Value Represented by Dwelling under the Program

Deduction from Maximum Allowable LTV

70% or greater

0%

60-69%

5%

50-59%

10%

40-49%

15%

 

 

unique properties

Mortgages on properties that have special types of housing design or construction are allowable. These may include the following:

The appraiser must be able to determine that an active, viable market exists for housing of the same property type. The following information, and the facts supporting the appraisers conclusion, must be included in their report:

 

 

 

properties listed for sale

 

 

mixed use properties

Note: Mixed use properties in urban areas where the business is at street level and the living quarters are either upstairs or behind the business are also acceptable.

 

 

agricultural/commercial zoning

Investor does not purchase loans on agricultural properties, such as farms, ranches, orchards, undeveloped land, or on land-development-type properties.

 

 

leaseholds

Note: For properties located in the FNMA Western Region (Alaska, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington and Wyoming), a CLTA 107.5 endorsement, or its equivalent, is also required. It must state that the property improvements are insured in the same manner as the land.

Note: The underwriter must analyze any foreseeable increase in lease payments to determine the impact on the borrowers ability to repay the mortgage.

 

 

 

Escrow Holdbacks

The following are the limits for mortgages with an escrow holdback:

Conforming Loans:

Non-Conforming, Non-Conforming Expanded Criteria, and Non-Conforming Expanded Criteria Conforming Loan Balance Loans:

 

 

 

declining values

 

 

inspection reports

Type of Inspection

When Required

Age of Inspection

Performed By

Termite

When required in the Sales or Purchase Agreement, OR when the appraiser recommends the inspection in the appraisal report

Requirements for standard age of documents apply.

Must be performed by a professional licensed in the respective or related field, or if applicable, a qualified representative from the local municipality

Private Well

Septic System

Roof

Any other inspection required by the sales/purchase agreement or appraisal.

 

 

 

Security Bars

The appraiser must comment with respect to the use of burglar or security bars. There must be an emergency release latch for at least one window in each room where the security bars are located, unless local or municipal codes state otherwise.

 

 

 

These are general underwriting guidelines only. Please refer to the product description for guidelines specific to that product.