FHA Purchase-Refi Non Streamline

Document Sample
FHA Purchase-Refi Non Streamline Powered By Docstoc
					                                           TABLE OF CONTENTS
Product Description

    1.     Programs                                   2
    2.     Loan Purpose                               2
    3.     Loan Types                                 2
    4.     Property Eligibility                       3
    5.     Loan Amount Min/Max                        3
    6.     LTV/CLTV/HCLTV                             3
    7.     ARM Program                                5
    8.     Qualifying                                 5
    9.     Mortgage Insurance Premium                 6

Doc Expiration                                        6


    1.     Credit Score                               7
    2.     Citizenship and Immigration Requirement    7
    3.     Special Underwriting                       7
    4.     Current Mortgage                           8
    5.     Foreclosure/Bankruptcy                     8
    6.     Subordinate Financing                      8
    7.     Secondary Financing                        9


    1.     Verbal Verification of Employment          10
    2.     VOE Form                                   10
    3.     IRS 4506 T                                 10
    4.     Income Documentation                       10


    1.     Reserves                                  10
    2.     Down Payment Fund                         11
    3.     Gift Funds                                11


    1.     Appraisal                                 11
    2.     Special Underwriting                      11
    3.     Property Flipping                         12
    4.     Termite Inspection                        12
    5.     Condominium Project Approval              12
Revised 11/10/11 FHA Purchase/Refi Non Streamline
                            FHA Purchase/Refi Non Streamline
Product Description


   •   Fixed rate and adjustable programs provide for a fixed interest rate and level payment s for the
       life of the loan or an adjustable rate according to FHA current guidelines. The program is fully
       amortizing mortgage insured by the Federal Housing Administration. All loans must be in
       compliance with published FHA guidelines.
   •   Refer to the 4155 for all FHA Guidelines not covered in this manual

Loan Purpose

   •   Purchase
   •   Rate/Term refinance
   •   Cash-out refinance
   •   Primary residence (only)
   •   HUD $100 Down Program
           o Standard FHA underwriting guidelines apply. Refer to ML-2011-19 for additional

Loan Types

   •   Eligible:
            o 203(b) with ADP codes of 703, 729, 796
            o 203(b), 234 (c) Condominiums with ADP codes of 731,734, 797
   •   Ineligible:
            o Refer or caution findings through total scorecard
            o Credit score less than 640, or 660 for loan amounts > $417000
            o HPML (Higher priced Mortgage Loans) on an FHA Adjustable Rate loan
            o Graduated payment mortgages
            o Growing equity Mortgages
            o Loan to non-profit organization
            o Loans with private water purification systems requiring an escrow for maintenance
            o Any program which impairs the lenders right to complete collection or foreclosure
            o Texas Section 50(a)(6) Program
            o Construction to permanent loans with modifications
            o Non-occupying borrowers on multi-unit dwellings
Revised 11/10/11 FHA Purchase/Refi Non Streamline
            o    Deed restricted properties
            o    Non-Traditional Credit (including, among other things, no traditional or inadequate
                 traditional credit report information) as defined in this section.
            o    “Tenants in Common with a Tenancy in common agreement”

Property Eligibility

    •   Eligible:
             o 1 Unit detached and attached – PUD, FHA approved Condo
                     Condos – see Project Approval requirements in this guideline
             o 2-4 Unit
    •   Ineligible:
             o Manufactured Housing
             o Properties that do not meet HUDs Minimum Property Standards
             o Not residential in nature and use (i.e.: farms, orchards, commercial properties, etc)
             o Properties with Deed restrictions (a.k.a. Resale restrictions)

Loan Amount Min/Max

    •   Max loan amounts vary by location:
            o Limits effective with Note dates 10/1/11 – 12/31/11 (Refer to ML 11-29)
    •   FHA will permit loans originated under the 2008 loan limits to be refinanced at mortgage
        amounts that exceed the current 2009 (and future) geographic loan limits. For full refinances,
        the mortgage amount may exceed the current geographic limit provide:
            o New loan amount (without MIP) does not exceed the prior case laon amount; and
            o The new appraised value supports the loan amount and the LTV is not greater than


    •   Max mortgage may not exceed the amounts defined on HUD’s website
            o Condo’s in the state of Florida: max is restricted to 70%/70%/70% with a min 740 Fico or
               60%/60%/60% with a Fico less than 740 prior to the inclusion of UFMIP
    •   Purchases
            o Max LTV is 96.5%.
            o Min cash investment is 3.5% of the value (sales price or appraised value, whichever is
               less) without closing cost
            o Max CLTV is 105%
    •   Rate and Term
Revised 11/10/11 FHA Purchase/Refi Non Streamline
           o  Max Mortgage is the lower of the loan to value or the existing debt calculation
              described below, and never exceed the statutory limit except by the amount of any
              upfront MIP (UFMIP)
          o LTV calculation
                   Max LTV 97.75%
                          • Multiply appraised value of the property by 97.75%.
          o Existing Debt calculation
                   Existing first lien + subordinate liens seasoned at least 1 year + all borrower
                      allowable closing costs + prepaid expenses + discount points + the cost of
                      repairs and improvements required by the appraiser – (minus) any refund of the
                      UFMIP if it was originally financed in the mortgage
          o Case # assigned prior to 9/7/10: Max CLTV 105%
          o Case # assigned after 9/7/10 Max CLTV 97.75% Refer to ML 2010-24 and ML 2010-36
   •   Cash-Out Refinance
          o Max LTV 85% and subject to the following conditions
                   Mortgage calculation is based on the length of the ownership:
                          • Owned for more than 12 months prior to application date: LTV can be
                              based on the appraised value
                          • Owned less than 12 months prior to application date: LTV is based on
                              the lower of the appraised value or sales price when property was
                              acquired. Does not apply if property was inherited and is or will
                              become the heir’s principal residence
                   Borrower’s who are delinquent, in arrears, or who have any mortgage
                      delinquencies within the most recent 12 months period are not eligible
                   Acceptable payment history must be documented and accepted if:
                          • Mortgage is current, an
                          • All payments on the mortgage have been made within the month due
                              for the previous 12 months
                          • Mortgages with more than 6 months and less than 12 months payment
                              history, mortgagor must have made all payments when due. If payment
                              history is less than 6 months – Not eligible
                   Subordinate financing
                          • CLTV does not exceed 105% for case number assigned prior to 9/7/10
                          • CLTV does not exceed 85% for Case Number assigned on or after
                              9/7/10, provided the borrower qualifies for making scheduled payments
                              on all liens.
                   New subordinate financing
                          • CLTV does not exceed 85%

Revised 11/10/11 FHA Purchase/Refi Non Streamline
                       Co-borrowers and co-signers must be an occupant of the property. Non
                        occupant borrowers may not be added to qualify
                    Debt consolidation should be evaluated carefully
   •   Refinancing of a former Investment property
           o Max mortgage amount available for borrowers who re-occupy their former investment
               property as their primary residence are subject to the following:
                    Former investment property was 12 months or more prior to the loan
                        application date then the max financing as an owner occupant
   •   Subordinate Financing
           o See ML 2008-13 for additional information. If subordinate financing is in the form of a
               home equity line of credit the entire lien must be subordinated to the new first
               mortgage and the entire line must be used to calculate the CLTV
   •   Principal Curtailments
           o Only allowed as a result of closing excess premium rate credits.

ARM Program

   •   Not permitted on Loan Terms less than 30 years
   •   Index
           o The index is based on the weekly average yield on U.S. Treasury Securities adjusted to a
              constant maturity of one year. Also known as the 1=Year Constant maturity Index.
           o ARMs are acceptable with margins of 2.00 or 2.25
   •   Adjustment Caps and Margins
           o Floor Rate: The minimum rate is equal to the applicable margin on each loan
           o Life Cap: Initial Note Rate plus 5.00%
           o Annual Change: After the initial fixed rate period, the ARM products allow a 1% annual
              interest rate adjustment


   •   Qualifying Rate
          o Fixed: Note Rate
          o 3/1, 5/1 ARM: Note Rate
   •   Qualifying Ratios
          o Fixed/ARM 31%/43% or as allowed with DU

Mortgage Insurance Premium (MIP)

Revised 11/10/11 FHA Purchase/Refi Non Streamline
   •   Upfront MIP on or after April 18, 2011:

Transaction Types                                   Up-Front
Purchase and Refinance Transactions                 1.00%

   •   Annual MIP on or after April 18, 2011:

        For loans with terms >15 years*                     For loans with terms ≤15 years*
         LTV                    Annual                       LTV                    Annual
                                                              ≤78                    None
          ≤95                     1.10%                   78.01 to 90                .25%
          >95                     1.15%                      >90                     .50%

   •   Upfront MIP on or after October 4, 2010 through April 17, 2011:

Transaction Types                                   Up-Front
Purchase and Refinance Transactions                 1.00%

   •   Annual MIP on or after October 4, 2010 through April 17, 2011:

        For loans with terms >15 years*                     For loans with terms ≤15 years*
         LTV                    Annual                       LTV                    Annual
         ≤95                     0.85%                       ≤90                     None
         >95                     0.90%                       >90                     0.25%

Doc Expiration

   •   Credit reports must be dated within 60 days of underwriting and must be dated within 120 days
       of the note
   •   Appraisal must be ordered after case received date unless:
           o Appraisal was originally ordered for a conventional loan that subsequently converted to
               an FHA loan
           o Documentation of prior non-FHA loan type required
           o Valid for period of 120 days
   •   Income: paystub: Most recent 30 days
   •   Assets: All verification of funds must be dated within 45 days of the loan application and within
       90 days of the note for existing construction and 120 for new construction
Revised 11/10/11 FHA Purchase/Refi Non Streamline

   •     Only accept loans submitted through Total Scorecard excluding streamlines w/appraisal unless
         paying off a Citi loan.
   •     Maximum number of borrowers
             o No more than 4 applicants/borrowers

   Credit Score

   •     Credit Score Overlays
            o <$417000 = 640 Fico
            o > $417000 = 660 Fico

Citizenship and Immigration Requirement

   •     Refer to HUD Handbook 4155.1 Chapter 4 Section A, Topic 3. The Immigration Classification
         Chart in the Exhibit section should be used in conjunction with HUD Handbook to determine visa
         classifications that are acceptable to CMG.

Special Underwriting

   •     Social security number discrepancies:
             o All borrowers to have a valid SSN
             o ITIN’s are not acceptable
             o Lender needs to validate each SSN number and if necessary resolve any issues or
                  inconsistencies that may be discovered. (SSN Audit)
             o If SSN is not able to be validated, not eligible
   •     Manually underwritten transactions require a business credit report if the borrower is self-
         employed and owns an S-Corp or Corporation, regardless of ownership percent.
   •     Delinquent Federal Debt on FHA Loan Applications
             o HUD will not process an application for mortgage insurance if an applicant has
                  delinquent Federal debts outstanding. Documentation that gives evidence that the debt
                  is resolved or under a satisfactory payment arrangement is required
   •     Short Sale/Short Payoff for Previous Loan is not eligible
   •     Non-Purchasing Spouse in Community Property must meet all requirements outlined in HUD
         Handbook 4155.1 Chapter 4, section A-5
   •     Unpaid Charge Offs and Collection Account:
             o Does not have to be paid in full at or before loan closing unless required by Total
                  Scorecard, or

Revised 11/10/11 FHA Purchase/Refi Non Streamline
           o  DE Underwriter has not reached a judgment or lien status and the borrower has
              documented evidence of the dispute.
   •   Non Tradition Credit is ineiligible

Current Mortgage

   •   Effective 2/14/11, the borrowers must be current on the mortgage being refinanced for the
       month due prior to the month in which they close the refinance and for the month in which they


   •   Cash Out transaction loan amount >$417000, prior to the inclusion of UFMIP, the Bankruptcy
       and foreclosure discharge/release date must have been at least 7 years prior to the loan
       application date.
   •   All other transactions, follow the FHA Guidelines in the 4155.1

Subordinate Financing

   •   Subordinate financing is any type of financing which creates a subordinate lien on the same
       property for which we are originating a first mortgage. Funds from subordinate financing may
       be used for a variety of reasons, including:
          o Supplementing the down payment
          o Payment of closing costs
          o Setting up a Partial-Term Buy Down or Full-Term Buy Down
          o Repairing/improving the subject property
   •   If the loan is secured by the subject property, subordinate financing and LTV parameters for the
       first mortgage must be enforced. Any lien against the subject property other than the first
       mortgage must be acceptable to CMG, clearly subordinated to the first mortgage lien, and
       properly recorded. The monthly payment on the subordinate lien should be included with the
       PITIA on the subject property, if applicable, when calculating the monthly housing ratio.
   •   If funds are from a subordinate lien that is secured by another property, we need not be
       concerned with the type of financing or combined LTV parameters, but we must include the
       monthly payment in the back-end qualifying ratio.
   •   Eligiblility
            o Subordinate financing may not be permitted on all transactions. Refer to the applicable
                  product, process, or program fact sheet for eligibility and available parameters.
   •   Disclosure Requirements
            o Must disclose the existence of subordinate financing and the terms of repayment
                  (including note rate, repayment terms, and the institution or individual providing the
                  financing) to the appraiser, the mortgage insurer and the investor. May not indicate to
                  the appraiser a value or loan-to-value needed to support the transaction.

Revised 11/10/11 FHA Purchase/Refi Non Streamline
   •     Max Combined Loan Amount
             o There are no restrictions on the combined loan amount. The first mortgage transaction
                 must meet LTV/CLTV/HCLTV and loan amount guidelines for the program selected.
   •     Calculations
             o CLTV: Calculate the CLTV by adding the first mortgage loan amount plus the current
                 balances of all subordinate financing, divided by the lower of the appraised value or
                 purchase price.
             o HCLTV: Calculate the HCLTV by adding the first mortgage loan amount, plus the total
                 amount of all subordinate financing, including the entire available home equity line
                 amount, divided by the lower of appraised value or purchase price.
             o The minimum down payment requirement for a transaction is based on the CLTV, not
                 the HCLTV, so if the CLTV is 90%, a 10% down payment would be required, regardless of
                 what the HCLTV is. Note: Borrowers must use their own funds to meet the minimum
                 borrower down payment or contribution requirement for the loan transaction. Refer to
                 the applicable program fact sheet for details.

Secondary Financing

   •     In some cases, the seller of the property may elect to provide secondary financing to the
         applicants. The sellers may be motivated to provide secondary financing when applicants do not
         qualify for maximum financing and the seller wants to sell the subject property more quickly, or
         it may be indicative that the property is difficult to market. Seller carry-backs must meet all
         requirements outlined in the Subordinate Financing section above.
   •     Seller carry-backs are permitted on primary residences and second homes provided the
         combined LTV does not exceed the maximum for the product, program and documentation
         process selected.
   •     Typically, the Purchase & Sale Agreement will state that the present owner is willing to provide
         secondary financing.
             o All payments related to secondary financing must be included in the debt ratio
             o The lien must be recorded and clearly subordinated
             o A copy of the note must be obtained to verify the amount secured against the property.
             o Regular payments must cover at least the principal and the interest at the market rate.
                  If financing provided by the property seller is more than 2% below the current standard
                  rates for second mortgages, it must be considered a sales concession and the
                  subordinate financing amount must be deducted from the sale price or appraised value,
                  whichever is lower.
             o The subordinate loan cannot have a call option of less than 5 years.
             o The subordinate loan must permit pre-payment at any time without a penalty.


Verbal Verification of Employment

Revised 11/10/11 FHA Purchase/Refi Non Streamline
   •     Wage Earner:
             o Documented VVOE with the employer no more than 30 calendar days prior to the loan
                closing is required. A written VOE can be used to verify employer and/or income.
                Neither a paystub nor a written VOE may replace the verbal VOE.
   •     Self-Employed:
             o Documented verification of the existence of the borrower’s business through directly
                assistance no more than 30 calendar days prior to the loan closing is required.

VOE Form

   •     Refer ot the 4155 for details

IRS 4506 T

   •     A signed form is required.
   •     If tax returns are used to calculate, Audit is required.

Income Documentation

   •     All income calculations must be documented in the loan file (MGAW). For self employed
         borrower’s, 1084 form is required
   •     Re-entering the workforce and have an employment and income history that covers less than
         the 2 most recent years must be with their current employer for a minimum of 6 months and
         must have a documented 2 year work history prior to the absence.



   •     1-2 Units: None required
   •     3-4 Units: 3 months PITI. Subject property must be “self sufficient”. Gross rents less the
         vacancy factor for all units, including the o/o unit, must be equal to or greater than the total
         payment for the subject property

Down Payment Fund

   •     May not be provided by:
            o Seller or any other person or entity that financially benefits from the transaction; or
Revised 11/10/11 FHA Purchase/Refi Non Streamline
             o   Third party or entity that is reimbursed, directly or indirectcly, by the seller or any other
                 person or entity that financially benefits from the transaction

Gift Funds

   •   Must meet all requirements per the 4155.1, Chapter 5, Section B
   •   Determine that the gift funds
          o Were not provided by an unacceptable source
          o Were the donors own funds; and
          o Were not derived from a party to the sale transaction such as a seller, etc.
   •   Need copy of the donors most recent bank statement, or
          o Also if large deposit noted, need proof of the deposit (more than half of the borrower’s
              qualifying income)
   •   A VOD mailed directly from the lender (the donor or borrower may not hand carry the
       document to the depository)



   •   Must meet requirements as outlined in FHA Handbooks and Mortgagee Letters
          o Must include the market conditions addendum (1004 MC). Refer to Mortgagee Letter
               2009-09 for complete details
          o Valid for 120 days. Form 1004D may be used to provide a recertification of value and/r
               completion of compliance repairs and completion inspections for existing and new
               construction properties.
          o Criteria regarding the transfer of an FHA appraisal applies. Refer to ML 2009-29
          o Criteria regarding appraiser independence as well as new requirements regarding who is
               eligible to request an FHA appraisal applies. Refer to ML 2009-28..
   •   Property inspection waivers are not permitted.
   •   Repairs and Escrow Holdback are not permitted

Special Underwriting

   •   Non ARMs Length/Identity of Interest
           o LTV is limited to 85% unless certain circumstances are met. Refer to Section 4155.1
   •   Borrower retaining current residence
           o Refer to Mortgagee Letter 2008-25 dated 9/19/08
   •   Surveys
Revised 11/10/11 FHA Purchase/Refi Non Streamline
           o   A new survey is not required on refinances provided the borrowers and/or the title
               company certifies that there are no changes from the original survey, or matters
               regarding the survey are insured over by the title company.

Property Flipping

   •   Less than 6 months before the purchase agreement was executed, the following rules apply:
           o Resale within 90 days or less (not eligible)
           o Resale occurs between 91 days and 180 days: If the resale price has doubled (100% or
               more over the price paid by the seller when the property was acquired), a second
               independent appraisal supporting the sales price is required. Refer to ML 2006-14 for
               additional information
   •   Temporary Waiver
           o For new property Flipping policies refer to “Waiver of requirement of 24 CFR
               2036.37a(b)(2) announcement dated January 15, 2010 at
           o Overlays
                    The increase of sales price over seller acquisition costs should be documented
                       per the announcement if the increase is 10% or more, instead of the 20%
                       allowed by the announcement
                    The increase in sales price over the sellers acquisition cost may not exceed 20%,
                       even if documented per the announcement
                    If the sales price is great than $500,000, the increase in sales price over the
                       sellers acquisition cost may not exceed $100000.
           o Waiver will expire Dec 31, 2011

Termite Inspections

   •   Refer to HUD Manual 4150.2, Chg. 1

Condominium Project Approval

   •   Will not participate in the DELRAP review process and will not approved loans that are under the
       DELRAP review process. Project must be added to the FHA condominiums List prior to
   •   “Certification for Individual Unit financing” form must be signed and dated when the appraisal is
       reviewed for each transaction.
           o Condo project approval is not required for detached site condo’s; however a Condo
                rider must be executed
           o Must be on FHA’s approved list
           o Spot approvals are not permitted

Revised 11/10/11 FHA Purchase/Refi Non Streamline
           o Condo’s located in the state of Florida are subject to LTV restrictions of 70%/70%/70%
             with a minimum 740 FICO or 60%/60%/60% with a FICO less than 740.
   •   Documentation required
          o Printed copy of the FHA Approved project page must be retained in the loan file
          o Insurance: Evidence the project is covered by appropriate hazard, liability, fidelity bond
             if more than 20 units and, if applicable, flood insurance.
          o Appraisal

Revised 11/10/11 FHA Purchase/Refi Non Streamline

Shared By: