Appraisals Comps should be within 90 days and 1 mile and include by HeMMu3


									                                           Operations Tips
                                             June 20, 2012
                                  Changes are highlighted in red

1003 (Initial) – 1003 is to be fully completed and executed by all parties. 1003 must include a 2 year
history for employment and residency, dependent information, borrower(s)present housing payment and
complete REO Schedule with associated liens and expenses.
4506 – This form is used to obtain actual copies of tax returns in the instance that the borrower has not
retained copies of returns. This request can be mailed directly to the IRS at a charge of $75.00.

4506T – This form is used to obtain tax transcripts/validation of tax returns. Tax transcripts are required
for all borrowers on all loans except in the case of non-credit qualifying FHA/VA streamline refinance
transactions (Chase does require 2 years tax transcripts on VA IRRLs). FHA and VA loans require 2
years tax returns and transcripts on self employed or income tax income/loss outside of W-2 earnings.
Conventional loans follow AUS findings on number of years required. Tax transcripts must be provided
by a third party vendor or from IRS directly to Cherry Creek Mortgage.

Borrowers at this time should have filed their 2011 tax returns or have provided an extension to the IRS
for a later filing date. Borrowers who have filed an extension on the tax returns must provide the
extension form and copy of any monies paid to the IRS.

In certain circumstances based on borrower(s) source of income, 2011 tax returns and transcripts must
be provided for adequate determination and use of qualifying income. These circumstances include self
employment income, new employment in 2011, borrowers whose income is impacted by Schedule E
income/loss or 2106 unreimbursed business expenses.
For Borrowers who are W-2 wage earners and are not impacted by expenses such as Schedule 2106, an
exception can be made to obtain required year(s) of W-2 transcripts (rather than full tax transcripts). This
is acceptable by Chase, Franklin American, PHH, Penny Mac, Citi and FNMA Direct.
Affordable Housing -
        Conventional - Chase, PHH, Franklin American and Wells will accept qualified Community
        Second or Community acceptable Affordable Housing programs.
        FHA - Allowed if entity has been prior approved through HUD. A list of approved parties can be
        found through HUD’s website and a copy of their approval is to be provided in UW file at time of
        VA – Reviewed case-by-case basis.
Age of Credit Documents and Appraisal –
        All loan types – Paystubs must be dated within 30 days of loan application and bank statements
        must be dated within 45 days of loan application.
        Conventional – The age of credit documents cannot exceed 90 days. Conventional appraisals
        (existing and new construction) should not exceed 120 days.
        FHA - Credit document expiration is 120 days. FHA appraisal expiration is 120 days.
        VA - Credit document expiration is 120 days. VA appraisals are valid for 6 months.
Appraisal Updates –
        Conventional and FHA - Appraisals older than 120 days require a new appraisal to be
        completed. Certain investors allow Appraisal update up to 150 days. Please contact UW to
        determine if acceptable on specific loan.
Appraisals – Requirements and Recommendations - At least 2 comparables should have closed
within 90 days of date of the appraisal and be within typical mileage of neighborhood setting (i.e. 1 mile
for suburban neighborhoods). Two listings/pending sales are recommended to be obtained. Appraisals
which reflect property is located within a Declining Market require 2 to 3 comparables which have closed
within 90 days and support appraised value.
All appraisals must include most recent 12 month listing history for subject property.
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Appraisal – 2 appraisal requirement - Jumbo loans require a 2 appraisal with loan amounts >
$1,000,000. Jumbo loan amounts > $650,000 require a desk review based on specific investor guidelines
with Redwood Trust, Credit Suisse or Alliant Credit Union.
A 2 appraisal is also required on all investment transactions with a sales price or appraised value less
than $100,000 if loan is being sold to Wells Fargo.
        Also see Property Flipping – FHA.
Appraisal – Minimum Appraisal Requirement/Conventional FNMA - DU findings can provide a lower
level of appraisal for a transaction. A 2075, 2055 or Property Inspection Waiver should be noted. A 2055
cannot be substituted for a 2075, a 1004 appraisal would be required. If loan changes from 1004 to
Property Inspection Waiver, a new loan number is required.
Loans selected for the PIW option require the Property Inspection Waiver form to be completed and
signed by the borrower(s). Any applicable HOA dues must be documented through title company or HOA
Management Company.
Regardless of the level of property fieldwork required by DU, or any waiver of property fieldwork offered
by DU, if this purchase transaction is the result of the sale of an REO property, the last transaction on the
subject property was a foreclosure or interested party transactions, an appraisal based on an interior and
exterior property inspection is required.
Note to underwriters – if PIW is utilized, the year built, number of bedrooms and rental income (est) may
be noted on the 1008.
Appraisals in Below Average Condition – Properties in Below Average condition will not be purchased
by any of Cherry Creek Mortgage’s investors. Below Average condition status on an appraisal will be
shown as either C5 or C6 condition rating or Q6 quality rating. The appraiser should appraise the property
at a minimum of Average condition subject to the repairs required to be made making the property
Average in condition. These repairs should be made prior to closing on the loan transaction.
On Bank Owned or Agency REO properties, the repairs/improvement may not be able to be made prior to
loan closing. This may affect the type of financing required for the loan for example switching a file from
FHA 203b to FHA 203k renovation loan. If the repairs/improvements are minimal in nature (not health or
safety), Senior Management has the ability to determine if a 5 day PTI is an option.
Appraisal – Collateral Risk Review – Upon underwriter review of an appraisal, the underwriter may
request a 2 level review to be completed by Cherry Creek’s Collateral Risk Underwriter. The
Underwriter must provide their write up of concerns and provide to Appraisal Department along with a
PDF of the appraisal. Once the review has been completed, the CRU will provide the review to the
Underwriter and Branch. Should appraisal corrections be necessary or a desk or field review needed, the
Appraisal Department will request.
        If the review is lower than the original value, the underwriter would reduce the appraised value to
the value of the review. If the value was higher on the review than on the original, the underwriter would
increase the appraised value accordingly.
Appraisal – FHA Final Inspection – New Construction and HUD REO require the completion of the
Compliance Inspection form (92051). On existing properties, the inspection must be completed on a
FNMA 1004D.
Appraisal Rebuttals – These are handled through the Appraisal Dept. The preparation of an Appraisal
Rebuttal Form should be done and include a detailed reason for rebuttal along with acceptable/verifiable
documentation to support request for reconsideration.
Appraisal Transfer-in: CCMC policy does not allow transferred in of Conventional appraisals and a new
appraisal is required to be completed. CCMC will still allow the transfer of FHA and VA appraisals. FHA
appraisals require HVCC compliance from prior lender.
Appraisals with Excessive Land or Unique property– Properties with excessive acreage or unique
characteristics require prudent review to determine property is readily marketable and will meet the
requirements per Agency guidelines. Acreage and unique property appraisals should have at minimum 2
comparables with similar characteristics as the subject property. Appraisals should be initially reviewed
by Underwriter to determine if an investor review will be required.
Appraisals – 1007/216 Rent Schedules – Must be included within appraisal on all properties where
income approach is being used. These schedules should also be provided if noted as an AUS finding
requirement for transaction.
Assets – Borrower minimum contribution –
        Conventional - Purchase loans where the LTV exceeds 80%, most investors require a minimum
        investment of 5% of borrower own funds except in the case of GMAC, Citi and FNMA Direct who
        will allow 3% borrower minimum investment of own funds into the transaction.
        FHA - Minimum Borrower investment for purchase must be 3.5% of the purchase price.
        VA – Minimum Borrower investment is determined based on veteran’s available eligibility.
Assets - Business Use of Funds - If funds for closing or reserves are coming from self-employed
business funds, a letter from the business’ disinterested third party CPA stating the borrower has full
personal use of the funds and that the withdraw of funds will not negatively impact the operation of the
business. This is not required on Schedule C Sole Proprietorships. In certain circumstances where a
CPA is unable to provide a letter, a full Cash Flow Analysis of the business may be used to determine use
of the business funds.
The use of business assets on Jumbo loan transactions is not allowed.
Assets – Down Payment Assistance – All loan types require the entity providing the assistance to be
approved/acknowledged by the Agencies.
FHA specific: Government Entity DAPs: No approval is required for Government Entities that provide
secondary financing in the form of a lien in conjunction with an FHA first mortgage lien.
FHA search tool for Non-Profit DAPs:
Penny Mac requires a minimum 680 FICO on loans with Down Payment Assistance.

Assets - Earnest Money Deposit – Evidence of Earnest money must be provided in every Purchase file
to determine use of borrower’s own funds. It must be verified by a copy of cancelled check and/or by
copy of check and corresponding bank statement reflecting earnest money has cleared the account. The
current balance of assets must also be documented to determine cash to close funds after EM clearance.
Assets – Gift Funds
         Conventional - GMAC, Citi and Wells require source documentation (donor bank statement)
similar to FHA and VA requirements. Chase, PHH, Franklin American and FNMA Direct loans continue to
follow standard Agency guidelines where source of donor’s funds are not required. In the event, the
source will cannot be provided, the loan must be locked investor specific based on the above.
        FHA and VA -- Gift funds must be fully documented with gift letter, source of funds, the transfer
of funds and borrower receipt of funds. .
Assets – Jointly owned – All loan types require an access letter from all non-borrowing parties reflected
on assets statements is required. If the non-borrowing party is a spouse and documentation within the
file supports that relationship, a letter will not be required.
Assets – Large/Atypical deposits – All loan types require the addressing of large deposits or atypical
deposits (easy rule of thumb, 10% or more of the lowest borrower’s income). On these items, an
acceptable letter of explanation signed by the borrower(s) and supporting documentation must be
provided. This is necessary to determine acceptable source and that no new debt has been obtained.
Please note that based on investor and agency update, these types of deposits cannot be backed out an
account balance.
Assets - Savings Bonds – All loan types require a letter from the bank officer verifying that the bond(s)
was cashed in for use as liquid assets.
Assets - Retirement –
        Conventional - FNMA 60% FHLMC 70% (less outstanding loans) of the verified, vested balance
        of retirement assets may be used for assets.
        FHA and VA – 60% of vested balance of assets (less outstanding loans) may be used as assets.
If funds are used for closing or reserves, proof of liquidation and terms of withdraw must be provided.
Assets - Stocks, Bonds, and Mutual Funds: All loan types allow 70% of stocks, bonds and mutual
funds to be used as assets. If being used for closing, proof of liquidation must be provided.
Assets - Trust Funds – All loan types require a full copy of the trust agreement noting borrower(s)
access to these funds, Certification of Trust from Trustee and a current asset statement with available
fund balance.
Attached PUD Property –

        Conventional – FNMA has eliminated the Limited Review verbiage on DU findings. Due to
        current investor requirements, it is now necessary to have all attached PUDs submitted for project
        approval review and certification through Barbara Weade. The following documentation is
        needed for Barbara’s review: Current Project Questionnaire, Recorded Declarations/CC&Rs or
        Master Deed including all amendments or annexations, Individual unit appraisal (if in a resort
        area will need also need “PUD-hotel” info addressed with Resort Area Addendum and appraiser
        specific comments on any hotel type characteristics), Title commitment, 1008 and copy of DU or
        LP findings, Estimated closing date, CCMC loan # and info if slotted for any specific investor and
        Evidence of Insurance in the name of the HOA for at least $1million liability on the common
        areas. Building coverage may:

        -be up to the individual unit owner for 100% replacement cost hazard (usually addressed in the
        Declaration), if so need COI with CCMC mortgagee clause OR

        - may be a blanket policy COI with CCMC mortgagee clause in the name of the HOA for 100%
        replacement cost hazard; if unit interior attachments, fixtures and improvements are not covered,
        then will also need HO-6 Walls-in Coverage for unit interior improvements, fixtures & attachments
        that is considered real property at 20% of appraised value OR the property portion
        FHA – FHA does not require the approval of existing attached PUD projects. New Construction
        PUD projects should be submitted for Barbara’s review.
        VA – A list of approved PUD projects can be located on VA’s website.
**Barbara Weade’s fee for a project approval is to be included within the Origination Fee (Block 1) on
Automated Underwriting/AUS (DU/LP) – Once a file is in Underwriting, all changes to automated
findings must be done by the Underwriter. Processors should provided documentation and reason for
change to Underwriter for proper re-running of findings.
Bank Statements/Verification of Deposit - Bank statements must be dated within 45 days of loan
application to be considered valid and most recent. AUS findings should be followed for applicable
number of months to be provided. Manually underwritten files require 2 months bank statements to be
included in file.

If a Verification of Deposit is provided, an accompanying most recent bank statement is also necessary
based on current investor guidelines. VODs cannot not be addressed to a specific individual and must
include the source of receipt (fax banner ie).
Bond Loans - All Bond loan agencies require that Originators, Processors, Underwriters, Closers,
Shippers and Post Closers take training prior to originating or working on a Bond loan transaction to
ensure knowledge level of the program.
        Colorado Housing and Finance Authority - CHFA minimum credit score requirement is 620. A
CHFA Score Card (RISC) should be used for all CHFA transactions when manually underwritten or in the
case of applicants whose credit score falls between 620 and 659 and DTI exceeds 43%.

        Manually underwritten loans – Maximum DTI is 43%
        620-659 – 50% maximum DTI
        660- 55% maximum DTI with Approve/Eligible findings
Grossing up of non-taxable income is not allowed.
CHFA does not allow cash back at closing in excess of borrower deposited Earnest Money (maximum
Mortgage Credit Certificates can be done and are made through CHFA’s First Step program only.

Training for CHFA programs can be found through the following link:

CHFA is currently in the process of updating certain programs and once full information is received, an
Alert regarding these updates will be provided.

        Other Bond programs such as CALHFA, CHADAP, IHDA, IA Bond require individual
        Branch training and communication with Underwriter with knowledge of these programs.

Buy and Bail - A buy and bail situation typically occurs in a market where housing values are declining
sharply. The borrower who plans to default continues to make payments on the home they purchased
when housing values were much higher, while applying for a purchase money mortgage on another home
that has been priced in alignment with current, lower housing prices. After the new property and
mortgage has been obtained, the buy and bail borrower will allow the first home to go to foreclosure.

Underwriters must provide prudent review in these circumstances to determine acceptable risk level for
the specific transaction. At time of underwriting submission, an acceptable signed and detailed Letter of
Intent from borrower(s) and available liquid assets to cover property expense for underwriter determined
amount of time.
Cash out Refinance – All loan types require a 6 month title seasoning for Cash out transactions.
Chain of Title - All loan transactions require a 12 month chain of title along with a copy of all Deeds
within the past 12 months or the most recent Deed if more than 12 months ago to be provided by the title
Closing of Unique Loan types (Bonds/Jumbos/203k loans) - The loans require unique and often
hand-typed documents, please allow the Closing Department adequate time to prepare closing
Compensating Factors - Examples of compensating factors are: length of time on job, reserves, minimal
increase in housing expense, a limited user of credit, overtime or bonus income not being used because
there is less than 2 years receipt. If asking for compensating factors to be considered, a Processor
Cover letter addressing the strength of the file is recommended.
ComplianceEagle - Processors are required to run on all loans and must provide clear findings within
underwriting submission. Compliance Eagle is also run at time of closing.
Any questions regarding this system should be directly to Pam Noonan or by emailing
Compliance Transmittal (GFE/TIL disclosure) – Must be used on all loans that are NOT a face to face
interview type.
Condominium Project Approval – See Project Approvals
Continuity of Obligation – Refinance Transactions -
        Conventional - A borrower cannot refinance without being a responsible party on the existing
        Note and Title. Detailed information on Continuity of Obligations can be found in FNMA/FHLMC
        FHA and VA – These Agencies require borrower(s) to be in title, but do not require the
        borrower(s) to be on current lien. See MRI guides for additional requirements.
Corelogic/LoanSafe Risk Manager – Underwriters must run this report on all loan files. Data Link can
be found in Relay under Fraud Detection.
Credit – Authorized User Accounts – This Issue typically arises with borrowers of limited credit.
Underwriter must be able to determine is sufficient borrower built credit history when authorized user
accounts are present based on the following:
If our borrower, the authorized user, makes the payments on the accounts we need:

    •  A letter of explanation from the applicant that identifies the relationship of the primary account
       holder to be that of a relative (the applicant's spouse, parent or an individual related to the
       applicant by blood, marriage, adoption, or legal guardianship)
    • Evidence of the most recent six months cancelled checks or account statements to document that
       the applicant(s) has been making payments on the account(s).

If the borrower (authorized user) and primary account holder are both on our loan, the removal of the
account is not necessary.
The following is required for authorized user accounts with an AUS Refer and needed for use of trade line
       A letter of explanation
       Evidence of the most recent 12 months of cancelled checks reflecting our borrower’s payment of

    If the primary account holder (not our borrower) is making the monthly payments, the authorized user
    account may be required to be removed and the credit report be updated and rescored to reflect an
    accurate credit score unless the Underwriter is able to determine sufficient other credit for borrower
    and impact of account is minimal in overall credit file.

Credit – Bankruptcy – Below are the timeframes, please note that Underwriter also considers borrower’s
re-established credit after bankruptcy.
        Conventional - Chapter 7 is 4 years after discharge, Chapter 13 is 2 years after discharge with
        acceptable payment history. Multiple bankruptcies require a minimum of a 5 year waiting period.
        FHA and VA - Chapter 7 is 2 years after discharge, Chapter 13 must have at least 12 payments
        made satisfactorily and Trustee approval.
Borrowers who have had multiple bankruptcies require a full risk review by Underwriter to determine
acceptance of credit history.
Credit – Disputed Accounts
        Conventional - FNMA requires that any accounts reflecting a derogatory status, outstanding
        balances and having the “disputed” message to be removed from the credit report and the
        Findings be re-run removing the DU messaging. Zero balance accts and accounts over 24
        months old with minimal balance can be reviewed with UW discretion. FHLMC (LP) does allow
        disputed accounts based on acceptable LP findings and acceptable underwriter credit risk review.
        FHA – Credit reports with either recently disputed accounts or disputed accounts with open
        balances may be require the file to be downgraded to a “Refer” and manually underwritten.
        Disputed accounts which have a zero balance, marked paid in full or resolved or disputed
        account with both less than $500 and more than 24 months old based on disputed date do not
        require the file to be manually downgraded.
Credit - Debt Payoff -
        Conventional - Revolving debt typically cannot be paid off to qualify on Conventional
        transactions. Investors will allow, on a case by case basis, the payoff of revolving debt if account
        is to being paid off and closed AT TIME OF OR BEFORE closing of loan.
        FHA and VA - Revolving debt payoff for qualification is allowed on FHA and VA loans. Closure
        of debt is required.

Credit – Erroneous Credit - The first step in these types of situations is to work with the borrower(s) and
creditor for possible resolution and correction to borrower(s) credit report.
        Conventional - If a file will require manual underwrite due to the erroneous credit information, the
        file must be submitted to either GMAC or Wells for direct underwrite after an initial CCMC
        underwriter review.
        FHA and VA – Government files are handled by CCMC in-house DE or VA delegated
Credit – Extenuating Circumstances – Acceptable extenuating circumstances are Loss of
income/employment due to long-term illness or Death of a primary wage earner. Divorce or the inability
to sell a property due to a job transfer or relocation to another area are not typically considered
extenuating circumstances.
Credit – Foreclosure/Deed in Lieu/Short sale -
        Conventional - FNMA and FHLMC’s required waiting period for foreclosures is 7 years. 3 years
        is allowed with extenuating circumstances.

        Additional requirements for between 3 to 7 years are as follows: 90% maximum LTV, purchase
        or limited cash out only.
        Deed in Lieu/Short sales waiting period for 95% LTV consideration is 7 years. FNMA/FHLMC
        treat a previous short-sale or deed in lieu as a foreclosure which requires the borrower wait the
        required length of time before being granted a new mortgage.
        The following is other allowed timeframes and LTVs: 2 years has a maximum 80% LTV (Citi
        requires 4 years unless extenuating circumstances), 2 years with extenuating circumstances has
        a maximum 90% LTV, and 4 years has a maximum 90% LTV.
For loans with extenuating circumstances, the file must be submitted for prior approval through GMAC or
        FHA- Foreclosure waiting period is 3 years. FHA also views a short sale as a foreclosure unless
        there were no late payments leading up to the short sale and no deficiency balance.
        VA – Foreclosure waiting period is 2 years and will allow short sales if no mortgage lates in the
        past 12 months.
Foreclosure timeframe is determined based on actual foreclosure sale date of the property.
If a property is included with bankruptcy, the next step is the foreclosure/deed in lieu process, the later
date of foreclosure/deed in lieu date is used for timeframe purposes.
Credit Inquiries and Derogatory Credit – Borrower(s) must provide a signed letter of explanation
addressing any derogatory accounts for the past 24 months and each inquiry for the past 120 days.
Inquiry explanation must include reason for inquiry, result of inquiry and if new debt was incurred.
A signed letter of explanation for any Major derogatory (BK or foreclosure) must always be provided and
included in the loan submission to underwriting.
AUS approvals must be downgraded for any derogatory debt, including, but not limited to, collection
accounts, tax liens, charges-offs or judgments discovered during processing but not reflected on the
original AUS used credit report.
Credit - Liabilities - If a significant monthly payment has less than 10 months remaining will strongly
impact the borrower’s repayment ability, it may still be included in monthly liabilities based on underwriter
review of file.
On Open or 30 day accounts where there are insufficient funds to cover balance, a 5% payment must be
included in monthly liabilities. In a high DTI scenario, our investors may require both 5% payment applied
and sufficient assets to cover account.
If borrower currently has a car lease with less than 10 payments, lease payment must be counted as a
Credit – Mortgage Lates - Generally approvals cannot be granted to borrowers who have had a
mortgage late on any mortgage within the past 12 months. Exceptions may be allowed with an
Approve/Eligible Finding and extenuating circumstances.
Credit – Non Traditional –
        Conventional – The use of non-traditional credit can only be done to support limited credit on
        conventional loans. File must receive AUS approval and is acceptable regardless of the number
        of trade lines although based on underwriter review.
        FHA and VA – Our investors no longer purchase loans with only the source being non-traditional
        credit. Non- traditional credit can be used to support limited credit history.

Credit – FICO Scores- All loan types
        All Owner Occupied Borrowers - With AUS approval and FICO – The number of trade lines
        required is dependant on the UW being able to determine that sufficient acceptable credit history
        has been established. Please also refer to Authorized User section. If an authorized user
        account is not being paid by our borrower, the trade line cannot be considered as a valid for the
        All Owner Occupied Borrowers - One with FICO and one without a FICO but we have AUS
        approval – Can be sold to Wells
        All Owner Occupied Borrowers with no FICO's and no AUS approval – Not eligible.
        One Owner Occupied Borrower with Non-Owner Occupied Co-Borrower - With AUS approval and
        FICO for both
        One Owner Occupied Borrower with Non-Owner Occupied Co-Borrower - With AUS approval but
        only Non-owner has FICO – Not eligible.
        One Owner Occupied Borrower with Non-Owner Occupied Co-Borrower - With AUS approval but
        only Owner Occupant has FICO - Can be sold to Wells without establishing non-traditional credit
        for the Non-Owner co-borrower.

For manually underwritten loans, all borrowers must meet the credit score requirements and have a
minimum of three total traditional credit references (trade lines – open or closed) with at least 12 months

history for each trade line. For joint credit reports, a total of three credit references are required. Three
credit references are not required from each applicant.
Credit – Mortgage Settled for Less than Amount Due – See Credit – Foreclosure/Deed in Lieu/Short
Deed Restricted Properties - Chase does require their prior approval of deed restricted properties with
exception to age restricted only. Wells requires prior approval of entire loan package on any deed
restricted property. Citi does not allow deed-restricted property. All other investors will accept age
restricted properties only.
        A full appraisal is required for any property having resale deed restrictions regardless of type of
appraisal required on AUS.
Employee Loans - Branch employee loans should be originated and processed inside the branch
preferably by the branch manager and a branch processor. If privacy is a concern from a processing
prospective, the loan can be processed by the corporate processing team (Greenfield) for a reduced fee
paid by the employee. Corporate employee loans must be originated by Art Bail. Underwriting of all
employee loans is done by Jeni DeBrine or Linda Grimes in Corporate Office.
Chase, Citi and Franklin American require prior approval on employee loans.
Employment Contract – When using a Guaranteed Non-Revocable employment contract, prior
employment history is same line of work and borrower must start employment prior to 1st month’s
paystub. An offer of employment does not meet the new employment requirement.
        Conventional – FNMA and FHLMC will no longer accept “future income”. The borrower must be
        on the job and WVOE provided prior to closing.
        BB&T will accept future income on a case-by-case basis on conventional purchase 1 unit
        transactions. File will require Underwriting Dept approval prior to the locking and submission of
        loan with BB&T.
        FHA and VA – Must also be able to verify the borrower(s) has a minimum of two months
        reserves on the transaction and a 30 day paystub will also be required after closing for insuring
Employment Job Gap – Letter of explanation should be provided if employment gap is more than 30
Employment - Paid Leave of Absence under Family Medical Leave Act – All investors will consider
income from a borrower that is on a temporary leave of absence for maternity, paternity or adoption
based on the below:
IF it is verified that the borrower         THEN…
return to work at their current employer    borrower’s regular employment income
as of the first mortgage payment,           (i.e., gross monthly income) that will be
                                            received upon return to work can be
                                            used for loan qualification purposes.
not return to work as of the first          use the lesser of the borrower’s:
mortgage payment,
                                            continue to be received for duration of
                                            leave of absence (if any), or

Employment Verification/VOE - Employer’s business name and phone number must be verified through
the phone book or internet listing. VOE’s must be fully completed including 2 years and YTD figures for
government loans and number of years based on AUS findings for conventional. Income must be broken
down for base, overtime, bonus, commission. VOEs must not be addressed to a specific individual and
should include the source of receipt (fax banner ie).
Escrow Waivers - Chase and Wells will allow insurance escrows to be waived without an escrow waiver
fee on LTV’s below 80% as long as taxes are being escrowed.
Expired Approvals - If a loan approval has expired due to the age of the credit or appraisal documents
(90 days ie), the loan will be automatically cancelled/denied. A new loan package with new loan number
should be sent to underwriting for review. These files do fall under standard UW turn time.
FHA Amendatory/RE Clause – This must be fully executed prior to closing. Not required on HUD REO,
203k or new construction loans.
FHA – FHA Connection-
        Mortgage Reject Screen must be provided in Underwriting file
        Appraisal Logging – Logging of appraisal must be done by Processor through FHA Connection
        and provided to underwriting at time of appraisal submission. Any 2 appraisals should also be
        logged through the system.
        Case Query Screen to be provided after Appraisal Logging and AUS run has been

FHA Energy Efficient Loans (EEM) – Program is available with select investors. Contact Rob Knox or
your Underwriter for assistance.
FHA 203k Full Renovation and Streamlines – Programs are currently being offered through Freedom
Mortgage and M&T Bank. For current 203k program details please contact Jennifer Levine, 203k
Specialist in Corporate office. The following is a quick list of overlays on this product:
        640 is the minimum credit score
        No manufactured or Modular homes SFR or condos only
        30 year fixed only
        No Jumbos
        No 100 down or Good Neighbor Next Door
        No Bond programs
        Self Help is not permitted
FHA 92900A – An executed copy of the initial 92900-A (pages 1&2) is required to be in the underwriting
file at time of submission.

FHA Annual MIP - The Upfront Mortgage Insurance Premium (UFMIP) is 1.75% as currently set on April
9, 2012. This applies to Purchases, Rate/Term Refinances, Cash out Refinances and existing FHA loans
with endorsement dates on or after June 1, 2009).

                                         Monthly MIP

                          Terms over 15 Years
                                  LTV                 Annual MIP
                               > 95. 00%                        1.25 BPS
                             < or = 95.00%                      1.20 BPS
                        Terms less than 15 Years
                               > 90.00%                           60 BPS
                           >78.01 to <90.00%                      35 BPS
                               < 78.00%                            None

FHA Case Number – FHA Case Number must be assigned prior to ordering the FHA appraisal.
Case number assignment should reflect the following if applicable: Condo, PUD, REO with or without
appraisal, prior case number (REO or FHA to FHA refinance). A copy of the Case Number Assignment is
required in file at time of underwriting submission. Borrower validation should be completed and names
should match as taking loan and title of transaction.
FHA case numbers are good up to six months based on FHA Connection activity within that timeframe. .
If no activity on case number within 6 months, case number will be automatically cancelled by FHA.
FHA Condos/PUDs – For Condo requirements, see Project Approval. PUD projects do not require FHA
approval unless new construction.
FHA with non-owner occupying borrower - Acceptable if AUS approval is obtained. Manual
underwriting is not available with less than 3 open active and recent trade lines.
Non-Purchasing Spouse in a Community Property state –
        FHA and VA - Below are CPS guidelines:
If property is located in a community property state, or the borrower resides in a community property
state, the following requirements apply:
Loans with non-borrowing spouse must have verification of non-borrowing SSN in file.
A credit report for the non-purchasing spouse is required to determine any joint or individual debts. The
spouse’s authorization to pull a credit report must be obtained. If the spouse refuses to provide
authorization for the credit report, the loan must be rejected.

If the non-purchasing spouse does not have a social security number, the credit reporting company
should verify that the non-purchasing spouse has no credit history and no public records recorded against

Credit Company should be given non-purchasing spouse information: Name(s), address, birth date and
any other significant information requested in order to do the records check.

The debts of the non-purchasing spouse must be considered in the qualifying ratios. If the debt(s) for the
non-purchasing spouse was acquired prior to the marriage or falls under the particular state law where
the debt has been set up for non-borrowing spouse only by documentation such as release of spousal
liability, we do not have to count the debt against the borrowing individual. Debts which may cause
potential credit or title lien issues must be adequately addressed to determine if underwriter has discretion
to disregard debt from loan qualification.

Disputed debts of the non-purchasing spouse need not be counted provided the file contains
documentation to support the dispute.

Credit history of the non-purchasing spouse should not be the basis for declining the loan.

FHA Refinances/Prior Investment – For mortgagors who re-occupy their investment property securing
the FHA refinance, maximum financing is allowed by the borrower who occupies the property at least 12
months prior to the loan application date. If occupancy is less than 12 months prior to loan application
date, the borrower is only able to do a rate/term refinance with maximum LTV of 85%.
FHA Streamline Refinance – Requires a minimum 640 FICO, tri-merge credit report with No mortgage
lates in the past 12 months, six months payments on current mortgage must have been made.
        For all SF Forward Streamline Refinance transactions that are refinancing FHA loans endorsed
on or before May 31, 2009, the UFMIP will decrease from 1 percent to 0.01 percent of the base loan
amount. The monthly MIP will be 55 bps, regardless of the base loan amount.
The endorsement date is on the Case Query screen in FHA Connection. This change is effective for case
numbers assigned on or after June 11, 2012. For FHA loans endorsed on or after June 1, 2009 – see
FHA – Annual MIP.
Non-credit Qualifying Streamline –
        Done without appraisal, no inclusion of closing costs or prepaid items are allowed.
       Investment properties can only be with Wells Fargo and Franklin American as Non-Credit
        qualifying transactions. For investor streamlines, please reference specific maximum loan
        amount requirements by FHA.
       Chase and Wells do not allow Non-Credit qualifying transactions.
       Penny Mac maximum LTV is 110% of AVM obtained.
       Maximum CLTV of 125%.
Credit qualifying streamlines –
       Can be done for deletion a borrower based on certain criteria.
       Done in the States of Illinois and Minnesota due to the requirement of income verification.
       Can be done with an appraisal to support inclusion of closing costs and prepaid items (maximum
        insurable mortgage is the lower of the outstanding principal mortgage minus MIP refund, plus
        closing costs (no discount fees), prepaid items and new UFMIP or 97.75% of the appraised
        value plus new UFMIP) with a maximum CLTV is 100%. Eligible investors are Chase and
        Franklin American.
All FHA non- credit qualifying Streamline refinances must have a 5% Net Tangible Benefit based on P&I
plus the annual MIP

Condo Approval is not required.
Items required in file in addition to standard documentation include a copy of the original note, a current
payoff, FHA Streamline Submission Sheet and FHA Streamline Worksheet provided by Kim Rembowski.
Max Cash back allowed at time of closing is $500.
A loan which is being done for reduction of term cannot be done as streamline unless reducing the term
of the mortgage meets the Net Tangible Benefit above.
Anticipated Refinance - FHA Connection will not allow the ordering of a new case number until 213 days
after the borrower’s last closing/disbursement date for streamline refinances transactions.
FHLMC LP Non-Owner Occupying Borrower – FHLMC does allow for blended ratios although LP may
require occupant borrowers to qualify on their own without non-occupant co-borrowers depending on the
layering of risk.
FHLMC system/LP may still issue an approval with only $1 of income for occupying borrower when a
strong non occupant co-borrower, no investor will purchase these loans without verification of at least $1
of monthly income. Processor should try to enter no employment or income to determine if LP will provide
LP Accept findings without income verification. FHLMC has also stated that the Underwriter must support
that the occupying borrower has sufficient income to support their liabilities.
FHLMC Refinance – FHLMC requires mortgages to be seasoned for 120 days from the original
Purchase Note Date in order to be refinanced as a “No Cash-Out” transaction. FHLMC also now requires
verification of funds on all refinance transactions where assets have been entered into the LP system.
FHLMC Relief Refi/Open Access – This product is currently only offered through Chase and PHH. LP
Findings will state borrower eligibility for this program. FHLMC Look up Tool -
Investment properties are not allowed under this program.
Maximum allowable DTI is driven by Accept LP findings with any exception below.

Non-Chase Serviced Loans must meet the following requirements:

• Primary 1-4 Unit/Condo/PUD 95/95% LTV/CLTV with 700 FICO
• Primary 1-4 Unit/Condo/PUD 90/90% LTV/CLTV with 680 FICO
• Second Home 1 Unit/Condo/PUD LTV/CLTV 80%/80% with 700 FICO
• Primary with properties located in AZ, CA, FL or NV LTV/CLTV 80/80% with 680 FICO Maximum DTI
capped at 45% regardless of AUS findings.
• Borrower cannot be added on Non-Chase serviced loans.
Currently serviced loans with Chase or WAMU are allowed to have a maximum LTV of 105%.

Non-PHH Serviced Loans must meet the following requirements:
     Primary 1-2 Units/Condo/PUD LTV 95%/CLTV unlimited with 620 FICO
     Second Homes 1 Unit/Condo/PUD LTV 95%/CLTV unlimited with 620 FICO
     Primary with property located in TX 80% LTV/80% CLTV – no funds back at closing
Currently serviced loans with PHH are allowed to have a maximum LTV of 125%.

Maximum cash back at closing is $250.
 Loan proceeds use is limited to unpaid principal balance, current interest and the lesser of 4% of unpaid
principal balance or $5,000 in closing costs and prepaid items.
**A copy of the original note is always required in file.
The removal of a borrower from the Note is now permitted regardless of the reason if the following are
met: The borrower being removed from the Note must also be removed from the deed and not retain any
ownership interest in the subject property. At least one existing borrower from the Mortgage being
refinanced must be retained.
         Conventional - Minimum FICO of 620.
         FHA- Minimum FICO score of 640.
         VA - Chase requires a minimum of 660 FICO and Wells minimum FICO is 620.
Flood Certificates – Flood certificates are good for six months.
FNMA DU Refi Plus – (Non Harp 2.0) Loans are eligible if they were purchased by Fannie Mae prior to
June 1, 2009 or in an MBS Pool with an issue date prior to June 1, 2009. A Look-Up Tool can be found
on the Efannie website.
Maximum allowable DTI is driven by Approved DU findings.
Maximum cash back at the time of closing is $250. Transferred MI is not allowed.
PIW (Property Inspection Waiver) is acceptable if DU allows as long as borrower signs statement
certifying that property has not been listed in the past 12 months. If a PIW is offered, estimated value
provided by DU must be used. For a condo, a 2075 is acceptable if DU allows.
Wells Fargo
    Maximum 105% LTV / 110% CLTV
    Minimum 620 fico for primary residence and 680 fico for second home and investment property
    If the new loan requires MI, the loan is NOT eligible for sale to Wells Fargo
    Maximum 105% LTV
    Chase or WaMu Serviced
    Maximum 105% LTV
    Non Chase or WaMu Serviced
    Primary: 95% max LTV/CLTV with 700 Minimum fico. Second Home: 80% max LTV/CLTV second
    home with 700 minimum fico. NOO not allowed.
    Primary: 90% max LTV/CLTV with 680 Minimum fico. Second Home: 80% max LTV/CLTV second
    home with 700 minimum fico. NOO not allowed.
    Only offers on existing BB&T Serviced loans
    Maximum 125% LTV (30 Yr & 20 Yr Fixed), maximum 105% LTV 15 Yr Fixed
    PHH Serviced Loans
    Maximum 125% LTV, minimum fico 620 (680 minimum fico for NOO)
    Non PHH Serviced Loans
    95% max LTV for OO and 2         Home (NOO NOT Allowed)
Franklin American
    Maximum 95% LTV / 110% CLTV, minimum fico 620 (680 minimum fico for 2                home)

Harp 2.0 Loans are currently being sent through CMG Lending. CMG Contact:
Karl Stewart, Sr. Account Executive,, 970-488-0889
FNMA’s LQI (Loan Quality Initiative) – Required on all loans types.
        SS Alerts of messages on credit reports require Interthinx SS# Verification
        Fraud Alerts on credit report – Contact with borrower and completed/notarized Fraud Alert form
        must be included in Underwriting file or no extension of credit may be given.
        LDP/GSA – required on all loans ** Provide actual LDP and GSA printouts from website, not one
        page sheet currently on Processing intranet site**
        Occupancy Verification required if questionable
        Letter of explanation from borrower(s) on any address mismatch on credit report or addressed
        reflected over most recent 2 years is required.
        Credit Report Monitoring through Equifax is done daily on all loans within Cherry Creek’s pipeline.
        Any changes in liabilities, new liabilities noted or new inquiry noted must be addressed by the
        Branch prior to loan closing. An Underwriting Assistant will contact the UW and Branch regarding
        any noted items.
        Credit Report Inquiries – must be addressed individually for the past 120 days
        All Credit Reports pulled by CCMC within past 120 days noted within inquiry section must be
        provided to UW for review.
GFE and TIL - *Double checking of GFE and TIL prior to providing to borrower is essential – items such
as UFMIP, MI and funding fee are common items missed
* Please remember to input the amount of the Owner’s Title Policy. Even though this may not be a
borrower charge, it is required on the GFE. If not disclosed, we have to credit the borrower the amount of
the premium which will be lender concession. Also verify that mortgage insurance, if any, is disclosed in
Box 3 and bona fide discount, if any, is disclosed in box 2. If PIW charge or charge for Barbara Weade,
the fee should be included within the origination fee (Block1). Valid loan extension fees can be charged
to the borrower if disclosed within 3 days of fee notification. This must be included with the discount line.
Any GFE and TIL Questions should be emailed to

Hazard Insurance - Although FNMA/FHLMC will allow deductibles of 5%/$5,000 except where limited
by some states, CCMC policy is 1%/$1,000 deductible with exception on a case by case basis if state law
allows and the borrower has sufficient reserves. Exceptions should be sent to Jeni DeBrine or Linda
Grimes for approval. Evidence of hazard insurance must be provided for in all loan files to underwriting.
Hazard insurance on refinances must be current as of closing date.
HELOC – If borrower has a HELOC on any real estate owned, we must count 1% of the total line as their
monthly payment. GMAC, Wells and Franklin American will allow us to use the actual payment as long as
payment covers the interest on the loan.
High Balance/Conventional Loans – CCMC allows in-house underwriting with 2 signature (i.e. UW
Mgr). Processor should review and provide in UW file, the specific investor’s high balance guidelines to
determine meeting of requirements prior to submission to Underwriting Dept.

HO6 (Walls In) Insurance – PUD/Condos – All loan types except USDA.
      If the ‘master’ or ‘blanket’ policy for the condominiums/attached PUD development does not
      provide full coverage of the interior or is a “bare walls” policy, then an individual HO‐6 (“walls‐in”)
      policy must be obtained for the property. Required coverage is 20% of appraisal value of subject
      property or guaranteed replacement. All investors except for Penny Mac require that we escrow
      for HO6 insurance on Conventional loans with LTVs above 80% and on all FHA and VA
HOA Dues - Can no longer be paid by Seller or Lender as part of closing costs/prepaids. However,
working capital or HOA reserve is allowed to be paid by Seller or Lender if paid directly to HOA at time of
closing on HUD-1.
HomePath – HomePath loans are sold to GMAC and Wells and are underwritten in-house. Full sales
contract, Homepath website screen print-out (must reflect both logos) and a Homepath Appraisal
Disclosure must be included in underwriting submission.
Homepath loans where the subject property is a Condo, must be underwritten directly by GMAC.
Documentation needed for Condos - 1) Master Insurance Policy for $1 mil; 2) Fidelity Bond for over 20
units; 3) Internet search of project to determine if hotel, motel or lodge. Review advertised features such
as daily cleaning service, nightly rentals.
Homepath Gifts (Primary residence): On a 1 unit primary residence more than 80% (excluding High
Balance mortgages), there is no minimum borrower investment. Gift funds can be used as the
Homepath closing – NO appraisal fee can be charged to the borrower and should not be reflecting on

HUD REOs - You may receive an "approve/ineligible" when running through AUS due to repair escrow
addition if applicable. Wells will not allow us to document to the findings so files must be manually
underwritten by following HUD's guidelines with ratios of 31/43%. Chase will allow us to document to
findings if ineligible is due to high LTV only. PHH will allow documenting to findings. Chase will not
purchase HUD REO Condo loans.
HUD REO $100 down financing on HUD REO's utilizing AUS approvals, the total loan amount including
the financed UFMIP cannot exceed the as-is appraised value.
HUD REO Escrow - FHA allows us to escrow for 30 days if the repair items and amounts are listed in the
contract. The amount of escrow repairs can also be added to the Loan Amount making the LTV over
100% (except in the instance of a HUD REO $100 down, maximum LTV is 100%). In the event the
repairs cost less than the estimate included in the contract, the excess cannot be refunded to the
borrower and must be treated as a principal reduction. HUD REOs require the completion of the
Compliance Inspection form (HUD form 92051).
Maximum escrow amount allowed on 203b loan for repair is $5,000.
Penny Mac and Chase will not purchase HUD REO transaction with repair escrows.
HVCC Appraisal Acknowledgment - Must be in every file where an appraisal is given a value (FHA, VA
and Conventional) and must be signed prior to closing. If desk or field appraisal review is done and the
value has been affected, an updated appraisal acknowledgment form must be signed by borrower noting
the value change.
Income - The 1003 and AUS findings should have income broken down between “base”, “overtime”, and
“commissions” in order to obtain accurate findings.
Income Calculations - Income Calculations for borrowers must be completed by Processors on forms
previously provided by Underwriting and are to be within loan file at time of underwriting submission –
Self Employed (MGIC Cash Flow Analysis form) or W-2 and employed income sources should have
Income Calculation Form.

Income - Borrowers with less than Two Years Current Work History: When the Borrower has less
than a two-year history of receipt of income, the Underwriter must be able to provide a written analysis to
justify the determination that the income that is used to qualify the Borrower is stable. While the sources
of income may vary, the Borrower should have a consistent level of income despite changes in the
sources of income. The determination that the income can reasonably be expected to continue must be
based on the documentation contained in the file. The determination should focus on the Borrower's past
employment/self-employment and the probability of continued consistent receipt of the income used to
qualify provided there is no knowledge, information or documentation that contradicts a reasonable
expectation of continuance or probability of consistent receipt over the next three years.

If a borrower was previously attending college or in a training program, the new income may be used if
properly documented and strength of continuance of income is supported. If a borrower is re-entering the
workforce and has been at the current employer for at least six months, prior history of more than the
recent 2 years will be required. A written VOE must be provided to determine strength of employment and
average number of hours worked or guaranteed in these cases.

Income – Asset Depletion – The program is available under GMAC and FNMA Direct only for
Conventional loans. Recognition of an income stream from an individual of retirement age and
employment-related assets can be used as eligible income for loan qualification on loans underwritten by

                                       Income Derived From Assets
          Eligibility             Desktop Underwriter
                                  Assets must be owned by one or more of the borrowers
                                  Assets must be liquid, unrestricted and available to the borrower without
                                  Maximum 70% LTV/CLTV/HCLTV (GMAC and FNMA Direct)
                                  Minimum credit score 620 GMAC and FNMA Direct)
                                  Purchase and limited cash out refinance
                                  Primary residence and second homes
                                  6 months reserves are required

          Eligible Assets         Non-self-employed severance package, or
                                  Non-self-employed lump sum retirement package, or
                                  Non-self employed lump sum retirement package
                                  Document with a distribution letter from the employer (1099R) and
                                   deposited into a verified asset account

                                  401k, KEOGH or IRA and SEP-IRA, retirement accounts are eligible if:
                                       o    Distribution is not yet set up, or
                                       o    Distribution is set up and being received, yet the distribution
                                            amount is not enough to qualify. Evidence of distribution change
                                            is not required.
                                           o     Document with the most recent monthly, quarterly, or annual

           Value and        Net Value Determination
           Calculation      70% of the value (remaining after any costs or penalty for transaction.

                            Asset Net Value - if retirement, stocks, bonds, mutual funds less any funds that will
                            be used for closing or required for reserves

                            Income Calculation

                            Divide the “Net Documented Assets” by 360 months (GMAC and FNMA Direct).
           Ineligible       The following non-employment related assets are not eligible: This list is not all-
           Assets           inclusive.

                                     Divorce proceeds Inheritance
                                     Stock options
                                     Lawsuits
                                     Lottery winnings
                                     Non-vested restricted stock
                                     Net Equity

Income – Auto Depreciation/Mileage - may be allowed, contact Underwriter directly to determine
acceptability. If underwriter approved, current IRS guidelines will allow .22 cents per business mile add-
Income – Capital Gains – A Capital Gain or Loss is the result of an individual selling an investment asset
(stocks, bonds, real estate etc.) at a price higher or lower than the amount originally purchased.
Capital gains that are non-recurring may not be considered in determining income. Only recurring gains
consistent over a period of time may be considered in the income analysis. Borrowers must have
sufficient remaining like assets with income likely to continue for the next three years.
For all loan types, an average two years of tax returns must be done when determining income. In
addition, the underwriter should determine if the asset sold will have an adverse affect on future income.
Capital losses reflect a reduction of personal assets and should not be considered when determining
Income, Child Support, Alimony or Separate Maintenance – All loan types typically require a 12
month history required and verification of continuance for three years. Based on AUS acceptance, the
number of months required may be less. If less than 12 month history but greater than six months, the
income can be considered if the amount does not exceed 30% of the borrower's qualifying monthly
income. If less than six months not less than three months may be acceptable with acceptable
underwriter review.
Income – Declining - If the borrower’s income is declining, the Underwriter will need to ensure that the
income will not further decline. A good rule of thumb is to view declining income as a red flag if there is a
15% or more in decline of income.
W-2/other employed income - If borrower’s earnings are declining, for example OT/Bonus/Commission is
declining, we will need a strong letter from the employer regarding reason for income decline and
underwriter must determine acceptance of income to be used.
Self-employment - Declining income will be difficult to use unless there is evidence that income has
stabilized since the last tax returns (Income cannot be averaged as only able to use declining income
amount for qualification). A satisfactory letter of explanation regarding the reason for income decline and
supporting documentation including YTD P&L to support that income has stabilized should be included in
file. Documenting the company profile and providing supporting documentation from CPA and other
acceptable sources may be helpful.
Income – Increasing:
If the borrower’s income has increased in most recent year more than 20% from prior year, this income
can be used if most recent tax transcript is validated or for employed borrowers, there is acceptably
documented reason provided to adequately support the increase.
For self employed borrowers, in this instance where 2 years of tax returns are provided, a 24 month
average should be used for loan qualification. Typically without transcripts documented income should
only be used to support the previous year’s income but may not be included in the averaging of income
for qualification.
Income – Family employment – Income must be documented by 2 years tax returns, most recent 30
day paystub and if paystub is not computer generated, a WVOE with payroll ledger from business’ CPA,
                     rd                                                                         rd
acct (disinterested 3 party) is required. Verification from business’ CPA, acct (disinterested 3 party)
must also provide letter regarding any ownership by borrower. WVOE cannot be completed by another
employee or owner of the company.
Income – Interest/Dividend - Interest/dividend income is acceptable with documenting the most recent
two years of borrowers’ filed tax returns along with current asset statements to support the
interest/dividend income has been consistent and is continuing. If assets are being used for cash to
close, the assets should not be used for income purposes.
Income - Rental –
       Conventional - Loans require updated new FNMA calculation guidelines: net rental income or
       loss must include the full PITI for the rental property. This is not applicable on free and clear

               Gross Rent Recd. (Line 4, Sched. E)

          Subtract: Total Expenses (Line 20, Sched. E)
                           Sub Total

                            Add Back:
                       Insurance (Line 9, Sched. E)
                        Interest (Line 12, Sched. E)
                         Taxes (Line 16, Sched. E)
                    HOA Dues/Other (Line 19, Sched. E)
                      Depreciation (Line 18, Sched. E
                        Total (Annual) $

                      Divided by 12 months =

  SUBTRACT PITIA (from current mortgage/tax/ins stmt.
                      HOA Dues, if any)
             = Monthly Income (Loss) $

       FHA – Rent received for properties owned by the borrower is acceptable if the lender can
       document that the rental income is stable through a current lease, an agreement to lease, or a
       rental history over the previous 24 months that is free of unexplained gaps greater than three
       If the borrower resides in one or more units of a multiple-unit property and charges rent to tenants
       of other units, that rent may be used for qualifying purposes.
       However, projected rent of additional units only and not the owner-occupied unit(s) may be
       considered gross income only after deducting the HOC's vacancy and maintenance factor.
       They may not be used as a direct offset to the mortgage payments.
       Income from roommates in a single-family property to be occupied as the borrower's primary
       residence is not acceptable.
       Rental income from boarders is acceptable if the boarders are related by blood, marriage, or law.
       The rental income may be considered effective income if shown on the borrower's tax returns.
       Otherwise, the income only may be considered a compensating factor.

               The following is required to verify all rental income:

               1. Schedule E of IRS Form 1040. Depreciation may be added back to the net income or
               loss shown on Schedule E. Positive rental income is considered gross income for
               qualifying purposes; negative rental income must be treated as a recurring liability. The
               lender must be certain that the borrower still owns each property listed, by comparing the
               Schedule E with the real estate owned section of the residential loan application.

               2. Current Leases. If a property was acquired since the last income tax filing and is not
               shown on Schedule E, a current signed lease or other rental agreement must be
               provided. The gross rental amount must be reduced for vacancies and maintenance,
               before subtracting PITI and any homeowners' association dues, etc., and applying the
               remainder to income (or recurring debts, if negative).
                 Vacancy factors based on HOC jurisdiction:

                 Santa Ana HOC - 15% vacancy rate

                 Philadelphia HOC - 15% vacancy rate

                 Atlanta HOC - 15% vacancy rate

                 Denver HOC - 25% vacancy rate

*Please note that Penny Mac currently requires the Conventional loan calculation on FHA loans

          VA – Verification of rents received to be documented similar to FHA. Property depreciation
          claimed as a deduction on the tax returns may be included in effective income. VA uses a 25%
          vacancy factor.

Income, Retirement / Pension/IRA Income - Proof of receipt required from copy of award letter, 1099's,
or two months bank statements. Wells will allow future SS income with a valid award letter as long as
receipt of income is in the month of their 1 payment. New annuity distributions must be set up as regular
payments and must be verified with letter from Company along with two month receipt on monthly
distribution, 1 quarterly or annual disbursement made. Distributions which have a history of receipt may
be used by conservative averaging of distributions. All income derived from Retirement/Pension/IRA
sources must have three years continuance.
Income – Self Employment – A borrower is considered Self Employed if he owns more than 25% of a
business or receives non-taxed 1099 income.
For borrowers who are self-employed (on all types of loan transactions), correct input into AUS is
essential in order to obtain the required documentation for the loan transaction.
If more than 120 days since last filed tax return, an unaudited P&L must be obtained to support consistent
Income - Trust - Provide proof of receipt for the most recent three months. If three month history
unavailable, two years tax returns required, and verification of balance to support 3 years of continuance.
A copy of the trust and/or letter from Trustee on amount, frequency and duration should also be provided.
If file is being sold to Chase and income is more than 20% of total qualifying income, the trust requires
review by Chase’s legal department.
Interest Credit – CCMC allows a 5 days interest credit at time of closing. Bond loans typically do not
allow an interest credit.
Investment Property- Landlord History
FNMA does not require landlord history and all investors except for Chase and Citi will follow FNMA
guidelines for the use of rental income from subject property. Chase and Citi will require a 2 year landlord
FHLMC requires 2 yr landlord history in order to use rental income.
If rental income is being used for qualification, the hazard insurance must provide proof of 6 months rent
loss insurance. All investment property transactions require 6 months of reserves.
“Other real estate owned, not subject” - Chase requires borrower to have 2 yr landlord history if using
rental income from other real estate owned and recently rented since last tax year.
Jumbo/Non-Conforming Conventional Loans – GMAC and Chase will underwrite their Jumbo/Non-
Conforming products directly. Files must be reviewed by CCMC underwriter prior to investor submission.

The following lenders are available for direct CCMC underwrite by Jeni DeBrine:
         Credit Suisse           (CS appraisal review required)
         Alliant Credit Union    (2 level Alliant review of credit package and appraisal required)
         Redwood Trust           (RT appraisal review required)

Appraisals should be ordered through Appraisal Dept with the following noted on request • Investor Name
• Jumbo loan amount • Appraisal management company from which the appraisal should be ordered.

Leasehold/Community Trust properties – All of our investors will provide financing on Leasehold
Estates, although Chase will not allow on Super Conforming products. At least two comparable sales on
appraisal must also be subject to leasehold. A copy of the lease must be provided to determine
expiration date will occur at full term of our loan.
Community Land Trusts are ineligible on conventional loans. Currently PHH is our only investor that will
allow Community Land Trusts on FHA transactions.
Locks -

Optimal Blue lock confirmation printout should be included in every file at time of underwriting submission.
Loan should be locked prior to underwriting submission to avoid having to resubmit at a different interest
rate in the event of market movement. Exceptions can be made if issue with loan transaction and prior
approval from Underwriting Dept.
        Below Par Pricing – Discount points should only be charge if pricing is below Par. If bonafide
        discounts are not to being collected and lock reflects below par pricing, the Branch Manager
        should request an approval for a concession from Capital Markets Prior to loan closing
        Lock Cancellations - If you know that the loan is not going to close for any reason, please notify
        Locks immediately and request the Lock to be cancelled.

        Specific Lock - If loan is locked under a unique program (ARM, Interest Only, High Balance),
        processor should include a copy of investor program guidelines in underwriting package at time of
Maximum number of financed properties-
        Conventional - All investors limit maximum number of financed properties by borrower to four for
        investment and second home transactions. Primary residences do not have this restriction unless
        sold to Chase (max of four).
        The FNMA Direct product does assist with conventional loans for borrowers with 5-10 financed
        properties, loan must be locked FNMA Direct prior to loan submission to underwriting. 5-10
        purchase transactions are limited to 75%. Refinance Cash out transactions are not eligible.
        FHA - FHA transactions are limited to four total financed properties with all investors.
Notes: 
    Ownership of commercial or multifamily (five or more units) real estate is not included in this
    Loans secured by residential lots or vacant land do not count towards the maximum financed
       property limits.
    Joint or total ownership of a property that is held in the name of a Corporation (even if the
       Borrower is the owner of the corporation) does not count towards the maximum financed property
    Joint or total ownership of a property that is held in the name of a Business Entity (Sole
       Proprietor, Partnership, S-Corp, LLC) must be included in the maximum financed property limits.
MDIA - Refer to the CCMC intranet site for procedures to comply with MDIA. Loans may not close earlier
than 7 business days from application. Questions regarding MDIA compliance should be directed to
Mortgage Insurance – CCMC Underwriting dept is now utilizing delegated MI underwriting on Radian,
MGIC, Essent and UGI transactions. Genworth is still required to provide their own underwrite to Citi
guidelines unless loan has been locked investor specific. On all transactions where property is of
concern or a flip transaction, a direct submission to the MI company may be required.
MI Contract underwrites are not allowed by Wells Fargo, PHH, Citi or Franklin American.
Standard Coverage must be used (Reduced MI is not acceptable). Also note that in the case of
investment or second home loans with MI that the MI does not drop off, so disclosures should not reflect
a cutoff of 78%.
Financed MI and Split Premium MI loans are allowed only with GMAC and PHH. Standard maximum LTV
including financed MI is 95%. Exceptions may be made to maximum LTV of 97% with GMAC or PHH with
prior Management approval. These files should be underwritten in-house with Radian, MGIC or Essent
MI product.
Names on Title – Please be sure to enter the borrower(s) name(s) in Point/ClientKeeper/Relay exactly
the way they intend to be on title and on our loan.
If refinance, names should match title commitment as to not require Quitclaim Deed for name change
only. FHA Connection also requires an exact match which causes many post-purchase corrections.
Non Arms Length Transaction – Tenant Purchase from Employer - even if Tenant has rented subject
property for at least 6 months – FHA will not allow max financing and limits LTV to 85%.
Non-Arm’s length transactions are not intended to bail out a family member or current owner from an
existing delinquent mortgage. When individuals wish to purchase or refinance a property currently or
recently owned by an individual with whom they have an established relationship, the title commitment
may not evidence foreclosure proceedings or notice of default.
Non-Arms length transactions sold to Citi have a maximum DTI of 40%.
Party Wall/Common Wall Agreements - Currently required on all loan types where occupants have a
common or shared wall and no HOA in existence.
These agreements are not required on conventional loans sold to GMAC or Wells through FHLMC
Payoff –
        Conventional – An estimated amount of payoff can be provided at time the loan is submitted. A
        current payoff must be provided prior to final loan approval.
        FHA and VA – A current payoff must be in all Government refinance files at time of submission.
Paystubs - The most recent paystub in file must be within 30 days of application date. Based on final
loan approval date, underwriter may request an updated 30 day paystub for current income support.
PIW (Property Inspection Waiver) – See Appraisal – Minimum Appraisal requirement.
Point Data Input – All information should be input with both capital and lower case letters.
At time of underwriting submission, be sure to provide most recent Point file to underwriter.
Please DO NOT copy a prior Point file for same borrower for new transaction, issue has arisen with
duplicate AUS (casefile and key #) findings used and has created unsalable transactions. If multiple
transactions for one borrower, DU findings must reflect different Casefile IDs. The copying of Point files
should not be done in order to eliminate the issue of duplication or overriding of findings.
Power of Attorney - The title company should prepare an acceptable Power of Attorney; copy should be
forwarded to your closer prior to closing so that closing docs can be drawn with correct signature lines.
Closer will also determine that POA meets minimum guidelines. If Borrower is using a POA for closing,
that borrower must have signed the initial 1003 and disclosures in person. A person may only act as a
POA if they will not benefit from the transaction (cannot be LO, Realtor, etc.).
POAs are not allowed when title is in the name of a trust or on an investment property transaction.
Preferred Provider List – must be included in every loan file submitted to Underwriting. Please use form
provided by Stacey Harding, not the form generated through Point.
Primary Residence Conversion to 2 Home or Investment or Property Retained - Generally rental
income is not allowed unless it appears on the most recent years filed tax returns. Exceptions may be
allowed if borrower has supported sufficient equity in their current home.
        Conventional - Borrower must have at least 30% equity in retained/converted residence in order
        to can count rental income. If property has 30% equity, 2 months reserves are required. If the
        property has less than 30%, the borrower must qualify with both payments and 6 months
        reserves for new primary plus 6 months for retained property is required.
        FHA - Borrower must have at least 25% equity in retained/converted residence in order to count
        rental income. FHA loans where insufficient equity is in property and borrower is qualifying with
        full payment, UW has discretion to ask for 2 months reserves for the retained property.
        VA - VA does not have specific guidelines regarding conversion of property but Chase treats VA
        primary residence conversions the same as Conventional conversions.
Evidence of equity – Chase, Franklin American and Citi require 1004 interior/exterior appraisal. GMAC
will accept a 2055 appraisal and Wells will accept a RELS AVM for their verification in lieu of the 1004 or
2055 appraisal.
Principal Reduction at time of closing –In the event borrower is receiving too much cash back at time
of closing, the resubmission of the file to the underwriter to lower the loan amount is CCMC’s first choice.
On a case-by-case basis, it is acceptable to allow up to a $1,000 principal reduction on government loans
refinance transactions only. On government streamline refinances due to minimum cash back guideline, if
tolerance cure or principal reduction is allowed, there cannot be any cash back.
Principal reductions are not allowed on Conventional loans or Purchases of any loan type.
If borrower wishes to make principal reduction after closing, borrowers should wait until after 1 payment
to the investor to send principal reduction payments.
Prior Approval through MI Company or Investor - Loans which require either direct Investor approval
through GMAC or Wells or MI approval through Genworth require the file to be submitted directly to
CCMC underwriter prior to investor. CCMC must review file and provide cover letter for submission to
investor or MI company – scanning of file to investor or MI company will be done through the Underwriting
Please note that upon review additional conditions may apply based on specific investor guidelines or
items that may have been missed in initial investor or MI underwrite. Estimated turn time will be
determined by UW time frame and investor/MI timeframes.
Private Road Maintenance Agreements- Private streets should be protected by permanent recorded
easement (common driveway) and have road maintenance agreement. If a legally enforceable, recorded
use and maintenance agreement is not in place, the following information should be provided to
determine acceptance:
 Statement from the Borrower acknowledging the existence of the private road and his or her
    responsibility to maintain and repair the road when necessary
 Affirmative statement from the appraiser confirming the private road is common in the area and is
    supported by comparable properties exhibiting the same characteristics.
 Additionally, the appraiser must state the existence of the private road is not a detriment to
    marketability, accessibility, or the value of the property
 Comparable properties must be subject to the same access conditions Appraiser must comment on
    the condition of the road and indicate that the road is in good condition
 Municipality or the appraiser must confirm that the private road does not detrimentally affect the
    availability of public services for the property, particularly fire protection and police protection

   Legal ingress and egress must be available to the property, and no exceptions may be noted on the
    title report for these characteristics

Project Approvals – Condos/Attached PUDs: All Conventional (including DU Refi Plus and FHLMC
Open Access) and FHA condominiums along with Conventional attached PUDs require project approval
from Barbara Weade. Please send all documentation by email to: and When you send in a project certification request email PLEASE include the following
ADDRESS, PH# & FAX# (even if you are sure we know it) and helpful to give Type of review (i.e. FHA
loan in FHA approved project, Conventional & if any specific investor, etc.) & your desired timeframe.
Provide all condo/PUD documentation to both Barbara Weade and Underwriter.
If an appraisal is required for the review, the appraisal must be ordered as HVCC compliant through our
Appraisal Dept.

        Conventional - INVESTOR OVERLAYS

   a) On all of the loans submitted for their direct underwriting and project approvals will not accept
any project for any type of loan if there are more than 30% of the units owned by investors
   b) Conventional loans in New Condo Projects (any condo that is not yet 90% sold & conveyed OR
control of the HOA is still with developer OR not yet 100% physically complete/still subject to future
additions/annexations) must meet a 70% presale requirement to owner occupants/2nd homeowners for
their direct submission and review.
   c) Has a specific list of declined/rejected condominiums that must be checked; if a condo project is
on this list we cannot sell any type of loan to them from the project. To check this list currently (listed
alphabetic by state, then city, then project name). Currently link to the list is: Chase Declined
Condominium Project List (it gets updated approximately monthly).

     a) Will not accept investment loans on attached condominiums, and no owner occupied loans over
     b) Any New Condo Project (not yet 90% sold & conveyed OR control of the HOA still with developer
OR not yet physically complete) will require an attorney's opinion letter
     c) Will not accept Freddie Mac/LP on attached condos... must go DU.

    a) Full reviews of condo projects will often require a copy of the HOA's signed management
agreement and the declaration pages for the insurance coverage. These items are not routinely
requested or available.

      a) Has a project search tool to check if a particular project has been reviewed and/or rejected by
To check the Wells Fargo list go to their web-site top left click on "Info Gallery" then "Project Search"
and put in the minimal amount of the project name (i.e. "Village" for Villages of South Park) and then state
& zip code (less is more so don't even put city...some we had as Highlands Ranch did show up as
Littleton). . If you find one that has been reviewed by them and indicated as approved, we still have to
certify current guidelines, but if they show the project as rejected or "do not lend" then a loan from the
project cannot be sent to Wells Fargo.

Other Project Items to Note:

  - Note that projects in resort areas are still often difficult to prove they are not a condominium hotel (or
PUD hotel) and will require a Resort Area Addendum and specific info from the appraiser on whether or
not the condotel type characteristics apply to the project and appraiser's opinion of whether or not the
project is a condo (or PUD) hotel.
  -Projects which reflect being in current litigation must have all documentation on litigation provided to
Barbara to determine if project is acceptable.

HUD Guideline for FHA Condo project approvals include:

        -   The max FHA concentration level of 50%
        -   Projects that are 100% complete, all sold & closed and all units have been complete for at
            least 1yr, will be eligible for 100% FHA loans provided the project clearly and fully meets all of
            the typical FHA project review criteria. This does NOT apply to new construction, new
            conversions or projects of less than 4 units.
        -   Maximum Non-Residential/Commercial space is 25%% of the project’s total floor space.
        -   For new construction condos still in their initial sales stage, the sales and occupancy
            requirement is acceptable at 30% sold or under contract and then at least 50% of the
            sales/contract must be to owner occupants (will require specific documentation and
            certification of this from the builder/developer). Since this must be met at any stage, a

               cushion is urged (i.e. 100 unit project meets presale at 30 contracts and owner occupancy
               with 15 owner and 15 investor, but is immediately out of compliance if next sale is to an
         - Existing condominium projects remain at the 50% owner occupancy requirement.
         - Second Homes do not count for owner occupancy requirement.
Other FHA info and reminders:
         - Cannot do an FHA loan in a condominium until the project shows up on the FHA Connection
         - on their current HRAP/DELRAP list as approved – an actual copy of the FHA Case number
               assignment is needed to be sure it was ordered under the correct Condo ID#. A review &
               certification of the FHA project criteria must be done for each individual loan to determine &
               certify specifically that all is fully met at that time for the one loan. Exceptions that require NO
               project approval or project review (still need condo rider and evidence of sufficient insurance):
                    o Fully detached free standing condos, sometimes called site condos
                    o FHA Streamline refinances
                    o HUD/FHA REO condo units financed with FHA loans
         - If a condominium only shows on the old (PreHRAP/DELRAP) list and not the current
               HRAP/DELRAP list, we no longer have any easy way to get it added to the approved list. Will
               now involve a full submission process to get the condo approved – as if it never was
         - The fidelity bond coverage that must be in force in the name of the HOA. Still must be in an
               amount at least equal to 3 months assessments for all units (1/4 of assessment income on
               the budget) PLUS the amount currently held in the HOA’s reserve account – required for all
               condominium projects of 20 or more units.
Because the new Lender Individual Unit Project Cert Appendix B Form must be signed by Barb on the
same day as the final approval, your Underwriter will make this a PTF condition. When Processors
receive this PTF condition on an approval, please forward the Final loan approval and signed FHA Loan
Transmittal to Barbara Weade. Barbara will return the signed Appendix B form after verifying that the
project is still on FHA's list and hasn't been withdrawn or rejected. The Processor can then forward the
signed Appendix B form to the Underwriter to clear the PTF condition.

                 VA – A list of approved Condo projects can be located on VA’s website.
Property Flipping –
        Conventional- GMAC is currently our only investor who will purchase a property flip in less than
        90 days. Seller must be on title at time of the sales contract, the loan application taken, date of
        appraisal inspection and date the title commitment is issued. Loan must be locked investor
        specific. All other investors require seller be on title for a minimum of 90 days prior to the sales
        contract. As a standard, MI companies require the Seller be on title for a minimum of 90 days at
        time of sales contract. CCMC underwriter will review and determine if MI company will review full
        review of the property, contract and title.
Please note on any transactions reflecting rapid appreciation require that the appraiser reflect on his/her
report, the reason for the increase, details of any improvements and photos of improvements to show
impact on value. UW has the discretion to order 2 appraisal product if necessary.
        FHA - Properties reselling 90 days or less are not eligible with Chase and Citi.
        Wells, Franklin American and PHH will provide financing on less than 90 day flips and less than
        20% increase in value.
        Wells has adopted the extension of FHA’s flipping waiver based on the following: Property can
        be resold within 90 days of the previous acquisition and at 20% or more above the seller’s
        acquisition cost. This is allowed if 2 FHA appraisal and Branch ordered inspection are obtained
        and can either verify property seller has completed sufficient legitimate renovation, repair or
        rehabilitation work on the property to substantiate the increase in value or in cases where no such
        work is performed, the appraiser can provide appropriate explanation of the increase in the
        property value since the prior title transfer. 2 FHA appraisal must be ordered through Appraisal
        Dept, requested as RELS appraisal order. The lower of the two appraisals will be used for
        qualification and any health and safety items noted on appraisal(s) must be completed prior to
        Franklin American and PHH will allow less than 90 days flips of more than 20% increase in value
        on exempt transactions (Bank owned, inherited property, relocations ie). A 2 appraisal is
        required on more than 20% transactions.
        Underwriter has discretion on less than 20% transactions to require 2            appraisal.

        Please note that the Borrower cannot pay for the second appraisal.
        The Seller however, must be on title at time of our loan application, the date the appraisal
        inspection is performed and at the time the title commitment is issued.
        If the loan is a non-arms length transaction, the Seller must be on title at least 90 days prior to the
        date of our borrower's contract.
        Properties sold between 91 to 180 days after acquisition require a 2 appraisal if the resale price
        is 100% or more over the price paid by the seller when property was acquired. Appraisers should
        provide appropriate explanation of the increase in the property value since the prior title transfer.
Ratios –
         Conventional (excluding DU Refi Plus and FHLMC Refi Plus) - Maximum DTI = 45%. AUS
         may allow up to 50% with compensating factors.
         Franklin American, GMAC, Chase and Citi – maximum DTI on LP findings is 45%.

         FHA and VA – Maximum DTI and approval on loans is driven by AUS findings on these
         programs, typically loans should not to exceed 50% regardless of AUS findings. UW has
         discretion to determine if higher DTI can be supporting based on full file review and compensating
         Bond Programs – Maximum DTI on Bond programs vary. Please review specific Bond program
Real Estate Commission – Seller commission should not exceed 8% or portion which exceeds 8% must
be deducted from sales price.
Real Estate Taxes - In all states except California, taxes are typically calculated at 1.00% of the
purchase price for new construction transactions. CCMC will allow 1.25% tax calculation on California
purchase transactions as we know in CA, real estate taxes are reassessed upon purchase. California
refinances still require underwriting qualification and escrow calculations based on the current taxes.
If you or the Title Company deem the current tax amount to be unreasonable, or simply the tax amount is
unknown (new construction i.e.) then the following typical acceptable methods for estimated real estate
taxes can be used:
        Through the applicable County website, whether it be a calculator option on the site or multiplying
         the tax millage rate by the sales price/acquisition cost
        A detailed estimate from the Title Company – since they are normally very knowledgeable on how
         taxes are computed in the jurisdiction.
Recently Listed Property - The seasoning for how long properties must be off the market varies by
Topic / Investor                                Chase           GMAC/Wells/Franklin   Citimortgage/PHH
Recently Listed - Conforming Rate-Term          30 days         1 day                 1 day
Recently Listed - Conforming Cash Out           180 days        1 day (70% max)       1 day (70%)
Recently Listed - FHA/VA Rate-Term              30 days         1 day                 1 day
Recently Listed - FHA/VA Cash Out               180 days        1 day                 1 day (70%)

Repair Escrows - If property repairs cannot be completed prior to closing, investors will allow only for
exterior, weather related repair escrows. If exterior repairs are required, an escrow amount of 1.5 times
the amount of the bid can be collected with completion date for up to 30 days, most investors will allow
extension out to 90 to 120 days due to weather on case by case exception and repairs required.
PennyMac does not allow Repair Escrows.
Please notify Melinda Berlin, Post Closing Manager so she can maintain tracking of the escrow
Repair Escrow – PTI (Prior to Investor Condition) – Requires Sr. Management approval –
An exception on minor property items that do not meet the regular Repair Escrow guidelines (i.e. interior
work) on REO and short sale properties may be allowed. A PTI condition for this purpose is a maximum
of 5 days (business days) at 1.5 times the amount of the bid. The lock must cover this repair period.
Reserves - When subject property is investment, all investors require 6 months reserves plus 2 months
PITI reserves for each additional second home or investment property regardless of what your AUS
findings require.
If subject is 2        home, 2 months reserves are required.
If concurrent closings of multiple loans for same borrower, borrower will be required to have 2 months
reserves for primary residence, 2 months reserves for second home and 6 months reserves for each
additional investment property.
Restructured/Modified loans – Refinance
         Conventional - Loans where the original loan has been restructured/modified are ineligible for
         FHA and VA – Loans are evaluated on case by case basis
         A comparison of original loan terms, current mortgage rating and payoff by Underwriter may
         determine these conditions exist.
Sales Contract - The copy of the contract included in the underwriting file must be legible. Owner of
record as the seller is not acceptable. The seller must be clearly identified. On properties owned by bank
or business, a Statement of signing authority is required for the party signing the contract.
Seasoning – 6 months seasoning from date of application is required on all types of cash out refinances.
         Conventional - Delayed Financing (FNMA and FHLMC) – cash out exception

 a cash-out refinance within six months of a purchase transaction when no
mortgage financing was obtained for the purchase transaction under all the
following parameters:
      New loan amount is not more than actual documented amount of
        borrower’s initial investment in purchasing the property, plus the
        financing of closing costs, prepaid fees, and points (subject to the
        maximum LTV, CLTV, and HCLTV ratios for the transaction).
      Purchase transaction was an arms-length transaction.
      Purchase transaction is documented by the HUD-1, which confirms that
        no mortgage financing was used to obtain the subject property. The
        preliminary title search or report must also confirm no liens on subject
      Source of funds for purchase transaction can be documented (bank
        statements, personal loan documents, HELOC on another property). Any
        loans used as the source for the purchase transaction will be required to
        be repaid on the new HUD-1.
Rate/Term Refinances with FNMA, FHA and VA financing do not require seasoning however value may
be considered the lesser of the acquisition price or the appraised value.
FHLMC requires 120 days seasoning for Rate/Term refinances.
Self Employment Verification – See VVOE for Self Employed
Seller Concessions – Seller concessions can only be applied to actual borrower closing costs and
prepaid items based on percentage guidelines per loan type.
Seller Seasoning – See Property Flipping.
Seller Tax Pro-ration – Cannot be used as liquid asset on the 1003 and should not be shown as a credit
on the 1003, GFE or IFW.
Short Payoff –
        Conventional- The paying off an amount less than owed is considered the same as a short
        sale/foreclosure/deed in lieu/modification and not acceptable to any of our investors.
        FHA- Currently only Wells and GMAC will accept.
Short Sale - If the seller has requested that their lender accept a short sale, we will need a copy of the
short sale agreement to assure that we can meet the conditions. This is required on all short sale
Short Sale Negotiation Fee – It is acceptable for the Borrower to pay the Seller’s short sale negotiation
fee if it is referenced in the short sale agreement. This fee is limited to 1% on FHA loans.
Short Term Financing – A loan being refinanced within six months of last refinance where funds were
                          st                        nd
used to consolidate of a 1 and non purchase money 2 must be considered a cash-out transaction.
Student Loan Payments –
        Conventional - Conventional loans require that all student loans be counted in DTI against
        borrower even if deferred. If the credit report does not clearly reflect a monthly payment amount,
        a letter from the creditor or loan calculation provided from can be provided. Citi and
        GMAC use a standard 2% payment of the balance within DTI.
        FHA and VA - Student loan payments are not required to be included in ratios if deferred over 12
        months from closing date on FHA/VA loans. Deferment dates must come in the form of a letter
        from the servicer. It is not acceptable to provide only a credit report, credit supplement or letter
        from school on borrower’s current status.
        **For USDA loan, SEE USDA for specifics
                 nd                          nd
Subordinated 2 – A Signed copy of the 2 mortgage Note is required for all loan types. Subordinate
financing should meet FNMA/FHLMC/FHA/VA guidelines. Penalties for early termination of minimum
amount can be an exception based on underwriter review.
Tax Returns – Required to be signed at time of closing on Penny Mac loans, Jumbo loans and VA loans.
Tax Transcripts – see 4506-T.
TBD Properties – Loan files without a property can be submitted for Underwriter review if a determined
need for credit approval is necessary. At time of property contract, a new application should be prepared
to include property address along with all required disclosures.– Files where updating of all credit docs is
necessary due to approval has expired or TBDs that have now found a property do fall under standard
UW turn time and are not deemed as “Conditions” only.
Teachers’ Continued Employment – As it is not possible to get a 3 year assurance of continued
employment for teachers who work through one year contracts, we must have a fully executed legally
enforceable employment contract along with a copy of the most recent 30 day pay stub. If the borrower is
a new teacher just out of college, we can accept the legally enforceable employment contract and WVOE.
Termite Inspections – If any documentation within the Loan file indicates a termite/pest inspection has
been ordered, requested, required, and/or completed (even if the borrower may have elected to have a
termite/pest inspection completed), a copy of that termite/pest inspection to be included in the loan file..

Title Commitment – A “Short Form” title commitment should be ordered on all transactions to assist in
quicker final title policy issuance.
The seller should be the same on our contract, appraisal and title commitment. None of these should
state “owner of record”. The name of the currently vested party should never state "see requirements"
which call for a Deed putting the listed party into title.
On refinance transaction, clarify borrower(s) loan documentation is taken in same fashion as title reflects.
*Also see – Chain of Title
Title Free and Clear - Providing evidence that a borrower owns a property free and clear can be done by
obtaining a written O&E (Owners and Encumbrances) from your title company or by a third party vendor
source (i.e. Realquest). Investors are no longer accepting a copy of the current hazard insurance
declaration page on the property in question showing no mortgagee for free and clear purposes, but for
premium amount only. Documentation should also be provided to show taxes and any other fees such as
HOA dues.
Title in the Name of a Trust - Submit the complete Trust Agreement and any Amendments to the trust
(i.e. InterVivos or Institutional Trust) to the legal review mailbox at A set
of questions will come back that you will need to answer in order for legal to begin your review. Once the
questions have been answered, it can take up to a week for the review and sign off by legal counsel to
come back. Please let them know when submitting the trust if there are any time constraints. Copy
should also be sent to Underwriter. There is no charge for legal review at this time. Wells Fargo and PHH
will not accept a review from CCMC legal and requires they review and approve the trust on loans which
are sold to them.
Investment properties cannot close within a trust.
         Appraisals - Appraisals must be HVCC compliant and ordered through Cherry Creek's Appraisal
        Department. USDA appraisals must comply with appraiser independence requirements including
        those requirements contained in the Dodd-Frank Wall Street Reform and Consumer Protection
        Act. Appraisal must have completed Cost Approach. Appraisals are good for 120 days.
        Assets - If borrowers have assets to make a 20% down payment, they are Not eligible for USDA
        Authorized User Accts- UW must ensure authorized user tradelines reported on the credit
        report are an accurate reflection of the applicant’s overall credit history. An automated
        underwriting recommendation of ACCEPT must include evidence of at least one of the following:
        1) another applicant on the mortgage application owns the tradeline in question, 2) owner of the
        tradeline is the spouse of an applicant, or 3) evidence the applicant has been making payments
        on the account for the last 12 months. If one of these conditions cannot be met, the file must be
        downgraded to a Refer and manually underwritten.
        Debt payoff – Revolving debt payoff is allowed for qualification. Closure of the account is
        Guarantee Fee - For all USDA loans, the UF Guarantee Fee is 2% and a monthly MI premium of
        .30% is required.
        *The new RD1980-21 covering monthly MI must be used for proper insurance of file*
        Qualification- All loans must be run through GUS for acceptance. Minimum FICO 640 with a
        minimum of 2 credit scores (one score/no score requires a 3 point hit in pricing), Max ratios
        29/45, 2 months reserves are required and Closing Costs may not be financed with exception of
        the Guarantee fee if the appraised value permits.
        Student Loans: Conventional/Fixed Payment/Deferred-
             The fixed monthly payment due can be used with an accompanying account statement.
             Deferred student loans that are not in repayment status must use an estimated payment of
             1% of the loan balance, or a verified fixed payment provided by the loan servicer to document
             the payment that will be due.
        Student Loans: Income Based Repayment (IBR):
             IBR amounts are not fixed payments and may increase annually.
             IBR payments of $0 are not eligible to be used in the debt ratio.
        If the IBR payment is less than $100 and 1% of the total loan balance is more than $100, a
        minimum payment of $100 must be included in the debt ratios.
        If the current IBR payment is over $100, lenders may use that payment amount in the debt ratios.
        Seller Contributions – CCMC limits seller contributions to 6% max
        Training - Originators and Processors must attend USDA training prior to being involved in a
        USDA loan as this is a very unique product.
VA Alive and Well Letter – Must be provided at closing for military borrowers on active duty using POA.
We can accept an e-mail. The e-mail should state that the borrower approves the closing to proceed and
should indicate the property address, purchase price, interest rate, etc. To verify he/she is aware of the
terms of the loan. The following is an example of what can be used for closer verification.
“The undersigned lender certifies that written evidence in the form of correspondence from the veteran
or, if on active military duty, statement of his or her commanding officer (including statement of person

authorized to act for said officer), affirmatively indicating that the veteran was alive and, if the veteran is
on active military duty, not missing in action status on (date), was examined by the undersigned and that
the said date is subsequent to the date the note and security instruments were executed on the veteran’s
behalf by the attorney-in-fact.”
VA Appraisal – Effective January 4, 2012, SARs are no longer allowed to deviate from fee appraiser’s
estimate. VA Staff Appraisers are able to assist if value adjustments are needed for NOV issuance.
VA Closing Costs – If charging a 1% origination fee on a VA loan, we are very limited in what other
closing costs may be charged to the borrower. Please refer to the VA Underwriting Guidelines.
VA Certificate of Eligibility – A fully completed Form 26-1880 and the DD214 must accompany the COE
in file submission to underwriting.
VA – Common Law Marriage – In certain states, a Common Law Marriage Affidavit from the Motor
Vehicle Department will be required on common law borrowers seeking a VA loan.
VA Indebtedness - Letter is no longer required due to the information being reflected on current
Certificate of Eligibility notices.
VA – Interest Rate Reduction Refinance (IRRRL) - A full 1004 conventional appraisal (unless same
servicer ie. Wells to Wells, GMAC to GMAC, Citi to Citi and Chase to Chase transactions) ordered
through the appraisal desk to be HVCC compliant and to support the total loan amount. Subject property
must be rated as “average” or higher. Any repairs noted by the appraiser that impact the safety, structural
soundness and habitability of subject property must be completed. Appraisal expense may NOT be
charged to the borrower. The LTV is limited to 100% of current appraised value. A Tri-merge credit report
and VVOE are also required on VA IRRRLs. Same Servicer files should be locked investor specific prior
to submission to underwriting. No minimum requirements regarding length of ownership will apply to
value. LTV will be calculated off of the Total Loan Amount (Base loan amount plus Funding Fee).
VA Refinances –Cash out - PHH will allow VA Cash out transactions for loan amounts above $144,000.
Texas properties are ineligible for any VA cash out transactions. Although VA allows 100% LTV, our
investors maximum LTV is capped at 90%.
VA funding fee on cash out transactions: 2.15% Veteran first time, 2.40% Reservist/National Guard first
time, 3.30% Second or Subsequent Use.
LTV does not impact funding fee percentage.
VA Residual – AUS Findings and VA Loan Analysis must contain same exact figure for residual.
Verification of Rent – If borrower is currently paying rent, this should be stated on the 1003. Verifying
rent, through a VOR from rental company or complex or 12 months of cancelled checks is required if file
is manually underwritten or at Underwriter discretion if a payment shock concern or overlay matrix
VVOE’s – A VVOE should be completed by Processors prior to loan submission to underwriting. Closers
will also complete verification at time of closing. A telephone listing or other acceptable documentation
must be obtained by Processor for underwriting and closing file.
VVOE’s for Self Employed Borrowers – DU requires a VVOE on self employed borrowers within 30
days of closing. Acceptable sources are a letter from their CPA or a Certificate of Good Standing from the
Secretary of State AND a verification of business’ phone number through telephone book, internet or
directory assistance. If the borrower is a sole proprietor with self-prepared tax returns, this can be difficult
and may require more creative avenues. An Underwriter may be able to help with ideas depending on
type of business.
Written VOE’s - Employer’s business name and phone number must be verified through the phone book
or internet listing. Also, VOE’s must be fully completed including 2 years with YTD figures for base,
overtime, bonus, commission, etc. VOEs cannot not be addressed to an individual and may not be hand-
carried to the employer.
When a new loan number is required – If a borrower is removed, a Statement of Credit Denial must be
issued and a new loan number is required.

If the borrower requests adding another borrower, no new loan number is required.

If the loan type changes, i.e. from conventional to FHA: a new loan number, 1003 and disclosures will be
required. Remember MDIA requires 7 business days from application to closing.

If the loan changes at the borrower's request from a conventional fixed to a conventional ARM, no new
loan number is required.

If the loan changes because the borrower can't qualify, i.e.from an FHA fixed to an FHA ARM,
we may "Decline and Counter Offer" and not require a new loan number.

To Decline and Counter Offer you will need to input Statement of Credit Denial information into Point and
check the Additional Statement box at the bottom of the form. Type in Counter Offer made on ___ by
____ to change from fixed to ARM (or whatever) into the box and print the Statement of Credit Denial to
be sent to the borrower, keeping a copy for our file. In Relay, complete the Underwriting Denial screen

and click on ECOA Comments at the top of the Underwriting Denial page. Fill in same info from Point, i.e.
Counter Offer made on ___ by____ to change from fixed to ARM (or whatever).

If loan changes from 1004 to Property Inspection Waiver, a new loan number is required.



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