| Topic |
NEW FHA
GUIDELINE |
BankerBroker.com |
Our Program Changes |
| Assets |
|
|
|
| Gift Funds – Documenting Transfer |
Requires
donor’s bank statement showing withdrawal of funds. |
X |
X |
| Earnest Money |
Document
source of funds if amount exceeds 1% of sales price or appears excessive
based on borrower’s savings history. |
X |
X |
| Large Deposit Definition |
Manual
underwriting and TOTAL Scorecard: For recently opened accounts and recent
individual deposits of more than 1% of the Adjusted Value (lesser of purchase
price minus inducements or the appraised value) the mortgagee must obtain
documentation of the deposits. The mortgagee must also verify that no debts
were incurred to obtain part, or all, of the minimum required investment. |
X |
X |
| Joint Funds Access |
Manual
underwriting and TOTAL Scorecard:
If the Borrower does not hold the deposit account solely, all non-Borrower
parties on the account must provide a written statement that the Borrower has
full access and use of the funds. |
X |
X |
| Retirement Accounts |
*
Most recent monthly or quarterly account statement.
* Use 60% and deduct existing loans unless there is “conclusive” evidence
that a higher percentage may be withdrawn.
* Evidence of liquidation is required if any portion is required for funds
to close. |
X |
X |
| Interested Party Credits / Costs Paid Outside Closing / Minimum
Required Investment (MRI) |
On
the HUD 1 settlement statement, the lender may apply interested party credits
to the closing costs and prepaid items including any items paid outside
closing (POC). The refund of the borrower’s POCs may be used toward the
borrower’s (MRI) if the lender documents that the POCs were paid with the
borrower’s own funds. |
|
X |
| Real Estate Tax Credits / Minimum Required Investment (MRI) |
Where
real estate taxes are paid in arrears, the seller’s real estate tax credit
may be used to meet the MRI, if the lender documents that the borrower had
sufficient assets to meet the MRI and the borrower paid closing costs at the
time of underwriting. This permits the borrower to bring a portion of their
MRI to the closing and combine that portion with the real estate tax credit
for their total MRI. |
|
X |
| Real Estate Commission – Proof of License |
When
commission income is used as funds to close through earnings or gift, lender
must document borrower or family member real estate license and entitlement
to commission from purchase. |
X |
X |
| Collateralized Loan |
A
collateralized loan is a loan that is fully secured by a financial asset of
the borrower, such as deposit accounts, certificates of deposit, investment
accounts, or real property. These assets may include stocks, bonds, and real
estate other than the property being purchased. Note: Loans against cars,
boats, or any other non-financial asset are no longer an acceptable source of
funds. |
X |
X |
| Credit |
|
|
|
| Satisfactory Credit |
A
lender may approve a borrower if:
* acceptable payment history and
* no major derogatory credit on revolving accounts in the last 12
months.
“Acceptable payment history” means:
* the borrower made all housing and installment debt payments on time for
the previous 12 months, and
* there are no more than two 30-day late mortgage or installment payments
in the last 24 months.
“Major derogatory credit” means:
* payments made more than 90 days after the due date, or
* 3 or more payments made more than 60 days after the due date |
X |
X |
| Derogatory Event Wait Period Definition |
Defines
as ‘from event date (typically BK discharge or transfer of title) to the new
loan case number assignment date’. |
X |
X |
| Non-Traditional Mortgage Credit Report (NTMCR) |
NTMCR
is not required.
For borrowers without a credit score, either:
* obtain an NTMCR, or
* develop a credit history using alternative references subject to
documentation and verification guidelines, including:
o review of public records to verify the provider’s existence,
o verification of credit information using published addresses and
telephone numbers, and
o retention of the most recent 12 months of canceled checks or equivalent
proof of payment. |
X |
X |
| Non-Traditional Mortgage Credit – Authorized User Account as
Credit Reference |
A
documented 12 month history of payments on an account where the borrower is
an authorized user is an acceptable credit reference. |
X |
X |
| Medical Collections |
Specifically
designated as obligation not considered debt and can be disregarded. |
X |
X |
| Charge Offs |
Defined
as loans or debts written off by the creditor that do not have to be included
in DTI. TOTAL Scorecard: If ‘Accept’ then no explanation needed. Manual
Underwriting: · The lender must: o determine why they exist; o document
reasons for approving the loan; and o obtain a letter of explanation from the
borrower and supporting documentation. |
X |
X |
| Documents/Processing |
|
|
|
| Age of Documents |
Existing
and new construction: 120 days |
X |
X |
| Handling of Documents |
Documents
can’t be transmitted from or though equipment of interested third parties or
unknown parties. |
X |
X |
| Application Signatures |
All
borrowers must sign both the initial and final 1003. |
X |
X |
| Borrower’s Authorization Form |
Must
obtain. |
X |
X |
| Disclosures |
Single
list of required disclosures. |
X |
X |
| CAIVRS |
VERIFIED
delinquent federal debt makes the borrower ineligible. |
X |
X |
| Federal Tax Liens |
Tax
liens may remain unpaid if the borrower has entered into a valid repayment
agreement and has made at least 3 months of timely payments. Payments may not
be prepaid. |
X |
X |
| Excluded Parties List |
Check
all parties to the transaction including processor, underwriter, appraiser
and 203(k) consultant. |
X |
X |
| Re-verification of Employment |
Required
within 10 days of loan note date. |
X |
X |
| Case Number Transfer Timeline |
Immediately
upon borrower request. |
X |
X |
| Appraisal Transfer Timeline |
Within
5 business days of borrower’s request. |
X |
X |
| Fees |
|
|
|
| Tax Service Fee |
Not
mentioned |
X |
X |
| Prepaids |
Prepaid
items include flood and hazard insurance premiums, MIPs, real estate taxes,
and per diem interest. There is no longer a 15-day interest requirement when
estimating GFE. |
X |
X |
| Per Diem Interest and Interest Credits |
Per
Diem Interest - May collect from disbursement date to the date amortization
begins.
Interest Credit – Lender may begin amortization up to 7 days prior to the
disbursement date and provide an interest credit. Per diem interest credit
may not be used to meet the borrower’s MRI.
Calculation – Per diem must be computed using 1/365th of annual rate. |
X |
X |
| Glossary Definitions |
|
|
|
| Family Member |
Family
Member is defined as follows, regardless of actual or perceived sexual
orientation, gender identity, or legal marital status:
• child, parent, or grandparent
o a child is defined as a son, stepson, daughter, or
stepdaughter
o a parent or grandparent includes a stepparent /
grandparent or a foster parent / grandparent
• spouse or domestic partner
• legally adopted son or daughter, including a child who is
placed with the borrower by an authorized agency for
legal adoption
• foster child
• brother, stepbrother
• sister, stepsister
• uncle
• aunt
• son-in-law, daughter-in-law, father-in-law, mother-in-
law, brother-in-law, or sister-in-law of the Borrower |
X |
X |
| INCOME/EMPLOYMENT |
|
|
|
| Part-Time Employment Income |
Two
years of uninterrupted part-time income is required. * Average the income
over the prior 2 years, or * Use a 12-month average of hours at the current
pay rate if the lender documents an increase in pay rate. |
X |
X |
| Self-Employed – Declining Income |
*
Income from a business with a greater than 20% decline in income over the
analysis period is not acceptable.
o If using an AUS, the lender must downgrade to manual underwriting.
* If there has been a 20% or greater decline, the income is still deemed
stable if:
o the reduction was the result of documented extenuating
circumstances,
o the income has been stable or increasing for at least 12 months,
and
o the borrower qualifies using the reduced income. |
X |
X |
| Frequent Job Changes |
If
the borrower has changed jobs more than 3 times in the prior 12 months, or
has changed lines of work, the lender must obtain: · transcripts of training
and education demonstrating qualification for the new position, or ·
employment documentation evidencing continual increases in income and/or
benefits. |
X |
X |
| Hourly Earnings Calculation |
*
If the hours do not vary, use the hourly rate.
* If the hours vary, use a two-year average.
* If the hours vary and there is a documented increase in pay rate, use a
12-month average of hours at the current pay rate. |
X |
X |
| Overtime and Bonus Income Calculation |
*
General Rule - Overtime or bonus income must have been received for the past
2 years.
* Exception – Periods between 1 and 2 years may be acceptable if
consistently earned for at least 1 year and likely to continue.
* How to calculate the income:
o Average over 2 years.
o If the income from the current year decreases by 20% or more from the
prior year, use the current year’s income. |
X |
X |
| Commission Income |
*Earned
for at least 1 year in same or similar line of work and likely to
continue.
*Calculate by subtracting unreimbursed business expenses from the
lesser of: o the average net commission earned over the past 2 years (or
however long it’s been earned) and o the average income earned over the prior
1 year. Note: 1 year history is now minimum allowed. |
X |
X |
| Voluntary Alimony or Child Support Payments |
Allowed
If using a voluntary payment agreement, the lender: *obtains 12 months
canceled checks, deposit slips, or tax returns, *if there is evidence of
receipt for the most recent 6 months, may use the current payment to
calculate income, & *if there are not 6 months of consistent payments,
may average the income received over the prior 2 years, or less if the income
has not been received that long. |
|
X |
| Rental Income on Retained Primary Residence |
*Rental
income may be counted when relocating and new residence is located at least
100 miles from previous residence AND · If no history of rental income since
the last tax filing, borrower must have 25% equity. |
X |
X |
| Non-taxable Income |
Gross
up is using greater of 15% or actual tax rate. If borrower did not file a
return use tax rate of 15%. |
X |
X |
| Pension Income Calculation |
*
Use current amount if consistent.
* Fluctuating amounts require use of 2 year (or time of receipt, if less)
average |
X |
X |
| 401K Income Calculation |
*
Use current amount if consistent.
* Fluctuating amounts require use of 2 year (or time of receipt, if less)
average |
X |
X |
| Gaps in Employment |
Manual
underwriting and TOTAL Scorecard:
Gaps of less than 6 months require no explanation. |
X |
X |
| Temporary Income Reduction |
For
borrowers with a temporary reduction of income due to a short-term disability
or similar temporary leave, lenders may consider the Borrower’s current
income as Effective Income, if it can verify and document that: * the
Borrower intends to return to work; * the Borrower has the right to return to
work; and * the Borrower qualifies for the mortgage taking into account any
reduction of income due to the circumstance. For Borrowers returning to work
before or at the time of the first Mortgage Payment due date, the mortgagee
may use the Borrower’s pre-leave income. For Borrowers returning to work
after the first Mortgage Payment due date, the mortgagee may use the
Borrower’s current income plus available surplus liquid asset Reserves, above
and beyond any required Reserves, as an income supplement up to the amount of
the Borrower’s pre-leave income. The amount of the monthly income supplement
is the total amount of surplus Reserves divided by the number of months
between the first payment due date and the Borrower’s intended date of return
to work. |
|
|
| Projected/Expected Income |
Expected
income (replaces Projected Income guideline) refers to income from
cost-of-living adjustments, performance raises, a new job, or retirement that
will be received within 60 days of closing. |
|
|
| Boarder Income |
Boarder
refers to an individual renting space inside the borrower’s dwelling unit.
Rental income from boarders is only acceptable if the borrower has a two-year
history of receiving income from boarders that is shown on the tax return and
the borrower is currently receiving boarder income.
Note: Boarder no longer has to be related to borrower |
X |
X |
| INSURANCE |
|
|
|
| Flood Insurance |
Amount
at least equal to the lesser of either:
*The outstanding balance of the mortgage, less estimated land costs;
or
* The maximum amount of the NFIP insurance available with response to the
property improvements. |
X |
X |
| LIABILITIES |
|
|
|
| Deferred Loans |
All
deferred obligations (including loans in forbearance), regardless of when
they will commence, must be included in the qualifying ratios. The lender
must obtain evidence of: *the
deferral; *the outstanding balance; * the terms of liability; and * the
anticipated monthly payment. For installment debt, the lender must use * the
actual monthly payment, or * if the actual payment is unknown
o the terms of the debt or
o 5% of the outstanding balance.
For a student loan, the lender must use * the actual monthly payment
or * if the actual monthly payment is zero or is not available then use 2% of
the outstanding balance. |
X |
X |
| Installment Debt <10 Mos Pymts |
TOTAL
Scorecard and Manual UW: May be excluded from ratios only if: * they have
remaining cumulative payments of less than or equal to 5% of the borrower’s
gross monthly income, and 8· the borrower may not pay the debts down to
achieve this percentage. |
X |
X |
| Alimony |
*
May be treated either as reduction from gross income or as a monthly
obligation.
* Obtain pay stubs covering at least 28 consecutive days to verify whether
the borrower is subject to any order of garnishment.
* Calculate the monthly obligation from the greater of:
o the amount shown on the most recent decree or agreement establishing the
obligation, or
o the monthly amount of the garnishment. |
X |
X |
| Revolving Accounts – Monthly Pymt Calculation |
*
5% of the outstanding balance or
* payment shown on credit report or statement |
X |
X |
30 Day Account
(Accounts requiring payment in full each month.) |
*
Not included in ratios if borrower has paid in full every month for past 12
months.
* If there were late payments in the last 12 months include 5% of the
balance in the ratios.
* Lender must document sufficient funds to pay off the balance and close
the loan. |
X |
X |
| Authorized User Accounts |
If
the primary account holder has made all required payments on the account for
the previous 12 months debt does not have to be included in borrower’s
ratios. If less than 3 payments have been required on the account in the
previous 12 months, the payment must be included in ratios. |
X |
X |
| MAXIMUM LOAN AMOUNT |
|
|
|
| HUD REO |
Based
on Adjusted Value (lesser of purchase price minus inducements or the
appraised value). |
X |
X |
| OCCUPANCY |
|
|
|
| Multiple FHA Loans |
Borrower
may obtain second FHA loan for new principal residence when relocating for
employment and current residence is more than 100 miles from new residence
area. |
X |
X |
| PROPERTY |
|
|
|
| Acceptable Mixed Use |
A
minimum of 51% of the entire building square footage is for residential use. |
|
|
| Inducement to Purchase – Builder-Provided Below Market Rent |
Below
market rent provided by builders who fail to meet construction completion
deadlines and provide buyers with temporary housing in other units owned is
not considered an inducement to purchase. |
|
X |
| Prior Ownership Review When Property Sold Within 12 Months |
Prior
ownership must be reviewed for undisclosed identity-of-interest transactions. |
X |
X |
| Shared Well - Feasibility |
Shared
wells allowed only when lender evidences
· Connection to public or community water system is not feasible and
· property is not located in an area where local officials have determined
public connection to be feasible. |
X |
X |
| Well and Septic Inspections |
Individual
Water Supply Systems (Wells): Lender must ensure that the water quality meets
the requirements of the health authority with jurisdiction. If there are no
local (or state) water quality standards, then water quality must meet the
standards set by the EPA.. Sewage System (Septic): Lender must confirm that a
connection is made to a public or community sewage disposal system whenever
feasible and available at a reasonable cost. If not reasonable, the existing
sewage system is acceptable provided it is functioning properly and meets the
requirements of the local health department. Note: A lender will have to
require well and septic inspections in order to comply. |
X |
X |
| REFINANCES |
|
|
|
| Rate and Term Refinance Types |
·
Rate and Term (refinance any mortgage-requires appraisal) · Simple Refinance
(refinance FHA-insured mortgage – requires appraisal) · Streamline Refinance
(no appraisal) · Streamline Refinance – Credit Qualifying (no appraisal) |
X |
X |
| Rate and Term Maximum LTV |
·
97.75% if owner-occupied for previous 12 months or owner-occupied since
acquisition if acquired within the last12 months, at case number date. · 85%
if borrower has not occupied as principal residence for <12 months prior
to case number date or if owned less than 12 months, has not occupied the
property for the entire period of ownership. · 85% for all HUD-approved
secondary residences. |
X |
X |
| Rate and Term – Short Payoffs |
Existing
note holder must write off remaining debt in short payoff scenario. |
X |
X |
| Cash-Out – Non-Occupant Co-Borrowers |
Non-occupant
co-borrower may not be used to help qualify. (Omission of second sentence is
addressed in FAQs and states that a non-occupant co-borrower may be added to
note but may not be used to qualify.) |
X |
X |
| Cash-Out LTV/CLTV |
Owned
and occupied as principal residence for 12 months* prior to case number
assignment date: 85% of appraised value *exceptions allowed for inheritance |
X |
X |
| Skipped Payments |
Payments
for all mortgages secured by the subject property must have been paid within
the month due for the month prior to mortgage disbursement. (This would allow
for a skipped payment.) |
X |
X |
| SECONDARY FINANCING |
|
|
|
| Family Member Secondary Financing – Additional Requirements |
*
Secondary financing must be disclosed at application.
* No costs from secondary financing may be financed into the new first
mortgage.
* No balloon payment within 10 yrs.
* Any payments must be level and monthly. |
|
|
| STREAMLINE REFINANCES |
|
|
|
| Streamline Refinance Net Tangible Benefit-Term Reduction |
Reduction
in term alone constitutes net tangible benefit if the new rate does not
exceed the current rate and payment (Principal + Interest + Monthly-Paid
Annual MI) does not increase by more than $50. |
|
X |
| Streamline Refinance Net Tangible Benefit - Definition |
A
reduced Combined Rate, a reduced term, and/or a change from an ARM to a fixed
rate Mortgage that results in a financial benefit to the Borrower. Combined
Rate refers to the interest rate on the Mortgage plus the Mortgage Insurance
Premium (MIP) rate. (Amount of required reduction to Combined Rate varies.
Example: Fixed to Fixed requires .5% lower Combined Rate) NOTE: It is
expected that FHA will be revising the Refinance Authorization screen in FHA
Connection to include a field containing the current MIP rate for Combined
Rate calculation and comparison. |
X |
X |
| Proof of Occupancy |
*
Lender must verify owner occupancy through utility bills or employment
documentation.
* Lender must verify second home status by obtaining proof of HOC
approval.
* All properties that cannot prove owner occupancy or second home status
must be processed as investment properties. |
X |
X |
| CLTV |
All
streamline refinances – No max CLTV |
X |
X |
| UNDERWRITING |
|
|
|
| TOTAL Scorecard Manual Downgrade Requirements |
Manual
downgrades are required when:
* Delinquent federal debt is present
* CAIVRS claim is present unless erroneous or qualifies for exception
listed below:
o Assumption-loan was current prior to the assumption
o Divorce-home and debt assigned to ex-spouse and mortgage was not in
default at the time o
Bankruptcy-mortgage was included in a bankruptcy due to extenuating
circumstances
* Borrower is named on excluded party list
* Foreclosure, short sale, or DIL within 3 years
* BK discharged within 2 years
* Late mortgage payments on purchase or r/t refi
o 3 or more > 30 days or
o 1 or more 60 days plus 1 or more 30 day
o or 1 >90 days
* Any mortgage tradeline (incl 2nd liens) has less than 6 months
history
* >$1000 in disputed derogatory accounts
* Cash-out refinance reflects
o delinquent payment in last 12 months or
o currently delinquent or
o non-occupant co-borrower is present
* AUS conditions cannot be met
* Derogatory or any other credit information has not been considered by
TOTAL (includes multiple NSF checks on bank statement)
* A borrower or co-borrower has no credit score
* Undisclosed mortgage debt is discovered
* Business Income shows a >20% decline over the analysis period |
X |
X |
| DEBT
RATIO |
|
|
|
| Manual u/w with debt ratio >43% |
**At
this time L1 is not approviing any manual underwrites >43% die to ATR/QM
restircitions |
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