Multiple (5-10) Financed Properties Retail and Wholesale

Transcription

1 Multiple (5-10) Financed Properties Retail and Wholesale Revisions Date Revisions 2/3/15 Updated Sections: Overview, Subject Property is Second Home or Investment Property, Delayed Financing Exception, and Reserve Requirements. 6/26/15 Added Product Codes Overview Many of our investors allow only four financed properties if purchasing or refinancing a second home or investment property. FNMA (FNMA direct) will allow up to 10 financed properties. The loan must be run through DU and obtain a DU approve/eligible. DU is unable to determine the number of financed properties the borrower owns or is obligated on, but does issue messages on second home and investment property transactions reminding lenders that the following eligibility requirements will have to be manually applied in regards to multiple financed properties. Any loan that falls under the Multiple Financed Properties (5-10) option must be locked with FNMA. As with any investor specific program, the loan must be priced and underwritten according to all FNMA underwriting guidelines. Product Codes C-F30MF Yr. Fixed C-F15MF Yr. Fixed Maximum Financed Properties Subject Property is Primary Residence When purchasing or refinancing a primary residence, there is no limitation on the number of financed properties. Subject Property is Second Home or Investment Property When purchasing or refinancing a second home or investment property, the borrower may own or be obligated on up to four financed properties (including the primary residence) unless the expanded eligibility criteria defined below is met. If the expanded criteria are met, then the borrower may own or be obligated on up to 10 financed properties (including primary residence). Exception: HomeStyle Renovation mortgage loans are subject to the one-to-four financed property limitations (that is, the five-to-ten financed property limitation is not applicable). **SNMC does not currently offer the HomeStyle Renovation mortgage loan. SNMC Page 1 June 26, 2015

2 Maximum Financed Properties (cont d) The financed property limit applies to the borrower s ownership of one-to-four unit financed properties or mortgage obligations on such properties and is cumulative for all borrowers. These limitations apply to the total number of properties financed and not to the number of mortgages on the property or the number of mortgages sold to FNMA. General Requirements for Expanded Multiple Financed Properties Borrowers listed on the loan application may not be affiliated with the builder, developer, or seller of the property. When a borrower is refinancing multiple investment properties at the same time, they must meet the total liquid financial reserve requirement for each mortgage. Expanded Eligibility for Multiple Financed Properties Multiple financed properties expanded eligibility is applicable to Conforming products only (excluding DU Refi Plus). Loans must be scored through DU. Loans scored through L.P. or manually underwritten are not allowed. When purchasing or refinancing a Second Home or Investment property, the borrower may own or be obligated on up to 10 financed properties (including primary) provided borrower meets the following: Cash out refinance transactions not permitted unless Delayed Financing guidelines are met (see section below). Follow FNMA guidelines for derogatory credit. Rental income on the subject investment property must be fully documented in accordance with Fannie Mae guidelines. Rental income from other properties owned by the borrower must be supported by one or two years' tax returns and 4506-T transcripts as required by DU. If rental income has not yet been reported on tax returns because the properties were acquired subsequent to the last tax filing, leases may be used to document rental income. The borrower(s) must complete and sign Form 4506-T and the transcript(s) must be obtained from the IRS to validate the accuracy of the tax returns provided by the borrower(s). The borrower(s) must have reserves for the subject property and for other properties currently owned by the borrower(s) (i.e. - other financed Second Homes and Investment Properties) in accordance with the reserves requirements outlined below. SNMC Page 2 June 26, 2015

3 Expanded Eligibility for Multiple Financed Properties (cont d) Eligibility Requirements Transaction Type Number of Units Max LTV/CLTV/HCLTV Second Home or Investment Property Purchase 1 Unit Loans subject to general loan limits: Limited Cash-Out Refinance Fixed Rate 75% ARM 65% Loans subject to high balance limits: Fixed Rate and ARM 65% Minimum Credit Score Cash-Out Refinance (not allowed unless it s within 6 months of purchase and all delayed financing exception requirements are met) Purchase Limited Cash-Out Refinance Cash-Out Refinance (not allowed unless it s within 6 months of purchase and all delayed financing exception requirements are met) 1 Unit Loans subject to general loan limits: Fixed Rate 70% Investment Property 2-4 Units Loans subject to general loan limits: Fixed Rate 70% Loans subject to high balance limits: Fixed Rate 65% 2-4 Units Loans subject to general loan limits: Fixed Rate 65% Delayed Financing Exception Investor and second home borrowers with five to ten financed properties are ineligible for cash-out refinance transaction. However, borrowers who purchased the subject property within the past six months (measured from the date on which the property was purchased to the disbursement date of the new mortgage loan) are eligible for a cash-out refinance if all of the following requirements are met: The original purchase transaction was an arms-length transaction. For this refinance transaction, the borrower(s) must meet FNMA s borrower eligibility requirements as described in B2-2-01, General Borrower Eligibility Requirements, of the Fannie Mae Selling Guide. The borrower(s) may have initially purchased the property as one of the following: o a natural person; o an eligible inter vivos revocable trust, when the borrower is both the individual establishing the trust and the beneficiary of the trust; o an eligible land trust when the borrower is the beneficiary of the land trust; or o an LLC or partnership in which the borrower(s) have an individual or joint ownership of 100%. SNMC Page 3 June 26, 2015

4 Delayed Financing Exception (cont d) The original purchase transaction is documented by a HUD-1 Settlement Statement, which confirms that no mortgage financing was used to obtain the subject property. (A recorded trustee's deed [or similar alternative] confirming the amount paid by the grantee to trustee may be substituted for a HUD-1 if a HUD-1 was not provided to the purchaser at time of sale.) The preliminary title search or report must confirm that there are no existing liens on the subject property. The sources of funds for the purchase transaction are documented (such as bank statements, personal loan documents, or a HELOC on another property). If the source of funds used to acquire the property was an unsecured loan or a loan secured by an asset other than the subject property (such as a HELOC secured by another property), the HUD-1 for the refinance transaction must reflect that all cash-out proceeds be used to pay down, if applicable, the loan (unsecured or secured by an asset other than the subject property) used to purchase the property. Any payments on the balance remaining from the original loan must be included in the debt-to-income ratio calculation for the refinance transaction. Note: Funds received as gifts and used to purchase the property may not be reimbursed with proceeds of the new mortgage loan. The new loan amount can be no more than the actual documented amount of the borrower's initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to the maximum LTV/CLTV/HCLTV ratios for the cash-out transaction based on the current appraised value). All other cash-out refinance eligibility requirements are met and cash-out pricing is applied. All refinance transactions must meet Continuity of Obligation requirements. Loans must be run through DU and receive approve/eligible findings. Loans run through LP are not eligible. Reserve Requirements DU is unable to determine the exact number of financed properties the borrower owns, and as a result, the lender must manually apply the reserve requirements to DU investment property and second home transactions as applicable. A reserves worksheet must be completed, which can be found in General Forms Section The reserves calculation for a financed property is based on the monthly housing expense of the financed property. All reserve requirements are based on the definition of reserves as defined below. Reserves should include all components of the monthly housing expense (PITIA), including: principal and interest, hazard, flood, and mortgage insurance premiums (as applicable), real estate taxes, ground rent, special assessments, any owners association dues (excluding any utility charges that apply to the individual unit), any monthly cooperative corporation fee (less the pro rata share of the master utility charges for servicing individual units that is attributable to the borrower s unit), and any subordinate financing payments on mortgages secured by the subject property. SNMC Page 4 June 26, 2015

5 Reserve Requirements (cont d) 1-4 financed properties (including subject property) required reserves: If the subject property is a Second Home follow DU findings for minimum reserves required on subject property. If the subject property is an Investment Property follow DU findings for minimum reserves required on subject property. An additional 2 months of reserves is required on each other financed Second Home or Investment Property Specific scenario or product guidelines may require additional reserves 5-10 financed properties (including subject property) required reserves: If the subject property is a Second Home follow DU findings for minimum reserves required on subject property. If the subject is an Investment property follow DU findings for minimum reserves required on subject property. An additional 6 months of reserves is required on each other financed Second Home or Investment Property. SNMC Page 5 June 26, 2015