Fannie Underwriting vs Freddie Underwriting

Transcription

1 Fannie Underwriting vs Freddie Underwriting 01/13/ Florida Blvd., Suite 200A Baton Rouge, LA NMLS # , GMFS LLC. All Rights Reserved. GMFS is a registered trade name of GMFS LLC., NMLS #, 7389 Florida Blvd., Suite 200A, Baton Rouge, LA Intended for GMFS clients (mortgage professionals) only. Not for consumer distribution. Not a commitment to lend. Pricing and terms are subject to change without notice. Material contained within this GMFS LLC Client Guide is intended for informational purposes only; it is not intended as professional counsel and should not be used as such. No recipients of content from this Guide should act or refrain from acting on the basis of any content included in the Guide without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient's state. GMFS LLC disclaims all liability in respect to actions taken or not taken based on any or all of the contents in this Guide. To verify GMFS LLC s state licenses, please visit: For information about GMFS LLC, please visit us at All other service marks, trademarks, and trade names are marks/names of their respective companies. 1 P a g e

2 Product Eligibility Matrix Fixed Rate Only Occupancy # of Units Purchase or LCOR Max LTV/CLTV/HCLTV Cash-out Refi Max LTV/CLTV/HCLTV DU Fannie Eligible LP Freddie Eligible DU- Fannie Eligible LP Freddie Eligible 1 Unit 97% (1) 95% 80% 80% Primary Residence 2 Unit 85% 80% 75% 75% 3-4 Unit 75% 80% 75% 75% Second Home 1 Unit 90% 85% 75% 75% Investment 1 Unit 85% 85% 75% 75% 2-4 Unit 75% 75% 70% 70% (1) Follow Fannie Mae requirements for LTV/CLTV> 95% This document is intended to help users identify some of the key differences between our conforming underwriting options. The GMFS Client Guide, Fannie or Freddie Selling Guide and any announcements holds precedent over this tools document Topic DU Fannie Eligible LP Freddie Eligible Overview Standard Fannie and GMFS Guide Program. Fannie Eligible is the only Option that allows Manual Underwrite. Appraisal Per Fannie Guidelines Allow PIW per DU Findings Auto Allowance Allows you to use the difference as either the income or liability LP Accept / Eligible Only Per Freddie Guidelines NO PIW Must count separately as income and as a liability. Must have 2 years history of receipt and expect it to continue for the next 3 years. 2 P a g e

3 Assets Stocks, Vested Stock Options, Bonds and Mutual Funds If the value of the asset is at least 20% more than the amount needed for down payment and closing costs, no documentation verifying liquidation is required. (Chapter B ) 100% of asset can be used for reserves Borrower Funds For LTV s > 80%, no minimum contribution from borrower s personal funds is required for primary residence (Chapter B ) Gifts from a relative, grants and Community Seconds ok source of funds for a 1-unit primary residence 5% borrower contribution on second homes Freddie mirrors Fannie as of 12/14/2015 (Bulletin ) Minimum of 5% of borrowers own funds must be in the transaction for second homes. For LTV s > 80% on primary residence, borrower is no longer required to contribute 5% when gifts are used from relative or EAH benefit is used as source of funds. Additionally, all of funds including reserves can come from non-occupant borrower (Section 22.16). Origination fees can come from credit card, cash advance or unsecured LOC (Section ): Max amount charged cannot exceed the greater of 2% of mortgage amount or $1,500 Verify sufficient funds available to pay charges or advance OR Include monthly payment for amount charged or advanced in monthly DTI ratios 3 P a g e

4 Condos CPM or Limited Review No Limited Review. CPM on existing condos allowed. New Condos must be approved through as Freddie eligible. Child Support Construction Fannie Guidelines Can use Appraised Value Minimum 6 months Child Support must be received after court ordered. Must be 6 FULL, consistent payments. If Requires any payments less of Appraised are partial, Value or Cost & Land. They require a Certificate of Occupancy if the appraisal is subject to Commission Income Less than 2 years may be eligible, follow Fannie Mae Guidelines Contingent Liabilities Proof the primary obligor has made consistent payments for 12 months Continuity of Obligation Allows transfer from borrower s LLC to borrower if borrower owns at least 25% of LLC Commission income received less than 2 years will not be considered as qualifying income. To exclude mortgage from DTI, need both court order and Proof title has transferred out of our Borrower s name. To exclude consumer debt from DTI, need debt note to show our borrower is only a co-borrower or guarantor on the debt. Transfer of title from a borrower-owned LLC is not allowed. 4 P a g e

5 Disputed Accounts Address if on Findings If more than 1 disputed account exists you must get a new tri-merge without disputes regardless of findings. If only 1 exists, follow findings. Financed Properties Per GMFS guidelines For Primary, follow GMFS Guidelines. If loan is Second Home or Investment. Borrower cannot OWN or be obligated on more than 4 properties total. Future Employment Must be on the job before the loan closes. Allowed for salaried borrower with non-contingent offer and acceptance letter. See GMFS announcement dated 7/8/2015. Primary Residence Purchase Money Only. Income - Passive Follow Fannie Guide Retirement income needs awards letter, proof of current receipt and 3 years continuance. If ret income is newly established proof of current receipt is no longer required.(section 37.13) Non-taxable Income: to gross up SSI, must be show nontaxable on 1040 Leasehold Must comply with Fannie Mae policy in Chapter B Must comply with Freddie Mac Guidelines in Chapter 41 5 P a g e

6 Mortgage Insurance Standard Coverage per chart below or as stated by DU. GMFS does not do the optional reduced coverage offered with a price adjustment. Fannie Guide on Financed MI Non-Arm s Length Transaction Not permitted if new construction on Second Home or Investment Standard coverage per chart below only. Can do Financed MI- but limited to Base LTV of 90% before financing and cannot do on investment. Not permitted on ANY new construction. Non-Occupying Co-Borrower Income from non-occupying co-borrower may be used to qualify income. (Chapter B2-2-04) Max LTV is 95% Income from non-occupying co-borrower may be used to qualify income If LTV is 90% or lower. Primary Conversion or Pending Sale No additional requirements apply. Follow standard rental income and financial reserve requirements when the borrower converts his or her current principal residence to an investment property. If current home is pending sale, PITI no longer has to be included in ratios if there is: Executed sales contract Confirmation that any financing contingencies have been cleared. Additional reserve and rental income requirement was removed. Standard reserve and rental income requirements still apply. (Section 37.16) Monthly PITI for pending sale can be excluded if: Executed sales contract with no unmet financing contingencies OR Executed buyout agreement as part of an employer relocation plan. 6 P a g e

7 Re-entering the workforce Follow Fannie Guide Can use income only if: o Been with current employer a minimum of 6 months. o Document previous employment prior to exiting the workforce. Revolving or Open Ended Accounts Self-Employed When calculating DTI, must use 5% of the outstanding balance of the account Self-employed income analysis is not required if using income that is not derived from selfemployment. Student Loan When calculating DTI, can use 1% of the outstanding balance of the student loan. If credit report does not indicate the required minimum monthly payment for any particular revolving or open-ended account, you may use 3% of the outstanding balance of the account. Must indicate self-employed on the loan app when 25% or more of a business is owned and deduct any losses; this is required even if selfemployment Follow Fannie income Mae is not Subordinate Financing May not Balloon in first 5 years Any HELOC subordinate lien, new or existing, will not be subject to the rule of ballooning in less than 5 years. 7 P a g e

8 Unreimbursed Business Expenses For a borrower who is qualified using base pay, bonus, overtime, or commission income less than 25% of the borrower s annual employment income: o URE are not required to be analyzed or deducted from the qualifying income or added to monthly liabilities. Useable Credit Score At least one borrower must have usable credit score. Must be primary residence No non-occupant co-borrower LTV >95% to 97% Allowed only on: o Primary Residence o At least one borrower FTHB o Purchase Only (or Limited RTR on current Fannie loan) o No manual Refer to Freddie Guidelines. If commission is used for qualification UBE must be deducted from 24 month commission average. Same as Fannie but it is not allowed if the borrower is self- employed. Not available MI Summary Fully amortizing fixed rate <=20 yr Fully amortizing fixed rate >20 yr Standard Mortgage Insurance Coverage Requirements % % % % 6% 12% 25% 35% 12% 25% 30% 35% 8 P a g e