Freddie Mac Relief Refinance-Open Access

Transcription

1 Freddie Mac Relief Refinance-Open Access Investor 12 - Retail Only Revisions Date Revisions Updated Section 4.5-A Overview 4.5-A Overview The Freddie Mac Relief Refinance Mortgage Open Access supports the Federal Making Home Affordable Program by helping borrowers who are making timely payments but have been unable to refinance due to declining home values. The mortgage being refinanced must be a first-lien, conventional mortgage currently owned or securitized by Freddie Mac and have a Freddie Mac Note Date on or before May 31, The new refinance transaction must have an application received date on or after December 1, 2011 and on or before December 31, Also, the loan must be approved under this program by LP, have an Accept Risk Classification, and meet the Net Benefit to Borrower requirements outlined in these guidelines. To determine if the mortgage is currently owned or securitized by Freddie Mac, the following website may be used: B Doc Type Full 4.5-C Eligible Properties Attached/Detached SFRs Attached/Detached PUDs Low-Rise/High-Rise Condos 2-4 Units Condo & PUD Warranty The project does not need to be warranted to standard Freddie Mac eligibility requirements, however the project cannot be any of the following: o Hotel/Resort o Houseboat o Timeshare o Project with fragmented or segmented ownership Standard insurance requirements apply. The underwriter must warrant that the project meets these requirements and provide this information on the Project classification must be indicated as Exempt From Review. SNMC Page 1 May 18, 2015

2 4.5-D Ineligible Properties Commercial Properties Condotels Cooperatives Log Homes Geodesic Dome Homes Geothermal Homes Manufactured Housing Mixed Use Mobile Homes Non-warrantable Condos Timeshares Working Farms, Ranches, Orchards 4.5-E Geographic Restrictions Florida Condos New and established detached site condos follow standard detached condo warranty requirements. 2-4 unit condos follow standard 2-4 unit warranty requirements. Mortgages secured by Condos in new and attached newly-converted condo projects in Florida are only eligible for Freddie Mac if the project is approved through PERS. Texas Texas (a)(6) are not eligible. The borrower may not receive ANY cash back from the transaction. Texas 2 nd Home and Investment Properties: o A signed copy of the borrower s most recently filed tax returns must be provided to evidence that the subject property has been a 2 nd or investment property for at least 12 months. It must be confirmed through the title company that the subject property is not considered the borrower s homestead and the borrower must submit an affidavit that the property is not their homestead. Closed-end variable rate subordinate secondary financing, with a payment that is not constant for each 12 month period, is NOT allowed. 4.5-F LTV/CLTV Parameters Fully Amortized Rate-Term Refinance Occupancy Units LTV CLTV Minimum FICO Max DTI Primary % Unlimited ¹ 620 ² 50% Second Home 1 300% Unlimited ¹ 620 ² 50% Investment % Unlimited ¹ 620 ² 50% ¹ Existing re-subordinate financing only. ² With LP approval SNMC Page 2 May 18, 2015

3 4.5-F LTV/CLTV Parameters Fully Amortized (cont d) Important Notes: Debt ratio not to exceed 50%. All loans with an LTV over 105% require a 2nd review and sign off from an underwriter who currently has second signature authority. LTVs over 105% should use value given on LP findings (if available and Property Inspection Waiver is received). No new appraisal is required. If an appraisal has been ordered, it must be included in the file and the value must be used regardless of whether it is lower or higher. If the value is higher, any discrepancy between the appraised value and the value from LP must be justified by the underwriter. 4.5-G Product Codes Conventional C-F15RR-12 C-F20RR-12 C-F30RR-12 High Balance Conforming C-F15HBRR-12 C-F20HBRR-12 C-F30HBRR H Loan Amount 4.5-H1 Maximum Loan Amount Conforming Loan Amounts Number of Units Continental U.S. Alaska and Hawaii 1 Unit $417,000 $625,500 2 Units $533,850 $800,775 3 Units $645,300 $967,950 4 Units $801,950 $1,000, H2 High Balance Loan Amounts Number of Units Continental US and Alaska Hawaii Permanent High Balance Permanent High Balance 1 Unit $625,500 $721,050 2 Units $800,775 $923,050 3 Units $967,950 $1,000,000 4 Units $1,000,000 $1,000,000 The above table provides the maximum loan limit by property type. For county specific loan amounts, refer to the following link: The maximum loan amount for the Relief Refinance program is $1 million, regardless of the MSA. SNMC Page 3 May 18, 2015

4 4.5-I Term Conforming 15, 20, and 30 year, fixed rate only Super Conforming 15, 20, and 30 year, fixed rate only 4.5-J Underwriting All loans must be submitted to LP and receive a Risk Classification of Accept. Manual underwriting is not permitted. All loans must be approved through LP. The LP findings must show the following: XXXXXXXX is the Freddie Mac loan number of the loan to be refinanced. LP findings must show Relief Refinance - Open Access as the offering identifier. The Relief Refinance Mortgage must result in at least one of the following benefits to the borrower: Reduction in the interest rate A more stable loan product (ARM to FIXED, interest only to fully amortized) Reduction in the amortization term Reduction in the monthly mortgage principal and interest payment The underwriter should address the benefit to the borrower on the approval. Extension of amortization period is not considered a more stable product. LP does not make the determination that the Relief Refinance transaction will benefit the borrower; the lender must determine this outside of LP. A Net Tangible Benefit form must be completed for all Relief Refinance loans. 4.5-J1Refinance Proceeds of the Loan The proceeds must be used only to: Pay off the first mortgage (amount including only the unpaid principal balance and interest accrued through the date the mortgage being refinanced is paid off). Pay related closing costs, financing costs and prepaids/escrows not to exceed $5,000. Disburse cash to the borrower not to exceed $250. In the event there are remaining proceeds from the mortgage after the proceeds are applied as described above: The mortgage amount must be reduced, or The excess amount must be applied as a principal curtailment at closing and must be clearly reflected on the HUD-1 form or other equivalent settlement statement. Under no circumstances may cash disbursed to the borrower (or any other payee) exceed $250. The proceeds may not be used to pay off or pay down any junior liens. A Maximum Loan Amount worksheet must be completed and in the file. This worksheet is available in Credit Policy, General Forms section Also, an estimated HUD is required prior to closing to verify exact closing costs to be added to the loan amount. SNMC Page 4 May 18, 2015

5 4.5-J Underwriting (cont d) 4.5-J2 Borrower Eligibility Eligible Applicants U.S. citizens Permanent resident aliens Non-permanent resident aliens InterVivos Revocable Trusts Removing Borrowers An existing borrower may be removed from the new refinance transaction provided that at least one of the original borrower(s) remaining on the loan has held title to and resided in the subject property as their primary residence. Adding Borrowers The addition of a borrower is permitted provided that at least one borrower from the mortgage being refinanced is retained. A non-occupying co-borrower may not be added to a mortgage secured by a primary residence. The existing mortgage and the new Relief Refi mortgage loan do not have to represent the same occupancy. The occupancy of the subject property may have changed by the time of the new mortgage transaction. Because the loan represents existing risk, there is no requirement that the occupancy has stayed the same. Ineligible Applicants Partnerships Corporations Non-Revocable Trusts Foreign Nationals Borrowers with Diplomatic Immunity 4.5-J3 Identity of Interest Identity of Interest transactions pose increased risk and warrant additional precautions when evaluating and prudently underwriting for that risk. In-depth analysis of transactions between parties with family or business relationships may reveal unsupported values, straw borrowers, non-arm's length or at-interest influences, inflated sales prices, or excessive fees or disbursements. Industry borrowers, whether the transaction is arm s length or non-arm s length, will only be considered for financing with full documentation, regardless of AUS findings. 4.5-J4 Credit Minimum Credit Score See Section 4.5-F for minimum credit score requirements. Valid Credit Score Regardless of AUS approval, for a credit score to be considered valid, the score must be generated based on sufficient credit depth and there must be at least 2 scores per borrower. Mortgage Payment History There may be no history of any 30 day late mortgage payments within the last 12 months. Any housing late payments in the last 24 months should be considered by the underwriter. SNMC Page 5 May 18, 2015

6 4.5-J Underwriting (cont d) 4.5-J4 Credit (cont d) Document Age The credit report must be dated no more than 60 days at the time the Note is signed. Re-established Credit After Bankruptcy In all cases, the following requirements apply A minimum of 4 traditional trade lines are required, 3 of which must have been active in the last 24 months and all accounts must be current as of the date of application. No late housing payments since the date of discharge. No more than (2) 30 day late installment or revolving payments in the last 24 months and no 60 day late payments on installment or revolving accounts since the discharge date. No new public records since the discharge date. Evidence that the borrower s credit history does not contain multiple revolving accounts with high balances to limit or high overall utilization of revolving credit. Bankruptcy and Foreclosure Seasoning Bankruptcy and Foreclosure Seasoning will be determined by LP. Deeds-in-Lieu of Foreclosure and Short Sales Extenuating Circumstances A minimum of 24 months from the execution date or completion date of the deed-in-lieu or short sale. Required Documentation In all cases, the loan must be documented with the following o A statement from the borrower regarding the circumstance and that it is not ongoing. o Supporting documentation such as a divorce decree, medical reports, etc. o Supporting documentation indicating that all debts are paid. Loan Modifications A borrower who has applied for or received a loan modification is eligible to refinance provided the requirements of chapter B24.3 of the Freddie Mac Selling Guide have been met and the borrower benefit provision must be met. The terms of the modified loan (trial or permanent) must be used for this comparison. If the borrower was previously in a trial period plan, but denied a permanent modification, the current terms of the loan must be used for this purpose. Refinances where another property (not the subject property) has a loan modification should be reviewed with caution to ensure that there was no short refinance (treated as a short sale). Disputed Accounts Loans with disputed accounts may remain open up to a maximum of $500 with a written explanation from the borrower and supporting documentation. Adverse Credit and Payoff of Adverse Credit Any outstanding judgments and/or tax liens, as well as any other derogatory items appearing in the title policy (delinquent taxes, tax liens, mechanics liens and collections) must be paid/released to the satisfaction of the title company. The borrower s own funds must be used to pay off any other liens on title. SNMC Page 6 May 18, 2015

7 4.5-J Underwriting (cont d) 4.5-J4 Credit (cont d) Collections and Charge-offs In certain cases, collection and charge-off accounts will be reflected in amounts that have no material effect on the priority of the lien; therefore, collection or charge-off accounts do not have to be paid off at or before closing if they meet the following guidelines: Occupancy and/or Property Type Max Allowable Amount to be Left Unpaid 1-4 units owner-occupied and 1 unit second $5,000 per individual or in aggregate home Investment properties $250 per individual account or $1,000 aggregate Aside from specific requirements in this Program Summary, the borrower s credit reputation will be deemed acceptable if LP returns a Risk Class of Accept. 4.5-J5 Income Documentation is required in all cases. Income must be documented according to the requirements in this section regardless of the documentation level returned by LP. Any scenarios not addressed in this section must meet Freddie Mac standard documentation requirements. Regardless of income type, the following are required for all borrowers: A signed 1003: complete with a 2 year employment history. 4506T/Tax Transcripts: For 1 or 2 years as required by AUS findings. Verbal Verification of Employment Minimum documentation requirements are below. Additional documentation may be required. Income Source Minimum Documentation Requirements Employment Income (primary or secondary) Bonus Overtime Year-to-date paystub documenting at least 30 days of income Verbal VOE must be dated at least one day prior to the note, but no more than five business days prior to Note Date Tip Automobile Allowance Commission Income Year-to-date paystub documenting at least 30 days of income, and Complete signed individual federal tax returns covering the most recent one year period Verbal VOE must be dated at least one day prior to the note, but no more than five business days prior to Note Date Mortgage Differential Provide a copy of the agreement from the employer stating the amount of the payments Military Income Year-to-date Leave and Earnings Statement (LES) documenting at least 30 days of income Verbal VOE must be dated at least one day prior to the note, but no more than five business days prior to Note Date SNMC Page 7 May 18, 2015

8 4.5-J Underwriting (cont d) 4.5-J5 Income (cont d) Minimum documentation requirements are below. Additional documentation may be required. Seasonal Employment Year-to-date paystub documenting at least 30 days of income & Unemployment Verbal VOE must be dated at least one day prior to the note, but no more than five business days prior to Note Date, or Evidence of current receipt and amount of unemployment compensation and evidence that it is associated with seasonal employment. Temporary Leave Use the gross monthly income that was received prior to temporary leave provided the following documentation is provided: A paystub documenting pre-leave income, and A written statement signed by the borrower confirming the borrower s intent to return to current employer Self-employed (primary or secondary) Notes Receivable Dividends & Interest Capital Gains Royalty payments Trust Income Retirement Income Survivor & Dependent benefits Long-term disability Social Security SSI Section 8 payments Public Assistance Foster Care Alimony Separate Maintenance Child Support The can be no indication or information from the borrower s employer indicating that the borrower does not have the right to return to work after the leave period. Complete signed individual federal tax returns covering the most recent one year period Verification of the existence of the business through a third party source no more than 30 calendar days prior to the Note Date Copy of the note Most recent one month bank statement or other equivalent documentation evidencing receipt of the income Copy of complete signed individual federal income tax returns for the most recent one-year period Evidence of sufficient assets to support the qualifying income for dividend/interest income and capital gains Copy of the Trust Agreement A copy of the award letter, 1099 or other third-party documentation showing income type, source, amount, and Most recent one month bank statement or other equivalent documentation evidencing receipt of the income Copy of the signed court order and evidence of receipt of the total court ordered amount for the most recent one month SNMC Page 8 May 18, 2015

9 4.5-J Underwriting (cont d) 4.5-J5 Income (cont d) Minimum documentation requirements are below. Additional documentation may be required. Housing Allowance A written VOE, a letter from the employer or paystubs reflecting the amount of the housing allowance and the terms under which it is paid, and Evidence of one month receipt of the housing allowance Tax Exempt Income The most recent complete signed individual tax returns or other documentation evidencing that the income, or a portion of the income, is nontaxable. Only the nontaxable portion of income may be grossed up. Rental Income Executed lease agreement or the most recent complete individual Federal tax return. ALL rental properties must have a market rent shown on the 1008 to satisfy delivery requirements even if rental income is not being used to qualify Mortgage Credit Certificate A copy of the MCC (MCC) Assets as the Basis for Mortgage Qualification Document the assets per the requirements in the Freddie Mac Seller Servicer Guide Section 37.22(a) 4.5-J6 Assets/Reserves Asset and reserves are to be documented according to Loan Prospector findings. Regardless of LP findings, the most recent monthly or quarterly account statement is required to document the assets listed in LP. 4.5-J7 Occupancy Owner-occupied Primary Residence, Second Homes and Investment Properties. The new refinance transaction is not required to represent the same occupancy as the existing loan. Example: It is acceptable if the existing loan was an owner occupied transaction but the subject transaction is now a second home or non-owner. 4.5-J8 Maximum Financed Properties There is no limit to the number of financed properties. Mortgages secured by investment properties and second homes are not subject to the requirements related to the number of financed properties in the Freddie Mac Guide Sections and J9 Properties Listed for Sale Properties must not be listed for sale and they must not have been listed at the time of application. The borrower must sign an affidavit confirming that the property was not listed at the time of application. 4.5-J10 Subordinate Financing New subordinate financing is not allowed. Re-subordination of eligible existing subordinate financing is allowed. SNMC Page 9 May 18, 2015

10 4.5-J Underwriting (cont d) 4.5-J11 Higher Priced Loan Requirements Because LP is unable to determine if a Relief Refi loan is either a higher-priced mortgage loan or a higherpriced covered transaction under Regulation Z, the lender must make this determination. If the lender does determine that the loan is either a higher-priced mortgage loan or a higher-priced covered transaction, the loan must have a representative credit score of 620 or more and a debt-to-income ratio of 45% or less in order to be eligible. 4.5-K Appraisal/Property Freddie Relief Refinances run through Loan Prospector on or after January 14, 2014 will no longer return an HVE value nor a Property Inspection Waiver. A full appraisal will be required. The appraisal requirement will be determined by LP. One full appraisal is required unless LP provides acceptable Home Value Explorer (HVE) findings. Whether a full appraisal or acceptable HVE results are used to determine value, both must be dated within 120 days of the Note. The original HVE point value estimate is valid through the original LP Assessment Expiration Date. Acceptable HVE Results For 1-2 Unit properties only (attached or detached), including condos and PUDs A Forecast Standard Deviation (FSD) no greater than 0.20 A Confidence Score of M (medium) or H (high) In LP, the data input field for Appraised Value of the Property must match the HVE Value. This generally means LP must be updated and re-run after an initial LP submission returns acceptable HVE findings. The initial LP submission is submitted with the property value input in the Estimated Value of Property field in LP. If acceptable HVE findings are returned, LP must be immediately re-run with the HVE value now entered in the Appraised Value of the Property field in LP and having been removed from the Estimated Value field. Verify acceptable HVE findings are again returned and the HVE value matches the Appraised Value of the Property. The HVE value is valid for up to 120 days but never beyond the original LP Assessment Expiration Date as printed at the top of the LP Findings. NOTE: Subsequent LP submissions may return a different HVE value. Value must be updated in LP and LP re-run. HVE Is Not Eligible When the property has been subject to a possible natural disaster in the previous 120 days or when the underwriter has reason to believe fieldwork is warranted based on additional information obtained about the value, condition, or marketability of the property. Condition and Quality Rating A condition rating of C4 or better is required A quality rating of Q4 or better is required SNMC Page 10 May 18, 2015

11 4.5-L Mortgage Insurance LP will provide feedback for whether mortgage insurance is or is not required. No Mortgage Insurance The LP cert will provide information relating to any outstanding mortgage insurance on the existing loan. If there is no MI information returned in the feedback, the underwriter proceeds assuming there is no MI present on the existing file. Cancelled Mortgage Insurance If the LP feedback indicates there is existing MI, the borrower states that the MI has been cancelled, a statement from either the current servicer or the Mortgage Insurance company is required. The statement must clearly identify that the MI was cancelled due to the LTRV dropping below threshold. MI can be cancelled for various reasons, including non-payment reasons. The underwriter should handwrite a note on the cert in the Mortgage Insurance section that the MI has been cancelled and to refer to additional documentation in the loan file. When Mortgage Insurance is Required LP will provide the level of mortgage insurance coverage currently in force. This amount of coverage is the minimum amount of coverage required for the refinance transaction. If the mortgage insurance is from an approved MI Company, the existing MI policy must be transferred to SNMC subject to the mortgage insurance company s approval and the guidelines below. SNMC Approved Mortgage Insurance Companies for Relief Refinance The Mortgage Insurance companies that have been approved for modified/transferred Mortgage Insurance in accordance with HARP guidance are as follows: Genworth MGIC PMI Radian RMIC United Guaranty Eligible Mortgage Insurance Types Borrower Paid Monthly MI Single Premium Borrower Paid MI Single Premium Lender Paid MI Ineligible Mortgage Insurance Types Financed MI Lender Paid Monthly MI It is up to the mortgage insurance company to approve the transfer of MI. Each mortgage insurance company has a different process for handling transferred MI. Please refer to HARP MI-to-MI Procedures document for specific requirements. The MI company needs to be notified within 30 days of the HARP loan closing date for the MI to be modified and coverage to remain in effect. It is imperative that loans contain evidence of the MI transfer being activated prior to purchase. SNMC Page 11 May 18, 2015

12 4.5-M Temporary Buydowns Not allowed. 4.5-N Impound Accounts Escrow waivers are not permitted on LTV s over 80%. California properties may waive escrows up to 90% LTV. 4.5-O Assumability Not assumable. 4.5-P Prepayment Penalty Not allowed. 4.5-Q Repair Escrows Not allowed. SNMC Page 12 May 18, 2015