MPF Xtra PFI Notice

Transcription

1 MPF Xtra PFI Notice Date: August 19, 2014 Effective Date: Immediately Special Attention: PFI MPF Program Management and Origination Management Note: The MPF Xtra Manual and the MPF Xtra PFI Notices supplement, but do not replace, the MPF Guides. PFIs that sell under the MPF Xtra product must continue to monitor and adhere to PFI Notices and Advisories. Subjects: Refinance Mortgages and the Continuity of Obligation Cash-Out Refinance Mortgages DU Refi Plus and Refi Plus Refinances Maximum Loans per Borrower Source of Funds Sale of an Asset or Real Estate Use of the MERS Rider (Fannie Mae/Freddie Mac Form 3158) in Specified Geographic Areas Requirements for the Use of a Power of Attorney Announcing Enhancements to the following MPF Xtra Manual Chapters: Xtra Manual Underwriting Guide Chapter 3.2 Refinance Mortgage Xtra Manual Underwriting Guide Chapter Cash-Out Refinance Mortgages Xtra Manual Underwriting Guide Chapter 3.10 DU Refi Plus and Refi Plus Refinances Xtra Manual Underwriting Guide Chapter 4.3 Maximum Loans per Borrower Xtra Manual Underwriting Guide Chapter 4.7 Source of Funds Xtra Manual Underwriting Guide Chapter Sale of an Asset or Real Estate Xtra Manual Origination Guide Chapter MERS Registered Mortgages Xtra Manual Origination Guide Chapter Power of Attorney MPF Xtra PFI Notice Page - 1

2 Description of Changes: Each of the updates to the MPF Xtra Manual is described below. The affected topics are noted for each policy change. PFIs should review each topic to gain a full understanding of the policy changes. All changes are effective immediately unless otherwise noted. Refinance Mortgages and Continuity of Obligation (MPF Xtra Manual UG Chapter 3.2) The requirements regarding the continuity of obligation are updated, as well as the permissible exceptions to the continuity of obligation requirements. Continuity of obligation is now measured from the date of the original event, and the new criteria are based on how long the borrower has been on title and the current appraised value of the property. This MPF Xtra Manual chapter s contents have been updated to include references and links to Fannie Mae s guide chapters that cover Cash-Out Refinance Mortgages. Duplicative information in the MPF Xtra Manual has been removed. Cash-Out Refinance Mortgages (MPF Xtra Manual UG Chapter 3.2.2) The guidelines have been updated to provide additional flexibility and clarity, including: A borrower who inherits or is legally awarded a property (by divorce, separation, or dissolution of a domestic partnership) is exempt from the six (6) month waiting period requirements that apply to cash-out refinances. Continuity of obligation must be demonstrated unless one of the following conditions are met: The borrower was added to title 24 months or more prior to the disbursement date of the new loan; or There is no existing mortgage on the subject property as a result of the borrower either having purchased the subject property with cash or having paid off any prior mortgage for which the borrower was an obligor. The requirements for the delayed financing exception have been clarified to include: The manner in which the borrower (or a related entity) may have taken title to the property at the time of initial purchase; and The HUD-1 Settlement Statement for the refinance must reflect the pay off (or pay down) of an unsecured loan or loan secured by an asset other than the subject property that was used to acquire the property; and The current appraised value is used for the cash-out transaction. Fannie Mae s guide chapters that cover Cash-Out Refinance Mortgages. Duplicative information in the MPF Xtra Manual has been removed. DU Refi Plus and Refi Plus Refinances (MPF Xtra Manual UG Chapter 3.10) Fannie Mae s guide chapters that cover DU Refi Plus and Refi Plus Refinances. PFIs may access MPF Xtra PFI Notice Page - 2

3 the Fannie Mae Selling Guide directly by clicking these links for quicker access to the guidelines. Duplicative information in the MPF Xtra Manual has been removed. The guidelines have been updated to reflect the use of unemployment benefits in qualifying an applicant, whether the benefits are seasonal or nonseasonal. Maximum Loans per Borrower (MPF Xtra Manual UG Chapter 4.3) Fannie Mae s guide chapters that cover maximum loans to borrowers. PFIs may access the Fannie Mae Selling Guide directly by clicking these links for quicker access to the guidelines. Duplicative information in the MPF Xtra Manual on maximum loans to borrowers has been removed. The guidelines have been updated to clarify how to apply the financed property limitation when the property is owned by a limited liability company (LLC) or partnership, based on the percentage of ownership and whether the financing is in the name of the borrower, the LLC, or the partnership. Source of Funds (MPF Xtra Manual UG Chapter 4.7) The guidelines regarding large deposits have been updated to focus only on funds that are required for the transaction. Other guideline changes have been made, including the following: The large deposits policy is limited to purchase transactions; The definition of a large deposit has been changed from 25% of the total monthly qualifying income to 50%; When a deposit includes both sourced and unsourced portions, only the unsourced portion must be used in calculating whether the deposit meets the 50% definition; and When the PFI uses a reduced asset amount, net of the unsourced amount of a large deposit, that reduced amount must be used for underwriting purposes (whether the mortgage is underwritten manually or through Desktop Underwriter ). Additional changes to asset policies: If an insurance company payout is used for the down payment or closing costs, PFIs must document the borrower s receipt of the funds from the insurance company by obtaining either a copy of the check from the insurer or a copy of the payout statement issued by the insurer. However, if the cash value of the life insurance is being used for reserves, the cash value must be documented, but does not need to be liquidated and received by the borrower. The use of business assets for a self-employed borrower as an acceptable source of funds for the down payment, closing costs, and financial reserves is addressed. The borrower must be listed as an owner of the account and the account must be verified in accordance with Fannie Mae Selling Guide Chapter B The PFI must perform a business cash flow analysis to confirm that the withdrawal of funds for this transaction will not have a negative impact on the business. Sale of an Asset or Real Estate (MPF Xtra Manual UG Chapter 4.7.3) The HUD-1 Settlement Statement no longer needs to be fully executed when the borrower is relying on the sale proceeds from another property to pay for the down payment or closing costs on MPF Xtra PFI Notice Page - 3

4 the subject property. In addition, assets for the down payment from a like kind exchange, also known as a 1031 exchange, are eligible if properly documented and in compliance with Internal Revenue Code Section Additional information is included in this update to provide more detailed guidance to PFIs on the sale of real estate as a source of funds. Use of the MERS Rider (Fannie Mae/Freddie Mac Form 3158) in Specified Geographic Areas (MPF Xtra Manual OG Chapter ) (Effective with note dates on or after October 15, 2014.) For newly originated mortgages that the PFI elects to be registered with MERS, the PFI is required to modify the standard security instruments to name MERS as the nominee for the mortgagee. As a result of recent judicial decisions regarding MERS and its role as the nominee for the mortgagee, PFIs are required to use the MERS Rider (Fannie Mae/Freddie Mac Form 3158) to modify the standard security instruments in the states of Montana, Oregon, and Washington. In addition, PFIs must make changes to the standard security instrument for these three states as detailed in the instructions to the MERS Rider. The new rider and instructions are available on the Single-Family Riders & Addenda page of Fannie Mae s website at The instructions are under the Summary link for Form PFIs are reminded to adhere to all instructions given by MERS for the completion of the assignment of the mortgage per MERS requirements. Requirements for the Use of a Power of Attorney (MPF Xtra Manual OG Chapter ) The MPF Xtra Manual has been updated to clarify that an attorney-in fact may sign the security instrument and/or note for all borrowers on the transaction, conducted in a recorded online interactive session, provided the applicable requirements governing such transactions are met. Additional Revisions: MPF Xtra PFI Notice also incorporates these additional changes: MPF Xtra UG Chapter 3.1 Purchase Mortgages Added a link to the Fannie Mae Selling Guide on this topic to replace the current content MPF Xtra UG Chapter Limited Cash-Out Refinance Mortgages Added a link to the Fannie Mae Selling Guide on this topic to replace the current content. MPF Xtra UG Chapter Limited Cash-Out Refinance Flexibilities for Disaster Impacted Properties Added a link to the Fannie Mae Selling Guide on this topic to replace the current content. MPF Xtra UG Chapter Unacceptable Refinance Practices Added a link to the Fannie Mae Selling Guide on this topic to replace the current content. MPF Xtra PFI Notice Page - 4

5 MPF Xtra UG Chapter Maximum LTV and TLTV Ratios The LTV Table for loan applications dated on or after November 1, 2009 through October 19,2012 has been removed as it no longer applies. Fannie Mae Selling Guide Glossary -The definitions of the terms Retail, Broker, and Correspondent, as applicable to the MPF Xtra product have been updated to provide greater detail and clarity. The definitions have also been updated to address certain common scenarios that were not previously referenced. Refer to the Fannie Mae Selling Guide Glossary, which is located in Fannie Mae Selling Guide Chapter E-3 for the exact definitions. MPF Xtra Manual Revisions: The following MPF Xtra Manual changes can be found on the AllRegs and empf websites. Links to these sites are on and/or may be accessed directly at MPF Xtra Manual Origination Guide (OG): Chapter 24 MPF Xtra Manual Underwriting Guide (UG): Chapter 3 Chapter 4 If you have any questions, please contact your MPF Bank Representative or call the MPF Xtra Service Center at MPF Xtra PFI Notice Page - 5