introduction to fannie mae homeready product mix … · introduction to fannie mae homeready...
TRANSCRIPT
Title goes here
Introduction to
Fannie Mae
HomeReady
Product Mix
Credit Policy 12/14/2015 1
Bookmarks/ Favorites
Once you receive a copy of this presentation, you will want to bookmark and/or save the following links to your Favorites or create shortcuts to your desktop as these links include important materials you will use regularly for HomeReady:
• Fairway’s HomeReady Site on the intranet – Product Matrix
– Resource Library
– FNMA Form 1019- Non-Borrower Household Income Worksheet & Certification
• Fannie Mae’s HomeReady Site
• Census Tract Search Site
• Income Limits Report
• FrameWork Coupons Site
• FrameWork Homeownership Education site
• Fannie Mae’s HOME mobile app
TIP Don’t forget to add these links in your Encompass setups as well!
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What is HomeReady?
HomeReady is a Fannie Mae lending program designed for creditworthy, low- to moderate-income borrowers, with expanded eligibility for financing homes in designated low-income, minority, and Disaster-impacted communities.
HomeReady is available as a
Fannie Mae Direct product in
Optimal Blue for pricing and
rate locks effective beginning on
Monday, December 14th.
BIG PICK-UP Fairway will be allowing no fico non-traditional credit for those borrowers who lack traditional credit history!!
Product Features
• DU will automatically identify potentially eligible loans.
• Underwriting flexibilities include:
• Offers an innovative new feature that supports extended
family households: will consider income from a non-
borrower household member as a compensating factor in
DU to allow for a debt-to-income (DTI) ratio >45% to 50%.
• Allows non-occupant borrowers, such as a parent.
• Permits rental income from an accessory dwelling unit
(such as a basement apartment).
• Allows boarder income (updated guidelines provide
documentation flexibility).
• Financing up to 97% LTV (DU is required for LTVs
>95%).
• Borrower is not required to be a first-time buyer; purchase
of one-unit principal residence (limited cash-out refi up to
95%).
• Lower MI coverage requirement than standard (25% for
LTVs >90% to 97%).
• Allows for nontraditional credit.
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There will be a slight delay to our ability
to offer the no score non-traditional
underwriting feature of the HomeReady
product due to an issue with Optimal
Blue that is being worked on.
We will advise as soon as this option is
available and ready!
VERY IMPORTANT!
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2 Important Aspects
There are 2 very important requirements &
restrictions for this program that you MUST
address up front on day one:
1. Income Limits.
2. Homeownership education requirement
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Income Eligibility
The chart below gives an idea of what percentage
of income tracts are technically eligible for
HomeReady.
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2 ways to determine income eligibility for the subject property area:
1. Run the loan through DU. At least 1 borrower must have a qualifying credit score. The following screens/fields in Encompass must be completed prior to running DU so DU can determine HomeReady eligibility: FNMA Streamlined 1003 screen
DU findings will message to state whether the entered income is within the area limit.
Income Limits- 2 ways
to determine
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DU Eligibility
Note: We are in the process of verifying with Fannie Mae exactly WHERE this FIPS Code is supposed to be entered because they have no provided this information!
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2. Manually Determine the income limits for the area.
• Go to
http://factfinder.census.gov/faces/nav/jsf/pages/searchre
sults.xhtml?ref=addr&refresh=t#none
• Enter the subject property address to generate a report
that will include the census tract number needed to
determine actual income limits.
Example:
Income Limits
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Income Limits
A report of census info is generated which includes the census tract number.
Next, refer to Fannie Mae’s excel spreadsheet report that provides income limits by state, county and tract number.
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In this case, based on the subject property address, the
maximum annual income limit for the transaction is $66,080.
Find the census tract income limit by referring to
Income Eligibility by Census Tract Lookup.
Search by state, then country, then by census
tract number. Refer to last column for income
limit.
Income Limits
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Homeownership Education
is REQUIRED
At least one borrower on the loan must provide a certification of completion prior to the note date on all loan types. (purchase and LCOR).
• Available online through Framework
• $75 fee must be paid by borrower credit card when registering OR originator can purchase Framework coupons for your borrowers! There are various coupon rates you can purchase and then simply provide the coupon to your borrower! The borrower can enter the coupon code when they register for the Framework course.
• You can credit them $75 credit toward closing costs to offset their out-of-pocket expense.
• Approximately 4 hours total investment needed
• Borrower must pass a final test with a score of at least 80%
• Borrower can download completion certificate upon completion and we must save in our file
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If borrower lacks access to internet and/or credit card, borrower may contact Framework Support Center 1-855-659-2267 for referral to a HUD-approved counseling agency in their area.
Borrower can also choose a HUD-approved counselor of their choice. http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm
The counseling agency must provide a certificate of completion, and the lender must retain a copy of the certificate in the loan file
Note: In rural areas, there may be lack of local counseling agencies. You may need to offer to assist the borrower by allowing them use of a PC in your office so they can complete the online course!
Refer to FAQs re: Homeownership Education Counseling for more information on Framework
Homeownership Education
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Homeownership Education
Has your borrower already complete a
HUD-approved homeownership education course?
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Landlord Education is
REQUIRED for 2-4 Units
When the subject property is a 2-4 unit, certificate of completion of Landlord education required in addition to certificate of completion of homeownership education.
Landlord education is not available through Framework.
Resources for Fannie Mae Accepted Landlord Education:
• Genworth
– Register a borrower for Landlord Education
– Landlord Education Guide (Fannie Mae’s Guide)
• MGIC: https://homebuyers.mgic.com/landlord/becoming-a-landlord.html
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Product
Standards
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Amortization Terms, Areas
Standard Loan Limits: 30, 20, 15, 10 year fixed
High Balance Loan Limits: 30 year fixed.
Geographic Eligibility & Restrictions: • Eligible: All states except West Virginia.
• Ineligible: West Virginia, U.S. territories such as Guam, Puerto
Rico, U.S. Virgin Islands
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Ineligible Characteristics
• Adjustable Rate Mortgages (ARMS) (check
investor-specific options)
• Assumptions
• Borrowers with traditional credit scores under 620
• Boarder Income for 2-4 unit property
• Buydowns
• Cash on Hand
• Community Land Trusts (check investor-specific
options)
• Community 2nds (check investor-specific options)
• Construction financing
• Construction to Permanent Mortgage Program
• Concurrent Short Sales
• Cooperative Properties
• Deed restricted properties (check investor-
specific options)
• Down-Payment Assistance / Community
Seconds (check investor-specific options)
• DU bankruptcy with extenuating circumstances
• EEM - Energy Efficient Mortgage
• Gifts, Grants from Non-profit Organizations
(check investor-specific options)
• High balance manual underwriting
• High Cost (Section 32) Loans
• HomeStyle Renovation
• Investment Occupancy
• Manufactured Housing
• Military Impact Area Loans
• Minimum MI Coverage with LLPA
• New Secondary Financing
• Resale Restrictions (check investor-specific
options)
• Restructured Mortgage Payoff
• Second Home Occupancy
• Supplemented credit for borrowers with
traditional credit scores under 620- Special
Feature Code 818
• Sweat Equity
• Temporary Buydowns
• Texas 50 (a)(6)
• Unexpired foreclosure redemption
The following characteristics are not/will not be eligible under our Fannie Mae HomeReady product :
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Loan Amounts/Loan Limits
Minimum: No minimum required.
Maximum:
• DU Approve/Eligible to 97%
• Conforming manual underwriting to 95%
• High balance requires DU Approve/Eligible up to LTV to 95% .
• High balance loan amounts are not eligible for manual
underwriting.
• See charts on the following pages for more specifics. 19
DU Approve/Eligible
Loan Purpose Number
of Units
Maximum
LTV Maximum DTI
Minimum
Credit Score Minimum
Reserves
Purchase 1 97% 45 620 per DU
Limited Cash-
Out Refinance
1 95% 45 620 per DU
Purchase or
Limited Cash-
Out Refinance
2 units 85% 45 640 per DU
3-4 units 75% 45 640 per DU
• Loans are eligible for DU if at least one borrower has traditional credit and contributes more than 50% of
qualifying income.
• Minimum Credit Score for borrowers with scoring = 620
• Non-occupant borrowers permitted to maximum 95% LTV w/ Approve/Eligible.
• DU will apply a maximum allowable DTI of 45%, with flexibilities offered up to 50% DTI with non-borrower
household income.
• Accessory unit income is eligible when meets guidelines. (on 1 unit property only)
• Boarder income is eligible when meets guidelines- up to 30% of total income. (on 1 unit property only).
DU Approve/Eligible Loan
Purpose, LTV/CLTV &
Minimum Score Requirements
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DU Refer/Manual Underwrite Loan
Purpose, LTV/CLTV & Minimum
Score Requirements
DU Refer/Manual Underwriting
Loan Purpose Number of
Units
Maximum
LTV Maximum DTI
Minimum Credit
Score
Minimum
Reserves
Purchase
&
Limited
Cash Out
Refinance
No score.
Non-Traditional Credit.
1
95%
Up to 36%
680 if >75% LTV 0
660 if >75% LTV 6
620 up to 75% LTV 0
Up to 45%
700 if >75% LTV 0
680 if >75% LTV 2
640 up to 75% LTV 0
620 up to 75% LTV 2
2 units
85%
Up to 36% 680 if > 75% LTV 6
640 up to 75% LTV 6
Up to 45%
700 if > 75% LTV 6
680 if > 75% LTV 12
660 up to 75% LTV 6
640 up to 75% LTV 12
3-4 units
75%
Up to 36% 660 up to 75% LTV 6
Up to 45% 680 up to 75% LTV 6
660 up to 75% LTV 12
Accessory unit income is eligible when meets guidelines. (on 1 unit property only)
Boarder income is eligible when meets guidelines. Up to 30% of total income. (on 1 unit property only)
Non-borrower household income is NOT eligible for manual underwriting as a compensating factor. (DU Approve/Eligible only)
Non-occupant co-borrower income is eligible to 90% LTV and occupant borrower must have a DTI ratio no higher than 43%.
Up to 30% of qualifying income may come from a borrower for which no traditional or nontraditional credit profile can be
established.
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Occupancy
Eligible: Primary Residence ONLY
Ineligible: Second home, investment.
Occupant borrower(s) may not have an ownership interest in any other
residential property at the time of closing.
Non-occupant co-borrowers are not restricted to number of property
interests
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Private Mortgage
Insurance
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Private Mortgage
Insurance
Company Tips References
Essent • Essent will not manually underwrite HomeReady loans
• Will follow Agency guidelines for DU Approve/Eligible
Essent hasn’t
posted HR
specific guides
Genworth • No score is acceptable under nontraditional credit guidelines (5.4)
• Nontraditional parameters (5.7): Primary residence only, purchases only (refinances on a case-by
case basis), 1-unit with a maximum 95% LTV/CLTV only and max 41% DTI.
• Scores begin at 620 for manual underwriting (traditional credit), at least 1 borrower must score.
Specific overlays to minimum tradelines and delinquency.
• Minimum 2 months PITI, regardless of agency requirements.
• Rate Cards
• UW Guide
MGIC • MGIC will not manually underwrite HomeReady loans Therefore no score and nontraditional credit is
not permitted.
• Scores 660+ with Approve/Eligible only, at least one borrower must score.
• Minimum 2 months PITI, regardless of agency requirements.
• Rate Cards
• UW Guide
Radian • Manual underwriting and no score permitted.
• Minimum score 620 for DU Approve/Eligible.
• Minimum 2 months PITI, regardless of agency requirements. (Except R/T Refi w/payment reduction).
• Minimum score TBD for manual underwriting. Specific overlays to minimum tradelines and
delinquency.
Radian hasn’t
posted HR
specific guides
United
Guaranty
• No scores are ineligible. Non-traditional credit is ineligible.
• Scores 620+ manual underwriting (traditional credit), 3 scores required.
• Minimum 2 months PITI, regardless of agency requirements on manual underwrite.
UG hasn’t posted
HR specific
guides
Helpful table to assist with MI options.
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Assets,
Downpayment,
Funds to Close,
Reserves
25
Assets, Downpayment, Funds to Close, Reserves
Minimum Borrower Contribution Requirements:
LTVS >80%:
• 1 Unit: $0 Own Funds
• 2-4 Unit: 3% Own Funds.
LTVs <=80%: No minimum contribution required from own funds.
Interested Party Contributions (standard IPCs):
Occupancy Type LTV/CLTV Ratio Max IPC
Principal residence or second home
Greater than 90% 3% 75.01% - 90% 6% 75% or less 9%
Investment Property All CLTV ratios 2%
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AUS
&
Underwriting
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Underwriting
Eligibility At least one borrower on the loan must have a qualifying fico score of at least 620 and must contribute more than 50% of total qualifying income.
DU Approve/Eligible 9.3 is REQUIRED for:
• 95.01-97% LTV
• High balance loan amounts
• Loans needing non-borrower household income as a compensating factor for approval of DTI 45.01-50%.
DU will message if the loan is eligible as a HomeReady mortgage but has not been run as a HomeReady mortgage.
If DU determines the income is above the area limit, findings will ready ineligible.
Manual Underwriting is permitted for:
• DU Refer/Eligible when the ONLY reason for the Refer is the result of documented/proven inaccurate credit that cannot be cleared up/resolved prior to closing.
• Also refer to the following scenarios.
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Underwriting
Eligibility
29
Underwriting
Eligibility
30
Underwriting
Eligibility
31
Underwriting
Eligibility
32
Underwriting
Eligibility
33
Special Feature
Codes
• All HomeReady loans require SPC 900
• SFC 818 must be used to identify loans with
supplemented thin files (for manually underwritten loans
only). Fairway not offering this option.
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Borrowers
&
Participants
35
36
HomeReady Non-Occupant
Borrowers
Non-Occupant Borrowers
Maximum Allowed LTV DU Approve/Eligible: 95%
DU Refer/Manual Underwriting: 90%
Income Non-occupant co-borrower income must be counted in both
the DTI qualifying income as well as the income limits income.
DTI DU Approve/Eligible: The DTI ratio is calculated using the
income and liabilities of all borrowers; there is no separate DTI
ratio requirement for the occupant borrower.
DU Refer/Manual Underwriting: The occupant borrower
must have a DTI ratio no higher than 43%, based solely on
their own qualifying income and liabilities.
See FNMA’s HomeReady Non-Occupant Co-Borrower Flyer for examples.
Note- Non-occupant borrowers do not have to be relatives on HomeReady!
37
Credit
Requirements
38
Credit Score Requirements
Refer to slides #16 & #17 for the consolidated charts indicating score requirements based on whether DU Approve/Eligible or Manual Underwrite.
No Score/Non-Traditional Credit Manual Underwrite: No scores required. Borrowers must meet non-traditional credit requirements.
Please note: Fairway is not allowing/accepting supplemented credit history from borrowers with sub-620 scores as is offered by HomeReady. SPC #818
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VERY IMPORTANT!!!
**IMPORTANT** Pricing for No-Score Borrowers: Depending upon the credit vendor you use to request credit reports, differing data will be imported in the fico score fields in the Borrower Summary Screen in Encompass when a credit report is returned with no credit scores reflected.
You will need to manually change the fico score fields and save the file changes prior to requesting pricing from Optimal Blue or you will not receive valid pricing for a no score/non-traditional credit/manual underwrite borrower.
• There must be a single “0” in each of the fico score fields in order to default a single “0” in the Credit Score for Decision Making field:
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Credit Received With No
Scores
EXAMPLE CBC Test borrower in Encompass:
Lucky Knowscore
999-42-2345
2121 13th Ave.
Las Vegas, NV 89109
Once credit is received back, be sure to import even if no liabilities in order for the reference number and fico score fields to import.
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Non-Traditional Credit
Requirements For HomeReady mortgage loans, Fannie Mae permits flexibility by requiring a
minimum of three rather than four sources of nontraditional credit that have been
active for at least 12 months.
Non-Traditional Source
Requirements
Payment History Requirements
REQUIRED- at least one housing related; i.e.,
rental housing payments.
No history of delinquency on rental housing
payments within the past 24 months (or since
inception, if less than 24 months).
REQUIRED- At least one utility company Only one account may have had a 30-day
delinquency in the past 12 months.
REQUIRED- Remaining source(s) may
represent any reasonable service or purchase
(e.g., auto insurance, medical insurance, school
tuition, daycare, gym, life insurance, etc.) as
long as the repayment terms are in writing, and
the borrower can provide canceled checks or
money order receipts that show the creditor as
the payee to document the payments.
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No Score Borrowers- Credit
History Requirements
• No collections or judgments (other than medical collections) filed within the past 24 months. – Any/all judgments must be satisfied. Collection accounts (including
medical) in excess of $250 per individual account or $1,000 in the aggregate must be paid in full.
• If a borrower with no credit score has a prior bankruptcy or foreclosure in his or her credit history, he or she must have re-established credit that satisfies standard requirements of Selling Guide section B3-5.3-07, Significant Derogatory Credit Events – Waiting Periods and Re-establishing Credit.
• If one or more HomeReady borrowers is underwritten with nontraditional credit, the mortgage loan must also meet the requirements in Selling Guide section B3-5.1-01, General Requirements for Credit Scores.
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How to add non-traditional tradelines to the credit report.
• CBC- How to Request Non-Traditional Tradelines
• CIS- How to Request Non-Traditional Tradelines
• Credit Plus – How to Request Non-Traditional Tradelines
• Factual Data - How to Request Non-Traditional Tradelines
Non-Traditional Credit
Requirements
44
Tips for Non-Traditional
Credit Files
Put together a well-documented loan file that “tells the borrower story” in all areas.
• WHY doesn’t the borrower have a traditional credit history?
• Does the borrower have a sufficient enough non-traditional credit history with which to make a credibility decision?
• Since traditional credit history is lacking, are there other compensating factors present to offset that risk?
• Is the housing expense increasing? Saying same? Very close to current?
• Are the basics there to help the underwriter facilitate judgment? – Experience managing payment of housing expenses
– Personal savings which demonstrates money management
– No NSFs/overdrafts etc. in bank statements
– Stable employment
– Steadily increasing income
45
DTI,
Debts
&
Liabilities
46
Max Qualifying Ratios
Refer to the Loan Purpose/LTV/Credit
Score/DTI/Reserve chart on slide #10 for
complete DTI details.
Follow Fannie Mae standard guidelines for
debts & liabilities.
47
Employment
&
Income
48
2 Types of Income on
HomeReady Loans 1. DTI Qualifying Income
2. Household Qualifying Income (considered in income restrictions)
Consider:
• All occupant borrower qualifying income
• All non-occupant borrower qualifying income.
Do not consider:
• Non-borrower household income.
For loans run through DU, as long as all income has been coded properly
through page 2 of the 1003, DU will analyze and determine if income falls
within the area income limits and meets all applicable guidelines (such as for
those cases where a certain percentage of income is allowed/required).
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Accessory Unit
Income
• Only eligible for 1 unit property with accessory unit rental (basement apartment, in-law suite, garage or attic apartment)
• Accessory unit rental income may be underwritten in DU or manually.
• Follow Selling Guide section B3-3.1-08, Rental Income for instruction on calculating rental income for the accessory unit.
• See FNMA’s HomeReady Rental Income Flyer for example of Accessory Unit Income
50
Boarder Income
• Permitted from renters who reside in the subject property have history of paying rent for at least 12 months on 1-unit properties
• Boarders may not be obligated on the mortgage in any way.
• Boarder income may be underwritten in DU or manually
• Document shared residency (i.e. driver’s license, utility bill, bank statement, etc.)
• Borrower must provide documentation for at least 9 of the most recent 12 months (averaged over 12 months). This flexibility on HomeReady is to provide support in instances where the boarder has lived with the borrower for 12 months, but is unable to provide a full 12 months’ worth of documentation. (example- maybe paid cash a month or two or worked off their rent versus paying it out for a month or so).
• Payment of rent paid from boarder to a third party is not acceptable. Must have been paid to the borrower(s).
• Up to 30% of qualifying income can come from boarder income.
See FNMA’s HomeReady Rental Income Flyer for examples.
51
52
Non-Borrower
Household Income
• DU Approve/Eligible only. May only be entered to serve as a compensating factor to allow for DTI
ratio 45.01-50% - There is no benefit to non-borrower household income if the DTI isn’t 45.01-50%.
• Must equal at least 30 percent of the total monthly qualifying income being used by the
borrower(s).
– When the income is entered into DU, the amount will be truncated to two digits and rounded to
the next whole number. For example, if the income represents 29.01 percent, this amount will
be rounded up to 30 percent by DU to determine eligibility.
• Non-borrowers must sign FNMA Form 1019 which includes statement of intent to reside with the
borrower for a minimum of 12 months. Documentation is only required if DU determines the non-
borrower income will provide a benefit.
• May not be used for DU Refer or manual underwriting.
• Is not included as qualifying income for DTI OR income limits. Compensating factor in DU only.
• May come from more than 1 individual and come from relative(s) or non-relative(s) living in
the household.
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• Must be documented in the exact same manner as standard qualifying borrower incomes in DU. (see Selling Guide section B3-3.3-01: Income and Employment Documentation for DU based on the income type.
• 4506-t is not required for non-borrower household income
• Cannot come from individuals already contributing boarder or rental income for qualifying purposes.
• Verbal VOE requirement does not apply for non-borrower household income.
• HomeReady does not require any prior history of shared residency for a non-borrower household member.
Note- The situation MUST make sense, however. Remember that having an individual sign FNMA Form 1019 stating intent to occupy would be considered as fraud if not true. We cannot just toss people’s income in to qualifying under household income if they aren’t truly going to occupy the property and contribute to the mortgage payment.
Non-Borrower
Household Income
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What have you
learned about
HomeReady?
55
Test Your Knowledge
Yes or No.
Maggie is purchasing a new primary residence in Virginia. Her Uncle Joe, who lives
in another state, wants to support her dream of homeownership by being a
borrower on her loan to assist with qualifying.
Should Uncle Joe’s income be included for DTI qualifying on Maggie’s
HomeReady Loan?
Yes or No.
Should Uncle Joe’s income be included in the income limit calculations
on Maggie’s HomeReady loan?
Multiple Choice.
Chloe is purchasing a 2 unit property using HomeReady for financing. Which of the
following courses must she complete prior to closing?
1. Homeownership Education
2. Landlord Education
3. Both of the Above.
4. Neither of the Above.
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Answers for Prior
Page
Question 1: Yes.
Question 2: Yes.
Question 3: 3-Both of the Above.
57
True or False: Up to 30% of the borrower’s
qualifying income can come from a boarder.
True or False: Rental income can be considered
as qualifying income when the subject is a 1 unit
property with basement apartment.
True or False: High balance loans can be
manually underwritten to a 90% LTV.
Test Your Knowledge
58
Question 1: True.
Question 2: True.
Question 3: False. High balance loans are
not eligible to be manually underwritten,
regardless of LTV.
Answers for Prior
Page
59
Helpful
Contacts
60
Helpful Contacts
Product guideline questions:
Scenario Questions: [email protected]
Registration/Rate Questions: [email protected]
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