Restriction: Non-Liquid Assets
Statement from
current quarter required
Restriction:
Self Employed Qualifying Income
The following is required
for Self Employed or 1099 income:
·
Reduce qualifying income by 25% OR
·
12 months reserves required
Restriction: Future Income
Not Permitted
·
If borrower
qualifies without future income the loan may proceed
Restriction: Manual Underwrite
Restriction: Age of Documents
Credit, income and asset documentation must be ≤ 60 days prior
to note date
Guideline Update | FHA
☐
Retail ☐ Consumer
Direct ☒ Correspondent
☒ Wholesale
Effective with locks on or
after April 2, 2020
Restriction:
Min FICO
WHOLESALE AND CORRESPONDENT
|
Transaction Type
|
FICO
|
Purchase, Rate & Term, Streamline, Cash Out
|
640
|
Manual Underwrites
|
660
|
203K Limited and Standard
|
640
|
203K Limited and Standard Manual Underwrites
|
660
|
Note: No Extensions or Relocks permitted
Effective with note dates on or after April 6, 2020
Restriction:
DTI and Reserves Requirement
DTI
|
Required Reserves
|
>45% and <50%
|
2 months PITIA liquid reserves
|
≥50%
|
6 months PITIA Liquid reserves
|
Restriction:
Transactions with Gift Funds
Max DTI 45%
Restriction: Manual Underwrite Reserve Requirements
2 months PITIA liquid reserves
Restriction: First Time Home Buyer
If living rent free, 6 months PITIA liquid reserves required
Restriction: Non-Liquid Assets
Statement from
current quarter required
Restriction:
Self Employed Qualifying Income
The following is required
for Self Employed or 1099 income:
·
Reduce qualifying income by 25%, or
·
12 months reserves required
Restriction: Future/Expected Income
Not Permitted
·
Loans with future
income must cease at this time
o
If borrower
qualifies without future income the loan may proceed
Restriction: Age of Documents
Credit, income and asset documentation must be ≤ 60 days prior
to note date
Guideline Update | USDA
☒
Retail ☒ Consumer
Direct ☒ Correspondent
☒ Wholesale
Effective with locks on or
after April 2, 2020
Restriction: Min FICO
WHOLESALE AND CORRESPONDENT DIRECT
|
TRANSACTION TYPE
|
MIN FICO
|
|
Purchase, Rate & Term, Streamline Assist
|
640
|
Manual Underwrite
|
660
|
Note: No Extensions or Relocks permitted
Effective with note dates on or
after April 6, 2020
Restriction: DTI and Reserves Requirement
DTI
|
Required Reserves
|
>45% and <50%
|
2 months PITIA liquid reserves
|
≥50%
|
6 months PITIA Liquid reserves
|
Restriction: Transactions with Gift Funds
Max DTI 45%
Restriction: Manual Underwrite Reserve Requirements
2 months PITIA liquid reserves
Restriction: First Time Home Buyer
If living rent free, 6 months PITIA liquid reserves required
Restriction: Non-Liquid Assets
Statement from
current quarter required
Restriction: Self Employed Qualifying Income
The following is required for Self Employed or 1099 income:
·
Reduce qualifying
income by 25%, or
·
12 months reserves
required
Restriction: Future/Expected Income
Not Permitted
·
Loans with future
income must cease at this time
o
If borrower
qualifies without future income the loan may proceed
Restriction: Age of Documents
Credit, income and asset documentation must be ≤ 60 days prior
to note date
Guideline Update | VA
☒
Retail ☒ Consumer
Direct ☒ Correspondent
☒ Wholesale
Effective with locks on or after April 2, 2020
Restriction: Min FICO
WHOLESALE
AND CORRESPONDENT
|
Transaction
Type
|
FICO
|
Conforming Loan Amount
|
640
|
Manual Underwrite
|
660
|
Note: No Extensions or Relocks permitted
Restriction: IRRRL – Collateral Value
WHOLESALE AND CORRESPONDENT
|
The following must be provided to support value:
·
AVM or Drive by
Appraisal
|
Note: No Extensions or Relocks permitted
Effective with note dates on or after April 6, 2020
Restriction:
DTI and Reserves Requirement
DTI
|
Required Reserves
|
>45% and <50%
|
2 months PITIA liquid reserves
|
≥50%
|
6 months PITIA Liquid reserves
|
Restriction: Transactions with Gift Funds
Max DTI 45%
Restriction: Manual Underwrite Reserve Requirements
2 months PITIA liquid reserves
Restriction: First Time Home Buyer
If living rent free, 6 months PITIA liquid reserves required
Restriction: Non-Liquid Assets
Statement from
current quarter required
Restriction: Self Employed Qualifying Income
The following is required for Self Employed or 1099 income:
·
Reduce qualifying
income by 25%, or
·
12 months reserves
required
Restriction: Future/Expected Income
Not Permitted
·
Loans with future
income must cease at this time
o
If borrower
qualifies without future income the loan may proceed
Restriction: Age of Documents
Credit, income and asset documentation must be ≤ 60 days prior
to note date
IN SUMMARY
SELF EMPLOYED GET A BIG INCOME HAIRCUT
NO more rental income to offset
More cash reserves
Lower debt to Income RATIOS
MUCH HIGHER FICO SCOREs
California we are in for a difficult ride
Age of Documentation
Age
of documents are being modified to two months (60) days from four months (120
days) for most income and asset documentation. If an asset account is
reported on a quarterly basis, the most recently issued quarterly statement is
required.
Third
Party Employment verification will now require the vendor’s database to be no
more than 60 days old as of the note date.
Standard
age of document requirements will remain for Military Income documented using a
Leave and Earnings Statement, Social Security, Retirement Income, Long Term
Disability, Mortgage Credit Certificates, Public Assistance, Foster Care, or
Royalty Payments.
Due
to the federal income tax filing extension granted through July 15, 2020, the
following documentation requirements are being eliminated:
- A copy of the IRS Form 4868 (Application for Automatic
Extension of Time to File U.S. Individual Tax Return), AND
- IRS Form 4506-T (Request for Transcript of Tax Return)
transcript to confirm “No Transcript Available” for the 2019 tax year.
All
other requirements in regards to Allowable Age of Credit Documents and Federal
Income Tax Returns continue to apply.
Verification of Self Employment
When
using self-employment income to qualify a borrower, the existence of the
borrower’s business must be verified within 120 calendar days prior to the note
date. Due to latency in system updates or re-certifications using annual licenses,
certifications, or government systems of record, additional steps must be taken
to confirm that the borrower’s business is open and operating. This
must be confirmed within 10 business days of the note date.
Below
are examples of methods that may be used to confirm the borrower’s business is
currently operating:
- Evidence of current work (executed contracts or signed
invoices that indicate the business is operating on the day
self-employment is verified);
- Evidence of current business receipts within 10 days of
the note date (payment for services performed);
- Certification the business is open and operating
(confirmed through a phone call or other means); OR
- Business website demonstrating activity supporting
current business operations (timely appointment for estimates or service
can be scheduled).
- They may ask for last two weeks business deposits or letters explaining how operations is continuing
- keep in mind in California they have to be an essential business to be out and about normal
Market Based Assets
Stocks,
Stock Options, and Mutual Funds -
In
light of current market volatility, the following updates are being made when
the borrower is using stocks, stock options, or mutual funds for assets:
- When used for down payment or closing costs, evidence
of the borrower’s actual receipt of funds realized from the sale or
liquidation must be documented in all cases.
- When used for reserves, only 70% of the value of the
asset must be considered, and liquidation is not required.
