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Announcement 2019-029 Conventional, Home Possible and HomeReady Updates

Updates are being made to allow the use of short-term rental income through Airbnb on DU scored conventional refinances, along with Freddie Mac and Fannie Mae updates.

The Freddie Mac changes announced in Bulletins 2019-05 and 2019-07 impact Conventional and Home Possible products. The Fannie Mae update is specific to HomeReady. With this update, NewRez is aligning with the changes announced. Please see details below.

Updates are effective with new applications on or after May 2, 2019.

Home Possible and HomeReady- Number of Multiple Financed Properties

Updated to state that the occupying Borrower(s) must not have an ownership interest in more than two financed residential properties, including the subject property, as of the Note Date.

Alimony or Maintenance Payments – LPA Scored

Alimony or maintenance payments with more than 10 months remaining must be deducted from the Borrower’s gross monthly income and cannot be treated as a liability in the DTI calculation.

Assets as a Basis for Repayment of Obligations – LPA Scored

The calculation for establishing the amount used to determine the DTI is being updated to divide the net eligible assets by 240 instead of 360.

Income Documentation – LPA Scored

Income documentation for the following income types has been updated to specify that one or more of the required documents can be used to verify income type, source, payment frequency, payment amount and current receipt of the income. Separate verification of receipt of income would not be required.

  • Retirement income
  • Survivor and dependent benefit income,
  • Long-term disability income
  • Social Security Supplemental Security Income

Restricted Stock (RU) and Restricted Stock Units (RSU) – LPA Scored

Updated documentation for RU and RSU to permit, including:

  • Allowing other documentation to verify vesting provisions
  • Allowing income verification from third-party verification service provider

Second Homes – LPA Scored

Second homes with seasonal limitations are now allowed with cash out refinances, as well as only requiring one comparable with similar seasonal limitations to demonstrate marketability.

Allows second homes with short term rentals, as long as the property is available more than half the calendar year as a residence for the borrower.

Self-Employed Documentation – LPA Scored

Updated the guideline for one year of tax returns to clarify:

  • Borrower must be self-employed with an ownership interest of 25% or more in the same business for five years or more

 

Short-Term Rental Income – DU Scored

Short-term rental income derived through Airbnb is acceptable for DU scored rate and term and cash-out refinances of one- to four-unit primary residences. Special Feature Code 863 is required.

The borrower must demonstrate rental history or receiving such income as follows:

  • The borrower’s most recent year’s signed personal federal income tax returns, including Schedule E, and
  • A report from Airbnb that documents that the borrower has either:
  • A minimum two-year history of receiving short-term rental income from the borrower’s principal residence, or
  • Twelve (12) months or more but less than twenty-four (24) months’ stable history of short-term rental income from the borrower’s principal residence.

Please reference our Product Profiles page for more details.