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Announcement 2020-062 - Conventional Conforming Guideline Clarifications and Updates

NewRez will be aligning with Fannie Mae and Freddie Mac in extending the temporary underwriting and appraisal policies previously announced for application dates through June 30, 2020.

NewRez will be aligning with Fannie Mae and Freddie Mac in extending the temporary underwriting and appraisal policies previously announced for application dates through June 30, 2020.

 

Underwriting policy clarifications and updates are addressed in the following releases and highlighted below.

Unemployment Compensation

  • Unemployment compensation received through the CARES Act is temporary in nature and therefore cannot be used for qualification. Unemployment benefits can only be used to qualify a borrower when the compensation is clearly associated with seasonal employment that is reported on the borrower’s signed federal income tax returns and is a stable and continuous source of income.

 

Furloughed Borrowers

  • A furlough is a suspension from active employment that does not typically guarantee restoration of an employee’s position when the furlough period ends. Until furloughed employees return to work, they are unable to provide evidence of a stable and reliable flow of employment related income and are therefore ineligible under Temporary Leave Income policy.

 

Effective for new DU casefiles on or after May 4, 2020 to June 30, 2020

Employment validation by DU validation service

  • DU will no longer validate employment within the DU validation service. A verbal verification of employment must be performed in accordance with NewRez policy or temporary guidance policies.
  • DU validation service will continue to validate income and assets. Income validation for a borrower remains dependent on the borrower being employed. If the borrower is no longer employed, that income cannot be used for loan qualification.

 

Automated Income Assessment (AIM) with Loan Product Advisor (LPA) using tax return data

  • To align with the IRS federal tax filing extension, Freddie Mac is revising their requirements applicable to AIM with LPA using tax return data (i.e., AIM for self-employed). For loans with LPA initial submission dates on or after August 1, 2020, the borrower’s most recent tax returns filed with the IRS must be the 2019 tax return. This is an extension of the May 1, 2020 deadline.

 

Loan Product Advisor update to identify Freddie Mac-owned mortgages

  • LPA was updated for submissions on or after April 27, 2020 to state when the borrower’s existing loan has been identified by LPA as a Freddie Mac-owned loan.

 

Previously Announced Temporary Guidance and Resources

 

Wholesale

The product profiles will not be updated with the temporary guidelines related to COVID-19 (with the exception of credit score updates). Refer to the following previously issued announcements.

  • Annc 2020-026 COVID-19 (3/25/20)
  • Annc 2020-031 Suspension of Tax Transcripts (3/30/20)
  • Annc 2020-033 Borrower Attestation (3/31/20)
  • Annc 2020-044 COVID-19 Additional Conforming Updates (4/9/20)
  • Annc 2020-045 Exterior-Only Report Determination (4/9/20)
  • Annc 2020-048 COVID-19 Conventional Updates – Property (4/17/20)
  • COVID-19 Quick Reference by Product Job Aid – Employment Verification and Appraisals

 

For additional information, below are links to Fannie Mae and Freddie Mac Frequently Asked Questions

 

Remember that NewRez is not adopting all flexibilities in the Fannie Mae and Freddie Mac announcements, therefore some guidelines in their announcements and FAQ may not apply.

 

Please reference the NewRez Lending Library for the changes outlined in this announcement.