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Announcement 2020-081 - Conforming, FHA, VA, and USDA Guideline Updates

The following updates are effective immediately, for all loans in pipeline or locked loans.

The following updates are effective immediately, for all loans in pipeline or locked loans.

Current Guideline

New Guideline

Conventional Conforming Guideline Updates

Primary Residence

·    Purchase and Rate & Term Refi: 660 credit score

·    Cash-out Refi: 680 credit score

·    Purchase and Rate & Term Refi: 640 credit score

·    Cash-out Refi: 660 credit score

Second Home

·    Purchase and Rate & Term Refi: 660 credit score

·    Cash-out Refi: not eligible

·    Purchase and Rate & Term Refi: 640 credit score

·    Cash-out Refi: 660 credit score

Manufactured Home

·    Cash-out Refi: 680 credit score

660 credit score

Co-ops Primary Residence

·    Primary Residence and Rate & Term Refi: 660 credit score

·    Cash-out Refi: 680 credit score

·    Primary Residence and Rate & Term Refi: credit score 640

·    Cash-out Refi: credit score 660

Texas

·        Rate & Term Refi: 660 credit score

·        Cash-out Refi: 680 credit score

·    Rate & Term Refi: 640 credit score

·    Cash-out Refi: 660 credit score

·    Employees of Brokers not eligible

·    Principal/Owners not eligible

·    Employees of Brokers eligible

·    Principal/Owners remain ineligible

Subject Investment Properties

·    Rental income from the subject investment property cannot be used for loan qualification

·    Six months reserves are required in addition to standard reserve requirements per the product

·    For purchase transactions, when rental income from the subject investment property is used for loan qualification, a vacancy factor of 50% must be applied to the rental income

·    Refinance transactions require evidence of the most recent two months receipt of rental income is required

·    Three months reserves are required in addition to standard reserve requirements per the product

Rental Income from Other Real Estate Owned (REO)

·    The use of rental income from other REO requires evidence of the most recent two months receipt of rental income for each rental property owned

·    Six months reserves required for each rental property owned in addition to standard reserve requirements per product if rental income is used to qualify

Rental Income from Other Real Estate Owned (REO)

·    The use of rental income from other REO requires evidence of the most recent two months receipt of rental income for each rental property owned

·    Three months reserves required for each rental property owned in addition to standard reserve requirements per product if rental income is used to qualify

Rate & Term Refi may not finance the payment of real estate taxes for the subject property in the loan amount and waive escrows

Removed guideline

Escrow waiver policy for investment properties in properties in CA:  LTV < 90%

LTV ≤ 80% for investment property

FHA Guideline Updates

·    Employees of Brokers not eligible

·    Principal/Owners not eligible

·    Employees of Brokers are eligible

·    Principal/Owners remain ineligible

Purchase, Rate & Term and Simple Refi

·    700 credit score to 55% DTI

·    660 credit score to 50% DTI

·    680 credit score to 55% DTI

·    640 credit score to 50% DTI

Cash-out Refi: 680 credit score to 43% DTI

660 credit score to 45% DTI

Manufactured Homes

·    Purchase, Rate & Term, Simple Refi and Portfolio Refi: 680 credit score to 45% DTI

Purchase, Rate & Term and Simple Refi: 660 credit score to 45% DTI

Credit Qualifying – Portfolio: 660 credit score to 50% DTI

620 credit score to 50% DTI

Non-Credit Qualifying – Portfolio: 660 credit score

620 credit score

Non-Credit Qualifying – Non-Portfolio: 640 credit score

640 credit score

Rental Income from Other Real Estate Owned

·        The use of rental income from other real estate owned requires evidence of the most recent two (2) months receipt of rental income for each rental property owned

·        Six (6) months reserves required for each rental property owned in addition to the  standard VA reserve requirements if rental income is used to qualify

·        The use of rental income from other real estate owned requires evidence of the most recent two (2) months receipt of rental income for each rental property owned

·        Three (3) months reserves required for each rental property owned in addition to the  standard VA reserve requirements if rental income is used to qualify

VA Guideline Updates

·    Employees of Brokers not eligible

·    Principal/Owners not eligible

·    Employees of Brokers are eligible

·    Principal/Owners remain ineligible

Purchase

·    $510,400 with 660 credit score to 55% DTI

·    $1,000,000 with 680 credit score to 55% DTI

·    DTI greater than 45% requires 2 additional months reserves

$1,000,000 with 640 credit score to 55% DTI

Cash-out Refi:  700 credit score to 50% DTI

640 credit score

Manufactured Home

·    Maximum loan amount $510,400

·    Purchase: 680 credit score to 45% DTI

·    Cash-out Refi not permitted

·    IRRRL not permitted

·    Maximum loan amount $510,400 remains

·    Purchase: 640 credit score to 50% DTI

·    Cash-out Refi:  640 credit score to 50% DTI

·    IRRRL max loan amount $510,400

·    Portfolio: 620 to 100% LTV to 55% DTI

·    Non-Portfolio: 640 to 100% LTV to 50% DTI

IRRRL

·        Portfolio

o   $1,000,000 loan amount

o   660 credit score to Unlimited LTV/CLTV to 50% DTI

·        Non-Portfolio

o   $1,000,000 loan amount

o   680 credit score to 45% DTI

·        Portfolio

o   $1,000,000 loan amount

o   620 credit score to 100% LTV/CLTV to 55% DTI

·        Non-Portfolio

o   $1,000,000 loan amount

o   640 credit score to 50% DTI

VA existing mortgage added clarification

The existing VA mortgage must be current at time of application and closing with evidence that existing mortgage is current for month of IRRRL closing and disbursement

Rental Income from Other Real Estate Owned

·        The use of rental income from other real estate owned requires evidence of the most recent two (2) months receipt of rental income for each rental property owned

·        Six (6) months reserves required for each rental property owned in addition to the  standard VA reserve requirements if rental income is used to qualify

·        The use of rental income from other real estate owned requires evidence of the most recent two (2) months receipt of rental income for each rental property owned

·        Three (3) months reserves required for each rental property owned in addition to the  standard VA reserve requirements if rental income is used to qualify

USDA Guideline Updates

·    Employees of Brokers not eligible

·    Principal/Owners not eligible

·    Employees eligible

·    Principal/Owners remain ineligible

Purchase Standard Rate & Term Refi:  41% DTI

44% DTI

Streamlined Refi:  41% DTI

44% DTI

Streamlined Assist Refi:  43% DTI

32/44% DTI

Rental Income from Other Real Estate Owned

·        The use of rental income from other real estate owned requires evidence of the most recent two (2) months receipt of rental income for each rental property owned

·        Six (6) months reserves required for each rental property owned in addition to the  standard VA reserve requirements if rental income is used to qualify

·        The use of rental income from other real estate owned requires evidence of the most recent two (2) months receipt of rental income for each rental property owned

·        Three (3) months reserves required for each rental property owned in addition to the  standard VA reserve requirements if rental income is used to qualify

Current Guideline

New Guideline

Conventional Conforming Guideline Updates

Primary Residence

·    Purchase and Rate & Term Refi: 660 credit score

·    Cash-out Refi: 680 credit score

·    Purchase and Rate & Term Refi: 640 credit score

·    Cash-out Refi: 660 credit score

Second Home

·    Purchase and Rate & Term Refi: 660 credit score

·    Cash-out Refi: not eligible

·    Purchase and Rate & Term Refi: 640 credit score

·    Cash-out Refi: 660 credit score

Manufactured Home

·    Cash-out Refi: 680 credit score

660 credit score

Co-ops Primary Residence

·    Primary Residence and Rate & Term Refi: 660 credit score

·    Cash-out Refi: 680 credit score

·    Primary Residence and Rate & Term Refi: credit score 640

·    Cash-out Refi: credit score 660

Texas

·        Rate & Term Refi: 660 credit score

·        Cash-out Refi: 680 credit score

·    Rate & Term Refi: 640 credit score

·    Cash-out Refi: 660 credit score

·    Employees of Brokers not eligible

·    Principal/Owners not eligible

·    Employees of Brokers eligible

·    Principal/Owners remain ineligible

Subject Investment Properties

·    Rental income from the subject investment property cannot be used for loan qualification

·    Six months reserves are required in addition to standard reserve requirements per the product

·    For purchase transactions, when rental income from the subject investment property is used for loan qualification, a vacancy factor of 50% must be applied to the rental income

·    Refinance transactions require evidence of the most recent two months receipt of rental income is required

·    Three months reserves are required in addition to standard reserve requirements per the product

Rental Income from Other Real Estate Owned (REO)

·    The use of rental income from other REO requires evidence of the most recent two months receipt of rental income for each rental property owned

·    Six months reserves required for each rental property owned in addition to standard reserve requirements per product if rental income is used to qualify

Rental Income from Other Real Estate Owned (REO)

·    The use of rental income from other REO requires evidence of the most recent two months receipt of rental income for each rental property owned

·    Three months reserves required for each rental property owned in addition to standard reserve requirements per product if rental income is used to qualify

Rate & Term Refi may not finance the payment of real estate taxes for the subject property in the loan amount and waive escrows

Removed guideline

Escrow waiver policy for investment properties in properties in CA:  LTV < 90%

LTV ≤ 80% for investment property

FHA Guideline Updates

·    Employees of Brokers not eligible

·    Principal/Owners not eligible

·    Employees of Brokers are eligible

·    Principal/Owners remain ineligible

Purchase, Rate & Term and Simple Refi

·    700 credit score to 55% DTI

·    660 credit score to 50% DTI

·    680 credit score to 55% DTI

·    640 credit score to 50% DTI

Cash-out Refi: 680 credit score to 43% DTI

660 credit score to 45% DTI

Manufactured Homes

·    Purchase, Rate & Term, Simple Refi and Portfolio Refi: 680 credit score to 45% DTI

Purchase, Rate & Term and Simple Refi: 660 credit score to 45% DTI

Credit Qualifying – Portfolio: 660 credit score to 50% DTI

620 credit score to 50% DTI

Non-Credit Qualifying – Portfolio: 660 credit score

620 credit score

Non-Credit Qualifying – Non-Portfolio: 640 credit score

640 credit score

Rental Income from Other Real Estate Owned

·        The use of rental income from other real estate owned requires evidence of the most recent two (2) months receipt of rental income for each rental property owned

·        Six (6) months reserves required for each rental property owned in addition to the  standard VA reserve requirements if rental income is used to qualify

·        The use of rental income from other real estate owned requires evidence of the most recent two (2) months receipt of rental income for each rental property owned

·        Three (3) months reserves required for each rental property owned in addition to the  standard VA reserve requirements if rental income is used to qualify

VA Guideline Updates

·    Employees of Brokers not eligible

·    Principal/Owners not eligible

·    Employees of Brokers are eligible

·    Principal/Owners remain ineligible

Purchase

·    $510,400 with 660 credit score to 55% DTI

·    $1,000,000 with 680 credit score to 55% DTI

·    DTI greater than 45% requires 2 additional months reserves

$1,000,000 with 640 credit score to 55% DTI

Cash-out Refi:  700 credit score to 50% DTI

640 credit score

Manufactured Home

·    Maximum loan amount $510,400

·    Purchase: 680 credit score to 45% DTI

·    Cash-out Refi not permitted

·    IRRRL not permitted

·    Maximum loan amount $510,400 remains

·    Purchase: 640 credit score to 50% DTI

·    Cash-out Refi:  640 credit score to 50% DTI

·    IRRRL max loan amount $510,400

·    Portfolio: 620 to 100% LTV to 55% DTI

·    Non-Portfolio: 640 to 100% LTV to 50% DTI

IRRRL

·        Portfolio

o   $1,000,000 loan amount

o   660 credit score to Unlimited LTV/CLTV to 50% DTI

·        Non-Portfolio

o   $1,000,000 loan amount

o   680 credit score to 45% DTI

·        Portfolio

o   $1,000,000 loan amount

o   620 credit score to 100% LTV/CLTV to 55% DTI

·        Non-Portfolio

o   $1,000,000 loan amount

o   640 credit score to 50% DTI

VA existing mortgage added clarification

The existing VA mortgage must be current at time of application and closing with evidence that existing mortgage is current for month of IRRRL closing and disbursement

Rental Income from Other Real Estate Owned

·        The use of rental income from other real estate owned requires evidence of the most recent two (2) months receipt of rental income for each rental property owned

·        Six (6) months reserves required for each rental property owned in addition to the  standard VA reserve requirements if rental income is used to qualify

·        The use of rental income from other real estate owned requires evidence of the most recent two (2) months receipt of rental income for each rental property owned

·        Three (3) months reserves required for each rental property owned in addition to the  standard VA reserve requirements if rental income is used to qualify

USDA Guideline Updates

·    Employees of Brokers not eligible

·    Principal/Owners not eligible

·    Employees eligible

·    Principal/Owners remain ineligible

Purchase Standard Rate & Term Refi:  41% DTI

44% DTI

Streamlined Refi:  41% DTI

44% DTI

Streamlined Assist Refi:  43% DTI

32/44% DTI

Rental Income from Other Real Estate Owned

·        The use of rental income from other real estate owned requires evidence of the most recent two (2) months receipt of rental income for each rental property owned

·        Six (6) months reserves required for each rental property owned in addition to the  standard VA reserve requirements if rental income is used to qualify

·        The use of rental income from other real estate owned requires evidence of the most recent two (2) months receipt of rental income for each rental property owned

·        Three (3) months reserves required for each rental property owned in addition to the  standard VA reserve requirements if rental income is used to qualify

 

 

As a reminder, 2019 tax returns must be filed by July 15, 2020. For application dates and/or note dates after July 15, 2020, if tax returns are required for loan qualification and the borrower has not filed their tax return, a Copy of Application for Automatic Extension of Time to File 2019 U.S. Individual Income Tax Return (IRS Form 4868) is required through October 15, 2020. After October 15, 2020, tax returns are required. See the Policy and Procedures Manual and substitute April 15, 2020 with July 15, 2020.