Below is a highlight of guidelines updates for Fannie Mae, FHA, and VA guidelines, effective immediately.
Conforming Updates
- Seasonal and Secondary Income
- Secondary employment-clarified that while a borrower may have different employers, they may not have any gap in employment greater than one month in the most recent 12-month period, unless the secondary employment is considered seasonal
- Seasonal income: removed the requirements to confirm with the employer if the borrower is likely to be rehired the next season and to confirm if the work is in the same job (or same line of work) as the previous two
- Sale of Other Assets
The following is required when using sale of personal assets for the transaction:
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- Proof of ownership for all asset types that are titled assets, such as an automobile title;
- The value of the asset, as determined by an independent and reputable source, if the proceeds represent more than 50% of the total monthly income used in qualifying. The lesser of the estimated value (as determined by the independent source) or actual sales price must be used when determining the amount of funds for the
For example, a borrower plans to sell their vehicle. The value as determined by an independent source is $10,000; the sales price of the vehicle is $12,000. $10,000 can be added to the borrower’s available funds even if the sale has already occurred.
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- The transfer of ownership of the asset, as documented by either a bill of sale or a statement from the purchaser; and
- Evidence of receipt of the proceeds (e.g., deposit slip or account statement).
- Fannie Mae Open 30-Day Account
Open 30-day accounts do not need to be included in the DTI ratio. The borrower must have sufficient funds to pay off the outstanding balance, in addition to the funds required for the transaction.
FHA Updates
- Significant Derogatory Credit
Additional clarification has been added to the Waiting Period following a significant derogatory event (bankruptcy, foreclosure, etc.)
- Frozen Credit
Clarified that any borrower with one (1) or more repositories with frozen credit on their credit report must have their credit unfrozen and be re-underwritten.
- Delinquent Credit - Judgments
The following additional clarifications are being provided when the borrower has a payment arrangement for an open Judgements:
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- Provide a copy of the payment arrangement and evidence of three timely payments;
- Subordination agreement for any liens on title;
- Evidence of three (3) timely payments prior to case number assignment date; and
- Inclusion of payment into the DTI
VA Updates
- Frozen Credit
Clarified that any borrower with one (1) or more repositories with frozen credit on their credit report must have their credit unfrozen and be re-underwritten.
- Foreclosure
Clarified that if a foreclosure, deed-in-lieu, or short sale process is in conjunction with a bankruptcy, use the latest date of either the discharge of the bankruptcy or transfer of title for the home to establish the beginning date of re-established credit.
- Chapter 13 Bankruptcy
Clarified that if the borrower has finished making all payments satisfactorily, you may conclude the borrower has re-established satisfactory credit.
- Past Due Accounts
Clarified that if a mortgage or other significant debt is past due and was last updated ≥ 90% days, verify current status of past due debt. The loan must be manually downgraded and is not eligible.
Power of Attorney
Chapter 9A Power of Attorney has been updated to align with Fannie Mae Announcement SEL- 2021-02 and Freddie Mac 2020-45.
Miscellaneous Updates
All miscellaneous updates are in red font in the applicable chapter.
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Chapter 1G Conforming Assets |
1G.3 (b) Sales Concessions |
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Chapter 2D FHA Property Types |
2D.1 (f) Condominium |
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Chapter 2E FHA Underwriting |
2E.1 (e) TOTAL Risk Classifications |
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Chapter 2F FHA Credit |
2F.5 Inquiries and Undisclosed Liabilities 2F.7 (b) Charge-off Accounts |
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Chapter 2H FHA Liabilities and Debt Ratios |
2H.1 (q) Student Loans |
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Chapter 3F VA Credit |
3F.1 Documentation Standards |
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Chapter 3H VA Liabilities and Debt Ratios |
3H.4 (g)(i) Deferred Installment Debt |
Please reference the Credit Policy and Product Development NewRez Lending Library for the Underwriting Guide changes outlined in this announcement.