The following updates are effective immediately. The Conforming, FHA, and USDA product profiles and underwriting guide have been updated. The VA guide will be updated in the future.
FHA Transactions Overlay Removals and Guideline Updates |
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Topic |
Current Guideline |
New Guideline |
Purchase, Rate & Term Refi (excluding manufactured homes) |
· Purchase, Rate & Term Refi o 620 per AUS o 600 to 50% DTI o 580 to 43% DTI |
· Purchase, Rate & Term Refi o 580 to 50% DTI
Eliminating 580 to 43% |
Purchase CLTV (excluding manufactured homes) |
100% CLTV |
105% CLTV |
Streamline Refi LTV/CLTV |
Max LTV/CLTV is per FHA |
Max LTV/CLTV is 105/125 |
Streamline Refi Non-Credit Qualify |
Non-Portfolio · 580 credit score |
Non-Portfolio · 600 credit score |
Manual Underwrite |
Not permitted |
Permitted; in accordance with FHA manual underwrite guidelines.
If DTI is greater than 45%, gift funds are not permitted |
Refer and Manual Underwrite |
Not permitted |
· Purchase, Rate & Term Refi o 600 to 50% DTI · Cash-out Refi o 600 to 50% DTI |
Bankruptcy Chapter 13 |
Chapter 13 bankruptcy is not permitted until the bankruptcy has been discharged |
· Chapter 13 bankruptcy eligible with evidence of 12 months payout per agency FHA guidelines |
Bankruptcy Chapter 7 |
Chapter 7 bankruptcy is not permitted until the bankruptcy has been discharged 24 months |
· Chapter 7 bankruptcy eligible when bankruptcy has been discharged 24 months or · Not less than 12 months if borrower o Can show that BK was caused by extenuating circumstances beyond borrower’s control; and o Has since exhibited a documented ability to manage financial affairs in a responsible manner |
Conforming Overlay Removal |
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Co-op Eligibility |
Fixed Rate · Cash-out Refi: 640 · ARM Primary Residence o Purchase: 620 to 90% LTV o Cash-out Refi: 640 to 75% LTV |
· Fixed Rate o Cash-out Refi: 620 · ARMs permitted within agency LTV/CLTVs |
Co-op Eligibility |
ARM Second Homes · Purchase, Rate & Term Refi o 620 to 80% LTV · Cash-out Refi: not permitted |
ARM Second Homes · ARMs permitted within agency LTV/CLTVs · Cash-out eligible (Freddie Mac only) |
Conforming, FHA, VA, and USDA Overlay Removals and Guideline Updates |
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Subordinate Financing |
Not permitted |
· Purchase: New subordinated financing permitted · Refinance: Subordination of existing subordinate financing permitted |
IRS Form 4506-C and Tax Transcripts |
Signed 4506-C and tax transcripts are required for each borrower whose income is documented with: · handwritten paystubs; · non-arm’s length transactions or at the underwriter’s discretion; or · tax returns are used to document income
Obtaining tax transcripts is suspended until further notice. |
Signed 4506-C and tax transcripts are required for each borrower whose income is documented with: · handwritten paystubs; and · non-arm’s length transactions or at the underwriter’s discretion.
Tax transcripts must be obtained for the above two reasons or at underwriter discretion. |
Mortgage/Employer Differential |
Not permitted |
· Permitted per agency requirements with the following exception: o Mortgage differential payments are only allowed if the employer sends the funds to the borrower. o The employer may not pay the mortgage lender directly |
Housing Choice Voucher Homeownership Program (Section 8) |
Not permitted |
Permitted per agency requirements |
Renegotiated Sales Contract |
Generally, renegotiated sales contracts are not allowed, however, minor adjustments due to condition or other relevant factors are permitted. Increasing of sales price after the appraisal is completed to provide seller credit is not permitted |
Permitted |
FHA, VA, and USDA Streamline Refinance Guideline Updates |
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Mortgage Forbearance |
Non-credit qualifying streamline requires that three (3) months must have passed since the borrower exited forbearance. |
Non-credit qualifying streamline requires that six (6) months must have passed since the borrower exited forbearance. |
VA Updates |
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Lava Flood Hazard Zones |
Silent |
· Lava Flow Hazard Zones are designated by the US Geological Survey. · Properties located in Lava Zones 1 and 2 are not permitted with following exception: o In Hawaii, Lava Zones are acceptable. o A Lava Insurance Policy, with coverage for at least the amount of the loan, is required for all properties located within Lava Zone 1 and Lava Zone 2. |
Resources
Refer to the applicable Newrez Product Profiles located on the Credit Policy and Product Development intranet site in the Newrez Lending Library.