This Week's Highlights - Tuesday, August 4, 2020
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- FHA Announces COVID-19 Temporary Guidance
- Fannie Mae & Freddie Mac Update FAQs
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- Reminder! E-Close Availability
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- Credit Report Typo
- Fannie Mae HomeReady Income
- Jumbo Program Guideline Updates
- VA Clarification for Fee Recoupment Calculation for IRRRLs
- COVID-19 Temporary Guidelines in KO
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FHA Announces COVID-19 Temporary Guidance
Due to the ongoing effect of COVID-19, FHA has announced updates to the following temporary guidelines below effective with case number assignments on or after 8/12/2020 -11/30/2020:
Rental Income
- When qualifying utilizing rental income, for each property generating rental income the following is required:
- Reduce the effective income associated with the calculation of rental income by 25%, or
- Verify 6 months PITI reserves, or
- Verify the borrower has received the previous 2 months rental payments as evidenced by borrower’s bank statements showing the deposit. (This option is applicable only for borrowers with a history of rental income from the property).
Self Employment Income
- Self employment income must be stable with a reasonable expectation that it will continue. Verification of the existence of the borrower’s business within 10 calendar days prior to the date of the Note to confirm that the Borrower’s business is open and operating. One (1) of the following to verify and confirm that the business is open and operating:
- Evidence of current work (executed contracts or signed invoices that indicate the business is operating on the day the lender verifies self-employment);
- Evidence of current business receipts within 10 days (Note Fairway Policy) of the note date (payment for services performed);
- Lender certification that the business is open and operating (lender confirmed through a phone call or other means) (Note Fairway Policy); or
- Business website demonstrating activity supporting current business operations (timely appointments for estimates or service can be scheduled).
Refer to ML 2020-03 for more details.
Fannie Mae & Freddie Mac Update COVID-FAQsBoth Fannie Mae and Freddie Mac have updated their FAQs relating to the temporary guidelines in place due to COVID-19. Clarifications are as follows:
- Non-Mortgage Debt in COVID Related Forbearance
- Whether forbearance or deferment is related to COVID-19, consider the monthly debt payment in the borrower’s DTI. Standard guidelines apply.
- Appraisal Waivers
- Not permitted when a COVID-19 exterior-only or desktop appraisal is available. Please Note: Fannie Mae policy for appraisal waivers has always prohibited the execution of an appraisal waiver for a loan transaction for which the lender has obtained an appraisal.
- COVID-19 Exterior-Only Appraisal Assignment
- Subject property and comparable sales photographs are required.
- Tax Return Requirements
- Questions added now that the 07/15 filing deadline has passed.
Refer to the FNMA FAQs and FHLMC FAQs.
Reminder! E-Close Availability
Fairway Wholesale Lending currently offers hybrid eClose transactions for our broker channel. Fairway also allows title companies to conduct audio/visual notary signing transactions at their discretion.
Q: I pulled a credit report on my borrower and realized I mistakenly entered their middle initial incorrectly. Do I have to repull credit?
A: If all of the other information is accurate a new report is not required. You will have to advise your borrower that they will be required to sign an aka statement at close due to the typo.
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Q: On a Fannie Mae HomeReady loan, does the wife's (or co-borrower’s) income need to be used when qualifying?
A: In determining whether a mortgage is eligible under the borrower income limits, the lender must count the income from all borrowers who will sign the note, to the extent that the income is considered in evaluating creditworthiness for the loan. In other words, the same income that would be used to determine the debt to income ratio on the loan.
Jumbo Program Guideline Updates
As a reminder, the Jumbo Program guidelines have been revised as provided below:
1.00 Improvement Jumbo Price Reminder
- For Jumbo loans that do not have borrowers using any self-employed income, a 1.00 price improvement applies. Please email ratedesk@FairwayWholesaleLending.com with the loan details to request the adjustment.
- The Jumbo lock window is open until 6PM for all states. The complete Lock Policy can be viewed here.
Self-Employed Income
- The S-Corporations, Corporations and Partnership guidelines have been updated to reflect that income must be reduced proportionately by the total obligations payable by the partnership/corporation in less than one year.
- Please refer to the Self-Employed Income topic in Knowledge Owl for full program guidelines. Note: As a reminder, you must be logged into KO to access guidelines.
VA Clarification for Fee Recoupment Calculation for IRRRLs
VA has provided the following clarification for the calculation of the fee recoupment for IRRRLs. This clarification is in addition to previous guidance and is effective for applications currently in process as of 07/24/2020.
- Lender credits may be used to offset allowable fees and charges. (Note: This is no change from how Fairway calculates the fee recoupment.)
- Additional updates to EEMs and ARMs were also made. However, please note, EEMs and ARMs are not eligible with Fairway Wholesale Lending.
- Loans closed prior to 07/24/2020 using the guidance in Circular 26-19-22 Exhibit B are considered compliant.
Please refer to Circular 26-19-22 for more details.
COVID-19 Temporary Guidelines in KO
Fairway Wholesale Lending has made various changes to the COVID temporary guidelines within Knowledge Owl. The current and active guidelines will continue to remain on the COVID-19 Temporary Guidance page as well as be provided within the matrices and their individual guideline topics.
As always, if you have any questions, please contact Ask@fairwaymc.com.
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Steve Jacobson, CEO - "Change has defined 2020. Change can manage me or I can manage change."
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