This Week's Highlights - Tuesday, September 22, 2020
- USDA Updates Mortgage Forbearance Requirements
- FEMA Disaster Area Declarations for OR and AL
- Jumbo Second Home Occupancy
- FHA Self-Sufficiency Rental Income Test Reminder
- Important! Adverse Market Fee Reminder
- Coming Soon! New Appraisal Ordering Platform
- On-Boarding Correspondent/Broker DRIVER Training
- Credit Re-Pulls
- Closing in Name of a Trust
- USDA Fiscal Year 2021 Conditional Commitment Notice
- Freddie Mac LIBOR ARM Cutoff
- FHA Updates for Borrowers with Mortgage Forbearance
- Updated! FEMA Disaster Area Declarations for LA & CA
- FWL Releases FHA Connection Videos
USDA Updates Mortgage Forbearance Requirements
USDA has updated their FAQs in regards to the waiting period after forbearance for borrower eligibility. Prior to 09/15/2020, previously missed payments were not permitted for USDA loans; however, guidance is now reflected in the FAQs specifying the minimum time period requirements for resuming payments and eligibility.
The waiting period after forbearance in order to be eligible for a new USDA loan is as follows:
- Purchase Transactions (Manually Underwritten, Refer and Refer with Caution):
- Borrower(s) emerging from forbearance must have resumed repayment of their mortgage loan for a period of at least 3 months prior to applying for a new loan.
- Non-Streamlined and Streamlined Refinance Transactions:
- Loan must have closed at least 12 months prior to the request to refinance, and
- Borrower must have resumed making payments for a period of at least 3 months, and
- Have a total of 180 day period of satisfactory payments, excluding the time the loan was in forbearance.
- Streamlined Assist Refinance Transactions:
- Borrower must have resumed making payments for a period of at least 3 months, and
- Not have any defaults in the previous 12 months period, excluding the time the loan was in forbearance.
Refer to USDA FAQs for details.
FEMA Disaster Area Declarations for Oregon and Alabama
The following areas in Oregon have been added as disaster areas due to wildfires and straight-line winds. The disaster incident period declared 09/07/2020 and is ongoing.
- Clackamas, Douglas, Jackson, Klamath, Lane, Lincoln, Linn, and Marion Counties
The following areas in Alabama have been added as disaster areas due to Hurricane Sally. The disaster incident period declared 09/14/2020 and is ongoing.
- Baldwin, Escambia, and Mobile Counties
Please Note: These are FEMA declarations and will affect all programs; therefore, FWL is implementing the Disaster Area Appraisal and Re-Inspection requirements for both conventional and government loans. This information has been added to FIMC’s Disaster Area List in Knowledge Owl for future reference.
As a reminder, FWL created the PDMDA Job Aid, which will assist in determining what appraisal and re-inspection requirements are to be applied in certain disaster areas eligible for individual assistance.
Jumbo Second Home Occupancy Requirements
Effective for loans on and after 09/16/2020, including loans in process, second homes with short term rental income are eligible to be classified as Second Homes providing the following are met:
- Purchase and Rate & Term Refinance only.
- 1 unit properties only
- Occupancy of borrower for a minimum of 14 days/yr
- Property must be available to the borrower half the year (i.e., in place rental needs to be <=6 months)
- Income from the in-place rental cannot be used in qualifying income
- Copy of any/all rental agreement(s) must be included in the loan file
For full program guidelines, refer to the Jumbo Program Matrix in Knowledge Owl. Note: As a reminder, you must be logged into KO to access guidelines.
FHA Self-Sufficiency Rental Income Test Reminder
Underwriting has seen an increase in loans being submitted without the necessary worksheets for 3-4 unit properties. As a reminder, the Self Sufficiency Test Worksheet and the Rental Income Worksheet are required for all 3-4 unit subject properties. Net self-sufficiency rental income refers to the rental income produced by the subject property that is over and above the PITI amount. Calculate by using the Appraiser's estimate of fair market rent from all units, including the unit the Borrower chooses for occupancy, and subtract the greater of:
- the Appraiser's estimate for vacancies and maintenance, or
- 25% of the fair market rent.
The subject property's PITI divided by the monthly net self-sufficiency rental income amount may not exceed 100% for 3- to 4-unit properties. If self-sufficiency is not met, the loan is ineligible for FHA financing.
Additionally, 3 months PITI reserves are required. For additional guidance, refer to the FHA Rental Income topic.
Important! Adverse Market Fee Reminder
Fairway will phase in the application of the 50 bps adverse market fee as an LLPA for all FNMA and FHLMC refinances using the schedule below to comply with the new delivery date requirements:
- 45-day locks beginning September 28, 2020
- 30-day locks beginning October 12, 2020
- 15-day locks beginning October 26, 2020
Any loan that funds or is purchased after November 9th, 2020 will be subject to the 50 bps adverse market fee at the time of extension. The adverse market fee does not apply to:
Coming Soon! New Appraisal Ordering Platform
- Loan Amounts <$125,000
- Home Ready or Home Possible Mortgages
As a reminder, Fairway is excited to announce that we have partnered with Mercury Network to offer a new and improved Appraisal Ordering Platform inside of DRIVER. This new release will provide a standardized appraisal ordering experience in one place.
In addition to the new platform, we are expanding our approved AMC list by adding 4 additional AMC’s. Stay tuned for additional announcements in the coming weeks.
Q: Can my borrower’s sales contract be in the name of a trust and are we allowed to disclose the file in the name of the trust?
A: The loan application and disclosures must be in the borrower’s name and not the trust because we have to use the individual as a credit-qualifying borrower. The sales contract can be in the name of the trust, as long as the borrowers sign the contract as the trustees of the trust. The borrowers will be personally liable for the FIMC loan, but can still vest title in the name of the trust as long as it meets agency guidelines for Living Trusts.
Q: Do I need to re-pull a credit report if the DOB was entered incorrectly?
A: Yes. If the borrower’s initial credit report was ordered with data errors such as misspelled name, address or incorrect birth date, a new credit report will need to be pulled reflecting the accurate information.
USDA Fiscal Year 2021 Conditional Commitment Notice
Fiscal Year 2021 will begin 10/01/2020. USDA has announced an upfront guarantee fee of 1% accompanied by an annual fee of 0.35%, which remains the same, for both purchase and refinance transactions in FY 2021 (no fee change from FY2020).
During the beginning of each fiscal year, funding for the Single Family Housing Guaranteed Loan Program (SFHGLP) may not be available for a short period of time (historically about two weeks). Rural Development will issue Conditional Commitments “subject to the availability of commitment authority” for purchase and refinance transactions”.
- As we have in the past, FWL will continue closing and funding USDA loans if there is a lapse in funding during the fiscal changeover.
- Conditional Commitments will be accepted from RD with "subject to commitment authority" language in them, which means USDA loans continue closing and funding. (Business as usual.)
Refer to Fiscal Year 2021 Conditional Commitment Notice for details.
Freddie Mac LIBOR ARM Cutoff
As a reminder, Freddie Mac will be transitioning LIBOR ARMs to the SOFR ARM in the upcoming months. In order to prepare for the transition of this product, the following cutoff dates have been applied by Fairway Wholesale Lending for the LIBOR ARMs.
Please plan accordingly.
- Application Cutoff Date: 09/15/2020
- Lock Cutoff Date: 10/01/2020
- Final Funding Date: 11/02/2020
FHA Updates for Borrowers with Prior Mortgage Payment Forbearance
FHA announced their stance for borrowers who were granted forbearance and are seeking new FHA insured financing. These changes may be implemented immediately but must be effective for case numbers assigned on or after 11/09/2020. Full guidelines can be found COVID-19 Temporary Guidance topic in KO.
Updated! FEMA Disaster Area Declarations for Louisiana & California
The following areas in Louisiana have been updated as disaster areas due to hurricane Laura. The disaster incident period was declared on 08/22/2020 – 08/27/2020.
- Union, Morehouse, Caddo, La Salle, St. Landry, Acadia, Grant, Jackson, Lincoln, Natchitoches, Ouachita, Rapides, Sabine, Vermillion, and Winn Counties / Parishes
The following areas in California have been updated as disaster areas due to wildfires. The disaster incident period declared 08/14/2020 and is ongoing.
- Butte, Lake, Monterey, Napa, San Mateo, Santa Cruz, Solano, Sonoma, and Yolo Counties
Please Note: These are FEMA declarations and will affect all programs; therefore, we are implementing Fairway’s Disaster Area Appraisal and Re-Inspection requirements for both conventional and government loans.
This information has been added to FIMC’s Disaster Area List in Knowledge Owl for future reference.
FWL Releases More FHA Connection Videos
To help ensure you have a successful FHA process from the start, Fairway Wholesale Lending created several short training videos to provide step-by-step instructions when completing tasks in FHA Connection.
These helpful videos are posted in KnowledgeOwl in the corresponding FHA topic. If interested in viewing last week's topic, refer to:
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