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.

FHA Announces Updates for Borrowers with Prior Mortgage Payment Forbearance
FHA has 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.

The updates below supersede the requirements in the Handbook where guidelines conflict. Full guidelines can be found COVID-19 Temporary Guidance topic in KO. Generally, a borrower who was granted Mortgage Payment Forbearance is eligible for a new FHA insured mortgage. 

The following requirements apply when a Borrower has not continued to make their regularly scheduled mortgage payments as a result of being granted a Mortgage Payment Forbearance:

Purchase / No Cash-Out Refinances

• The Borrower must have completed the Forbearance Plan and made at least 3 consecutive monthly payments post forbearance.
• If any mortgage tradeline during the 12 months prior to the Case Number Assignment date reflects that the Borrower has made less than 3 consecutive payments since the Forbearance Plan, the loan must be downgraded.

Cash-Out Refinances

• The Borrower must have completed the Forbearance Plan and made at least 12 consecutive monthly payments post forbearance.
• If any mortgage tradeline reflects that the Borrower has made less than 12 consecutive payments since the completion of the Forbearance Plan, the loan must be downgraded.

Streamline Refinances

• A Borrower is eligible for a Non-Credit Qualifying Streamline if the Borrower has completed the Forbearance Plan and made at least 3 consecutive monthly payments post forbearance at the time of the Case Number Assignment. If these requirements are not met, the borrower must credit qualify.

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

• 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:

• Loan Amounts <$125,000
• Home Ready or Home Possible Mortgages

Q: My borrower is serving in the military and is just over halfway through his 6 year contract.  Does that mean he is ineligible for financing as the income has an end-date?

A: Not necessarily.  Although the guidelines indicate that income that has a defined expiration date must continue for certain number of years (dependent on agency) in order to be used, there are situations where contracts have set expiration dates, but are common and customarily subject to renewal.  When this situation occurs, we ask you obtain a letter of explanation from the borrower's superior officer, and a letter of explanation from the borrower that indicates the borrower is both eligible and intends to continue serving in the military.

Q: If the sales contract calls for “Owners Extended Coverage”, is the borrower allowed to remove it from the sales contract with an addendum or does FWL require this additional coverage?

A: The borrower can remove if they choose to. Owner’s title insurance coverage is optional.

Freddie Mac Guideline Updates and Clarifications
Freddie Mac updated and/or clarified the below items which became effective 09/02/2020, unless otherwise note below.

• Resale Restrictions
  • FHLMC has extended the right of first refusal time period from 90 days to 120 days for properties with resale restrictions.
• Leaseholds
  • At least one borrower must have been the lessee on the ground lease or lease agreement for at least 6 months on cash-out refinance transactions.  Note:  This was not previously addressed by FHLMC.
• Accessory Units
  • FWL had previously confirmed with FHLMC that MFHs as accessory units were not permitted. With this update, they will be eligible as accessory units. Refer to topic in Knowledge Owl for full requirements.
• Social Security Income
  • SS Income can be grossed up to 15% without documentation validating that the portions of the social security income is tax exempt. Current requirements still apply when using >15% gross up figure.
• Gift Funds
  • Wedding gift funds are now permitted when it is verified that they were in the borrowers' account within 90 days of the date of the marriage license/certificate (previously 60 days).
• Appraisals - Effective for all loans on and after 11/02/2020
  • Appraisers will need to analyze contract sales and listings, in addition to closed sales, when analyzing market conditions to report one unit housing trends in the neighborhood section of the appraisal. The appraiser’s analysis will support the use of positive or negative adjustments in the sales comparison approach and reflect changing market conditions.

• Benton, Boone, Cedar, Jasper, Marshall, Polk, Poweshiek, Scott, Story, and Tama Counties

Please Note: These are FEMA declarations and will affect all programs; therefore, Fairway’s Disaster Area Appraisal and Re-Inspection requirements for both conventional and government loans should be followed.  This information has been added to FIMC’s Disaster Area List in Knowledge Owl.