This Week's Highlights - Tuesday, September 15, 2020
- USDA Fiscal Year 2021 Conditional Commitment Notice
- FHA Updates for Borrowers with Mortgage Forbearance
- Updated! FEMA Disaster Area Declarations for LA & CA
- FWL Releases New Disaster Area Reinspection Job Aid
- Freddie Mac LIBOR ARM Cutoff
- Adverse Market Fee Reminder
- Coming Soon! New Appraisal Ordering Platform
- On-Boarding Correspondent/Broker DRIVER Training
- FWL Releases FHA Connection Videos
- Income Continuance for Military Borrowers
- Owner's Extended Coverage
- Fannie Mae Selling Guide Updates
- Freddie Mac Guideline Updates & Clarifications
- FEMA Disaster Area Declarations for Iowa
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.
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.
- 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.
- 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.
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.
*Newly added counties from last week's Insider are provided in red.*
- 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 New Disaster Area Reinspection Job Aid
Fairway Wholesale Lending is excited to release the newly created PDMDA Job Aid for Properties Not Affected by Disasters, which will assist in determining what appraisal and re-inspection requirements are to be applied in certain disaster areas eligible for individual assistance.
NOTE: As a reminder, in order to access guidelines, you must be logged into Knowledge Owl.
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.
Adverse Market Fee Reminder
- Application Cutoff Date: 09/15/2020
- Lock Cutoff Date: 10/01/2020
- Final Funding Date: 11/02/2020
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
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.
On-Boarding Correspondent/Broker DRIVER Training
On-Boarding DRIVER training is now available for both new and existing correspondent and broker accounts. Various options are available depending on channel type as well as disclosing preference.Register below: Wednesday, September 16th @ 2:00 CSTTraining for Correspondent Lenders Thursday, September 17th @ 2:00 CSTTraining for brokers with initial disclosures prepared by Fairway
FWL Releases More FHA Connection Videos
To help ensure you have a successful FHA process from the start, Fairway Wholesale Lending continues to create 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. This week's topics include:
If interested in viewing last week's topic, refer to FHA Case Queries.
Note: As a reminder, you must be logged into Knowledge Owl to access guidelines.
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.
Fannie Mae Selling Guide Updates
Fannie Mae announced updates to their Selling Guide for September as follows:
- Accessory Dwelling Units
- Expanded property eligibility by allowing multi-width manufactured homes titled as real property to be eligible as an accessory unit, which was previously ineligible.
- As a reminder, a subject property that is a manufactured home and has an accessory unit is not permitted.
- Non-Occupant Borrowers - Clarification
- Guarantors, co-signers, and non-occupant borrowers are permitted on purchase, limited cash-out and cash-out refinance transactions.
Refer to SEL-2020-05 for details.
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.
- 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.
FEMA Disaster Area Declarations for IowaEarlier last week, the following areas in Iowa were updated as disaster areas due to severe storms. The disaster incident period was declared on 08/10/2020.
- 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.
Jumbo Appraisal Review Requirements
Previously, all Jumbo loans required a third-party appraisal review. Effective immediately for all loans, including loans in process not already submitted for review, an appraisal review is not required if either of the following are met:
- CU score of 2.5 or less or
- CDA is within -10% of appraised value
Important Notes: All loans must be locked in order to submit the appraisal for third-party review. Please account for additional time to complete review as rushes are not permitted.
For full program guidelines, refer to the Jumbo Program Matrix in Knowledge Owl.
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