Mortgage Talking Points

Question: How long does a Buyer need to collect child support to use the money to qualify for a loan, and can 100% percent of the funds be used to qualify if paid monthly?

Answer: 100% of child support income can be used if 3 yrs continuance, including the ages of children, how long the child support will be paid, documentation of the child support order (divorce decree, court order, etc.).  Document regular receipt of payments. Fannie and Freddie have different rules when it comes to verifying child support income.

Fannie’s Rules:
–Full, Regular, and timely payments must be made:
– Fannie says Child Support must be received for 12 months by borrower to be considered stable. Freddie is only 6 months.
–If 6-12 months — for income to be considered stable, it must represent 30% or less of the total gross income used to qualify
– If less than 6 months, it cannot use income
–Full or partial payments made on an inconsistent or sporadic basis are considered unsuitable for qualifying or justifying high ratios.

In November 2011, Freddie updated their verification requirements to the following:

Alimony, Child Support and Separate Maintenance Income

• • Freddie says Child support must show that the Payor was obligated pay Borrower for the most recent 6 months and is obligated to make payment to the Borrower for the next three years.

• • Evidence that the payments have been received for the most recent six months

• • If the Payor has been obligated to make payments for less than six months, if the payments are not for the full amount or are not received on a consistent basis, the income cannot not be considered for qualifying.

Find more answers to your mortgage questions www.MortgageCurrentcy.com

Fannie has updated the HARP FAQ’s as of December 20, 2011.  Here are 5 questions and answers that affect loan originators:

Q. 23. (New) Does standard Selling Guide policy related to the 4506-T apply to Refi Plus and DU Refi Plus transactions?

Standard Selling Guide policy related to the 4506-T applies to Refi Plus loans if the payment is increasing more than 20% and to all DU Refi Plus loans since borrower income must be verified for qualification purposes. It is not applicable to Refi Plus loans when the payment is not increasing more than 20% since verification of borrower income is not required.

Q 26. (Updated) Why was the “reasonable ability to repay” representation and warranty removed?

The “Reasonable Ability to Repay” terminology has been removed from the DU Refi Plus and Refi Plus Underwriting Requirements sections of the Guide because these sections already describe the specific underwriting requirements that are applicable to each transaction.

Under Refi Plus (manual underwriting) eligibility is based primarily on the payment history of the existing mortgage and the borrower benefit provisions. Additionally, effective with applications dated December 1, 2011, if a borrower’s payment increases more than 20% then the borrower will have to be re-qualified. Under DU Refi Plus, DU applies the standards for ensuring the borrower has a reasonable ability to repay. For these reasons the lender is not responsible for meeting additional “reasonable ability to repay” standards.

Q 59. (Updated) Even if no new project review is required for a Refi Plus (manual underwriting) loan secured by a condominium or cooperative, must the lender still confirm adequate insurance coverage for the project or unit?

No confirmation of insurance coverage is required for Refi Plus (manual underwriting). The lender’s original project review would have included confirmation of the required insurance coverage, and there are existing processes required by the Servicing Guide to monitor and ensure such insurance coverage remains in force

Q 83. (Updated) If a loan is originally submitted to DU, can it be converted to manual Refi Plus?

Yes. Loan casefiles originally submitted to DU may be converted to a Refi Plus (manual) transaction for any reason and without regard to the DU recommendation. In all cases, if the lender is converting a loan from a DU Refi Plus to a Refi Plus (manual underwriting) transaction, the lender must be the current servicer of the loan and the loan must comply with all Refi Plus (manual underwriting) requirements.

Q 84. (Updated) For a loan to be eligible for DU Refi Plus, the borrower(s) and subject property address on the loan casefile must match an existing eligible Fannie Mae loan. Are there any existing Fannie Mae loans that are not eligible to be refinanced using DU Refi Plus?

Certain existing loans will not be identified by DU as eligible for DU Refi Plus. They include, but are not limited to: loans purchased by Fannie Mae on or after June 1, 2009; loans currently subject to any outstanding repurchase request (see Q82 for related information); some loans that were subject to some form of secondary-market credit enhancement (see Q56); and government mortgages.

Although these loans may not be eligible to be refinanced using DU Refi Plus, they may be eligible for other Fannie Mae refinance options.

Here’s the link to read all 100 of them:

https://www.efanniemae.com/sf/mha/mharefi/pdf/refinancefaqs.pdf

The big surprise this month is USDA increasing the upfront guarantee fee for refinance loans. Just 7 days beforehand, Rural Housing sent out an email about the new guarantee fees—and the memo still had the lower fee.

Then lo and behold, on Dec 5, they sent an update letter—with the notice that the funding fee would go in effect on Dec 7. Even the rural housing field offices were surprised. This increase in refi guarantee fees is supposed to alleviate the shortage of refinance funds where the money faucet is turned off and on a regular basis—we’ll see!

So you think you are confused now?  Well we just got word (Nov 22, 2011) that Fannie and Freddie’s loan limits are remaining the same (except in Fairfield County CT) while FHA loan limits are increasing.

Here’s the issue–  FHA requires 3.5% down payment based on higher loan amounts.

Fannie and Freddie require a minimum of 5% based on lower loan amounts.

I hope it doesn’t happen, but guess who’s going to have the higher default rates a few years from now?  Are they purposely trying to put an end to the FHA loan program?

Here’s the link to the FHFA News Release -

http://www.fhfa.gov/webfiles/22769/CTY112211.pdf

Oh, and just try to remember which loan amount is for which loan program!

Fannie and Freddie just released their separate versions of how they will be underwriting loans sold to them prior to June 1, 2009 when it comes to refinancing mortgages they own.

Here’s how they are the same:

NO LTV limits (200% LTV anyone?)

Lowered the LLPA add ons for owner-occupied homes

Eliminate LLPA add ons for less than 20 year terms

620 Minimum Credit Score

Max Debt Ratio 45%

Now, here’s where they are different - Fannie is MORE specific when it comes to what they will accept and won’t accept.  For example, Fannie says that the Bankruptcy and foreclosure waiting periods do not apply. Freddie does not mention it.

Fannie has specific wording you can use when soliciting borrowers whose loans are held by Fannie.  Freddie does NOT want lenders to solicit borrowers.

There many other differences. I  recommend that you read both articles on the www.MortgageCurrentcy.com website  and become familiar with with the differences between the two–don’t get caught no knowing what rule applies to Fannie and which one applies to Freddie!

HUD published the final rule setting minimum standards that states must meet to comply with the SAFE Act in licensing MLOs in the Federal Register on June 30, 2011.  The rule is effective in 60 days – August 29, 2011. 

The SAFE Act established nationwide standards for licensing of MLOs in 2008.  A proposed rule was published 18 months ago for comment.  The final rule details HUD’s consideration of the commentary and reasoning behind the final rule.

All 50 states, the District of Columbia, Puerto Rico, Guam, and the Virgin Islands have enacted legislation in support of the SAFE Act.  HUD is also charged with oversight of the states’ compliance and if HUD determines a state or territory does not meet SAFE Act requirements, HUD will establish and maintain a licensing system for a state or territory.  States are allowed to enact their own requirements over and above the federal guidelines.  The Act was amended by Dodd-Frank, and the authorities and duties assigned to HUD by the SAFE Act will be transferred to the CFPB on July 21, 2011.

The SAFE Act also requires states to participate in the NMLSR, which was established by two state regulatory associations – the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR).   The NMLSR is up and running and registration of all MLOs is now required.  Consumers can or will soon be able to also access free information on state-licensed and federally licensed MLOs as well as disciplinary and enforcement actions against them.  In addition to developing the NMLSR, CSBS and AARMR developed model legislation to aid states’ compliance with the requirements of the SAFE Act.  HUD has reviewed the model legislation and advised that the model meets or exceeds minimum requirements.

Clarifications of Note in the Final Rule

A License is required for individual who is engaged in the “business of a loan originator” – a person that acts as an MLO in a commercial context and with some degree of habitualness or repetition.  An MLO is an individual that takes an application and offers or negotiates terms for compensation or gain.  The absence of either a commercial context or a degree of habitualness or repetition means that the activity does not constitute the “business” of a MLO and indicates an individual may not be subject to SAFE Act licensing requirements.

The SAFE Act seeks to protect consumers from incompetency, fraud, and other abuses by ensuring that individuals acting as MLOs have received training on and have demonstrated understanding of the applicable legal and ethical obligations. 

HUD concludes that consumers are unlikely to need protection from individuals acting as MLOs in a purely public or charitable context, without the purpose of obtaining profit, or who acts as a MLO with respect to financing that is provided only once or very rarely.  Individuals who act as MLOs as employees of government agencies or of housing finance agencies, are not subject to licensing and registration requirements of the SAFE Act.  These employees of government and housing agencies do not engage in the “business” of loan origination – the requisite commercial context is lacking.

The SAFE Act does not cover employees of bona fide nonprofit organizations who act as MLOs outside a commercial context.  An organizations 503©(3) status is insufficient to conclude the organization’s employees are exempt, rather the organization’s activities, purpose, incentive structures, and loan products must be considered in order to determine that its employees act outside of a commercial context.

SAFE Act coverage is determined by activities, not the label of the transaction or professional title of an individual.  HUD deferred determination of coverage of individuals involved in material mortgage modifications to the CFPB.

Interpretation? 

Far too many mortgage related laws (and most other laws in general) are written, passed, justified, and then read.  Regulators are pushing for a brighter line between operations and sales, yet the SAFE Act trips over this line in addressing supervision of loan processors and underwriters.  Loan processors and underwriters are clearly not covered by licensing under the SAFE Act when such individuals perform clerical or support duties at the direction of and subject to the supervision and instruction of either a state-licensed MLO or a registered MLO.  Hmmm…  HUD says get over it…the language is clear and here are some definitions – gee, thanks.  News Flash – if your Ops Staff has customer contact, they may be subject to SAFE Act requirements.  Yep, clear as mud…Read Appendix C starting at page 147 of the final rule for your clarity.

Links

HUD Announcement http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2011/HUDNo.11-133

With Fannie’s REO HomePath incentives expiring on June 30th, Fannie has extended the dates, on the sale of their REO’s as follows:

• Incentives available on offers submitted between 6-14-11 and 9-15-11
• Must close by 10-31-11
• They added $1200 selling bonus to agent who sells owner-occuped property
• All other incentives remain the same…

Link to “other Incentives”  http://www.mortgagecurrentcy.com/archives/archives_action3.php?article_number=939&first_test=1

Be the first to let your real estate agents know…

Question:   We have a borrower who has withdrawn funds from her Italian Bank for the down payment.  How do you verify foreign assets?

Foreign assets are not looked at any differently — the statement must be readable and show the following:

 – Clearly identify the borrower

 – include account number

 – include the time period covered

 – include all transactions

 – include the ending account balance

There are services that will translate statements –including online translation websites like www.Babelfish.com.   You could provide the English version and in your cover letter, tell the underwriter what you did so he/she can re-verify themselves.  Or you could possibly request a VOD in lieu of the statement — the foreign bank may be able to accommodate filling out the VOD rather than providing their statement in English.

Freddie announced their HomeSteps new incentive program on Monday, May 16th.  

But, first a couple of things (you need to know) about the fine print!

·         Freddie is paying up to 3.5% of the buyers closing costs—It’s based on the PURCHASE PRICE and not the loan amount

·         Freddie says they will pay up to 30% Appliance Discount—No they won’t—it’s part of the 2-year Home Warranty that in included, BUT, it’s only paid if the, and I quote “if the appliances are found to have a mechanical failure that existed PRIOR to the closing date…the Home Warranty company will provide a coupon for a 30% discount if appliances are defective. 

·         $1,200 Selling bonus to real estate agent—But Freddie has the right to remove homes from the promotion at any time. 

·         Here’s the link to learn more http://www.homesteps.com/smartbuy/

The push is on by Freddie to sell their REO properties and on May 16, 2011, they posted a home buyer incentive program and a selling agent bonus program and combined it with their FirstLook Initiative.  Here are the details—with a short explanation of the “fine print” that you need to know about!

·         Purchase offers for select properties must be dated between May 16 and July 31, 2011

·         Must close by September 30, 2011

·         Owner-occupied only

·         “Select Properties” only

·         Will pay up to 3.5% of buyer’s closing costs

o   Based on purchase price (not loan amount)

o   If closing costs are less than 3.5%, will only pay actual amount

o   Partial list of closing costs: 

§ Discount Points

§ Loan origination fees

§ Lender fees

§ survey

§ Appraisal

§ Pre-paids

·         Bonus to Selling agent - $1,200

o   Can remove property any time

§ 2-Year Home Owner Warranty Included

o   30% discount for new appliances if found to “have mechanical failure due to condition that existed prior to the closing date. 

o   15% discount for repairs if buyer chooses from home warranty company’s list of providers

§ First Look Initiative

o   New REO listings

o   First 15 days of listing—only offered to owner-occupied home buyers.

o   After 15 days—offers from investors will be accepted

If you’d like to know more, here’s the link http://www.homesteps.com/smartbuy/.  

Fannie Mae, under their www.HomePath.com program, announced a new incentive (actually it’s an old one that they brought back because the other one sucked) for buyers of their REO properties.

Will Pay 3.5% of buyer’s closing costs

Owner-occupied homes only

Must close by June 30, 2011

Some states are offering a Realtor “selling bonus” on certain properties

Here’s what to watch out for–make sure that the incentive clauses are INCLUDED in the contract because Fannie has been known to “forget” to include and won’t pay the incentives if they are not in the contract.