Loan Terms for FHA Case Numbers Assigned Prior to … … · Correspondent Seller Guide Page 1 of 31 Loan Terms for FHA Case Numbers Assigned Prior to January 1, ... HUD Allowable

Loan Terms for FHA Case Numbers Assigned Prior to January 1, 2009

January 16, 2009

Correspondent Seller Guide Page 1 of 31


In This Product Description

This product description contains the following topics:

Loan Terms...................................................................................................................2 Maximum Loan Amount and LTV.............................................................................2 Low & High Average Closing Costs States ..............................................................4 Minimum Cash Investment .......................................................................................5

Parties in Title ..............................................................................................................7 Non-Purchasing Spouses.........................................................................................7 Parties in Title ...........................................................................................................7

Veteran’s Preference ...................................................................................................8 General .....................................................................................................................8 Veteran’s Who Benefit ..............................................................................................8 Minimum Cash Investment Required for Veterans...................................................8 Potential Cash Savings ............................................................................................9 Documentation Requirements ..................................................................................9 AUS/TOTAL Scorecard ............................................................................................9 SunTrust Internal MLCS Data Entry .......................................................................10

Refinances..................................................................................................................11 Cash-Out Refinances .............................................................................................11 No Cash-Out With appraisal (Rate/ Term Refinance) ............................................13 Streamline Refinances General Information ..........................................................15 Streamline Refinances General Information, (continued) ......................................16 Streamline Refinance WITHOUT an Appraisal ......................................................17 Streamline Refinance (No Credit Qualifying) WITH an Appraisal ..........................19 Additional Requirements for All Streamlined Refinance Transactions...................21

Cash Requirements ...................................................................................................24 Down Payment .......................................................................................................24

HUD Allowable Closing Cost ....................................................................................25 General ...................................................................................................................25 Allowable Costs/ Not Included in Acquisition .........................................................26 Unallowable Costs..................................................................................................26

Mortgage Insurance...................................................................................................27 General ...................................................................................................................27 MIP Premiums ........................................................................................................27 Streamline Refinance: MIP for 15 or Less Years ...................................................31


January 16, 2009


Loan Terms

Maximum Loan Amount and LTV

General Information • Generally, the maximum insurable mortgage is the lesser of:

• FHA’s statutory loan limit for the area (typically a county or metropolitan statistical area, MSA), or

• the applicable loan-to-value limit. • Loan amount limits vary by program and the number of units within the dwelling.

They apply to both purchase transactions and refinances. For some programs, they may be increased where housing costs for the area support higher limits. FHA sets nationwide limits for low closing cost areas and high cost areas. Information on a particular area’s maximum statutory loan limit should be addressed to the appropriate HOC office.

Reference: See the Low and High Average Closing Costs States subtopic subsequently presented for a listing of states.

Base Loan • Maximum LTVs are determined using the “base” loan amount. • The “base” loan is the maximum loan amount prior to adding any financed

mortgage insurance premium. The type of transaction and the geographic location of the subject property determine the calculation of the base loan amount.

• If the subject property is located in a “high closing cost” state, the maximum base loan is determined as the lesser of the following: • The maximum loan for the geographic area, or • One (1) of the following LTV percentages based on the lesser of the sales

price or appraised value: • 98.75% for properties <= $50,000, or • 97.75% for properties > $50,000

• If the subject property is located in a “low closing cost” state, the maximum base loan is determined as the lesser of the following: • The maximum loan for the geographic area, or • One (1) of the following LTV percentages based on the lesser of the sales

price or appraised value: • 98.75% for properties <= $50,000, or • 97.65% for properties more than $50,000 up to $125,000, or • 97.15% for properties more than $125,000.

Continued on next page


January 16, 2009


Loan Terms, continued

Maximum Loan Amount and LTV, (continued)

The table below reflects the allowable LTV or other methods used in the maximum mortgage calculations.

Occupancy Value Stage of

Construction LTV

Purchases Owner Occupied </=$50,000 Proposed and Existing

98.75%

Owner Occupied >$50,000 Proposed and Existing

Low Closing Cost States: 97.65% up to $125,000 97.15% if > $125,000 High Closing Cost States: 97.75% if >$50,000

Owner Occupied Under Construction or Less than 1 Year

90% Maximum financing allowed if Pre-approved* *See the “New Construction” topic for acceptable pre-approval documentation in the FHA product description.

**Second Homes 85% **Investment 75%-1 Unit

85%-2 - 4Units Note: **Second Homes and Investment properties are eligible for FHA financing only under limited circumstances. Refer to each subtopic within the “Occupancy/Property Types” topic of the FHA product description for additional information before offering FHA financing for these property types. Type of Refinance 1 Value LTV Refinances Streamline </=$50,000 98.75% Streamline > $50,000 97.75% “No Cash Out” with

appraisal </=$50,000 98.75% Both Low/High

Closing Cost States “No Cash Out” with

appraisal >$50,000 97.75% High Closing

Cost State “No Cash Out” with

appraisal >$50,000 - $125,000 97.65% Low Closing

Cost State No Cash Out” with

appraisal >$125,000 97.15% Low Cost

closing State 1See the topic Refinance Guidelines for further information.



January 16, 2009



Low & High Average Closing Costs States

The following table shows the low and high average closing costs states.

Low Closing Cost States High Closing Cost States

Arizona Alabama Mississippi California Alaska Montana Colorado Arkansas North Carolina

Guam Maryland Tennessee Idaho Connecticut North Dakota Illinois District of Columbia Nebraska Indiana Delaware New Hampshire Nevada Georgia New York

New Mexico Florida New Jersey Oregon Hawaii Ohio

Utah Iowa Oklahoma Virgin Islands Massachusetts South Dakota Washington Kansas Pennsylvania Wisconsin Kentucky Puerto Rico Wyoming Louisiana Rhode Island

Maine South Carolina Michigan Texas Missouri Vermont Minnesota Virginia West Virginia



January 16, 2009



Minimum Cash Investment

HUD’s Requirement The National Housing Act requires the borrower to have a minimum cash investment of three percent (3.00%) of the Secretary’s estimate of the cost of acquisition. FHA has determined that the minimum cash investment be based on sale price, excluding closing costs. Closing costs will not be included in calculating the three percent (3.00%) cash requirement, but may be included in satisfying the three percent (3.00%) requirement. Notes: • If the borrower pays for the appraisal and credit report fees with a credit card,

these fees may NOT be included in the three percent (3.00%) cash requirements.

• Individuals will be required to manually apply the three percent (3.00%) minimum cash investment requirements to DU/DO findings when the casefile submission occurs on or after the weekend of January 24, 2009.

Reference: See the topic Veteran’s Preference in this product description for reduced cash investment requirements for veterans. Procedures • Calculate the borrower’s minimum investment of three percent (3.00%). • Calculate the maximum mortgage amount. • Calculate the borrower’s down payment. Total acquisition cost minus maximum

mortgage amount. Notes: • The Mortgage Credit Analysis Worksheet (MCAW) must be included in the loan

file to assist the underwriter with mortgage calculations when the FHA Case Number has been assigned prior to January 1, 2009.

• Total acquisition cost is the lesser of the sales price or appraised value plus closing costs paid by the borrower, exclusive of prepaid items and discount points.

• Compare the minimum investment of three percent (3.00%) to the calculated

down payment. • The borrower’s down payment must be greater than or equal to the minimum

cash investment. If not, then the loan amount must be reduced. • When the transaction includes seller credits, POCs, lender credits, etc… the

calculation gets more complicated. Please use the following forms to help determine if the three percent (3.00%) investment requirement has been satisfied: • COR 0327 - FHA 3.00% Required Investment For Purchases, • COR 0326 - 3.00% Aggregate Investment For FHA Purchases, and • COR 0328 - Procedures for Verifying Borrower’s 3.00% Cash Investment On

FHA Loans.


http://www.stmpartners.com/manual/cor/forms/COR0327.pdf




January 16, 2009



Minimum Cash Investment, (continued)

• The table below provides an example of a calculation used to determine the

borrower’s required three percent (3.00%) investment.

Calculation of Required Minimum Cash Investment

Sales price Minimum cash investment Borrower(s) required funds

$140,000 x 3.00%$ 4,200

Calculation to Determine Actual Down Payment

Sales price Less base loan amount ($140,000 x 97.75%) Actual down payment

$140,000-136,850$ 3,150

Determination of Amount of Required Borrower Paid Closing Costs.

Borrowers required funds Less actual down payment Borrower paid closing costs

$ 4,200 - 3,150$ 1,050

• In the preceding example, the borrower must pay a minimum of $1,050 of HUD

closing costs to meet the three percent (3.00%) requirement. If the loan amount were reduced to $135,800 (97.00% of $140,000), all closing costs could be paid by the seller as the down payment would equal the $4,200 required investment.


January 16, 2009


Parties in Title

Non-Purchasing Spouses

• If it is required by state law in order to perfect a valid and enforceable first lien,

the non-purchasing spouse may be required to sign either the security instrument or documentation evidencing that he/she is relinquishing all rights to the property.

• If the non-purchasing spouse executes the security for such reasons, he/she is not considered a borrower for HUD’s purposes and does not need to sign the loan application. In all other cases, the non-purchasing spouse is not to appear on the security instrument or otherwise take title to the property at closing.

• Except for those obligations specifically excluded by state law, the debts of the non-purchasing spouse must be considered in the qualifying ratios if the borrower resides in a community property state or the property to be insured is located in a community property state.

• If the borrower resides in a community property state or the property is located in a community property state, a credit report must be obtained The non-purchasing spouse’s credit history is not to be considered a reason for credit denial.

• HUD requires that DE Underwriters know the state laws concerning community property and apply them appropriately to ensure that there is no increased risk to HUD.

Parties in Title • All parties appearing on the property deed or title must also appear on the

security instrument (i.e., mortgage, deed of trust, security deed). • The only exception would be in the event of a Living Trust. The Trust must

appear on the security instrument (i.e., mortgage, deed of trust, security deed). The individual borrower(s) is not required to appear on the property deed or title.

Reference: See the “Eligible Borrowers” topic of the FHA 203(b) product description for additional information.


January 16, 2009


Veteran’s Preference

General • This FHA program supplements but does not replace the entitlement programs

offered by the Department of Veterans Affairs (VA). • The three percent (3.00%) cash investment requirement for mortgagors does not

apply to borrowers who are qualified veterans. • Under certain circumstances, the “Veteran’s Preference” may result in a

significant reduction to the cash needed to close the mortgage.

Reference: See the Potential Cash Savings subtopic subsequently presented for additional information.

Veteran’s Who Benefit

The additional mortgage financing opportunity being provided by FHA may directly benefit the veterans listed below. • Veterans with less than full eligibility for a VA guaranteed loan. • Veterans who are co-borrowers with someone other than a spouse. • Veterans whose eligibility is tied up until a loan that was assumed is paid off, or

the veteran is released from all liability. • Veterans reusing their eligibility and whose new loan, under VA, may have a

funding fee greater than FHA’s mortgage insurance premium.

Minimum Cash Investment Required for Veterans

The following chart reflects the minimum cash investment required for Veterans. Reference: See the Low and High Average Closing Costs States subtopic within the Loan Terms topic for a listing of low and high average closing costs states.

High Average Closing Cost States

Value/Sales Price =/< $50,000 1.25%Value/Sales Price > $50,000 2.25%

Low Average Closing Cost States

Value/Sales Price =/< $50,000 1.25%Value/Sales Price > $50,000 up to $125,000 2.35%Value/Sales Price > $125,000 2.85%



January 16, 2009


Veteran’s Preference, continued

Potential Cash Savings

• If the property seller pays all the closing costs, or if there is premium pricing used

for settlement charges, or some combination of both, the cash settlement reduction can be substantial. As the amount of borrower-paid closing costs increase, the benefit diminishes.

• The cash reduction will always be equal to the difference between the maximum loan-to-value (LTV) limit, which varies according to sales price and the state where the property is located, and 97.00% multiplied by the lesser of the sales price or appraised value.

• The table below shows the potential cash savings at loan settlement for veterans in both low and high-closing costs states.

Sales Price - Normal 3% Low Closing Cost State

Savings for Veterans Cash Required - Savings

High Closing Cost State Savings for Veterans

Cash Required - Savings $ 50,000 $1,500 $ 625 $ 875 $ 625 $ 875 $ 75,000 $2,250 $1,763 $ 487 $1,688 $ 562 $100,000 $3,000 $2,350 $ 650 $2,250 $ 750 $125,000 $3,750 $2,938 $ 812 $2,813 $ 937 $150,000 $4,500 $4,275 $ 225 $3,375 $1,125 $200,000 $6,000 $5,700 $ 300 $4,500 $1,500 $250,000 $7,500 $7,125 $ 375 $5,625 $1,875

Documentation Requirements

• A completed Certificate of Veterans Status (CVS, form VA 26-8261) issued to

the veteran borrower is the only document that may be used for program eligibility.

• The Department of Veterans Affairs is solely responsible for determining eligibility for a Certificate of Veterans Status (CVS) and its subsequent issuance.

• The CVS is obtained by sending the form Request for Certificate of Veteran Status (COR 0359), HUD –92950, VA Form 26-8261a, along with proof of military service to the appropriate VA Eligibility Center.

AUS/TOTAL Scorecard

• Manual underwriting is required for the Veteran’s Preference loans. • The reduced cash investment for veterans is not yet eligible for AUS/TOTAL

Scorecard underwriting. • If run through AUS an Approve/Ineligible decision will be generated, the AUS

feedback/ documentation requirements are invalid and may NOT be used for documentation requirements.




January 16, 2009


Veteran’s Preference, continued

SunTrust Internal MLCS Data Entry

The following MLCS data entries are required for calculation of the reduced cash investment for veterans: • Loan Type = F • Processing Field/MOE Screen = VET • Purpose = P



January 16, 2009


Refinances

Cash-Out Refinances

General • Cash-out refinances are eligible only for primary residences. • HUD considers cash out refinances for debt consolidation a high risk, especially

if borrowers have not demonstrated a significant increase in income and appear to be heavy credit users. These transactions should be scrutinized more carefully.

• Properties owned free and clear must be refinanced as cash-out transactions. • Borrowers who are delinquent or in arrears with their existing mortgage, or had a

late payment in the last twelve (12) months are NOT eligible for cash-out financing.

• Any co-borrower or co-signer being added to the Note must be an occupant of the subject property.

• Non-occupant co-borrowers or co-signers may not be added to the Note in order to meet SunTrust’s credit underwriting guidelines for any cash-out transaction.

• New subordinated financing is not allowed on any cash-out transaction. LTV / TLTV up to 95.00% The eligibility conditions that must be met for FHA to insure a 95.00% LTV cash-out refinance include those listed below. • Base loan amounts greater than $417,000 are not eligible. • The borrower must have made at least twelve (12) mortgage payments on the

subject property. • For borrowers who have owned their property for at least twelve (12) months

but do not have a full twelve (12) months payment history; lenders may create an aggregate twelve (12) month payment history from a previous mortgage the borrower held on the subject property.

• The borrower must have owned the subject property as his/her principal residence for at least twelve (12) months preceding the date of the loan application.

• The maximum LTV is based on the appraised value. • When the LTV of the proposed first mortgage is 95.00%, no subordinate

financing may remain on the loan regardless of the length of ownership. • Subordinate financing may remain in place, up to a TLTV of 95.00% (must be

subordinate to the new FHA insured first mortgage), provided the homeowner qualifies for making scheduled payments on all liens.



January 16, 2009


Refinances, continued

Cash-out Refinances, (continued)

• Discount points, prepaid expenses and closing costs may not be included in or

added to the appraised value of the property. • If the subject property is encumbered by a mortgage, the borrower must have

made all of his/her mortgage payments within the month due for the previous twelve (12) months (i.e., no payment may have been more than thirty (30) days late) and be current for the month due.

• The property must be a one-to-two (1-2) unit dwelling. • Three-to-four (3-4) unit properties are not eligible.

LTV up to 85.00% When any of the eligibility conditions of the 95.00% cash-out refinance cannot be met, the borrower(s) may qualify for a cash-out refinance at a combined 85.00% TLTV. The eligibility conditions include those shown below. • If the subject property is owned less than one (1) year prior to loan application

and it is a primary residence, the maximum loan is limited to a combined TLTV of 85.00% of the lesser of: • appraised value (no closing costs, discount points or prepaid items), or • original sales price of property (no closing costs, discount points or prepaid

items). • A combined TLTV of 85.00% of the appraised value may be used if the borrower

has owned the subject property for at least one (1) year.

Note: A combined TLTV includes the proposed FHA first mortgage and any secondary financing.

• If the secondary financing is an equity line, the maximum amount of the equity

line is used in the calculation. • When the LTV of the proposed first mortgage is 85.00%, no subordinate

financing may remain on the loan regardless of the length of ownership. • Properties owned free and clear must be refinanced as cash-out transactions. • Discount points, prepaid expenses and closing costs may not be included nor

added to the properties appraised value. • One-to-four (1-4) unit dwellings are eligible. Reference: See the Contributions by Interested Parties topic of the FHA 203(b) product description for additional information.



January 16, 2009



No Cash-Out With appraisal (Rate/ Term Refinance)

General Information • The existing mortgage being refinanced can be either a current FHA, or a

conventional or a VA loan. • Requires an appraisal, full processing documentation and underwriting. • Owner-occupied only. • The maximum insurable mortgage is based on the lesser of one (1) of the

following two (2) calculations: • multiply the appraised value of the property by the appropriate factor, as

shown in the chart below for the property’s value and the state where it is located (not including discount points, closing costs nor prepaid expenses), or

• the sum of the existing first lien, closing costs, prepaid expenses, borrower paid discount points, purchase money seconds, junior liens (not used to acquire the property) over twelve (12) months old [i.e. twelve (12) permanent mortgage payments made], borrower paid repairs required by the appraisal minus any refund of UFMIP (prepaid expenses are limited to per diem interest and hazard/flood insurance, property taxes and mortgage insurance impound).

Note: Any appraisal requirements, including, repairs, must be complied with before the mortgage is eligible for insurance endorsement.

See the table below for the Max LTV/TLTV Percentage and Property Value/State Location chart.

Low Closing Cost State LTV / TLTV

Property value at $50,000 or less 98.75% / 105.00% Property Value between $50,00 and $125,000

97.65% / 105.00%

Property value in excess of $125,000 97.15% / 105.00%

High Closing Cost State LTV / TLTV Property Value at $50,000 or less 98.75% / 105.00% Property value in excess of $50,000 97.75% / 105.00%

References:

• See the Low and High Average Closing Costs States subtopic in the Loan Terms topic for additional information.

• See the FHA Refinance Loan Amount Worksheet (COR 0333) for assistance in calculating the loan amount.

• The mortgage being refinanced must be current for the month due. The

payment does not need to be paid for the month in which the loan closes/funds; if the closing/funding rolls over to the following month, the prior month’s payment cannot be included in the loan amount.

• The borrower may not receive cash back in excess of five hundred dollars ($500) at closing.




January 16, 2009



No Cash-Out With appraisal (Rate/ Term Refinance), (continued)

• The new mortgage amount cannot exceed the sum of the existing first lien

(including interest and any prepayment penalties), closing costs, discount points, accrued late charges, escrow shortages, the amount necessary to satisfy any subordinate liens, including equity lines of credit, seasoned at least one (1) year [i.e. twelve (12) permanent mortgage payments made] and borrower paid repairs required by the appraisal.

• Delinquent interest may not be included. The refinance does not permit a borrower to obtain cash back by not making a mortgage payment when due.

• Prepaid items may be included in the new loan amount for rate/term refinance transactions as long as there is sufficient equity in the property. Prepaid expenses may include the per diem interest to the end of the month on the new loan, hazard insurance premium deposits, monthly mortgage insurance premiums, and any real estate tax deposits needed to establish the escrow account.

Note: This is regardless of whether the mortgagee refinancing the existing loan is also the servicing lender for that mortgage.

Subordinate Liens • Subordinate liens, including credit lines, with six (6) months seasoning (i.e. six

(6) permanent mortgage payments made), may remain outstanding provided the FHA loan and subordinate lien meets the criteria outlined in the topic “Secondary Financing” of the FHA product description.

• If disbursements from an equity line exceed a total of one thousand dollars ($1000) within the past twelve (12) month period and the funds were used for purposes other than repairs and rehabilitation of the subject property, the line of credit cannot be included in the new mortgage.

• Subordinate financing must be seasoned twelve (12) months [i.e. twelve (12) permanent mortgage payments made] to be included in the loan amount.

Spousal Buy-Outs • The amount of “specified equity” in a spousal buy-out is considered property

related indebtedness and can be included in the new mortgage. • The “specified equity” must be documented in a recorded property settlement

agreement or divorce decree. • If the borrower is newly separated and no property settlement agreement has

been prepared, a legally recorded document prepared by an attorney specifically outlining the division of equity is acceptable to HUD.

Seasoning Requirement • If the subject property was purchased less than one (1) year prior to loan

application and is not already FHA-insured, the maximum loan will be determined by using the lesser of the appraised value or the original sales price (plus the cost of any repairs or rehabilitation, with proper documentation).

• If the subject property was purchased more than one (1) year prior to loan application, the maximum loan will be determined from the appraised value.



January 16, 2009



Streamline Refinances General Information

• Streamline refinances are designed to lower the monthly principal and interest

(P&I) on a current FHA mortgage and must involve no cash back to the borrower except for minor adjustments at closing not to exceed five hundred dollars ($500).

• A mortgage on a principal residence may be refinanced to a shorter-term mortgage, provided the monthly principal and interest increases no more than twenty percent (20.00%). Any increase exceeding twenty percent (20.00%) requires a credit review.

• The existing loan, including subordinated financing must be seasoned for six (6) months [i.e. six (6) permanent mortgage payments made} with an acceptable payment history [i.e., no late payments of thirty (30) days or beyond].

• A credit report is not required for a Non-Credit Qualifying Streamline Refinance. • Streamline refinances can be insured with or without an appraisal, and without

HUD’s Credit Alert Interactive Voice Response System (CAIVRS). • Streamline refinances by investors or for secondary residences may only be

made without an appraisal. • Repair costs may not be included in the mortgage amount. Although FHA does

not require repairs (except for lead based paint repairs) on streamlined refinances with an appraisal, the lender may require completion of repairs as a condition of the loan.

• HUD’s “Limited Denial of Participation (LDP) List” and the government wide General Services Administration’s (GSA) “List of Parties Excluded from Federal Procurement or Non-procurement Programs” are still required.

• The results of reviewing these two lists must be documented in the file with a copy of the LDP/GSA computer printouts placed in the underwriting package BEFORE submitting the loan to the Underwriter.

• The “Underwriter Comments” section of the FHA Loan Underwriting and Transmittal Summary (HUD-92900-LT) must be completed to reflect this information.

• Prepaid expenses may include the per diem interest to the end of the month on the new loan, hazard insurance premium deposits, monthly mortgage insurance premiums, and any real estate tax deposits needed to establish the escrow account, regardless whether the mortgagee refinancing the existing loan is also the servicing lender for that mortgage.

• Tax escrows are limited by the amount necessary to establish the required account. Depending on when taxes are due, this amount could vary from the two (2) months cushion permitted under RESPA to as many as 14 months (a year’s worth of taxes due before the first payment plus the cushion).



January 16, 2009



Streamline Refinances General Information, (continued)

• It is not appropriate to include in the new mortgage amount the sum of any mortgage payments due for a prior month by the homeowner.

Note: If a payment is due June 1 and the loan closes/funds during that month, the payment may be “skipped;” on or after that date, the June payment is considered as a past due payment on July 1 and may not be included in the loan amount.

• A refund of the previous upfront MIP (UFMIP), if there is one, must be included

in determining the mortgage amount. The lesser of the new UFMIP or the “refund” process is used.

• Borrowers with bankruptcies that are discharged less than one (1) year are only eligible for non-credit qualifying streamline refinance.

• If a condominium project has its approval withdrawn, FHA will only insure streamline refinances without appraisals in that project.

• The Streamline Refinance should not be run through TOTAL. If the loan is run through TOTAL for a risk assessment, it then becomes mandatory to provide documentation verifying the entries (i.e., income, liabilities, assets, and/or cash reserves).

References: • See the FHA Refinance Maximum Loan Amount Worksheet (COR 0333) for

assistance with the calculation. • See the Additional Requirements for All Streamlined Refinance Transactions

subtopic subsequently presented in this topic for additional information.




January 16, 2009



Streamline Refinance WITHOUT an Appraisal

• Eligible for owner occupied, secondary, or investment (with restrictions) loans. • The investor/borrower cannot receive any cash at closing. An owner-

occupant/borrower can receive up to five hundred dollars ($500) as a closing adjustment.

• The term of the new mortgage must be the lesser of thirty (30) years or the unexpired term of the mortgage being refinanced plus twelve (12) years.

• The maximum loan amount, for an owner-occupied property, is the lesser of one (1) of the following three (3) calculations: • the ORIGINAL principal (including the UFMIP) of the loan being refinanced,

or • the sum of the outstanding principal balance and interest charged by the

servicing lender of the existing mortgage plus accrued late charges, escrow shortages, closing costs, reasonable discount points, and prepaid expenses, or

• the maximum statutory geographic limit.

Notes: • Delinquent taxes are not included. • The monthly payment due for the month in which the loan will close/disburse

does not need to be paid prior to or at closing. However, if the closing/disbursement rolls over to the following month that “skipped” payment may NOT be included in the loan amount and must be paid from borrower’s own funds.

• Prepaid expenses may include the per diem interest to the end of the month on the new loan, hazard insurance premium deposits, monthly mortgage insurance premiums, and any real estate tax deposits needed to establish the escrow account (whether or not the mortgagee refinancing the existing loan is also the servicing lender for that mortgage).

• Any refund of the existing loan’s UFMIP must be deducted in determining the

mortgage amount. Use the lesser of the new MIP or the FHA refund for this calculation.



January 16, 2009



Streamline Refinance WITHOUT an Appraisal, (continued)

• The borrower(s) for a non-owner occupied property, even if originally acquired as

principal residences by the current mortgagors, may only refinance the outstanding balance of the existing mortgage.

• FHA will compute a new loan to value (LTV) ratio by dividing the new loan amount, exclusive of any UFMIP, by the lower of the sales price or appraised value that is in their Single Family Insurance System (SFIS) database for the existing loan being refinanced. If there is missing information in the database and a computed value is not possible, only then will the new LTV default to 89.99%. • When the TLTV exceeds 105.00% based on the property value in FHA’s

database, the loan must be processed as a Streamline Refinance WITH an appraisal to use a property value greater than FHA has in their database.

• The transaction should not require repairs, except as pertains to lead-based paint issues on structures or property improvements built before January 1, 1978.

• If refinancing an investment property that was originated as a 203(k), the streamline refinances can only be made under the “without an appraisal” refinance procedures. The new loan can only include the outstanding principal balance of the current loan, minus MIP refund, plus new UFMIP. Interest, closing costs, prepaids and discount points may not be included.



January 16, 2009



Streamline Refinance (No Credit Qualifying) WITH an Appraisal

• Eligible for primary residences only. • Borrower must have a satisfactory twelve (12) month mortgage history on the

property being refinanced. • If the property was acquired less than twelve (12) months prior to the refinance,

then a minimum six (6) month pay history will be required. • Payment histories less than 6 months are not acceptable.

Note: A satisfactory mortgage pay history is defined as no more than 0 x 30 days late within the twelve (12) month [or six (6) month, if applicable] period.

• The existing loan must be seasoned with the current lender for at least six (6) months except as follows: • A loan transferred from one lender to another lender (i.e. through a bank or

servicing sale), that does not result in a refinance is NOT covered by this restriction.

Note: As long as the loan transfer is documented and a satisfactory six (6) month payment history is established, the transactions are eligible for a Streamline Refinance loan.

• No minimum credit score is required based upon the pay history and seasoning

requirements above. • If a credit score is documented in the loan file, it will not be used as part of the

underwriting process. • The mortgage may be refinanced to a shorter-term mortgage provided that the

monthly principal and interest increases no more than twenty percent (20.00%); otherwise, the borrower must credit qualify.

Note: An owner-occupant/borrower is allowed up to five hundred dollars ($500) for a closing adjustment only.

Reference: See the Eligible Transactions topic presented in the FHA 203(b) product description for other investor loan requirements.

• The maximum insurable mortgage, prior to adding the UFMIP, is limited to the

lesser of one (1) of the following three (3) calculations: • the sum of the existing first lien (including interest), accrued late charges,

escrow shortages, closing costs, prepaid expenses and reasonable discount points minus MIP refund (no delinquent interest except for the interest due in the current monthly payment providing the loan closes and funds during that month),or

• multiply the appraised value of the property by the appropriate factor, as shown in the chart above for the property’s value and the high cost or low cost state where it is located, or

• the maximum statutory geographic limit.



January 16, 2009



Streamline Refinance (No Credit Qualifying) WITH an Appraisal, (continued)

• Any refund of UFMIP on the old mortgage (if originally financed) must be

subtracted from the existing first lien (i.e., current loan payoff) in calculating the new mortgage amount.

Additional Guidelines For Streamlined Refinance (No Credit Qualifying) Transactions with Properties Located in Colorado, Illinois, Minnesota and Nevada

• If the credit overlays and guidelines below are not met, the borrower must credit

qualify for the refinance. Standard FHA Streamline Refinance guidelines apply. • Borrowers can only refinance into a fixed rate loan. • If the borrower is refinancing from an ARM loan to a Fixed Rate loan, the

housing payment must decrease. • The new payment must be at least fifty dollars ($50) less than the current

payment on conforming loan amounts. • Borrower’s income and credit must have been verified on the loan being

refinanced. If this information cannot be obtained and all other requirements listed above are met, CoreLogic Income Pro must be used and it must support borrower’s income.

Note: If the loan is serviced by SunTrust, copies of the original verification of income documents and credit must be obtained and put in the loan file. If they cannot be obtained and all other requirements listed above are met, CoreLogic Income Pro must be used to support borrower’s income.



January 16, 2009



Streamline Refinance (Credit Qualifying) With or Without an Appraisal

• On all SunTrust to SunTrust FHA Streamline Refinance transactions, borrower

must have a satisfactory twelve (12) month mortgage pay history on the property being refinanced. If the property was acquired less than twelve (12) months prior to the refinance, then a minimum six (6) month pay history will be required. Pay histories less than six (6) months is not acceptable. A satisfactory mortgage pay history is defined as no more than 1 x 30 days late within the twelve (12) month [or six (6) month, if applicable] period.

• If one of the original borrowers is being deleted, evidence must be provided that the remaining borrower(s) have an acceptable credit history and the ability to make the mortgage payments.

• The maximum mortgage amount is calculated as either a streamline without an appraisal or a streamline with an appraisal.

• Documentation includes the following: • verification of income, • a credit report, • calculation of debt ratios, and • an appraisal (if applicable).

• Eligible transactions for streamline refinancing with credit qualifying: • change in mortgage term that results in more than a twenty percent

(20.00%) monthly principal and interest increase (allowed only for principal residences, second homes meeting HUD requirements, and investment properties purchased by governmental agencies and eligible nonprofit organizations as approved by HUD),

• change in mortgage term that results in a mortgage payment increase, • deletion of a borrower(s) that triggers the due-on-sale clause, • assumption of a mortgage that does not contain restrictions (i.e., due-on-sale

clause) limiting assumptions only to creditworthy borrowers and the assumption occurred less than six (6) months previously, or

• assumption of a mortgage where the transferability restriction (i.e., due-on-sale clause) was not triggered, such as in a divorce the divorce decree calls for a property transfer or by devise or descent where the assumption occurred less than six (6) months prior to loan application.

• The following additional information titled “Additional Requirements for All Streamlined Refinance Transactions” also applies to a Streamlined Refinance with credit qualifying.

Additional Requirements for All Streamlined Refinance Transactions

• Additional documentation:

• a copy of the original HUD-1 or equivalent information (i.e., to verify date of loan closing and the current FHA case number).

• Documentation NOT required: • CAIVRS codes, and • verification of cash to close.



January 16, 2009



Additional Requirements For All Streamlined Refinance Transactions, (continued)

• When refinancing to a shorter term, the following applies:

• if the mortgage payment (P&I only) does not increase more than twenty percent (20.00%), the borrower does not have to credit qualify (not available for investor loans or second homes unless meeting HUD guidelines), or

• if the P&I payment increases more than twenty percent (20.00%), the borrower must credit qualify (available for owner-occupied principal residences, secondary residences meeting HUD guidelines, and investor properties purchased by governmental agencies or eligible non-profit organizations meeting HUD guidelines).

• An “eligible” investor with a financial interest in more than seven (7) rental units may only refinance without appraisals.

• If the principal and interest payments are less than the current payment, the loan may be processed as a “no credit qualifying” transaction.

• Buydowns are not eligible. • If a condo project has been withdrawn from HUD’s approved list, the transaction

must be completed WITHOUT an appraisal. • Lead-base paint issues must be met on Streamline Refinance loans with an

appraisal. • If the appraised value is such that it would be advantageous for the borrower to

proceed as if no appraisal was completed, the appraisal may be ignored and a notation made in the “Underwriter Comments” section of the FHA Loan Underwriting and Transmittal Summary (HUD-92900-LT).

• If the new loan is an ARM, the property must be a primary residence. • The following information specifically addresses the requirement when the

refinance is from one FHA loan type to a different FHA loan type. • 1-Year ARM to 1-Year ARM - must be an immediate payment reduction and

the maximum interest rate on the new loan cannot exceed the maximum interest rate on the old loan.

• Fixed Rate to 1-Year ARM - interest rate on the new loan must be at least two percent (2.00%) below the interest rate on the old loan.

• Fixed Rate to 3/1 or 5/1 ARM - must result in an immediate payment reduction.

• ARM (1-Year, 3/1 or 5/1) to 3/1 and 5/1 ARMS - must result in an immediate payment reduction.

• GPM to ARM - must be a reduction to the current P&I payments. • GPM to Fixed Rate - provided the new mortgage payment will not exceed

the current payment. • 1-Year ARM to Fixed Rate - the rate on the new loan cannot exceed two

percent (2.00%) over the current ARM rate on the old loan. In addition, all mortgage payments must have been made within the month due for the last twelve (12) months (or the period that the loan has been in force if less than twelve [12] months) and the owner must be the occupant. However, if the new fixed rate mortgage will be lower than the existing rate of the ARM, thus reducing the homeowner’s monthly mortgage payment, the “within the month due,” i.e., not more than thirty (30) days late, rule is not applicable.



January 16, 2009



Additional Requirements For All Streamlined Refinance Transactions, (continued)

• Hybrid ARM (i.e., 3/1, 5/1) to a Fixed Rate – the Hybrid ARM may be

streamlined to a fixed rate mortgage, with or without an appraisal, provided that the payment will not increase by more than twenty percent (20.00%), and all mortgage payments have been made within the month due for the past twelve (12) months, or the period the mortgage has been in force, if shorter.

• 203(k) to 203(b) – all work must be complete (i.e., fully executed certificate of completion, final release from the closed rehabilitation escrow account), and the close out information has been entered into the FHA connection.

Title issues

• When adding an individual to title, the new individual must make loan application and sign all necessary documents.

• When deleting an individual from title, the only eligible transaction is a “credit qualifying” streamline refinance.

• An exception to deleting individuals from title applies if interest in the property was transferred at least six (6) months prior to the loan application date and both of the following can be provided: • a copy of the quit claim deed reflecting a date six (6) months prior to the

application date, AND • verification that the remaining titleholder(s) paid the entire mortgage

payment without assistance for the last six (6) months (i.e., copies of bank statements for the last six (6) months to verify payment of the mortgage and no unusual pattern of deposits other than payroll).

• Subordinate financing may remain in place, with or without an appraisal. • The subordinate lien must be clearly subordinate to the new HUD-insured

mortgage. • The subordinate lien must have been seasoned for at least six (6) months

(i.e. six (6) permanent mortgage payments made) prior to application for the new SunTrust loan.

• The maximum TLTV for SunTrust is 105.00%. • If new subordinate financing exist on a Streamline Refinance, the combined first

and second mortgages may not exceed the maximum mortgage limit and LTV limit for the area.

• Termite inspections are not required on streamline refinances without an appraisal. Termite inspections may be required if the appraiser requires it on streamline refinances with an appraisal.

• An eligible investor that has a financial interest in more than seven (7) units in a contiguous area (i.e., two [2] block radius) must receive approval from the local HUD Field office for streamline refinancing with an appraisal.


January 16, 2009


Cash Requirements

Down Payment • HUD does not require a minimum down payment. However, they do require that

a borrower have a minimum investment of three percent (3.00%) in the property. • The borrower must make a minimum cash investment of three percent (3.00%)

of the cost of acquisition. • The minimum cash investment is based on the sales price without considering

closing costs, however closing costs may be included in satisfying the three percent (3.00%) requirement.

• The minimum cash investment must be provided from borrower’s own cash funds (“own cash” is defined as inclusive of gifts, loans from family members, or loans from a governmental agency or instrumentality).

Reference: See the form FHA Maximum Mortgage and Cash Needed Worksheet (COR 0334) for the FHA purchase loan amount calculation to determine the borrower’s minimum investment requirement.



January 16, 2009


HUD Allowable Closing Cost

General • The homebuyer may pay customary and reasonable costs that are necessary to

close the mortgage loan. • These fees may be used to meet the homebuyer’s minimum investment

requirements.

Note: Discount points may be acquisitioned on some refinances, BUT NEVER ON PURCHASE LOANS. Discount points may not be used to meet the buyer’s minimum investment requirements.

• All closing costs, including any costs paid outside of closing (POC), lender credit,

or seller contribution items, must be itemized on the HUD-1. • FHA will not allow “mark-up’s” (i.e., charging a fee to the mortgagor for an

amount greater than that charged by the service provider). Only the actual cost for a service may be charged to the mortgagor.

• It is expected that “Actual Costs” will not exceed what is reasonable and customary for the area.

Notes: • All fees and charges must comply with Federal and State disclosure laws

and other applicable laws and regulations. • The Lock-in Confirmation must be executed by the borrower(s) at least

fifteen (15) DAYS prior to the date of the Note, if a commitment fee is collected.



January 16, 2009


HUD Allowable Closing Cost, (continued)

Allowable Costs/ Not Included in Acquisition

Closing costs and related information, pertaining to some of the fees that MAY be charged to the borrower and NOT included in the acquisition cost, are shown in the table below.

Allowable Fees/Costs Not

Included in Acquisition Related Information

Reasonable Discount Points (May be financed in the mortgage on some refinance transactions, but may never be part of the minimum three percent [3.00%] cash investment on a purchase transaction.)

Escrow Deposit (Property Taxes and Assessments, and Insurance Premium)

Buyer may pay a maximum of two (2) months. (May be financed in the mortgage on a refinance, but may not be part of the minimum three percent (3.00%) cash investment on a purchase transaction.)

Hazard Insurance Premium Actual cost for first year only [plus two (2) months, subject to aggregate adjustment requirements]. Note: May be financed in the mortgage on refinances, but not as part of the three percent (3.00%) minimum cash investment.

Interest Actual cost. Calculated on three-hundred, sixty (360) days per year basis. Interest may only be collected from the mortgagor from the date the mortgage proceeds are actually disbursed by the mortgagee. Interest may be paid by the borrower, or financed in the mortgage on refinances, but not be part of three percent (3.00%) minimum cash investment.

Unallowable Costs

Below is a list of unallowable closing costs and fees, which may not be charged to the borrower.

Unallowable Fees/Costs Related Information

Finders fees and kickback payments

Unallowed in transaction

Origination fee greater than one percent (1.00%)

An Origination fee less than or equal to one percent (1.00%) may be paid by the borrower and included in the acquisition cost.

Commitment Fee Unallowed if the loan has not been locked at least fifteen (15) days prior to the date on the Note.

Tax service fee Buyer cannot be charged.


January 16, 2009


Mortgage Insurance

General Mortgage Insurance Premium (MIP) is charged on all FHA loans, regardless of the LTV. There is an initial up front mortgage insurance premium (UFMIP) which can be financed in the loan amount or paid in cash, AND an annual monthly payment, which is paid monthly in the mortgage payment. If any of the MIP is paid in cash, then the entire amount must be paid in cash. Notes: • There is no UFMIP charged on Military Impacted Areas (MIAs), but there is the

monthly premium for the life of the loan regardless of term or LTV. • Monthly MIP is not applicable on loans with fifteen (15) years or less term and an

LTV of 89.99% and less, with the exception of loans in a Military Impacted Area (MIA).

MIP Premiums • Mortgage insurance premiums have fluctuated between July 14, 2008 and

October 1, 2008. • Click here for the “FHA Single Family Mortgage Insurance Upfront and Annual

Mortgage Insurance Premiums” matrix. • The matrix includes required UFMIP and Annual MIP for the following dates:

• prior to July 14, 2008, • on or after July 14, 2008, and prior to October 1, 2008, and • on or after October 1, 2008.

The following table shows Upfront Mortgage Insurance Premiums and Annual Monthly (UFMIP and Monthly), for FHA Case Numbers assigned prior to July 14th, 2008.

New Mortgage

Term LTV Ratio UFMIP Mo. Premium Yrs MIP on Loan

16-30 Years 95.01% & up 1.50% .50% 1

16-30 Years 90.00-95.00% 1.50% .50% 1

16-30 Years 89.99% & less 1.50% .50% 1

15 Years & less 95.01% & up 1.50% .25% 2

15 Years & less 90.00-95.00% 1.50% .25% 2

15 Years & less 89.99% & less 1.50% None N/A 1 Years will be determined when the loan balance equals 78%, provided the mortgagor has paid the annual mortgage insurance premium for at least five (5) years (scheduled or actual). 2 Years will be determined when the loan balance equals 78% (scheduled or actual).


http://retaillendingguide.suntrust.com/doclib/resource_center/Ghost_Docs/FHA/FHAMIPMatrix.xls


January 16, 2009


Mortgage Insurance, continued MIP Premiums, (continued)

The following table shows Upfront Mortgage Insurance Premiums and Annual Monthly (UFMIP and Monthly), for FHA Case Numbers assigned on or after July 14th, 2008 but prior to October 1, 2008.

Upfront and Annual Mortgage Insurance Premiums

Loan Terms > 15 years Decision Credit Score

LTV 850-680 679-640 639-600 Non-Traditional

< 90%

1.25/.50

1.25/.50

1.25/.50

1.50/.50

90.01%-95.00%

1.25/.50

1.25/.50

1.50/.50

1.75/.50

> 95%

1.25/.55

1.50/.55

1.75/.55

2.00/.55

The following table shows Upfront Mortgage Insurance Premiums and Annual

Monthly (UFMIP and Monthly), for FHA Case Numbers assigned on or after July 14th, 2008 but prior to October 1, 2008, continued.

Upfront and Annual Mortgage Insurance Premiums

Loan Terms of 15 years or Fewer Decision Credit Score

LTV 850-680 679-640 639-600 Non-Traditional

< 90%

1.00/.00

1.00/.00

1.25/.00

1.50/.00

90.01%-95.00%

1.00/.25

1.25/.25

1.50/.25

1.75/.25

> 95%

1.25/.25

1.50/.25

1.75/.25

2.00/.25



January 16, 2009



The following table shows Upfront Mortgage Insurance Premiums and Annual Monthly (UFMIP and Monthly), for FHA Case Numbers assigned on or after October 1, 2008.

FHA Single Family Mortgage Insurance

Upfront and Annual Mortgage Insurance Premiums (All Loan Terms)

Effective with case number assignments as of October 1, 2008 LTV

Loan Term Purchases – Full Credit Qualifying Refinances

(Non-Delinquent FHASecure)

Streamline Refinances

> 95% Greater than 15 Years 1.75% / .55% 1.50% / .55%

< 95% Greater than 15 Years 1.75% / .50% 1.50% / .50%

> 90% Less than or equal to 15 Years 1.75% / .25% 1.50% / .25%

< 90% Less than or equal to 15 Years 1.75% / none 1.50% / none

Notes: • All loans must be run through TOTAL Scorecard if any occupant borrower on the

loan has a credit score, except non-credit qualifying streamline refinances. • If none of the occupying borrowers have a credit score, the loan does not have

to be run through TOTAL Scorecard and must be traditionally underwritten. • These premiums apply to the FHA 203(b) and 234(c) loan programs, but do not

apply to the 238(c) (military impact areas) loan program. • FHA is not authorized, and will not, insure any mortgages for which new FHA case

number assignments are made on or after October 1, 2008, where the above premium structure has not been utilized.



January 16, 2009



The following table shows Upfront Mortgage Insurance Premiums and Annual Monthly (UFMIP and Monthly), for FHA “Credit Qualifying” and “Non-Credit Qualifying” Streamline Refinances.

Streamline Refinances Case Number

Assignment Dates1 With or Without an Appraisal FHA Case Number assigned PRIOR TO 07/14/2008

UFMIP = 1.50% Annual Premium = .50 > 15 Years .25% < 15 Years and > 90% LTV None < 15 Years and < 90% LTV

“New” FHA case number assigned ON OR AFTER 07/14/2008 and “Old” FHA case number assigned PRIOR TO 07/14/2008

UFMIP = 1.00% Annual Premium = .50% > 15 Years .25% < 15 Years and > 90% LTV None < 15 Years and < 90% LTV

Both “Old” FHA case number and “New” FHA case number were assigned on or AFTER 07/14/2008 but prior to 10/01/2008

Use the appropriate chart for case number assignments on or after 07/14/2008, but prior to 10/01/2008, based on the loan

term of the new transaction and the information provided below.

LTV

• Provided by FHA on the “Case Number Assignment Screen”

• Will use the score from the previous transaction (old case number)

Credit Score on Non-Credit Qualifying Refinance

• Provided by FHA on the “Case Number Assignment Screen”

• Will use the score from the previous transaction (old case number)

Credit Score on Credit Qualifying Refinance

• Based on new credit report FHA case number assigned ON OR AFTER 10/01/2008.

UFMIP = 1.50% Annual Premium = .55% > 15 Years and > 95% LTV .50 > 15 Years and < 95% LTV .25% < 15 Years and > 90% LTV None < 15 Years and < 90% LTV

1FHASecure delinquent borrowers are not eligible for streamline refinances regardless of when the FHASecure loan was originated. Notes: • If the loan term is 15 year or less and the LTV is less than 90%, no Annual MIP is

required. • Streamline refinance policy varies based on when the old case number (to be

refinanced) and new case number were assigned.



January 16, 2009


Mortgage Insurance, continued

Streamline Refinance: MIP for 15 or Less Years

• MIP procedures vary for streamline refinance loans with terms of fifteen years

(15) years or less, depending upon the closing date of the “existing” loan being refinanced and the LTV calculation.

• For loans without an appraisal use FHA’s computed value from the existing loan to calculate the LTV.

• If FHA does not have a computed value only then may 89.99% be considered as LTV.

Reference: See the Streamline Refinances subtopic in the Refinance topic for additional information on FHA’s computed value.

Documents

Loan Terms for FHA Case Numbers Assigned Prior to … … · Correspondent Seller Guide Page 1 of 31 Loan Terms for FHA Case Numbers Assigned Prior to January 1, ... HUD Allowable