Section 5.1: Non-Conforming Fixed - esnmc.com · Non-Conforming Fixed ... 5.1-A3 Eligible Programs/Product Codes J-F30-35 ... The borrower must sign the Occupancy Affidavit Form prior

Section 5.1: Non-Conforming Fixed - Investor 35

SNMC P a g e | 1 March 28, 2014

Non-Conforming Fixed Investor 35 – Retail Only

5.1-A General

5.1-A1 Overview

Loans must be submitted to a SNMC underwriter for review and upload to the investor for underwriting. Loans must be submitted for underwriting at least twenty (20) days prior to the lock expiration. An Underwriting Submission Checklist is required to be in the file when uploaded for underwriting. The checklist is posted in Section 12.1 General Forms. These guidelines are an overview. Please see the investor’s website for additional guidelines. http://newpenncorrespondent.com/media/686714/2014-1-10-advantage-v-14-0--final.pdf

5.1-A2 ATR/QM Requirements

Effective with loan applications on or after January 10, 2014, loans will need to meet ATR/QM requirements, including loans that meet either the Safe Harbor or the Rebuttable Presumption provision of the applicable regulation. Points and fees are generally limited to 3%, with higher limits for loan amounts below $100,000.

Effective with applications on or after January 10, 2014, the following changes will take place:

All Interest Only options will be retired DTI will be capped at 43%; no exceptions On all loan programs, unreimbursed business expenses must be deducted from qualifying

income when calculating the debt-to-income ratio. Commission income earned for a period of less than one year will be ineligible as qualifying

income Updated Debt Calculations

o If the credit report does not show a required minimum payment amount and there is no supplemental documentation to support a payment of less than 5%, an amount equal to the greatest of 5% of the outstanding balance or $10 must be used as the borrower's recurring monthly debt obligation.

o If no payment is shown on the credit report for a student loan payment, then the payment information should be provided by student loan lender. If the monthly payment amount cannot be determined, use 2% of the original loan amount.

Fee Details Form

All loans with application dates on or after January 10, 2014 will be subject to all applicable points and fees tests (high cost, higher-price, 3% QM threshold) to ensure full compliance with both the new regulations and previously established rules. A fee details form is required.

http://newpenncorrespondent.com/media/686714/2014-1-10-advantage-v-14-0--final.pdf

http://newpenncorrespondent.com/media/686714/2014-1-10-advantage-v-14-0--final.pdf



5.1-A General (cont’d)

5.1-A2 ATR/QM Requirements (cont’d)

Income and Debt Worksheet

All loans secured by owner-occupied or second homes are subject to a comprehensive Ability to Repay Review (formerly known as DTI Review). It will be critical to be precise in verifying whether your applicant satisfies the criteria. An income worksheet is required.

5.1-A3 Eligible Programs/Product Codes

J-F30-35 - 30 year fixed J-F25-35 – 25 year fixed J-F20-35 – 20 year fixed J-F15-35 - 15 year fixed J-F10-35 – 10 year fixed

5.1-A4 Ineligible Programs

Section 32 Mortgage Credit Certificates (MCC) Temporary Buydowns Land trusts in the state of Illinois are not eligible Leaseholds secured by Indian/Tribal lands

5.1-A5 Doc Type

Full

5.1-A6 Minimum Loan Amount

$417,001

5.1-A7 Occupancy

Primary residences for 1-4 unit properties, including condos Second home residences for 1 unit properties, including condos Investment Properties are ineligible Co-borrowers are not permitted Transactions where occupancy is questionable are ineligible

5.1-A8 Term

10, 15, 20, 25 and 30-year




5.1-A9 LTV/CLTV Parameters – Fully Amortized – Standard Eligibility

Purchase and Rate and Term Refinance

FICO Max Ratio Reserves¹ Owner Occupied LTV/CLTV/HCLTV

Second Home LTV/CLTV/HCLTV

≤ $2,000,000 720+ 43% 12 Months 70% N/A

≤ $1,500,000

720+ 43% 12 Months 75% 65%

700-719 43% 12 Months 70% 65%

680-699 43% 12 Months Not Available

≤ $1,000,000

740+ 43% 6 Months 85% 75%

720+ 43% 6 Months 80% 75%

700-719 43% 6 Months 75% 70%

680-699 43% 6 Months 70% 70%

≤ $650,000 700+ 43% 6 Months 85% 75%

680-699 43% 6 Months 80% 75%

First Time Homebuyer² Purchase



≤ $1,000,000 720+ 43% 12 Months 80% N/A

≤ $650,000 680+ 43% 12 Months 65% N/A

Cash-Out Refinance



≤ $1,500,000 720+ 40% 12 Months 70% N/A

≤ $1,000,000 720+ 40% 6 Months 75% N/A

700-719 40% 6 Months 70% N/A

≤ $650,000 700+ 40% 6 Months 75% N/A

¹ Additional Reserves may be required based on the number of financed properties owned. ² Payment shock must be < 300% - see First Time Homebuyers Section for additional information.

5.1-A10 Purchase Transactions

Retaining Current Residence When the borrower is purchasing a new primary residence and retaining their current residence, the following requirements apply:

If the current property residence is pending sale but the transaction will not be closed prior to the new transaction, both the current and proposed mortgage payments must be used to qualify the borrower for the new loan.

If the current primary residence is being converted to a second home, both the current and proposed mortgage payments must be used to qualify for the new loan. In addition, the borrower must meet second home requirements.

If the current primary residence is being converted to an investment property, see Conversion of Primary Residence in these guidelines for qualification details.

The borrower must sign the Occupancy Affidavit Form prior to closing.




5.1-A11 Refinance Transactions

The new refinance transaction must represent the same occupancy as the existing loan. Borrowers must meet Continuity of Obligation. All refinance transactions must be a measurable benefit to the borrower. On a loan where the only benefit is monthly savings, recoup of closing costs must be realized within 36 months unless state regulations require a lesser period. The benefit to the borrower must be calculated based on the qualifying housing payment for non-traditional mortgage products.

Rate and Term Refinances Limited Cash-Out / Rate and Term Refinance (Incidental cash-back must be less than or equal to the lesser of 2% or $2,000). The following are generally considered to be Rate and Term Refinances if the transactions meet the following criteria:

Pay off of the current mortgage to include principal balance plus accrued interest, and any required prepayment penalty, only. (Other costs such as late fees and past-due amounts may not be paid with the new loan proceeds.)

Paying off subordinate financing is permissible provided the subordinate lien meets the loan seasoning requirements (must be seasoned a minimum of 24 months (zero draws in this 12 months on HELOCs) to qualify as rate and term); junior liens do not have to be part of the original transaction.

Standard loan fees (e.g., closing costs on the new mortgage; prepaid finance charges, such as interest, taxes, insurance, etc; and points) may be included in the refinance transaction. No cash out also includes the equity buy-out of a co-owner due to a divorce provided the following conditions are met:

The property must have been jointly owned by all parties for at least the 12 months preceding the date of the mortgage application.

The property must be the primary residence. A written agreement signed by all parties is required stating:

o the terms of the property transfer, and o the disposition of the proceeds from the refinance

The borrower who retains sole ownership of the property may not receive any proceeds from the refinance.

The following is not eligible for a Limited Cash-Out Refinance:

A transaction that involves payoff of a subordinate lien that was not used to acquire the subject property, unless the second lien is an installment loan that is 24+ months old or is a line of credit with zero draws within the past 12 months.




5.1-A11 Refinance Transactions (cont’d)

Rate and Term Refinances (cont’d) Texas 50 (a)(6) Refinances are not permitted; for refinances in Texas, a copy of the current mortgage or note is required to determine the previous terms are not subject to Texas Section 50(a)(6), also known as (Home Equity Deed of Trust, Home Equity Installment Contract or Residential Home Loan Deed of Trust) requirements.

If the first or second Texas Section 50(a)(6) loan is being paid off, regardless of whether the borrower is getting any cash back, the loan is restricted to the Texas Equity and ineligible.

If the first mortgage is not a Texas Section 50(a)(6) loan and the second mortgage is a Texas Section 50(a)(6), the second lien may be subordinated and is considered a rate and term refinance. The second lien must be subordinate to the first mortgage. Borrower cannot receive any cash back from first mortgage transaction.

If a Texas Section 50(a)(6) second lien is being paid off, the loan is restricted to the Texas Equity and is ineligible.

Delayed Financing Delayed Financing is permitted with the following restrictions:

No longer than 6 months has elapsed since the original cash acquisition of the property. Must be underwritten as a rate & term refinance. LTV/CLTV/HCLTV based on purchase price or appraised value, whichever is less. Property must have been purchased using the borrower’s own funds. HUD-1 from the original purchase and documentation to show the down payment and closing

costs used for the purchase were from the borrower’s own funds (no borrowed, gift or shared funds).

Cash-Out Refinances A letter of explanation is required on all cash-out refinances. Texas 50 (a)(6) Refinances are not permitted.

Maximum cash in hand and debt consolidation combined may not exceed $400,000. Cash-back proceeds may be used to pay existing debts; all revolving debt must be paid off and

closed in order to be excluded from qualifying ratios. The amount of a cash-out refinance may include the present first mortgage loan payoff, subordinate liens (if applicable), closing costs and additional cash in hand to the borrower. The payoff of the present lien and the subordinate liens must be indicated on the HUD-1. The payoff demand statement(s) must be in the file. Properties with subordinate financing originated, refinanced, or drawn upon (regardless of seasoning) are eligible for cash-out refinances when the cumulative sum of cash proceeds paid to the borrower in the prior 12 months does not exceed the maximum allowable cash out. A loan secured by a mortgage placed on a property previously owned free and clear by the borrower is always considered a cash-out refinance mortgage. The payoff or payment to any of the following results in a cash-out refinance:

Cash proceeds to the borrower in excess of the lesser of $2,000 or 2% of the loan amount. Subject property liens that were not part of the property’s acquisition or that provided cash

proceeds (of more $2,000) to the borrower and are: o a fixed lien seasoned a minimum of 24 months, or o a HELOC with zero draws in the past 12 months





Cash-Out Refinances (cont’d)

Subordinate Financing The borrower is not required to satisfy outstanding junior liens secured by the mortgaged premises in order to obtain a cash-out refinance loan, provided that:

The junior lien remains subordinate to the lien of the new refinance mortgage loan The CLTV with the subordinated debt does not exceed LTV guidelines A copy of the subordination agreement is maintained in the mortgage loan file The subordinate financing was provided by a financial institution

A debt consolidation loan is classified as a cash-out refinance for pricing and loan eligibility purposes.

Continuity of Obligation For a refinance transaction (either limited cash-out or cash-out) to be considered an eligible transaction there must be a continuity of obligation if there is currently an outstanding lien that will be satisfied through the refinance transaction. Continuity of obligation is met when any one of the following exists:

At least one borrower is obligated on the new loan who was also a borrower obligated on the existing loan being refinanced.

The borrower has been on title and residing in the property for at least 12 months and has either paid the mortgage for the last 12 months or can demonstrate a relationship (relative, domestic partner, etc.) with the current obligor.

The loan being refinanced and the title to the property are in the name of a natural person or a limited liability company (LLC) as long as the borrower was a member of the LLC prior to transfer. Transfer of ownership from a corporation to an individual does not meet the continuity of obligation requirement.

The borrower has recently inherited, or was legally awarded, the property (divorce, separation, or dissolution of a domestic partnership).

Loans with an acceptable continuity of obligation may be underwritten, priced, and delivered as either cash-out or limited cash-out refinance transactions based on the requirements for each type of transaction.

Unacceptable Continuity of Obligation If the borrower is currently on title but is unable to demonstrate an acceptable continuity of obligation, or if there is no outstanding lien against the property, the loan is still eligible but with the additional restrictions described in the following table. The loans must also be underwritten as a cash-out refinance transaction.





Outstanding Liens Purchase Date LTV Ratio Requirements

NO (The property was purchased for cash; previous mortgages have been paid off, etc.)

Within the 6-12 month period prior to the application date for the new loan

The LTV/CLTV/HCLTV ratios must be based on the lesser of the original sales price/acquisition cost (documented by the HUD-1) or current appraised value.

More than 12 months prior to the application date

The LTV/CLTV/HCLTV ratios must be based on the current appraised value.

YES The borrower has been on title for at least 6 months.

The maximum LTV ratios are limited to 50% of the current appraised value.

Seasoning Requirements The appraised value is used to calculate the LTV when the property was acquired more than six months ago. For properties acquired in the past six months, use the following chart:

Occupancy Rate and Term Cash-Out

Primary Appraised Value Lesser of Purchase Price or Appraised Value

Second Home Appraised Value Lesser of Purchase Price or Appraised Value

Investor N/A N/A

The timeline is established for seasoning purposes from the acquisition date of the property to the note date of the new loan.

5.1-A12 Land Contracts See investor guidelines for information.

5.1-A13 Construction To Permanent Financing Permitted as either a purchase or refinance; refinances require a minimum 20% down payment from the borrower’s own funds. The conversion of construction-to-permanent financing involves the granting of a long-term mortgage loan to a borrower for the purpose of replacing interim construction financing that the borrower has obtained from another source to fund the construction of a new residence. The borrower must hold title to the lot, which may have been previously acquired or purchased as part of the transaction. All construction work must be complete and the amortization period for the permanent financing must be 360 months or less. A construction-to-permanent loan may be closed as a purchase, limited cash-out refinance, or cash-out refinance. Typically, a purchase transaction is completed when the borrower elects to use the documented acquisition cost to determine the value. A refinance is used when the borrower wishes to use an appraisal to determine the value.




5.1-A13 Construction To Permanent Financing (cont’d)

The following are required for all construction-to-permanent loans: Certificate of Occupancy from the applicable government authority (required on all new

construction regardless of whether the transaction is a construction-to-permanent loan). Appraisal report 1004-D with complete interior photos reflecting completion of construction. For qualification purposes, taxes are calculated at 1.5% of the sales price. One time close loans are not eligible.

Purchases The LTV is determined by dividing the unpaid principal balance of the construction-to-

permanent loan by the lesser of the appraised value and the sum of the documented costs of the construction, and the current appraised value of the lot in the following instance:

o The borrower acquired the lot 12 or more months before applying for the construction financing.

The LTV is determined by dividing the unpaid principal balance of the construction-to-permanent loan by the lesser of the appraised value of the property and the total acquisition cost (which are the sum of the documented construction costs and the sales price of the lot) in the following instance:

o The borrower acquired the lot within the 12 months preceding the date of the application for the construction financing.

Limited Cash-Out and Cash-Out Refinance Transaction The LTV is determined by dividing the unpaid principal balance of the construction-to-

permanent loan by the current appraised value of the property in the following instance: o The borrower acquired the lot 12 or more months before applying for construction

financing. The LTV is determined by dividing the unpaid principal balance of the construction-to-

permanent loan by the lesser of the appraised value and the total acquisition costs (which are the sum of the costs of the improvements and the sales price of the lot) in the following instance:

o The borrower acquired the property within the 12 months preceding the date of the application for construction financing.

5.1-A14 Subordinate Financing

Resubordination of existing subordinate financing will be allowed. The pay-off of an existing subordinate lien with the borrower’s own funds is also allowed. New subordinate financing is not permitted. The following requirements also apply:

Maximum CLTV/HCLTV does not exceed the maximum LTV allowed as stated in section 5.1-A9 LTV/CLTV Parameters.

The subordinate financing must be recorded and clearly subordinate to the new mortgage. The title indicates it is in second lien position. If there is an outstanding balance at the time of closing, the payment on the subordinate

financing must be included in the calculation of the borrower’s debt to income ratio. The qualifying payment is the payment evidenced on the credit bureau or for new draws, the actual payment required by the lender.




5.1-A14 Subordinate Financing (cont’d)

Secondary financing must be reviewed to ensure that there are no terms that restrict prepayment. Terms that restrict prepayment are not permitted as acceptable secondary financing. Terms that require payment of certain closing costs that were waived upon origination of the subordinate lien loan are not considered a restriction of prepayment.

The source of the secondary financing is not a natural person except when the natural person is the seller of the subject property.

Negative amortization is not allowed. The scheduled payments must be sufficient to cover at least the interest due.

If the debt is an equity line of credit:

The CLTV ratio is calculated by adding the amount drawn on the HELOC (not the credit limit unless the full amount has been drawn) to the first mortgage amount, plus any other subordinate financing, and dividing that sum by the value of the mortgaged premises.

The HCLTV ratio is calculated by adding the HELOC credit limit to the first mortgage amount, plus any other subordinate financing, and dividing the sum by the value of the mortgaged premises.

The terms of a HELOC may not provide for a balloon or call option within the first five years after the noted date of the new first mortgage.

If the second is a closed-end subordinate lien:

Maturity date or amortization basis of the junior lien must not be less than five years after the note date of the first lien mortgage, unless the junior lien is fully amortizing.

The loan cannot have a balloon or call option within five years of the date of the note. If the subordinate financing is from the borrower’s employer:

The financing terms may provide for the employer to require full repayment of the debt if the borrower’s employment is terminated (either voluntarily or involuntarily) before the maturity date of the subordinate financing.

In all instances, the following items are required:

A copy of the subordinate note or direct verification from the lien holder verifying all items detailed above must be obtained.

o A copy of the unsigned subordination agreement prior to closing. o A copy of the executed subordination agreement at closing.

Nothing as described in this section shall be deemed to restrict secondary financing to the extent that such restriction would violate the terms of the borrower’s loan documents or applicable federal or state law.




5.1-A15 Ineligible Transactions

Unacceptable loan types include, but are not limited to, the following, provided however, that in the event that any of these limitations would violate the requirements of the Equal Credit Opportunity Act or the Fair Housing Act, the provisions of those laws and implementing regulations are controlling:

Section 32 and/ or other loans described in the “Responsible Lending Statement” Blanket loans, covering multiple properties Bridge loans Deed-Restricted Properties (exceptions will be considered on a case-by-case basis) Investment Properties Lease-Purchase Options Model Home Lease-Backs Loans to fund escrows for work completion except as provided in New Penn guidelines Loans to officers / owners of SNMC Flip transactions Borrowers less than 18 years old or otherwise legally incapable of entering into a contract Refinancing of a subsidized loan, including loans subsidized by Habitat for Humanity, U.S.

Department of Agriculture, FHA with a recapture or any city/county grant Borrowers with diplomatic Immunity or otherwise excluded from U.S. jurisdiction Cross-collateralization Straw borrowers or straw buyer Builder/seller bailout plans Multiple property payment skimming, which typically involves investors who purchase

investment properties with seller carry back financing and collect rents but do not make the mortgage loan payments

Foreclosure bailouts of any kind (an arms-length purchase of a short sale is not deemed a foreclosure bailout)

Texas 50(a)(6) transactions as described in these guidelines

5.1-A16 Electronic Signatures

New Penn Financial does not accept electronic signatures on any documents provided to the borrower by New Penn. Purchase contracts and other documents not prepared or provided by New Penn may contain electronic signatures.

5.1-A17 Excluded Parties Lists

All parties involved in each transaction are screened for inclusion on various lists, including without limitation:

Freddie Mac’s Exclusionary List GSA List of Excluded Parties Office of Foreign Asset Control (OFAC) Approved Buyer’s internal exclusionary list

If a match is determined, the loan may be ineligible.




5.1-A17 Excluded Parties Lists (cont’d)

All name variations found throughout the loan file must be run when performing the searches. This requirement includes:

Borrowers Seller Builder Processor Underwriter LO Account Executive Broker Listing Agent & Listing Company Selling Agent & Selling Company Title Agent Title Company Closing Attorney Appraiser and Appraisal Company

5.1-B Underwriting Loans will be manually underwritten but must be submitted to DU for additional review. All loans that meet agency guidelines and score Approve/Eligible must contain a valid/documented reason why the loan is a portfolio product. As per SNMC general underwriting guidelines, any loan amount > $417,000 must receive a branch manager signature, any loan amount > $650,000 must be receive a second underwriting manager signature, and any loan amount > $1,000,000 will require additional corporate underwriting review and approval.

5.1-B1 Borrower Eligibility

Borrowers must be either U.S. Citizens or lawful permanent or non-permanent residents of the United States and have reached the age at which the mortgage note can be enforced in the jurisdiction where the property is located. Details on non-U.S. Citizen borrowers can be found below. There is no maximum age limit for a borrower. No more than 4 borrowers may be party to any transaction.

Non-U.S. Citizen Borrowers Non–U.S. citizens who are lawful permanent or non-permanent residents of the United States are eligible under the same terms as U.S. citizens, so long as they are legally present in the U.S. A loan must be originated under the New Penn Foreign National program when the borrower earning the majority of the income is not eligible for a FNMA loan as described by the citizenship requirements outlined in Chapter B2-2 of the FNMA Selling Guide and within the New Penn Foreign National Product Profile.



5.1-B Underwriting (cont’d)

5.1-B1 Borrower Eligibility (cont’d)

Non-U.S. Citizen Borrowers (cont’d) Examples of acceptable evidence of permanent residency consists of a completed Certification of Residency, certifying that the borrower’s alien registration information has been reviewed by the originator and meets one of the following criteria:

I-151 – Alien Registration Receipt Card (Green Card) that does not have an expiration date on the back, or

I-551 – Alien Registration Receipt Card (Resident Alien Card/Green Card) that does not have an expiration date on the back, or

I-155 – Alien Registration Receipt Card (Conditional Resident Alien Card) that has an expiration date on the back, as long as it is accompanied by a copy of USCIS form I-751, or

Unexpired Foreign Passport with an unexpired stamp reading: Processed for I-155 or I-551 Temporary Evidence of Lawful Admission for Permanent Residence. [Valid until mm-dd-yy.] Employment Authorized.

First Time Homebuyers First Time Homebuyers are permitted as outlined in these guidelines and product matrices. Only one borrower must meet the homeownership requirements to meet standard guidelines and not be considered a first time homebuyer loan. A First Time Homebuyer is an individual who (1) is purchasing the security property; (2) will reside in the security property as a principal residence; and (3) had no ownership interest (sole or joint) in a residential property during the three-year period preceding the date of the purchase of the security property, unless he or she is a displaced homemaker or single parent whose only ownership interest in a principal residence during the preceding three-year time period was a joint ownership with a spouse. A displaced homemaker or single parent who during the three-year period owned a principal residence alone or with anyone other than a spouse, or who owned a second home or investment property, cannot be considered a first-time homebuyer. A displaced homemaker is an adult who:

has not worked full time in the labor force for several years has worked in the home to care for the home and family during that time, and is currently unemployed or underemployed and is having difficulty finding or upgrading

employment A single parent is a person who is unmarried or legally separated from his or her spouse and is pregnant or has custody (including joint custody) of one or more minor children. A minimum of 24 months housing payment history is required as reflected on a Tri-Merge credit report. All mortgages showing on the credit report must reflect a 0x30 payment history for the lesser of 24 months or the length of the mortgage. Borrowers who do not own their homes free and clear and have less than 24 months total mortgage payment history must meet first time homebuyer guidelines; only one borrower must meet this requirement in order to meet the homeownership requirements. Private mortgages must be verified with canceled checks, referencing the company or individual who completes the VOM. Checks must be dated prior to the next due date and reflect 0x30x24. Borrowers who have lived in a rent-free situation are ineligible.





First Time Homebuyers (cont’d) Payment shock cannot exceed 300%. Calculation based upon verified current monthly rent and anticipated PITIA payment on subject property.

Power of Attorney See investor guidelines for information.

Trusts (1-Unit Properties Only)

Living Trust (Inter Vivos Revocable Trust) Living Trusts are permitted, provided that the following requirements are satisfied:

The trust must be established by one or more natural persons, solely or jointly. The primary beneficiary of the trust must be the individual(s) establishing the trust. The trust must become effective during the lifetime of the person establishing the trust, and must be in effect prior to the date of origination of the loan.

If the trust is established jointly, there may be more than one primary beneficiary as long as the income or assets of at least one of the individuals establishing the trust will be used to qualify for the mortgage loan.

A signed attorney’s opinion is required. The opinion letter must state that the trust meets all requirements in this section and must also include the following: name of the trust, date of execution of trust agreement, settler(s) of the trust, whether the trust is revocable or irrevocable, whether the trust has multiple trustees, name of trustees, vesting to be held as: [Insert Borrower’s Name]. The attorney must also verify that the trust has not been revoked, modified, or amended in any manner that would cause the representations set forth above to be incorrect.

The trustee must include either:

The individual establishing the trust (or at least one of the individuals if there are two or more), or

An institutional trustee that customarily performs trust functions in and is authorized to act as trustee under the laws of the applicable state.

Other requirements:

The trustee must have the power to hold the title and mortgage to the property. These powers must be specified in the trust.

One or more of the parties establishing the trust must use personal income or assets to qualify for the loan.

Blind Trusts Blind trusts are not eligible for financing. A blind trust is an arrangement where financial holdings of a person are placed in the control of a fiduciary, typically to avoid a conflict of interest. Therefore, someone other than the borrower has control over the trust assets.





Non-Arms Length Transactions Identity of Interest is not allowed. Such relationships with the borrower may be (but not limited to):

Family Members – (Second Homes) Mortgage Loan Officer Originating Lender (owner, employees or family members) Loan Broker Real Estate Broker (including listing and selling agents) Employer Closing Agent Appraiser Builder Developer Trading Properties with the Seller Foreclosure Bailouts

At-Interest Transactions Transactions where:

Builder is acting as Realtor/Broker – permitted on primary residence only Realtor/Broker is selling their own property – permitted on primary residence only The originator is acting in another real estate related role (originators cannot have another real

estate related position on any loan, regardless of the loan program)

Ineligible Borrowers Due to the inability to compel payment or obtain judgment, the following borrowers are not eligible for financing:

Borrowers with diplomatic immunity or otherwise excluded from U.S. jurisdiction. Borrowers who are citizens and not employed in the U.S., AND do not claim the income earned

outside of the U.S. on their tax returns (regardless of citizenship or immigration status); except for foreign nationals.

Borrowers whose income is not likely to continue for at least 3 years (e.g., a bonus or an inheritance).

5.1-B2 Credit

Each borrower must have a valid and usable FICO score from at least two of the following agencies: Experian, TransUnion and Equifax. Revolving debt is not permitted to be paid down or paid off to qualify. Borrowers may not use a credit enhancement product in order to qualify or to improve tiers from a pricing standpoint. A minimum of 3 tradelines are required on all transactions. An acceptable trade line is defined as any Open or Closed account with at least 12 months rating history. Authorized user accounts will not be considered and the DU recommendation must be Approve.




5.1-B2 Credit (cont’d)

Mortgage History A minimum of 24 months housing payment history is required. All mortgages showing on the credit report must reflect a 0x30 payment history for the lesser of 24 months or the length of the mortgage. Borrowers who do not own their homes free and clear and have less than 24 months total mortgage payment history, must meet First Time Homebuyer guidelines. Only one borrower must show a mortgage history to be eligible as a standard homebuyer to meet this requirement. Private mortgages must be verified with cancelled checks, referencing the company or individual who completes the VOM. Checks must be dated prior to the next due date.

Derogatory Credit A written explanation is required for all derogatory credit, which must meet the following guidelines:

Major Adverse Credit (Collections, Charge-offs, Judgments, Liens): All delinquent credit that will impact title – including but not limited to delinquent taxes, judgments, charge off accounts, tax liens and mechanics lines – must be paid off prior to or at closing of the loan. Title must insure New Penn’s lien position without exception. Any credit item secured by the subject property must be paid in full.

o Chapter 7 Bankruptcy - NONE in the past 4 years. o Chapter 13 Bankruptcy - Must have been discharged at LEAST 4 years prior to the

application date; when Chapter 13 bankruptcy has been discharged less than 7 years prior to application date, a copy of all bankruptcy paperwork (discharge, petition and schedule of debts) must be provided.

o No Foreclosure/NOD filed in the past 8 years, includes: Property Taxes >60 days delinquent Foreclosure consummated Foreclosed property redeemed Delinquency of 120 days or more

o Deed-in-lieu/Pre-Foreclosure Sale: 4 years – Lesser of 80% max LTV/CLTV/HCLTV or Program Limit 7 years – LTV per the Eligibility Matrix

o Previous Short Sales (purchases): Prior non-delinquent short sales are permitted at standard LTV's as long as the short sale can be classified as being due to extenuating circumstances as defined by FNMA and FHLMC. Non-delinquent short sales not due to extenuating circumstances and short sales with a mortgage delinquency in the last 4 years must follow pre-foreclosure underwriting guidelines.

o Short Payoffs (refinances): Financing is permitted when existing lien holder is willing to accept a reduced payoff (less than full balance) at maximum 70% LTV. The lien holder must provide documentation stating that a deficiency judgment will not be placed against the borrower and that their credit will not be negatively impacted as a result of the short payoff.

o CCCS: Must be treated as a Chapter 13 bankruptcy. The loan is not eligible if the last action date of CCCS was within the previous 4 years.




5.1-B2 Credit (cont’d)

Qualifying Ratios DTI is set forth in the product matrix; under no circumstances may the DTI on a loan file exceed 43%.

Fixed Rate: Borrowers must qualify at the note rate. ARMS: Qualify at the greater of the note rate or fully indexed rate In instances where the borrower’s current primary residence is pending sale, but the sale will

not be finalized prior to the new loan’s closing, the PITIA of the current principal residence must be included in the borrower’s debt ratios in all instances; exceptions will not be made based on reserves.

Transactions resulting in significant payment shock should always be considered by the underwriter. The borrower’s income must clearly support the borrower’s ability to make the higher monthly payment. It is always at the underwriter’s discretion to require additional verification of assets or a larger down payment as a compensating factor for a loan with high payment shock.

Liabilities Monthly payments on all existing debts are included in the borrower’s total liabilities or obligations. Installment debt that is paid off at closing may be excluded from the DTI provided the final HUD-1 reflects the payoff. Revolving debt that is paid off at closing must be included in the DTI. Paying down of debts to qualify is not allowed.

Proof of payments made by other parties must be documented with twelve (12) months canceled checks, however in every case the party making the payment must be obligated under the note. The debt should not have been delinquent at any time.

Loans secured against the borrower’s financial assets, such as 401k loans, will be considered in reviewing the borrower’s overall capacity to repay. Loans should be included in calculating the borrower’s ratios as an installment debt (i.e. if there are less than 10 payments, this debt may be excluded).

Lease obligations, regardless of the remaining lease term, are included in the DTI calculation. Unreimbursed business expenses must be deducted from qualifying income when calculating

the debt to income ratio.

Business Debt Business debts for which the borrower is personally liable are included in the debt calculation up to the amount of the personal recourse. These debts include business paid personal debt, unless proof of payment by the business is established. If the account is new, it must be included in the DTI calculation. These debts may be excluded from the DTI calculation if a minimum of twelve (12) months of consecutive canceled checks from the business are provided.

Deferred Student Loans Deferred student loans are included in the DTI calculation as a long term obligation. Student loans can be counted as credit debt as long as they are in repayment and are not being deferred. Student loans listed as delinquent must be brought current. If no payment is shown on the credit report for a student loan payment, then the payment information should be provided by student loan lender. If the monthly payment amount cannot be determined, use 2% of the original loan amount. If a student loan is charged off, the total of the amount charged off will be included in the cumulative charge off balance in the last 24 months. If a student loan is placed for collection, get a copy of the repayment agreement and a copy of a canceled check and include the payment in the DTI.




5.1-B3 Income

This link is for a New Penn Income Calculator that is not mandatory, but provided as a tool to assist in calculating income: Income Calculator

Full documentation of income is required, including:

o 30 days worth of paystubs, showing a minimum of 30 days YTD earnings and two years W2's, or

o Two years personal tax returns, signed and dated, plus business tax returns when the borrower has 25% or more ownership interest in the business

A 4506-T, signed at application and closing, is required for all transactions IRS tax transcripts are required for the most recent two years All income documentation must be dated within 90 days of the date the note is signed Verbal Verification required for all borrowers

o Within 10 business days prior to closing for salaried borrowers o Within 30 business days prior to closing for self-employed borrowers

The most conservative approach for the income calculation must be used when income is declining. If income has been declining or is inconsistent, further documentation is required based on underwriting review. If the decline or inconsistency cannot be shown to be isolated or nonrecurring in nature, then the lowest annual compensation over the 2-year period prior to the date of loan application must be used to qualify the borrower.

Employment History The borrower should explain, in writing, any gaps in employment exceeding one month.

Self Employed Borrowers A borrower is considered to be self-employed when their primary source of income or the majority of their income is from self-employment. Borrowers with declining income will be carefully scrutinized.

Self-employed borrowers are permitted with a minimum 4 year history; a 4 year history in the same line of work with two full years of self-employment will also be considered.

Two years taxes with all applicable tax schedules are required, both personal and corporate. Both years must be evaluated/averaged to derive income level.

A YTD P&L prepared or reviewed by a reliable third party. Business Credit Report (Corporations and S-Corporations). Business Credit Reports are required

when: o Tax returns in the file are either 1120 or 1120s o K-1s show the borrower’s ownership in the business is 25% or more

Employment Offers/Recent Employment Borrowers who have switched jobs within 30 days of application or will switch jobs prior to close, must provide a copy of the offer and a minimum of one paystub from their new job. A written VOE will be required.

http://newpenncorrespondent.com/media/701414/npf-income-calculator-(v3-2).xlsm




5.1-B3 Income (cont’d)

Employment by a Relative/Family Business Income for a borrower who is employed by a relative must be verified using federal tax returns for the past two years and a current pay stub. Proof must be provided that the borrower is not an owner of the business (signed personal or corporate tax returns). For Family Businesses, the borrower must provide a signed copy of the corporate tax returns detailing their ownership percentage. In any instance where the borrower owns more than 25% of the company, full self-employed documentation must be provided.

Foreign Income Income from a non-U.S. source may be considered only if such income is paid by a corporate entity and is not subject to tax in any jurisdiction outside of the U.S. Any and all income used to qualify a borrower must be verified through filed tax returns and validated through tax transcripts.

Conversion of Primary Residence Rental income from vacating a primary residence may only be used if the borrower is relocating with a new employer or being transferred by current employer to an area that is outside realistic commuting range, or the borrower has 25% equity verified from a 2055E/1004 issued within 6 months. BPO (Broker Price Opinion) is not permitted.

Rental Income Rental income used to qualify must be disclosed on the loan application.

Personal income tax return(s), Form 1040 including Schedule E. Include executed IRS form 4506T. Subtract actual operating expenses (excluding depreciation) from actual rents received for Usable Rental Income. Aggregate net rental loss must be considered a liability for qualification purposes, and

A fully executed lease agreement of 12 months (or longer) must be provided. To account for maintenance, repairs and vacancy, multiply the gross monthly rent by 75% for Usable Rental Income.

Rental income from the subject property for a 2-4 unit primary residence:

If the subject property has been owned less than 12 months prior to the date of the loan application and is not reflected in the borrower's most recent tax returns, the following must be used to document rental income:

Copies of the present lease and income approach on the appraisal. If the subject property was owned 12 months or more prior to the date of the loan application, the same requirements apply, in addition to the most recent tax return/s. Vacancy and maintenance factors must be taken into consideration.

The full Housing Expense (PITIA) of the subject property is treated as debt. Usable Rental Income is treated as income. Rental Income is not to be treated as a direct off-set of the mortgage payment.




5.1-B3 Income (cont’d)

Unacceptable Sources of Income Gambling Winnings (except lottery payments continuing for 5 years) Educational Benefits (such as grants and scholarships) Refunds of Federal, State or Local Taxes Illegal Income or Income Not Reported to the IRS Expense Account Reimbursement Bank Statements as Income Verification Mortgage Credit Certificates Homeownership Subsidies Boarder Income Income Received from Roommates Projected Income Projected Income for a New Job that Starts after Closing

Residual Income Disposable income is the amount of income remaining after the borrower has paid all committed monthly expenses, including housing (PITIA), installment and revolving loans. Disposable income is calculated based on monthly gross income, and does not include expenses for regular income taxes, utilities, food, unexpected housing expenses or repairs, automobile insurance, clothing, medical emergencies, etc. Non-taxable income may be grossed up by 25% before calculating disposable income. Borrowers with substantial residual income are considered favorably when considering the borrower in light of higher ratios. A minimum residual income is required based on total household size:

One Person

Two Persons

Three Persons

Four Persons

Five Persons *

Required Gross Residual Income $1,515 $2,964 $3,227 $3,644 $3,688

* An additional $100 should be added for each individual over 5

5.1-B4 Assets

Assets must be sourced using the two most recent consecutive month’s bank statements covering a minimum of 60 days; if account information is reported quarterly, then the most recent quarter. Assets for Income (AFI) is not permitted.

Down Payment On purchase transactions, the borrower must make a minimum down payment with funds from his/her own resources. The amount of the minimum required down payment depends upon the occupancy of the subject property, documentation type and loan program. A minimum of 10% of the purchase price must be from the borrower’s own funds.




5.1-B4 Assets (cont’d)

Reserves Reserves are measured by the number of months of the qualifying payment amount for the subject mortgage (based on PITIA) that a borrower could pay using his or her financial assets. Minimum required reserves may vary depending on a number of factors, including:

The transaction The occupancy status and amortization type of the subject property The number of units in the subject property The number of other financed properties the borrower currently owns, AND The status of the borrowers current principal residence (pending sale or converting to second

home or investment property) PITIA is defined as:

Principal and Interest Hazard, flood, mortgage insurance premiums (as applicable) Real estate taxes Ground lease Special assessments Association dues Any payments on subordinate mortgages loans secured by the subject property

Certain assets are discounted when used for reserves. Refer to investor guidelines for applicable asset type for additional information.

Business Assets If business funds are used for down payment, closing costs and/or reserves, the borrower must be the sole proprietor or 100% owner of the business.

Earnest Money Deposit The deposit on the sales contract (earnest money) for the purchase of the security property is an acceptable source of funds for both the down payment and the closing costs. Verification of source of funds:

If the deposit is being used as part of the borrower’s minimum contribution requirement, the funds must be verified that they are from an acceptable source.

A request for Verification of Deposit may be used however, VOD’s are not acceptable as a standalone documentation source; bank statements are always required.

Bank statements must be seasoned according to matrix requirements and must evidence that the average balance was large enough to support the amount of the deposit. If a copy of the cancelled check is used to document the source of funds, the bank statements must cover the period up to and including the date the check cleared the bank.

If it cannot be determined that these funds were withdrawn from the borrowers account, additional verification of the source and evidence that the funds have actually changed hands from the borrower to the seller, the realtor, the escrow agent or settlement attorney should be provided.

Large earnest money deposits or deposits that exceed the amount customary for the area should be closely evaluated.





Earnest Money Deposit (cont’d) Receipt of the deposit must be verified by:

Copy of canceled check; Copy of check not canceled with bank statement to evidence check cleared; Evidence from the real estate broker (not the agent) that the funds were deposited into the

broker’s trust account (i.e., copy of broker’s trust account statement); or Escrow agent/attorney’s letter acknowledging receipt of funds.

Other forms of verification may be acceptable, so long as the verification clearly indicates that the funds were in the borrower’s possession for at least 90 days prior to transfer.

Anticipated Sales Proceeds If the borrower’s currently owned home is listed for sale but has not been sold, the borrower may be qualified on the basis of anticipated sales proceeds. Determining the amount of net proceeds:

Sales price established o Sales price-(sales costs +all liens) = estimated proceeds

Sales price not established o 90% of listing price – all liens = estimated proceeds

Sales Proceeds Needed for Down Payment and Closing Costs If the proceeds from the sale of a currently owned home are needed for the down payment and closing costs on the new house, the source of funds must be verified by obtaining a copy of the fully executed HUD-1 Settlement Statement on the existing home before or simultaneously with the settlement of the new home, showing sufficient cash proceeds to consummate the purchase of the new home.

Corporate Relocation Plans When the borrower’s employer assumes responsibility for paying off the existing mortgage in connection with a corporate relocation plan, a copy of the executed buyout agreement must be obtained to document the source of funds. A photocopy of a sales contract or a listing agreement is not considered an acceptable source of verification of proceeds from the sale.

Unacceptable Assets Personal, unsecured loans Bridge Loans Gift funds which must be repaid in full or in part Proceeds from a cash-out refinance cannot be used to meet reserve requirements Anticipated Savings Cash-on-hand/Mattress Money Sweat Equity (labor performed by the borrower or goods or materials provided by the borrower) Gifts from seller-funded programs Donated funds in any form, such as cash or bonds donated by the seller, builder or selling agent

outside of approved financing contributions in the Seller Concession Net proceeds from a 1031 exchange Trade Equity Pooled Funds





Unacceptable Assets (cont’d) Individual Development Accounts (IDA’s) Funds from a Community Second Mortgage/Down Payment Assistance Program Funds in a Custodial or “In Trust For” account Employer Assistance Rent Credits Donation from Equities Withdrawing funds/taking a loan from a non-liquid/retirement account to meet the reserve

requirements for the specific loan program Stocks held in an unlisted corporation

Gifts Owner Occupied loans only. Donor funds must be sourced and it must be verified that sufficient funds to cover the gift are either in the donor’s account or have been successfully transferred to the borrower’s account.

Borrower must have a minimum 10% of their own funds into the transaction (LTV 50% or less does not require 10% of their own funds into the transaction).

Loan must meet standard ratio requirements; expanded ratios are not permitted when gift funds are being used.

Subordinate financing is not permitted. Gift funds cannot be used as reserves or closing costs.

Acceptable Donors A relative, defined as the borrowers spouse, child or other dependent, or by any other individual

who is related to the borrower by blood, marriage, adoption or legal guardianship OR A fiancé’, fiancée or domestic partner The donor may not be or have any affiliation with the builder, developer, the real estate agent

or any other interested party to the transaction. Documentation Requirements Gifts must be evidenced by a letter signed by the donor, called a gift letter. The gift letter must:

Specify the dollar amount of the gift Specify the date the funds were transferred Include the donors statement that no repayment is expected AND Indicate the donor’s name, address, telephone number and relationship to the borrower Verifying Donor Ability of funds and transfer of gift funds It must be verified that sufficient funds to cover the gift are either in the donor’s account or

have been transferred to the borrowers account. Acceptable documentation includes the following:

o A copy of the donors check and borrowers deposit slip o A copy of the donors withdrawal slip and the borrowers deposit slip o Evidence of the donor’s ability to provide funds





Gifts (cont’d)

Gifts of Equity A gift of equity refers to a gift provided by the seller of a property to the buyer. The gift

represents a portion of the seller’s equity in the property and is transferred to the buyer as a credit in the transaction.

A gift of equity is permitted for primary residences if: o The sales price for the property is at market rate o The acceptable donor and minimum borrower contribution requirements for gifts also

applies to gifts of equity. Documentation Requirements

Signed gift letter

HUD-1 settlement statement showing gift of equity If the requirements shown here are met, the gift of equity is not subject to the IPC requirements

Seller Concessions Maximum third party concessions, as a percentage of the purchase price, are:

6% for LTVs ≤ 80% 2% for LTVs > 80%

5.1-C Property

5.1-C1 Eligible Properties Most residential use properties are eligible. Atypical improvements are considered provided marketability has been demonstrated through the appraisal; however, they may not be eligible. Eligible Property Types include:

Attached/Detached SFRs Attached/Detached PUDs Low/Mid/High-Rise Condos and Site Condos 2-4 Unit Properties (Owner Occupied, Primary Residences Only)

Condos All loans secured by condos must be reviewed by the New Penn Condo Review team prior to approval. In general, condos must meet FNMA Condo Project Manager Standards (CPM) or be FNMA/New Penn approved; if the project is currently FNMA approved, a HOA Certification is still required. Non-warrantable condos are not eligible. All requests for condominium review should be emailed to [email protected]

Mixed Use Properties For mixed use properties, originators may follow FNMA guidelines with the exception that the square footage of commercial part of the property cannot exceed 25% of the total square footage.



5.1-C Property (cont’d)

5.1-C1 Eligible Properties (cont’d)

Non-Conforming Additions/Granny or In-law Suites/Accessory Units Properties with accessory units, also known as Granny units, mother-in-law suites, etc., may be acceptable if all of the following criteria are met:

1 unit property Subject property is typical, common and readily-acceptable in the subject property’s market

area Appraisal contains three comparables with similar additional accessory units Rental income from the accessory unit may not be used to help the borrower qualify Existence of the unit must not jeopardize any future hazard insurance claim Subject property must conform to all zoning laws and/or regulations Legal non-conforming use may be acceptable provided the subject property’s current use does

not adversely affect its market value and marketability Accessory unit is substantially smaller than the primary unit

Unconventional Floor Plans Properties with unusual floor plans or functional obsolescence are considered, if the appraisal demonstrates acceptability in the market place and includes appropriate adjustments. A floor plan sketch must be submitted with the appraisal in such cases.

PUDs Planned Unit Developments must comply with the PUD project requirements of Fannie Mae or Freddie Mac. There are two distinct classifications for PUD projects – Type E established PUD projects and Type F new PUD projects. If the subject property is a detached unit, no analysis is required. If the subject is an attached PUD, the following review is required:

Type E Warranty applies to established PUD projects in which the owners’ association has been turned over to the unit purchasers. This is the sole eligibility criterion for qualifying as a Type E project (manufactured homes not allowed).

Type F Warranty applies to new PUD projects that are still under the control of the developer. The project must meet the following eligibility criteria:

o The project cannot have been created by the conversion of existing buildings into a PUD. o The project may not include any multi-dwelling units that represent the security for a

single mortgage loan. o The project must not be composed of manufactured homes. o A sufficient number of the total units in the project (or legal phase) must have been

conveyed or be under contract to be sold to the purchasers in order for the lender to determine whether the presales will support the responsibilities of the homeowners association for at least two years.

o The units must be owned in fee simple or leasehold, and the unit purchasers must have the sole ownership interest in, and right to the use of, the project’s facilities once control of the homeowners association has been turned over to them. The homeowners association should complete a questionnaire so that the originator can make the appropriate determination if the Type F requirements have been met.




5.1-C1 Eligible Properties (cont’d)

SFP Attached With No Homeowners Association Townhouses or single family attached properties use a method of construction of individual homes with common side walls and a common roof. Certain geographic areas have an architectural style that is not subject to a homeowners association. An appraisal review is required for SFR Attached with No Homeowner’s Association.

Acreage/Agricultural Use Acreage and land value must be typical and common for the subject’s market. Loan amounts may be reduced on properties with land values that exceed 35% of the appraised value of the property. To avoid a reduction in loan amount, the appraisal report must provide data which indicates that like-size properties with similar land values are typical and common in the subject’s market area. A maximum of 10 acres will be considered for property valuation. Properties with more than 10 acres will be reviewed on a case by case basis to ensure the LTV limits are not met based on “excess acreage”. An appraisal of a large parcel should include a discussion about the actual parcel size and the typical parcel size for the neighborhood. Properties with minor agricultural usage will be considered, provided the agricultural use is minimal in nature and has little to no effect on marketability. Any agricultural usage should not have a material impact on the borrower’s overall income. In no case may a borrower derive their entire income from such activities. In addition, the value of the property must be based on a maximum of 10 acres.

5.1-C2 Ineligible Properties

Co-ops Condotels Non-Warrantable Condos Manufactured/Mobile, Modular, or Factory Built Homes Investment Properties Log Homes Timeshares Geodesic Domes, Burms, Earth Homes Properties with Resale Deed Restrictions Properties Vested in an LLC or Corporation (title must be taken as an individual) Properties Purchased Through Auctions Unimproved Land and Property Currently in Litigation Commercial Enterprises (e.g. Bed and Breakfast, Boarding House, Hotel) Zoning Violations including Residential Properties Zoned Commercial Properties with Less Than 750 Square Feet of Living Area Properties Held in a Business Name Properties Located in a Lava Zone Properties Located Adjacent To or Containing Environmental Hazards

5.1-C3 Ineligible States Alaska Hawaii




5.1-C4 Appraisals

All appraisals must be ordered through a New Penn-approved AMC. An Approved AMC list can be found on the investor website. Appraisers listed on the Ineligible Appraiser List are not eligible to complete appraisals.

Loans ≤ $1,000,000 require 1 full appraisal Loans >$1,000,000, but ≤ $1,500,000 require a full appraisal and a desk review Loan Amounts > $1,500,000 require 2 appraisals

Additional requirements:

Property condition must generally be in average or better No transferred appraisals permitted The re-use of an appraisal is not permitted

5.1-C5 Declining Market

Appraisals defined by the appraiser as declining are subject to 5% LTV reduction. Appraisals defined as Tier 4 or 5 (declining) by the investor’s Market Risk Rating have additional requirements:

Tier 4 - Field Review Tier 5 - 2nd Full Appraisal required

A market will be deemed “declining” if:

Appraiser indicates in Neighborhood Section that market is declining Appraiser indicates anywhere in comments that market is declining Any Appraisal Review indicates that the market is declining

If two appraisals are required by program guidelines and one of the two appraisals are marked as declining, a 5% LTV reduction is required unless the appraisal that is marked declining is 10% greater than the value of the lower of the two appraisals. See the following example:

Appraisal #1 – property values are marked as stable - $200,000 value Appraisal #2 – property values are marked declining - $225,000 value

The LTV reduction would not be required as the second appraisal marked as declining is 10% higher than the first appraisal.

5.1-C6 Disaster Areas

See investor guidelines for information.

5.1-C7 Flood Insurance


5.1-C8 Hazard Insurance





5.1-C9 Rent Loss Insurance

Rent loss insurance covers rent losses that are incurred during the period that the property is being rehabilitated following a casualty. The coverage must be for at least six months’ rent loss. Rent loss insurance must be maintained for:

2-4 Unit primary residences and 1-4 unit investment properties when rental income from the subject property is used to qualify the borrower.

Rent loss insurance may be waived when:

Rental income from the subject property is not used for qualifying, and PITIA and operating expense from the subject is included in the borrower’s qualifying ratios

5.1-C10 Properties Listed For Sale

The listing must have been expired or withdrawn a minimum of 6 months prior to the application date.

5.1-C11 Property Flip

Purchases and Rate and Term Refinances: Appreciation >20% in the past 90 days requires 2 appraisals regardless of loan amount; paying off seller financing is not permitted

Cash-out Refinances: Appreciation >20% in the past 12 months requires 2 appraisals regardless of loan amount

There can be no pattern of previous flipping as evidenced by multiple transfers in the last 12 months, unless the property seller is a GSE, bank, or recognized mortgage company, then no seasoning is required. Excessive appreciation by any seller regardless of time the property is held will be carefully scrutinized.

5.1-C12 Private Roads

Properties on private roads are acceptable subject to the following: The title company must affirmatively insure access to the subject property from a public street. Any maintenance costs are included in the borrower’s housing ratios. A copy of the road

maintenance agreement may be required if significant upkeep of the road is required (i.e., frequent snow removal, etc.). Private road agreements will not be required in California.

5.1-C13 Escrow Waivers

Allowed, as permitted by state law, except in cases where the loan is determined to be a High Priced Mortgage Loan (HPML). A pricing adjustment may apply.

5.1-C14 Maximum Number of Financed Properties

Borrower may own up to four financed properties. Follow Fannie Mae Guidelines as it pertains to properties owned in the name of a business. Investor exposure not to exceed $2.5 million with MAX $1.5 million in non-primary residence, max 5 units. Maximum of 1 financed unit in a single condo project.

Documents

Section 5.1: Non-Conforming Fixed - esnmc.com · Non-Conforming Fixed ... 5.1-A3 Eligible Programs/Product Codes J-F30-35 ... The borrower must sign the Occupancy Affidavit Form prior