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Desktop Underwriter is a registered trademark of Fannie Mae. Loan Prospector is a registered trademark of Freddie Mac. This presentation is a summary and.

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Presentation on theme: "Desktop Underwriter is a registered trademark of Fannie Mae. Loan Prospector is a registered trademark of Freddie Mac. This presentation is a summary and."— Presentation transcript:

1 Desktop Underwriter is a registered trademark of Fannie Mae. Loan Prospector is a registered trademark of Freddie Mac. This presentation is a summary and is not complete. This information is for mortgage professionals only and should not be distributed to or used by consumers or other third-parties. Information is accurate as of the date shown below and is subject to change without notice. 8/22/2013 JUMBO PROGRAM Training Offered by… FIRST MORTGAGE CORPORATION AUGUST 22, 2013

2  Jumbo Program  Eligibility Guidelines  Program Guidelines  Program Matrix  Underwriting Guidelines  Pricing and Fees  FMC Resources and Support FMC Jumbo Program AGENDA

3 ELIGIBILITY GUIDELINES Eligibility Guidelines Program Guidelines Jumbo Matrix FMC Jumbo Program

4 Borrower Eligibility U.S. Citizens / Non U.S. Citizens  Must have valid SS Number – ITIN not allowed  Permanent Resident Aliens - Must have evidence of valid permanent residency status Non-Permanent Resident Alien  Provide evidence of an acceptable visa  Valid SS number and proof of eligibility to work in the U.S.  Minimum 2-yr history of credit and employment in the US or another country  Non-Permanent Resident aliens who meet at least one of the following requirements are generally eligible for the same financing terms as a U.S. Citizen: 1.Minimum 2-yr history of residence, employment and credit in the US., or 2.Borrowing with a U.S. Citizen or permanent resident alien

5 FMC Jumbo Program Borrower Eligibility Foreign Nationals  Not allowed # of financed properties to one borrower  Max: Four (4)  ALL borrowers on the loan (not just the primary borrower) cannot own more than four (4) financed properties  When aggregate financing for all properties owned by borrower(s) exceeds $3 Million, one of the following is required:  Max PCL is 36 mos PITI or  Max 50% LTV/CLTV

6 FMC Jumbo Program Eligible Property Types Eligible Properties  Single family detached or attached dwellings  PUD’s  Condominiums – Fannie Approved with Investor review  Factory built except manufactured homes May not be part of a PUD or condo project Ineligible Properties  2-4 units  Manufactured/Mobile homes  Time-share projects  Unimproved land  Condotels/Resort Condominiums/Hotel Condominiums  New construction homes purchased through auction  Log, earth or dome homes  Hobby farm Property Flips  Not allowed Resale/Deed restrictions  Not allowed

7 FMC Jumbo Program Program Highlights TopicDescription Program Types  30-yr Fixed – J30F0012  15-yr Fixed – J15F0012  5/1 ARM – J30AQ812 – see next slide for details Maximum loan amount  Up to $1 Million – See Jumbo matrix  Over $1 Million – requires Corporate approval Loan Purpose  Purchase Transactions  Rate & Term Refinances  Cash Out – NOT ALLOWED Occupancy TypePrimary Residence Only

8 FMC Jumbo Program Program Highlights TopicDescription ARM Eligibility  5/1 Libor Index  Margin: 2.25%  Caps: 2/2/5  Qualify: The higher of :  Fully Indexed rate (Index plus margin), OR  Initial Note rate plus 2%  Conversion: Not allowed

9 JUMBO Matrix FMC Jumbo Program Median Home Prices Link: Go to FMC website Go to “My Learning Center” Click on Training Materials Click on Jumbo Program

10 JUMBO Matrix FMC Jumbo Program

11 JUMBO Matrix (Reserves) FMC Jumbo Program Median Home Prices Link: Go to FMC website, click on Training Materials, Jumbo Program

12 UNDERWRITING GUIDELINES Credit Guidelines Income Guidelines Assets Guidelines Other UW Guidelines FMC Jumbo Program

13 UW: Underwriting Method Underwriting Method  Investor prior approval required  DU Approve/Eligible required to submit file to FMC underwriting  DU Approve/Ineligible allowed if reason for ineligibility is due to loan size only Investor Prior Approval Process  Register the loan with the Secondary Marketing Department (Use online lock system)  Submit file to FMC underwriting department as usual  Copy of Registration must be in file upon submission  FMC underwriter submits file directly to investor for prior approval  Investor’s current turn times (please note these are in addition to FMC turn times):  Investor Underwriting: 7 business days  Investor UW Conditions: 3 business days Manual underwriting Not allowed

14 FMC Jumbo Program UW: Credit Minimum Loan Fico Score 720 Non-Traditional Credit Not allowed Qualifying Ratios  36/40  Occupant Borrower’s Ratios with Non-occupant Co-borrower: 36/45 ReservesSee Jumbo Matrix for reserve requirements

15 FMC Jumbo Program UW: Credit Major Derogatory Credit Borrowers with a Bankruptcy, Foreclosure, Deed-in-Lieu, Short Sale, Repossession, or Loan Modification is subject to the following:  LTV/CLTV greater than 70%: NOT ALLOWED  LTV/CLTV less than or equal to 70%: Allowed when: Adverse Credit was due to extenuating circumstances, and a minimum of 60 months re-establishment of credit since the discharged/dismissal/completion date, or The adverse Credit was due to financial mismanagement, and 84 months re-establishment of credit since the discharged/dismissal/completion date Charge-Off  Individual, unpaid charge-off less than or equal to $500 is allowed with no requirement to pay off  Individual, unpaid charge-off more than $500 is not allowed

16 FMC Jumbo Program UW: Credit cont’d… Payoff vs. Paydown  Accounts may not be “paid down” to less than 10 months to qualify  Installment or Mortgage accounts must be paid in full  Payoff of revolving accounts to qualify is not allowed Co-signed loans  The monthly payment on a co-signed loan with 10 or more payments remaining may be excluded if there’s documentation (12-mos cancelled checks or statement from the creditor) the primary obligor has been making the payments during the previous 12 months with no history of delinquency  Applies to: o Car loan o Student loan o Mortgage o Any other obligation

17 FMC Jumbo Program UW: Credit cont’d… Buydowns  2/1 Buydowns allowed  Qualify using fully indexed /fully amortized – greater of Note Rate or Index plus Margin Interested Party Contribution 6% MCCNot allowed Properties listed for Sale  Cannot be currently listed for sale  Cannot be listed for sale within the six months prior to the loan application Age of documents  Credit documents: 120 days  Appraisal documents: 120 days  If appraisal is older than 120 days at closing but less than 1 yr old, obtain an update from appraiser indicating that the property value has not declined since the original appraisal

18 FMC Jumbo Program UW: Income Qualifying Income  Follows standard conventional income guidelines  Follow DU findings with regards to documenting income Employment Gaps  Provide detailed 2-yr employment history  Written explanation for any gaps in employment one or more months Gaps for schooling/training for specific profession ok - requires diploma or transcripts to verify Self Employed Borrowers  Provide previous 2-yrs copies of signed individual (and business if appropriate) tax returns including all applicable schedules Loans with extensions on tax returns is not eligible

19 FMC Jumbo Program UW: Rental Income Rental Income from 1-4 unit properties  When the rental property has been owned for at least 12 months: Prior year’s Individual Tax Return with Schedule E  When the rental property has been owned less than 12 months, and is not reflected on borrower’s most recent filed individual tax returns: Copies of present signed lease(s) may be used only if borrower has a 2-yr history of property management experience evidenced by most current two years tax returns (IRS 1040), and 3-months cancelled checks or bank statements verifying receipt of rental income Personally held, commercial properties  Rental income must be documented if used to qualify, as follows:  Most current 2-yrs filed and signed Individual Tax Returns including Schedule E evidencing a 2-yr history of receipt of rental income

20 FMC Jumbo Program UW: Income cont’d… Other income sources/unearned income  Five (5) years of continuation is required for income types with finite period of receipt. Eg.,  Child Support  Alimony or separate maintenance payments  Note Income  Trust Income  IRA/401k/Keogh Income  Certain types of retirement income, such as annuities (excluding SSI)  Social Security survivor benefits for children  Foreign Income  Certain types of benefit income, such as worker’s compensation  Public assistance income  Royalty income  Mortgage differential  Relocation compensation  Continuance requirement may be reduced to 3 yrs if income source contributes to less than 25% of total qualifying income

21 FMC Jumbo Program UW: Income cont’d… Note Receivable, Installment sales, Land Contracts (Secured or Unsecured)  Copy of Note is required to establish payment amount and length of payment  5-yr continuance beyond date of mortgage application  May be reduced to 3-yrs if less than 25% of total qualifying income  Evidence payments have been received consistently for the last 12- months verified through one of the following: Bank deposits slips or deposit receipts Cancelled checks Bank or other account statements Tax returns Unacceptable Income The following types of income or compensation cannot be included in borrower’s qualifying income:  Expense account payments  Automobile allowances  VA education benefits; education benefits used to offset education expenses are not acceptable  Retained earnings in a company  Boarder Income from Primary residence or 2 nd home  Proceeds from a reverse mortgage or other financing

22 FMC Jumbo Program UW: Reserves… Liquidity (Reserve) requirements  See matrix for reserve requirements  Liquid assets verified to meet the reserve requirements may be in the form of: Cash equivalents (checking, savings, MMA) 100% of vested value of publicly traded Stocks, Mutual Funds, Government securities Cash surrender value of life insurance (less outstanding loans, if repayment not included in debt ratio calculation) For borrowers eligible to make penalty-free withdrawals: o 70% of vested pension, profit sharing, 401k, or traditional IRA (less outstanding loans) o 100% of Roth IRA (less outstanding loans) Equity proceeds from sale of a residence Funds held in business accounts if the requirements under “use of business funds” are met (see next slide for details)

23 FMC Jumbo Program UW: Assets Use of Business Funds Borrowers with insufficient personal liquid assets to qualify or close, but has sufficient verified funds in a 100% owned business, may use business funds for down payment and reserves if both of the following conditions are met: 1.Business average annual cash flow is greater than the amount to be withdrawn/reserves 2.Cash on company year-end balance sheet for previous 3-yrs is greater than the amount to be withdrawn/reserves. See Line 1 of Sch. L for the Partnership, S-Corp, and Corp 3-yr history of a balance greater than or equal to DP/reserves is required 2-yrs of the Sch. L will show 3-yrs of cash on hand for the company Full analysis of the business must consider the effect of the withdrawal and how it will impact the strength and viability of the business in the future Consider the following questions: What is the pattern of company cash flows? Do we have declining gross or net income? Do we have concerns about the type of business? Is the business experiencing a downturn?

24 FMC Jumbo Program UW: Assets Minimum down payment See Matrix for max LTV to determine down payment For LTV 80% or less, full down payment may be gifted Gift funds Allowed Full down payment may be from a gift when the LTV/CLTV is 80% or less Cash Assets for Down Payment & Closing Costs In addition to standard liquid assets, the following are considered cash assets at 100% of the verified amounts: Gift or grant from a municipality, nonprofit religious or community organization, or the borrower’s employer Group savings Pooled funds Savings cash to close Proceeds from the sale of personal property

25 FMC Jumbo Program UW: Assets Ineligible assets for reserves The following assets are ineligible for reserve requirement: Borrower’s not eligible for penalty-free withdrawals: Retirement funds including but not limited to vested pension, profit sharing, 401k, or IRA. Retirement funds may not be liquidated in order to be used to meet reserve (post-closing liquidity) requirements Gift funds Borrowed funds Stock in a closely held corporation Proceeds from sale of assets other than sale of a residence Proceeds from cash-out refinances Credit Card for payment of fees Acceptable fees allowed with credit card payments for the mortgage:  Appraisal  Credit Report  Origination Fee  Commitment, Lock-In, Extended lock-in fees Acceptable credit cards include:  Visa, Mastercard, Discover

26 FMC Jumbo Program UW: Appraisal Required Appraisal Total loan amount less than or equal to $1 Million:  One Full Appraisal required Form 1004/70, 2090 or 1073 A PIA/PIW, 2055, 1075 or 2095 Summary report is not acceptable  Must be ordered from RESdirect only (will be ordered by FMC) Median Home Price When the aggregate loan amount exceeds ten times (10x) the subject property’s county-level MHP, the max LTV/CLTV is capped at: 70% LTV/CLTV, or If the transaction’s maximum LTV/CLTV is less than the ratios above, the lower LTV ratios apply

27 FMC Jumbo Program UW: Departing Residence Departure Residence for Conversion of Principal Residence to 2 nd Home or Investment Property Current Principal residence is pending sale but will not be sold (closed) prior to the new loan:  Both the current and the proposed PITI must be used to qualify the borrower for the new transaction, AND  Reserve requirements are the greater of 6-mos PITI or the standard post-closing/reserve requirements When the departure residence will not be sold at closing and is in a negative equity position, the following is required to reduce overall risk:  Additional reserves to cover the negative equity of the departure residence, OR  Pay down the lien on the departing residence to eliminate the negative equity Existing Property Converting to 2 nd Home:  Both the current and the proposed PITI must be used to qualify the borrower, AND  Reserve requirements are the greater of 6-mos PITI or the standard post-closing/reserve requirement

28 FMC Jumbo Program UW: Departing residence cont’d… Departure Residence for Conversion of Principal Residence to 2 nd Home or Investment Property Cont’d… Existing Property Converting to Investment Property:  If there’s documented evidence of at least 30% in the departing residence, 75% of rental income may be used to offset the mortgage PITI in qualifying when: Reserve requirements are the greater of 6-mos PITI for both properties, or the standard post-close liquidity, and Rental income is documented with a fully executed lease agreement when the borrower’s tax returns reflect a 2-yr history of managing investment properties, as evidenced by the most current 2-yrs filed ta returns, and Proof is provided that a security deposit was received from the tenant and deposited into the borrower’s account

29 FMC Jumbo Program UW: Departing residence cont’d… Departure Residence for Conversion of Principal Residence to 2 nd Home or Investment Property Cont’d… If rental income will not be used to offset the payment to qualify, the following reserve requirements must be met: The greater of 6-mos PITI or the standard post-closing/reserve requirements. If 30% equity cannot be documented, or the borrower doesn’t have the 2-yr managing properties, rental income may not be used to offset the PITI and: Both the current and proposed PITI must be used to qualify borrower for new transaction; AND Reserve requirements are the greater of 6-mos PITI or the standard post-closing/reserve requirements

30 FMC Jumbo Program UW: Departing residence cont’d… Departure Residence for Relocation Borrowers The monthly PITI on the property pending sale does not need to be included in the DTI calculation when the file contains ALL of the following documentation: 1.Borrower’s executed non-contingent sales contract for the previous residence, and 2.Lender’s Commitment to the buyer of the previous residence if the executed sales contract includes a financing contingency, and 3.Reserve requirements are the greater of 6-months PITI, or the standard post-closing reserve requirement Exception: Employer relocation plan where the employer/relocation company takes responsibility for the outstanding mortgage(s).

31 FMC Jumbo Program UW: Miscellaneous Subordinate Financing Subordinate financing, CES or HELOC, is allowed Maximum CLTV must not exceed guideline limits Subordinate financing must be recorded and clearly subordinate our 1 st When subordinating a HELOC, the credit line limit is used to calculate CLTV rather than the amount of the HELOC in use Trade Equity Acceptable after the borrower has made a 5% cash down payment Subtract the outstanding balance of the property being traded, plus any transfer costs from the lesser of the property’s appraised value or its trade-in value A separate written appraisal for the property that is being traded is required A search of the land records to verify ownership and to document any existing liens on the property is also required Sweat EquityNot allowed

32 JUMBO – RATES/FEES Sample Rate Sheet Rates / Fees / Incentives FMC Support FMC Jumbo Program

33 Sample JUMBO Rates FMC Jumbo Program

34 Pricing Incentives FMC Jumbo Program Price Improvement  -0.625 price improvement  Applies to all purchase transactions Rate Reduction .250% interest rate reduction  Available with Preferred Payment Plan with Wells Fargo  Automatic mortgage payment (ACH) from a Wells Fargo checking or savings account  Borrower set up with Wells Fargo direct – account information required prior to closing

35 Jumbo Rates & Fees FMC Jumbo Program TopicGuidelines Interest Rates  Interest Rates available on the FMC Rate Sheet – last page  For Retail – Contact Secondary Marketing  For WS Brokers/Correspondent Lenders – Contact your FMC Account Executive Origination Fees  No max required - Follow new HUD RESPA rules Discount Fees  Buyer or Seller Discounts allowed subject to consumer laws – Discount Points allowed only for loan level price adjustments (subject to FMC’s discretion) Rebate/Discount Pricing  See FMC rate sheet Allowable Fees  Must be reasonable and customary and fully disclosed to the borrower in accordance with all agencies, federal, state and local laws  See FMC fee sheet for our lender fees

36 FMC SUPPORT WEB SITE Go to FMC websites for: 1.RATE SHEET 2.TRAINING MATERIALS 3.GUIDELINES 4.FORMS 5.CALCULATORS 6.TOOLS 7.MARKETING SUPPORT Retail: Contact Loan Help Wholesale/Correspondent: Contact your FMC A/E For help with your: Scenarios Pricing / Fees Guidelines Loan Submissions Trainings FMC Jumbo Program TRAININGS First Mortgage offers FREE Weekly ONLINE Trainings See September Training schedule for upcoming trainings Trainings for August 2013: 8/2: Product Overview 8/13: NHF ACCESS 8/20: Manufactured Homes Training 8/22: Jumbo Product Training

37 On behalf of First Mortgage, thank you for joining today’s training and we hope the information provided will help you build your business! The main purpose of First Mortgage Corporation’s (FMC) training documents is to assist real estate and mortgage professionals in developing entry-level competence with loan programs. While FMC staff, employees, contractors and contributors take care to ensure the accuracy of the content of training documents, FMC makes no warranties as to the accuracy of the information contained within these materials. Furthermore, every user of this material uses it understanding that he or she must still conduct his or her own original legal research, analysis and drafting. In addition, every user must refer to the relevant legislation, case law, administrative guidelines, rules and other primary sources. FMC specifically disclaims any liability for any loss or damage any user may suffer as a result of information contained within this training material. While the information contained in FMC’s training material addresses guidelines and issues surrounding mortgage programs, these materials do not constitute legal advice. All non-legal professionals are urged to seek legal advice from a lawyer. THANK YOU FOR YOUR BUSINESS… FMC Jumbo Program

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