Training Presentation - First Mortgage Corporation

Transcript Training Presentation - First Mortgage Corporation

FK PROGRAMS

Training

Offered by… FIRST MORTGAGE CORPORATION April 2, 2015

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. 4/2/2015



Introduction



Non-Warrantable Condos



Available Programs

Non-Conforming Jumbo

Non-Agency Expanded Program Investor Property Express Program



Eligibility / Program Guidelines



Underwriting Guidelines



Pricing and Fees



FMC Resources and Support

‘FK’ PROGRAMS

AGENDA

Introduction to the… FK PROGRAM



The new “FK” Programs are an extension to our existing programs, designed to offer a broader menu of “common sense” loan programs.



These new products offers expanded guidelines for credit, citizenship and debt-to-income ratios, and a wider range of solutions for qualified residential borrowers.

3 ‘FK’ PROGRAMS

Available ONLY for… Investor Express Product Expanded Product

NON-WARRANTABLE CONDOS

Non-Warrantable Condo Guidelines

Available Products: 1.

Non-Agency Jumbo Program 2.

Investor Express Program Expanded Program Available Terms:  Fixed Rate Programs LTV’s:  Up to 80% LTV Loan Amounts:  $100,000 to $2,500,000

5 ‘FK’ PROGRAMS

Non-Warrantable Condo Guidelines

 Loans secured by properties located in condominium projects that are not warrantable to Fannie Mae under specific, expanded project criteria are eligible.

 Non-Warrantable condominiums must meet the Expanded Criteria and all Standard Fannie Mae Criteria referenced below…

‘FK’ PROGRAMS 6

Eligibility Guidelines Program Guidelines Underwriting Guidelines

NON-AGENCY JUMBO

Non-Agency JUMBO Highlights…



Fixed Rate – 30 Yr



Loan Amounts up to $2.5 Million



LTV’s up to 80%



FICO scores as low as 700



DTI’s up to 43% max



Delayed financing (within 6-months of cash acquisition)



Payoff of 12 month seasoned subordinate liens considered rate/term

‘FK’ PROGRAMS

Topic

Term Program Code LTV’s Loan Amounts Occupancy Type Loan Purpose Subordinate Liens

Program Highlights

  

Description

30-year Fixed Rate J30FEC Up to 80% - See matrix  $417,001 up to $2.5 Million – See Matrix   Primary Residence for 1-2 unit properties 2 nd Home for 1-unit property      Purchase Rate & Term Refinance Cash out (Max $300,000) N/A for Texas

– FMC Overlay

Delayed Purchase Refinance (Purchase by borrower within 6 months of loan application) Construction to Perm Finance (NO Single Close CTP)  Payoff of 12-mo seasoned subordinate liens considered Rate & Term Refinance

‘FK’ PROGRAMS 9

MATRIX

Borrower Eligibility Guidelines

Eligible Borrowers: Ineligible Borrowers:  US Citizens  Permanent Resident Aliens  Documented proof of lawful permanent residence in the US  24-months employment history in the US  First Time Homebuyers  All borrowers must have a valid Social Security Number       Non Permanent Resident Aliens (Including Foreign Nationals) Non-occupant co-borrowers Trusts  Inter-Vivos Revocable Trust – may be allowed on a case by case   basis Irrevocable Trusts Land Trusts including Illinois Land Trust Limited Partnerships, General Partners, Corporations, and Limit Liability Companies Borrowers party to a non-arm’s length transaction Borrower with only an ITIN

11 ‘FK’ PROGRAMS

Underwriting Guidelines Topic

Underwriting Method DTI Reserves        

Description

Manual UW ONLY

• No documentation waivers based on AUS permitted

INVESTOR APPROVAL REQUIRED

• FMC pre-underwrites file prior to submission to investor QM Eligible up to max 43% DTI The debt-to-income ratio must be determined in accordance with the ATR/QM Final Rule. Income includes verified gross monthly income, meaning the sum of the Borrower’s current or reasonably expected income, including any income from verified assets. See matrix – must be documented and verified Unless the borrower is of retirement age, no more than 50% of total reserve requirements may come from retirement accounts (including 401K, IRA, SEP, and Keogh). See reserve by loan amount, occupancy and DTI detail on matrix.

12 ‘FK’ PROGRAMS

Underwriting Guidelines CREDIT Topic

Fico Scores

Description

 As low as 700 – See matrix Credit Requirements BK/FC/SS/DIL Significant Derog Credit • • • • • • A minimum of 3 trade lines open for at least 24 months is required: At least 2 of the trade lines must show activity within the past 12 months; At least 1 trade line must be a mortgage for non-first time homebuyers, and for first time homebuyers, 1 trade line must be an installment line; First time homebuyers must have a satisfactory VOR for at least 24 months; A satisfactory 24 month housing payment history is required of each borrower. Credit history must be established for at least 5 years, and be consistent with the borrower(s) occupation and financial activity. No significant derogatory ratings on any trade line activity within the last 36 months (including installment or revolving accounts)   None in last 7 years None on any trade line activity within the last 36 months (includes installment and revolving accounts)

‘FK’ PROGRAMS 13

Underwriting Guidelines CREDIT Topic

Public Records Modifications    

Description

None in last 24 months Public records of di minimis amounts which occurred as isolated events may be permitted. Documentation must be provided describing the cause of the event and the extenuating circumstances that illustrate the borrower’s inability to resolve the problems. Patterns of continuous or repetitive derogatory events are not acceptable. All public records with outstanding debt obligations must be paid off prior to or at closing as noted below: • Open judgments, garnishments and all outstanding liens must be paid. • In general, outstanding collections and charge-offs must be paid off. Collections and charge-offs with minor outstanding balances may remain open. None in last 7 years Modifications that are not the result of adverse circumstances are permitted, including: • Modification due to a principal pay down with recast may be considered on a case by case basis, • Modification as part of a previous single-close construction-to permanent financing transaction.

14 ‘FK’ PROGRAMS

Underwriting Guidelines cont’d… Topic

Employment

Description

 Any gaps in employment spanning 1-month or more must be explained and documented by the Borrower in writing Escrows   Loans without escrow are subject to a loan-level price adjustment. • At a minimum, taxes and hazard insurance must be escrowed in order to avoid the loan-level price adjustment Escrows cannot be waived for Higher Priced Mortgage loans, and additional disclosures are required Escrow Holdbacks  Not eligible except, loan may be originated with escrow holdbacks but all items must be completed and escrows disbursed prior to sale to investor Financial & Sales Concessions   6% Interested Party Contributions for closing costs or pre-paid items only Anything > 6%, both the appraised value and sales price must be reduced by the concession amount for purposes of calculated the LTV/CLTV/HCLTV

15 ‘FK’ PROGRAMS

Underwriting Guidelines cont’d… Topic

Funds to Close Gift Funds

Description

   Minimum 5% required from borrower’s own funds Business funds may be used for down payment and/or closing costs, not for calculating reserves Cash Flow analysis required using 3mos business bank statements to determine no negative impact to business on withdrawal of funds • • • • Use of gift funds subject to the following: Primary Residence O/O, Purchase Transactions ONLY Provided borrower meets 5% minimum down from own funds; gift funds may be used to lower LTV further Not allowed to meet reserve requirements Donor must be a relative or domestic partner (domestic partner must live with borrower) Assumptions / Conversion Options  Not Allowed

16 ‘FK’ PROGRAMS

Income Documen tation

Underwriting Guidelines INCOME

  W-2 forms or personal tax returns, including all schedules, for prior 2 years; Most recent year-to-date computer generated paystub up through and including the most recent pay period (at the time of application).  Paystub must cover at least 30 days.   Sole Proprietorship  Personal tax returns, incl. all schedules for the most recent 2 years;  Year-to-date P&L statement and balance sheet signed and dated. Corporations, “S” Corporations, Partnerships (General, Limited), Limited Liability Companies  Personal tax returns, incl. all schedules, for the most recent 2 years;  K-1s from most recent 2 years, showing ownership percentage;  Business tax returns, incl. all schedules, for the most recent 2 years;  Year-to-date P&L statement and balance sheet  4506-T / Tax Transcripts  A completed, signed, and dated IRS form 4506-T must be completed for all borrowers (whose income is used to qualify for the mortgage). The 4506-T must be processed and tax transcripts obtained for each year requested and match documentation in loan file

‘FK’ PROGRAMS 17

Underwriting Guidelines PROPERTY

Eligible Properties

 1-2 Unit owner occupied properties  1 Unit second homes  Low/Mid/High-Rise Condominiums and detached (site) condos, Fannie Mae Warrantable  Planned Unit Developments (PUDs), Fannie Mae warrantable  Non-warrantable Condos - must meet investor criteria and certain other Fannie Mae criteria  Modular homes  Properties with ≤ 20 acres  Properties with > 10 and ≤ 20 acres  Must be typical for area as evidenced by recent comparables  Maximum 35% land to value  No income producing attributes  Accessory Units – must follow Fannie Mae requirements regarding Accessory Units and Additions without Permits

18 ‘FK’ PROGRAMS

Ineligible Properties

Underwriting Guidelines PROPERTY

 Investment Properties  3-4 Unit Properties  Manufactured Homes  Mixed Use properties  Properties with less than 750 sq feet of living area  Properties with > 20 acres  Properties held in a business name  Condotels must meet investor criteria and certain other Fannie Mae criteria  Cooperatives, Fannie Mae warrantable  Leaseholds

19 ‘FK’ PROGRAMS

Underwriting Guidelines PROPERTY Topic

Appraisal  

Description

<= $1,500,000 – One Full Appraisal > $1,500,000 – Two Full Appraisals

Maximum Financed

 

4 Max – Borrower(s) may not own a total of four (4) financed 1-4 unit residential properties including the subject property All financed residential properties (other than subject) require an additional six (6) mos PITI reserves for each property

Recent Listings   Rate & Term Refinance: Cannot be listed for sale on date of loan app Cash Out: Cannot be listed within 12 mos from date of loan application

20 ‘FK’ PROGRAMS

Underwriting Guidelines Miscellaneous Topic

Secondary Financing

Description

 Secondary or Subordinate financing allowed as limited by the product matrix Age of documents   90 days: Credit Report, Income, Assets, Title Commitment 120 days: Appraisal, Power of Attorney

21 ‘FK’ PROGRAMS

Eligibility Guidelines Program Guidelines Underwriting Guidelines

NON-AGENCY EXPANDED

EXPANDED Program Highlights



Eligible Borrowers

• US Citizens, Permanent Resident Alien • Non-Permanent Resident Alien o Loan amounts to $1MIL up to 70% LTV o Primary Residence o H-1B, H-2B, L-1, L-2 VISAs with SSN 

Foreign Nationals

• Loan amounts to $1MIL up to 60% LTV, and $1.5MIL up to 55% LTV • Second Homes • B-1, B-2, H-1, I, J-1, J-2, O-2, P-1, P-2 VISAs • ITIN or SSN 

Credit Standards

• FICO minimums as low as 640 • BK/FC/SS – None in the past 4 years 

Debt-to-Income Ratios

• Maximum increased to 50% • > 43% DTI o Additional Reserves Required o Minimum residual income levels

‘FK’ PROGRAMS 23

Topic

Asset Depletion Borrower qualifications Title LTV reduction LTV restriction Impounds Non Warrantable Condos

Program Highlights

 

Description

  May be used as qualifying income Monthly qualifying income: Qualifying asset value divided by loan term  One year tax returns to validate rental income for subject property No other borrower income is verified May be held in an LLC  Maximum LTV reduced by 10% if subject property is vacant   LTV may be restricted depending on cash flow Required regardless of LTV  OK

24 ‘FK’ PROGRAMS

Topic

Term Program Code Loan Amount LTV / CLTV Loan Purpose Occupancy

Program Guidelines

           

Description

30-Year Fixed Fully Amortizing C30FEC – Conforming Loan Amounts J30FEC – Jumbo Loan Amounts $100,000 to $1,500,000 – see Matrix See Matrix Purchase Rate & Term Refinance

Cash out (See Product Matrix for Max Cash Out Amount)

N/A for Texas – FMC Overlay

Delayed Purchase Refinance (Purchase by borrower within 6 mos of loan application) Construction to Perm Finance (NO Single Close CTP) Primary residences for 1-2 unit properties 2 nd Home residences for 1-unit properties

‘FK’ PROGRAMS 25

MATRIX

97% LTV OPTIONS PROGRAM 26

Borrower Eligibility Guidelines

Eligible Borrowers:

 US Citizens  Permanent Resident Aliens 

Non-Permanent Resident Aliens (See Express for more details)



Loan amounts to $1MIL (70% LTV)



Primary Residence Only



H-1B, H-2B, L-1, L-2 VISAs with SSN



Foreign Nationals (See Express for more details)



Loan amounts to $1MIL (60% LTV) and $1.5MIL (55% LTV)



Second Homes



B-1, B-2, H-2, I, J-1, J-2, O-2, P-1, P-2 VISAs



ITIN or SSN



Non-Occupant Co-Borrower

 First Time Homebuyers  All borrowers must have a valid Social Security Number, or

ITIN for Foreign Nationals 27 ‘FK’ PROGRAMS

Ineligible Borrowers:

Borrower Eligibility Guidelines

 Trusts  Inter-Vivos Revocable Trust – may be allowed on a case by case basis  Irrevocable Trusts  Land Trusts including Illinois Land Trust  Limited Partnerships, General Partners, Corporations, and Limit Liability Companies  Borrowers party to a non-arm’s length transaction  Borrower with only an ITIN, except for Foreign Nationals

28 ‘FK’ PROGRAMS

Topic

Underwriting Method DTI Reserves

Underwriting Guidelines

 

Description

Manual UW available ONLY

• No documentation waivers based on AUS permitted

INVESTOR APPROVAL REQUIRED

• FMC pre-underwrites file prior to submission to investor  

Maximum increased up to 50% - See Matrix > 43%:

Additional Reserves Required

Minimum Residual Income levels

   See matrix – must be documented and verified Unless the borrower is of retirement age, no more than 50% of total reserve requirements may come from retirement accounts (including 401K, IRA, SEP, and Keogh). See reserve by loan amount, occupancy and DTI detail on matrix.

‘FK’ PROGRAMS 2 9

Topic

Fico Scores Credit Requirements

Underwriting Guidelines CREDIT Description



As low as 640

– See matrix • • • A minimum of three (3) trade lines open for at least 12 months is required. At least two (2) of the trade lines must show activity within the past 12 months; First time homebuyers must have a satisfactory housing payment history for at least 24 months; and Authorized user accounts and non-traditional credit are not considered acceptable trade lines. • Fewer than three (3) trade lines open for at least 12 months may be • considered if, Credit history is established for at least five (5) years, and no fewer than five (5) trade lines are reported, one of which must be a mortgage; At least one (1) trade line is open and shows activity within the past 12 months. Borrowers contributing less than 25% of the qualifying income are not subject to the minimum credit standards.

30 ‘FK’ PROGRAMS

Underwriting Guidelines CREDIT

Acceptable number of late payments and time elapsed for adverse credit events: Mortgage/Rent



Max 0x30 in past 12-months Installment/Revolving Debt BK/FC/SS/DIL

 

2x30 in past 12-months None in past four (4) years Modifications (due to Adverse circumstances) Due to adverse circumstances



None in past four (4) years Judgments, Liens Collections

 

Not due to adverse circumstances; acceptable if:



Due to principal pay-down with re-cast



As part of a previous single-close construction-to-permanent financing None in last 12-months All judgments. Liens, and garnishments with a collective balance of greater than $1,000 must be paid in full with borrower’s own funds prior to closing

 

Collection accounts with < $250 balance or total collections balance need not be paid prior to closing All other collections must be paid with borrower’s own funds prior to close 31 ‘FK’ PROGRAMS

Underwriting Guidelines cont’d… Topic

Employment

Description

32 ‘FK’ PROGRAMS

Underwriting Guidelines cont’d… Topic

Funds to Close Gift Funds

Description

   Minimum 5% required from borrower’s own funds Business funds may be used for down payment and/or closing costs, not for calculating reserves Cash Flow analysis required using 3-mos business bank statements to determine no negative impact to business on withdrawal of funds • • • • Use of gift funds subject to the following: Primary Residence O/O, Purchase Transactions ONLY Provided borrower meets 5% minimum down from own funds; gift funds may be used to lower LTV further Not allowed to meet reserve requirements Donor must be a relative or domestic partner (domestic partner must live with borrower) Assumptions / Conversion Options  Not Allowed

33 ‘FK’ PROGRAMS

Underwriting Guidelines INCOME Topic

 

Description

W-2 forms or personal tax returns, including all schedules, for prior 2 years; Most recent year-to-date computer generated paystub up through and including the most recent pay period (at the time of application).  Paystub must cover at least 30 days. Income Documentation    Sole Proprietorship   Personal tax returns, incl. all schedules for the most recent 2 years; Year-to-date P&L statement and balance sheet signed and dated. Corporations, “S” Corporations, Partnerships (General, Limited), Limited Liability Companies     Personal tax returns, incl. all schedules, for the most recent 2 years; K-1s from most recent 2 years, showing ownership percentage; Business tax returns, incl. all schedules, for the most recent 2 years; Year-to-date P&L statement and balance sheet A completed, signed, and dated IRS form 4506-T must be completed for all borrowers (whose income is used to qualify for the mortgage).

34 ‘FK’ PROGRAMS

Topic

Asset Depletion Residual Income

Underwriting Guidelines INCOME Description

  

Asset Based Income (Asset Depletion)- Only Available on Expanded Product



May be utilized as qualifying income in total or to supplement other income in order to lower the DTI Qualifying asset value / By loan term



Maximum DTI is 43% Not available for First Time Homebuyers, or Foreign National Borrowers Dual utilization of assets is not permitted, Assets used for income cannot also be used for reserves, cash to close or interest/dividends income Loan will be classified as Non-QM UW if Asset Depletion is used for qualification



A completed, signed, and dated IRS form 4506-T must be completed for all borrowers (whose income is used to qualify for the mortgage).



DTI Ratios greater than 43% and up to a maximum 50% are permitted with Borrowers with household income of at least $3,000 plus an additional $500 per additional household members 35 ‘FK’ PROGRAMS

Underwriting Guidelines PROPERTY

Eligible Properties

36 ‘FK’ PROGRAMS

Ineligible Properties

Underwriting Guidelines PROPERTY

37 ‘FK’ PROGRAMS

Topic

Appraisal

Underwriting Guidelines PROPERTY Description

 <= $1,500,000 – One Full Appraisal  > $1,500,000 – Two Full Appraisals 

The borrower(s) may own a total of seven (7) financed 1-4 unit residential properties, including the subject property Maximum Financed



All financed residential properties, other than the subject property, require an additional six (6) months PITI reserves for each property

Recent Listings  Rate & Term Refinance: Cannot be listed for sale on date of loan app  Cash Out: Cannot be listed within 12 mos from date of loan application

38 ‘FK’ PROGRAMS

Underwriting Guidelines cont’d… Topic

Secondary Financing

Description

 Secondary or Subordinate financing allowed as limited by the product matrix Age of documents  90 days: Credit Report, Income, Assets, Title Commitment  120 days: Appraisal, Power of Attorney

39 ‘FK’ PROGRAMS

Eligibility Guidelines Program Guidelines Underwriting Guidelines

INVESTOR EXPRESS PROPERTY

EXPRESS Program Highlights

 30 year fixed rate mortgage  Unlimited number of financed properties (Investor will finance up to 10)  Purchase or Refinances – no limit on cash out  Property DTI based solely on subject property cash flow.

• 65% to 90% maximum Property DTI  Credit Scores as low as 620  Bankruptcy/Foreclosure: None in last 36 months  Foreign nationals and non-permanent residents  Non-warrantable Condos  1-Yr tax returns to validate rental income for subject property(no other borrower income is verified)  Title may be held in an LLC  Maximum LTV reduced by 10% if subject property is vacant  LTV may be restricted depending on property cash flow.

 Impounds required regardless of LTV

‘FK’ PROGRAMS 41

Topic

Term Program Codes LTV’s and Loan Amount Occupancy Type Loan Purpose

Program Guidelines Description

 30-year Fixed Rate Fully Amortizing   Conforming: C30FOE Jumbo: J30FOE  See matrix 

Investment Properties ONLY

   Purchase Rate and Term Refinance Cash Out (No Limit on Cash Out)

N/A for Texas – FMC Overlay

Loan Description  One (1) loan per property secured by a mortgage and note

42 ‘FK’ PROGRAMS

MATRIX

97% LTV OPTIONS PROGRAM 43

Topic

Maximum LTV

Program Guidelines

Description

  Max LTV on product matrix is only available when all of the units are occupied.

If any of the units are unoccupied, a 10% reduction to the Max LTV is required Maximum Loan Amount and Cost Basis The Maximum Loan Amount in the product matrix is available if the length of ownership of the Eligible Property is greater than 12-months. The following restrictions apply should the length of ownership be 12 months or less:  ≤3 months: The lesser of (i) 75% of Cost Basis and (ii) as calculated by all other terms of the product matrix.  4-6 months: The lesser of (i) 80% of Cost Basis and (ii) as calculated by all other terms of the product matrix.  7-12 months: The lesser of (i) 90% of Cost Basis and (ii) as calculated by all other terms of the product matrix. • • • The "Cost Basis" is defined as the original acquisition cost plus verifiable rehabilitation costs. Eligible rehabilitation costs may include both "Soft" and "Hard" costs. Hard costs include direct construction costs (lumber, paint, nails, concrete, etc.). Soft costs are defined as indirect construction costs that include architectural plans, engineering, legal, and permits. Closing costs, contingency reserves, builder overhead, and like costs may not be included in the Cost Basis. Length of ownership shall be measured from the date of the acquisition of the property to the date of the subject loan application.

‘FK’ PROGRAMS 44

Borrower Eligibility Guidelines

Eligible Borrowers:

 US Citizens  Permanent Resident Aliens  Documented proof of lawful permanent residence in the US  24 months employment history in the US 

Non-Permanent Resident Aliens

 Unexpired passport from the country of citizenship containing INS form 1 94 which must be stamped Employment Authorized,  An Employment Authorization Card along with a copy of the Petition for    Non-Immigrant Worker (form I-140) in file, Unexpired H1B, H2B, L-1, L-2 visas only,

Credit trade line requirements must be met; no exceptions

All borrowers must have a valid social security number 

Foreign Nationals – see next page for more details

 Limited Liability Company, in combination with all members of the LLC  All borrowers must have a valid Social Security Number, or

ITIN for Foreign Nationals 45 ‘FK’ PROGRAMS

Borrower Eligibility Guidelines

Foreign Nationals: Visa types allowed: B-1, B-2, H-2, H-3, I, J-1, J-2, O-2, P-1, and P-2:

 Individuals with diplomatic immunity are not eligible  Valid Passport and unexpired Visa (unless resident of country in VISA waiver program) are required

Tax identification:

 Social security number (U.S. credit report required), or  Individual Tax Identification Number (ITIN), and  1 year 1040-NR

Credit:

 If borrower has a SSN • Credit report is required (minimum 680 FICO) o If credit history is not sufficient to generate credit scores, follow the requirements for borrowers with an ITIN. • Mortgage History: 0x30 for most recent 24 months • No significant derogatory credit history • Investor minimum Credit Standards apply (see Section 8.7.1.4) • Insufficient tradelines can be supplemented with foreign credit.

46 ‘FK’ PROGRAMS

Borrower Eligibility Guidelines

Foreign Nationals:

  

If borrower has ITIN

• International credit report is required,

available. Minimum three (3) active and open trade-lines with a minimum 24 month history.  No derogatory credit history permitted. • If international credit report is

not

available, provide at least three (3) satisfactory written credit references from the borrower’s country of origin with at least one reference from a financial institution.  Letters of reference from verifiable financial institutions in a foreign country may be used to establish the three open accounts and  acceptable history. Letters of reference must state the type and length of relationship,   how the accounts are held, and status of the account. All contact information must be provided for the person signing the letter. Any translation must be signed and dated by a certified translator. Any history of Bankruptcy, Foreclosure, Short-Sale or Deed-in-Lieu are not permitted. A satisfactory mortgage history and rating are required for any other residential property financed in the US.

47 ‘FK’ PROGRAMS

Borrower Eligibility Guidelines

Foreign Nationals:

 

Assets:

 All funds for down payment, closing, and reserves must be seasoned for 2 months in a US banking institution. Automatic debit payment required from US banking institution. All asset documentation must be translated into English and US currency by a certified translator. Title: Must be vested in borrower’s name.

Exclusionary List/OFAC:

 All parties involved on each transaction must be screened through the creditor’s standard processes. In addition, parties to the transaction (borrowers, sellers, employers, banks, etc.) must be cleared through OFAC’s Specially Designated Nationals and Blocked Persons list.  Borrowers from OFAC sanctioned countries are ineligible.

Documents:

 Valid Passport and unexpired Visa (unless resident of country in VISA waiver program) are required  All documents must be fully translated into English by a certified translator. A copy of the translators valid certification must be provided and be from a recognized US professional translation organization (i.e. American Translator Association, etc).  Documents signed outside the US must be notarized by US embassy or consular office.  All borrowers must complete IRS form W-8  Declaration of Foreign Residency-FKM required closing document

‘FK’ PROGRAMS 48

Underwriting Guidelines Topic

Underwriting Method 

Description

Manual UW ONLY

• No documentation waivers based on AUS permitted 

INVESTOR APPROVAL REQUIRED

• FMC pre-underwrites file prior to submission to investor Reserves     Borrower must provide evidence acceptable that demonstrates a minimum of 12-months reserves. Reserves are equal to the sum of: a) b) The monthly P&I due, and The monthly real estate taxes, insurance and HOA dues (if applicable) for the property collateralizing the loan Additional Reserves are required for each additional loan financed by the investor If there is more than one Borrower, Reserves shall be based on the collective sum of the Borrowers.

See reserve by loan amount, occupancy and DTI detail on matrix.

49 ‘FK’ PROGRAMS

Underwriting Guidelines

Debt-to Income-Ratio (DTI)

The Debt-to-Income Ratio is calculated for the subject property as follows: • • 𝑀 o 𝑛𝑡ℎ𝑙𝑦 𝑃𝑎𝑦𝑚𝑒𝑛𝑡 ( 𝑃𝐼𝑇𝐼𝐴 ) / 𝑀 o 𝑛𝑡ℎ𝑙𝑦 𝑅𝑒𝑛𝑡𝑎𝑙 𝐼𝑛𝑐𝑜𝑚𝑒 The “Monthly Payment (PITIA)” is equal to the (a) the monthly principal and interest due on the loan and (b) monthly real estate taxes, insurance and HOA dues (if applicable) for the property collateralizing the loan. The “Monthly Rental Income” is equal to the gross rental income realized from the property. Monthly Rental Income shall be based on the following criteria: o For “Occupied” Units or Properties, the Monthly Rental Income should be the lesser of (i) the monthly rental amount reflected on the lease or (ii) the monthly rental market rent documented on the appraisal or other acceptable source. o For “Vacant” Units or Properties, the Monthly Rental Income shall be based on the monthly market rent documented on the appraisal or other acceptable source.

50 ‘FK’ PROGRAMS

Topic

Fico Scores Credit Requirements Credit Standards Authorized Accounts

Underwriting Guidelines CREDIT Description

 620 • • • A credit bureau report is required for each borrower (in case of trust, the trust beneficiary) and must include the full name, address and social security number or ITIN for a Foreign National. The credit report must reflect credit history from all three (3) repositories.

Investor will perform a review of all public records including state/federal searches for UCC lien filings, tax liens, litigation, bankruptcies, judgments, criminal records, OFAC/AML and negative news.

• • • • • A minimum of 3 trade lines open for at least 24 months is required: At least 2 of the trade lines must show activity within the past 12 months; At least 1 trade line must be a mortgage Credit history must be established for at least 5 years, and be consistent with the borrower(s) occupation and financial activity. Borrowers who rent their O/O must provide satisfactory 24-mo rental verification, verified w/VOR, cancelled checks or bank statements No significant derogatory ratings on any trade line activity within the last 36 months (including installment or revolving accounts  Authorized user accounts and non-traditional credit are not acceptable

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Underwriting Guidelines CREDIT

Topic Adverse Credit BK/FC/SS/DIL

      

Description

No mortgage lates in the past 24 months on any mortgage reported on the credit report; • For borrowers renting their primary residence, the verification of rent must evidence no late payments in the past 24 months. Modifications due to adverse circumstances are not permitted within the last 3 years. Modifications that are not the result of adverse circumstances are permitted, including: • Modification due to a principal pay down with recast may be considered on a case by case basis, • Modification as part of a previous single-close construction-to-permanent financing transaction. Generally, no public records are permitted within the past 24 months; • Public records which occurred as isolated events may be permitted. • Documentation must be provided describing the cause of the event and the extenuating circumstances that illustrate the borrower’s inability to resolve the problems. Patterns of continuous or repetitive derogatory events are not acceptable. All public records with outstanding debt obligations must be paid off prior to or at closing as noted below: Open judgments, garnishments and all outstanding liens must be paid. In general, outstanding collections and charge-offs must be paid off. Collections and charge-offs with minor outstanding balances may remain open. No significant derogatory ratings on any trade line activity within the last 36 months (including installment or revolving accounts) None in last 36 months

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Eligible Properties Appraisal Maximum Financed

Underwriting Guidelines PROPERTY

 1-4 Unit Non-Owner occupied residential properties  Low/Mid/High-Rise Condominiums and detached (site) condos, Fannie Mae Warrantable  Non-warrantable Condos - must meet investor criteria and certain other Fannie Mae criteria  Planned Unit Developments (PUD), Fannie Mae warrantable   1-Unit Property  Form 1004 (or Form 1073 for attached Condos)  Form 1007 SFR Comp Rent Schedule or other source acceptable 2-4 Unit Property  Form 1025 Small Residential Income Property and Appraisal Report   Unlimited # of financed Properties Investor will finance up to 10 investment properties

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Underwriting Guidelines cont’d… Topic

Escrows

Description

  Real estate taxes, insurance (hazard and flood) premiums, special assessments, ground rents, water, sewer or other governmental impositions.

The investor reserves the right to require escrows for HOA dues at any time during the loan term.

Prepayment Premium Secondary Financing Loan Assumption  None  Not Permitted  Not Permitted Insurance Requirements   All Insurance must meet Fannie Mae guidelines Rent loss insurance with coverage equal to at least six (6) months of gross monthly rent must be obtained and maintained on each investment property financed

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Underwriting Guidelines cont’d… Topic

Landlord Experience Title/Ownership Interest LLC Requirements 

Description

Borrower(s) who will own four (4) investment properties at closing must demonstrate sufficient landlord experience • Experience is having owning and managing at least two (2) rental properties for at least 24-mos within the last 3 years Fee Simple with Title Vesting as:  Individual  Joint Tenants  Tenants in Common  Limited Liability Company • • • • Title must be in the LLC at time of application for refinance and at time of closing for all transactions Borrower is defined collectively as the LLC and the individual members of the LLC (“individuals”) LLC must be wholly owned directly by the individuals Loan application must be completed by the individuals See complete investor guidelines for complete details regarding specific documentation, signature and closing requirements.

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Topic

Documentation Requirements Interested Party Contribution Escrow Holdbacks Gift Funds

Underwriting Guidelines cont’d…



Description

All Borrowers:  Signed and dated personal tax returns, including Schedule E, for most recent tax year  Bank statements or other form of acceptable statement to validate satisfaction of the Reserve requirement Subject rental property owned by Borrower:  Copy of current lease  3 months rental payment verification  Evidence of security deposit from tenant (if leased) All properties financed by Investor must be listed on the 1003 Schedule of Real Estate Owned 6% Interested Party Contributions for closing costs or pre-paid items only   Not permitted Not permitted

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UW Process Flow UW Submission Form Miscellaneous Information

SUBMISSION, FORMS, MISC.

UW Submission Flow Topic

UW Submission

Description

 FMC Underwriter pre-underwrites file for product eligibility  Submit UW 1008 with file to investor  File goes to Investor for Full Underwrite / Approval Turn-times  FMC UW: Follow standard FMC UW Turn-times for Pre-UW  Investor Turn-times: 4-5 Business Days in addition to FMC TT above

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UW Submission Form

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Rates and Fees Reminders FMC Support

INTEREST RATES/FEES

Topic

Interest Rates Origination Fees

Interest Rates & Fees

Guidelines

 Available on FMC Rate Sheets starting Monday, March 16, 2015  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



Allowable Fees

 See FMC rate sheet Must be reasonable and customary and fully disclosed to the borrower in accordance with all agencies, federal, state and local laws

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FMC WEB SITE



Rate Sheets



Matrices



FMC Overlays



Training Schedule/Materials

 

Guidelines Forms



Marketing



Tools



Calculators

FMC SUPPORT TRAININGS

First Mortgage offers FREE Weekly ONLINE Trainings See the FMC website for the April 2015 Training schedule

SUPPORT TEAM

RETAIL:

Contact your FMC Loan Help Team

Wholesale Brokers / Correspondent Lenders:

Contact your FMC Account Executive

Trainings for April 2015:



4/2 –FK Program Training



4/3 – Retail: Point to FB Interphase



4/7 – Retail: New Program



4/9 – FMC Product Overview



4/14 – Access/FirstDown Program



4/17 – Retail: ECOA Training



4/21 – CalHFA Wholesale Roll Out For help with:



Guidelines

 

Program questions Scenarios



Pricing / Fees



Loan Submissions



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THANK YOU FOR YOUR BUSINESS…

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.

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