Criteria
FHASecure
FHA 95% Cash-out Refinance
FHA to FHA Refinance*
Eligible Loan Types
•· Current conventional fixed-rate or ARM loan.
•· Delinquent conventional ARM loan.
•o Delinquency was caused by rate reset (recast) or extenuating circumstance but does not affect borrower's overall capacity to repay the FHA loan.
•· Acceptable loan features include interest only, payment option and negative amortization.
•· FHA or conventional loan that is seasoned at least 12 months with last 12 payments made within the month due. Otherwise, limited to 85% LTV.
•· FHA
Ineligible Loan Types
FHA or conventional loans seasoned less than 12 months. Otherwise limited to 85% LTV.
•· Conventional
LTV
•· Standard LTV on FHA first mortgage.
•· In addition to standard rate and term maximum mortgage calculation may include arrearages (PITI) incurred after reset or extenuating circumstance.
•· Current appraised value is used to determine maximum loan amount.
•· No seasoning requirement for purchase money seconds.
•· Equity line in excess of $1000 advanced in last 12 months is not eligible for inclusion (unless documented for repair/renovation of subject property).
•· Up to 95% LTV on FHA first mortgage that does not exceed $417,000. Otherwise limited to 85% LTV.
•· Standard cash-out maximum mortgage calculation up to 95%.
•· Current appraised value is used in determining maximum loan amount.
•· There are no seasoning requirements for subordinate liens.
•· Standard rate and term maximum mortgage calculation.
•· Equity line in excess of $1000 advanced in last 12 months is not eligible for inclusion (unless documented for repairs/renovation of subject property).
CLTV
•· Unlimited CLTV for new subordinate financing.
•· Unlimited CLTV for re-subordination or modification of existing subordinate financing.
•· Unlimited CLTV for re-subordination and/or modification of existing subordinate financing. Also applicable for FHA first mortgages limited to 85% LTV.
•· Standard FHA CLTV ratio on new subordinate financing: the combined 1st and 2nd liens do not exceed the applicable FHA LTV and maximum mortgage limit for the area.
Underwriting
FHA First Mortgage
•· Borrower is delinquent but mortgage payment history shows that:
•o during the 6 months prior to reset or extenuating circumstance there are no instances of making mortgage payments outside the month due; or
•o during the 12 months prior to reset or extenuating circumstance there are no more than 1x60 late payment or 2x30 late payments; or
•o no more than 1x90 or 3x30 during the 12 months prior to reset or extenuating circumstance provided the LTV on the FHA first does not exceed 90%.
•·Delinquency was caused by rate reset or extenuating circumstance but does not affect borrower's overall capacity to repay the FHA loan.
•·Borrower delinquent on IO and/or payment option ARMs must demonstrate that they were making their monthly mortgage payments within the month due during the 6 months prior to rate reset.
•· Standard 31/43 ratios may be exceeded with compensating factor(s), except for loans limited to 90% LTV mortgage payment history.
•· Non-occupant co-borrowers may be added.
•· Borrower must have owned property for 12 months AND if encumbered by a mortgage made payments for the last 12 months within the month due. Otherwise limited to 85% LTV.
•· Standard 31/43 ratios, may be exceeded with compensating factor(s).
•· Non-occupant co-borrowers may not be added for 95% cash-out refinance transactions but are permissible for those limited to 85% LTV.
•· Borrower must be current and have an acceptable mortgage payment history.
Secondary Financing
•· If payments on the second are required, they must be included in the qualifying borrower unless deferred for a period of at least 36 months.
•· Secondary financing must meet the following requirements:
•ü No prepayment penalty
•ü No balloon payments less than 10 years
•ü Payments on FHA 1st and subordinate liens, plus other housing expenses, cannot exceed borrower's capacity to repay.
•ü Any periodic payments due on the second mortgage are due monthly and are essentially the same in dollar amount.
•· If payments on the second are required, they must be included in qualifying the borrower.
FHA Identifier
•· Conventional not delinquent
•· Conventional delinquent
Conventional not delinquent
FHA to FHA Refinance, use appropriate identifier
New Mortgage
FHA Fixed, 1-year ARM or hybrid ARM
Mortgage Insurance
Delinquent
Current
1.5% UFMIP and .50% Annual Premium
2.25% UFMIP and .55% Annual Premium when LTV > 95%
Expiration
Delinquency and/or > Std FHA CLTV Ratio:
Current and =/< Std FHA CLTV Ratio:
Permanent
Applications on/or before 12/31/08
Documentation Requirements
In addition to standard FHA documentation requirements, the following documents are needed for FHASecure:
•· Evidence of the current loan type and reset date such as the current ARM Mortgage Note or Rider, if applicable.
•· Evidence of occurrence of extenuating circumstance(s), if applicable.
•· Explanation letter from borrower for delinquency and/or missed payments.
•· Evidence that the payment history for the 6 months prior to reset had no payments outside the month due (credit report, payment history, etc); OR
•· Evidence that the payment history has no more than 1x60 late payment or 2x30 late payments in the last 12 months (credit report, payment history, etc); OR
•· Evidence that the payment history has no more than 1x90 or 3x30 late payments in the last 12 months.
•· Include evidence of partial forbearance, if applicable.
•· Evidence of terms and conditions of secondary financing, if applicable.
•· MCAW (LT) with comments from the underwriter in the Remarks section to document decision that reset or temporary financial setback caused the loan to become delinquent.
Standard FHA documentation requirements
Other
All other standard FHA requirements apply
A Life-Changing Procedure
The eyes are the windows of the soul. So, to the person you are capable of
becoming, each evening, just before you go to bed, stand in front of a mirror
alone and in the first-person, present tense, look yourself in the eye and repeat
with passion and enthusiasm paragraphs A, B, C and D. Repeat this process
every morning and every evening from this day forward. Within one week you
will notice remarkable changes in your life. After thirty days add the procedure
at the bottom of this card.
“I, ___________, am an honest, intelligent, organized, responsible, committed,
teachable person who is sober, loyal, and clearly understands that regardless of
who signs my paycheck I am self-employed. I am an optimistic, punctual,
enthusiastic, goal-setting, smart working self-starter who is a
disciplined, focused, dependable, persistent positive thinker with
great self-control, and am an energetic and diligent team player and
hard worker who appreciates the opportunity my company and the
free enterprise system offer me. I am thrifty with my resources and
apply common sense to my daily tasks. I take honest pride in my competence,
appearance and manners, and am motivated to be and do my best so that my
healthy self-image will remain on solid ground. These are the qualities which
enable me to manage myself and help give me employment security in a nojob-
security world.
“I, ____________, am a compassionate, respectful encourager who is a
considerate, generous, gentle, patient, caring, sensitive, personable, attentive,
fun-loving person. I am a supportive, giving and forgiving, clean, kind,
unselfish, affectionate, loving, family-oriented human being and I am a
sincere and open-minded good listener and a good-finder who is
trustworthy. These are the qualities which enable me to build good
relationships with my associates, neighbors, mate and family.
“I, ____________, am a person of integrity, with the faith and wisdom
to know what I should do and the courage and convictions to follow through.
I have the vision to manage myself and to lead others. I am authoritative,
confident, and humbly grateful for the opportunity life offers me. I am
fair, flexible, resourceful, creative, knowledgeable, decisive and an
extra-miler with a servant’s attitude who communicates well with
others. I am a consistent, pragmatic teacher with character and a
finely-tuned sense of humor. I am an honorable person and am
balanced in my personal, family and business life, and have a passion for
being, doing and learning more today so I can be, do and have more tomorrow.
“These are the qualities of the winner I was born to be and I am fully committed
to developing these marvelous qualities with which I have been entrusted.
Tonight I’m going to sleep wonderfully well. I will dream powerful, positive
dreams. I will awaken energized and refreshed; tomorrow’s going to be
magnificent and my future is unlimited. Recognizing, claiming and
developing these qualities which I already have gives me a
legitimate chance to be happier, healthier, more prosperous, more
secure, have more friends, greater peace of mind, better family
relationships and legitimate hope that the future will be even better.”
Repeat the process the next morning and close by saying
the qualities of the winner I was born to be and I will develop and use these
qualities to achieve my worthy objectives. Today is a brand new day and it
mine to use in a marvelously productive way.
After 30 days, add the next step:
Choose your strongest quality and the one you feel needs the most work.
Example: Strongest
3x5 card, print
I am getting better and better organized.
it out loud at every opportunity for one week. Repeat this process with the
second strongest quality and the second one which needs the most work. Do
this until you
as you want to get more of the things money will buy and all of the things
money won
Note:
or two that brings back unpleasant memories (example: discipline). Eliminate the word or
substitute another word.
FHA Credit Policy Manual
Page 1 of 139 Revision 5.6.2008
THIS INFORMATION IS TO BE PROVIDED EXCLUSIVELY TO MORTGAGE PROFESSIONALS/REFERRAL SOURCES AND IS NOT INTENDED FOR PUBLIC USE. THIS IS NOT AN ADVERTISEMENT TO EXTEND CONSUMER CREDIT AS DEFINED IN REGULATION Z,
§226.2. ALL LOANS ARE SUBJECT TO CREDIT AND PROPERTY APPROVAL. PROGRAMS, RATES, TERMS AND CONDITIONS ARE SUBJECT TO CHANGE WITHOUT NOTICE. NOT ALL PRODUCTS ARE AVAILABLE IN ALL STATES OR FOR ALL LOAN AMOUNTS.
OTHER RESTRICTIONS APPLY. ALL RIGHTS RESERVED. 01/09/08
The Credit Policy Manual makes reference to “The Lender”. The Lender shall at all times refer to the institution or
business which is to ultimately fund or purchase the mortgage loan. Any outside business or entity involved, at
any time, in the process of the originating, processing, underwriting, or closing of the mortgage must comply with
The Lender’s credit policy as set forth in this manual.
Any discrepancies between this Credit Policy Manual and published Product Profiles will defer to whichever has
the most recent revision date. This manual was last revised
To Search this manual, Click
simple keyword to search for. Adobe Acrobat will only search for the phrase exactly as you type it.
You may also click the Binoculars Icon in Adobe Acrobat, which will provide more search
options.
CHAPTER 1 – ELIGIBILITY REQUIREMENTS ....................................................................................................... 9
I
U
R
G
P
S
100.01
100.02
100.03
100.04
100.05
100.06
Checklist for Inter Vivos Revocable Trusts...................................................................................................... 12
101.01 – Owner Occupied Principle Residence.............................................................................................. 13
CHAPTER 2
201.01
201.02
201.03
201.04
202.01
202.02
203.01
203.02
203.03
203.04
203.05
204.01
204.02
204.03
204.04
Revision 5.6.2008 Page 2 of 139
204.05
204.06
204.07
205.01
205.02
205.03
205.04
206.01
206.02
206.03
206.04
206.05
206.06 – Recently Listed Properties................................................................................................................ 32
206.07 – Good Neighbor Next Door ................................................................................................................ 32
207.01
209.01
209.02
209.03
209.04
209.05
209.06
209.07
209.08
209.09
209.10
209.11
210.01
210.02
210.03
210.04
211.01
211.02
211.03
211.04
213.01
213.02
213.03
213.04
213.05
213.06
213.07
213.08
213.09
214.01
214.02
215.01 – Face to Face Interview ..................................................................................................................... 47
Page 3 of 139 Revision 5.6.2008
215.02
215.03
215.04
215.05
215.06
215.07
215.08
215.09
215.10
215.11
215.12
215.13
215.14
215.15
CHAPTER 3
305.01
305.02
305.03
305.04
305.05
305.06
305.07
306.01 – Non-Traditional Credit Verification and Evaluation........................................................................... 56
306.02
306.03
306.04
307.01
307.02
307.03
307.04
307.05
307.06
307.07
307.08
307.09
307.10
307.11
307.12
307.13
307.14
307.15
307.16 – Deferred Loans................................................................................................................................ 63
307.17
307.18 – Foreclosure/Primary Residence ....................................................................................................... 63
307.19
307.20
307.21
Revision 5.6.2008 Page 4 of 139
307.22
307.23
307.24
307.25
307.26
307.27
307.28
307.29
307.30
307.31
307.32
307.33
307.34
307.35
307.36
307.37
307.38
307.39
307.40
307.41
307.42
308.01
308.02
308.03
310.01
310.02
311.01
311.02
311.03
311.04
CHAPTER 4
400.01
400.02
400.03
401.01
401.02
401.03
401.04
402.01
402.02
402.03
403.01 – Alimony / Separate Maintenance ..................................................................................................... 76
403.02 – Auto Allowance................................................................................................................................ 76
403.03
403.04 – Capital Gains ................................................................................................................................... 76
403.05
403.06
403.07
Page 5 of 139 Revision 5.6.2008
403.08
403.09
403.10
403.11
403.12
403.13
403.14
403.15
403.16
403.17
403.18
403.19
403.20
403.21
403.22 – W2 Professional Salaried Income .................................................................................................... 81
403.23
403.24
403.25
403.26
403.27
403.28
403.29
403.30
403.31
403.32
403.33
403.34
403.35
403.36
403.37
403.38
403.39
403.40
403.41
404.01
404.02
404.03
405.01
406.01
406.02
406.03
406.04
CHAPTER 5
500.01
501.01
501.02
503.01
503.02
Revision 5.6.2008 Page 6 of 139
503.03
503.04
503.05
504.01
504.02
504.03
504.04
504.05
504.06
504.07 – Collateralized/Secured Loans........................................................................................................... 95
504.08
504.09
504.10
504.11
504.12
504.13
504.14
504.15
504.16
504.17
504.18
504.19
504.20
504.21
504.22
504.23
504.24
504.25
504.26
504.27
504.28
504.29
504.30
504.31
504.32
504.33
504.34
504.35
504.36
504.37
504.38
504.39
CHAPTER 6
600.01
600.02
600.03
600.04
600.05
SECTION
601.01
601.02
601.03
601.04
601.05
Page 7 of 139 Revision 5.6.2008
601.06
601.07
601.08
601.09
602.01
602.02
602.03
603.01
603.02
603.03
603.04
603.05
603.06
603.07
603.08
603.09
603.10
603.11
603.12
604.01
604.02
604.03
604.04
604.05
604.06