What’s Your Mortgage IQ? Dec 2011 Issue

by 28 Jan 2012
Fannie: Compensating factors.  Do you have a current list of what FNMA accepts as comp factors?   Fannie does not provide a list of compensating factors.  There is a Comprehensive Risk Assessment Worksheet that gives guidance for manual underwriting which might help however. *  Reserves:  the more the better, but at > 6 months and again at > 24 months are specific points referred to in the guide for particular mortgage types, and I would expect some consistency *  Ratios:  the lower the better -- helpful for lower credit scores *  Credit:  over 700, and again over 740 *  Payment:  or rather lack of payment shock -- going down is better *  LTV: break at 80 percent LTV,  60-70 percent LTV, and again under 50percent LTV *  Property type: Single Family vs. Condo...etc... *  Mortgage term: shorter term does matter *  Mortgage payment history or rent payment history Be sure to write a cover letter and point them out when you have to go to manual underwriting. 
Fannie Multiple Parcels:  Do Fannie guidelines prohibit lending on more  than one parcel of land?   FNMA allows multiple parcels under the following rules:
  • Each parcel must be conveyed in its entirety
  • Parcels must be adjoining one another    
  • Each parcel must be zoned residential  
  •  Only one parcel may have a dwelling unit (limited nonresidential improvements such as a garage are acceptable)
   
  • No excessive value given to the land
  • Appraisal comps not required, but suggested   
  •  The mortgage must be a valid first lien on each parcel
VA Cert of Elig. Status:   Is there an email address at the VA to check the status of a veteran's eligibility? No email address.  If you have a question on a Certificate of Eligibility (COE) that had already been requested, call the number: 1-888-244-6711.  You can get to a live person who will look it up for you. 
If you are looking for info on applying for a COE the link below should help.  The instructions on this link are designed for the Veteran, not a lender.  A lender would request the COE using the Veteran's Information Portal:  http://www.benefits.va.gov/homeloans/eligibility.asp If you are working with a veteran who isn’t sure whether he/she has enough eligibility left to get a VA loan, here’s a link for the homebuyer to check it out. http://www.benefits.va.gov/homeloans/eligibility.asp
FHA Old Case Numbers:   How do I get a client's current FHA case number when they can't find their closing docs? 1.  Go into FHA Connection, Single Family Origination>Case Processing>Case Query    You can enter the borrower’s info and pull up the case number (if it's over a year old it may be 'archived').
2.  Call your favorite title company.  Many counties have electronic records.  They can simply look up by legal description and view the image of the Trust Deed/Mortgage.  The front page will have the FHA Case Number. 
VA Non-Spouse on loan:   A veteran has a significant other and they have a child together. Can she be on the VA loan with him?   VA will allow what's called a "Joint Loan." This is where a non-veteran, non-spouse is a co-borrower.  VA will allow the Veteran borrower to use only 1/2 of his/her entitlement in this situation AND the Regional Loan Center has to underwrite the file.  More info can be found in VA Pamphlet 26-7 Revised, Chapter 7
VA Non-Spouse Co-borrowers:  VA will allow a non-veteran, non-spouse to buy a home and use VA financing. But, the veteran borrower can only use ½ of his/her entitlement.  VA will also have to underwrite the loan. But don’t let that stop you! Call me for more info.
USDA Length of time on job:   I have a client that has worked on a farm for two years. He started another job for the last six months, but he is still working at the farm part time. Underwriter says he has to be on BOTH jobs for ONE year. Is that true?    Here is what RD regulations say:   Determining Repayment Income: Employed Applicant Approved lenders must determine stable and dependable monthly income from verifiable sources. Refer to sections 1980.345(b) and 1980.345(c)(2)(i).   There is no minimum length of time an applicant must have held a position to consider employment income as dependable.   Obtaining two years of documentation for an applicant’s employment and income history will assist lenders in their analysis regarding probable stability and continuance of the present income source.   The applicant should not have any gaps in employment of more than a month within a two-year period of loan application. The lender may consider reasonable allowances under the following circumstances:   (1) A recent graduate, as evidenced by college transcripts, or a recent member of the military, as evidenced by discharge papers, entering the civilian workforce. Caution must be utilized when the applicant’s employment includes a probationary period; (2) An applicant has recently re-entered the workforce after an absence to care for a family member or minor child, extended medical illness, or other circumstance reasonable to the lender; (3) An applicant will begin a new job with a firm offer letter from the employer indicating a start date within 90 days of loan closing (lenders must verify the applicant will have sufficient income, or cash reserves, to support mortgage payments and other obligations between the time of loan closing and the start of employment). This type of allowance is commonly represented by an applicant entering a teaching position with a contract from the school district; and (4) An applicant frequently changes jobs but demonstrates income continuity. Sources of income the lender cannot verify are not acceptable for the purpose of qualifying applicants for guaranteed loans. Income that is verified, but not considered stable and dependable by the lender, may be considered as a compensating factor for meeting debt ratios. It remains the lender’s responsibility to fully document their analysis and basis for stable and dependable income utilized. The lender must be able to determine the applicant’s income stability based on the available documentation.



Written and contributed by Karen Deis of Mortgagecurrentcy.com.  Provided monthly by www.mortgagecurrentcy.com- interpreting the Rules and Regulation Changes for loan officers, processors, underwriters, and owners/managers. Mortgage Talking Points TM, charts and checklists included.

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