Agency Program Updates and Clarifications

HomeBridge is announcing updates and clarifications to its policies based on Fannie Mae Announcement 2013-04 dated May 28, 2013. These changes are effective immediately. Loans that are in the pipeline and were submitted on or after May 28th are eligible to receive the benefit of these improvements.

Age of Credit Documents – Update

Credit documents may now be ≤ 4 months old from the Note date (currently ≤ 90 days) for both existing and new construction.

Basis for Determining if Waiting Periods Met – Update

The credit report date or disbursement date will now be used to determine if the borrower has met the waiting periods required by Fannie Mae instead of the application date.

Refinance Transactions – Disbursement Date

  • Limited Cash-Out Transactions
    The subject property must be taken off the market on or before the disbursement date of the new mortgage loan, and the borrowers must confirm their intent to occupy the subject property (for principal residence transactions).
  • Cash-Out Transactions
    Properties listed for sale in the 6 months preceding the disbursement date of the new mortgage loan are limited to 70% LTV/CLTV/HCLTV.
    Properties that were listed for sale must have been taken off the market on or before the disbursement date of the new mortgage loan.
    The property must have been purchased by the borrower at least 6 months prior to the disbursement date of the new mortgage loan except if delayed financing guidelines are met.

Derogatory Credit Events – Credit Report Date

  • The waiting period for derogatory credit events (e.g. bankruptcy, foreclosure, deed-in-lieu, etc.) commences on the completion, discharge, or dismissal date of the respective derogatory event and ends on the credit report date.

Document Requirements for Receipt of Income – Clarification

The following may be used to document the history of receipt, amount, frequency and duration of income:

  • Current paystubs,
  • Bank statements to confirm direct deposits,
  • Cancelled checks from the payer’s account to the borrower,
  • Court records,
  • Copies of the borrower’s bank statements showing regular deposit of funds.

Social Security Income – Clarification

Social security benefits received by the borrower(s) may be expected to continue for three (3) years with no additional documentation however Fannie Mae clarified that social security benefits received on behalf of another person requires documentation that the income will continue to be received for a minimum of three (3) years.

Employment-Related Assets as Qualifying Income – Update

Funds in a checking or savings account that are from an eligible employment- related asset, such as a severance package or lump sum retirement distribution, may be used for qualifying income subject to additional Fannie Mae requirements. The asset must be individually owned by the borrower or the coowner of the assets must also be a co-borrower on the loan.

10% Single Entity Ownership Requirement for Condominium and PUD Projects – Clarification

When determining whether a single entity owns more than 10% of the total units in the project, the following applies:

  • Units owned by the developer that are currently leased (including lease-purchase agreements) must be included in the calculation.
  • Units that are vacant and are actively being marketed for sale are not included in the calculation.

Housing or Parsonage Income – Update

Borrowers who receive a housing or parsonage allowance may use that income for qualification purposes if the income has been received for the most recent 12 months and the income/allowance is expected to continue for the next three (3) years. The allowance may be added to the borrower’s income but cannot be used to offset the monthly housing payment.

NOTE: This requirement does not apply to military quarter’s allowance.

Trust Income – Update

Tax returns are no longerrequired to document trust income.

Royalty Income – Update

The royalty contract, agreement, or statement confirming amount, frequency and duration of income is now required in addition to tax returns and confirming receipt of income for the previous 12 months and that the payments will continue for a minimum of three (3) years.

Calculation of Real Estate Taxes for Housing Expense – Clarification

The calculation of real estate taxes for borrower qualification must be based on no less than the current assessed value (based on the taxes listed on the title commitment) per Fannie Mae guidelines. The real estate taxes should be projected, however, if one of the following can be documented:

  • The amount of taxes will be reduced based on federal, state, or local jurisdictional requirements. The taxes may not be reduced if an appeal to reduce them is only pending and has not been approved.
  • If the transaction is new construction, a reasonable estimate of the real estate taxes, based on the value of the land and completed improvements, must be made.
  • There is a tax abatement on the subject property that will last for no less than 5 years from the Note date.

    • When the municipality allows for a 10-year abatement, the borrower may be qualified with the reduced tax amount.
    • When the municipality allows for a 10-year abatement that includes annual real estate tax increases in years 1 through 10, the borrower may be qualified with the annual taxes that will be required at the end of the 5th year after the first mortgage payment date.

HomeBridge policy when calculating taxes on purchase transactions is as follows:

  • In the state of California, taxes are calculated using 1.25% of the purchase price.
  • All other states, taxes are calculated using the tax certification or preliminary title report. For new construction only, in the event the preliminary title report reflects a non-subdivded property, 1.25% of the purchase price will be used.

4506-T Forms – Clarification

Multiple IRS 4506-T forms may be required if the borrower is using personal and business tax returns to validate income.

As a reminder, in certain cases copies of the actual tax returns may be required when the tax transcripts do not provide all the required information (e.g. Schedules B through F, Schedule K-1, Form 2106 or business returns). The schedules or forms are not required if