DU Refi Plus Program Guide
Fixed Rate
Wholesale Lending
October 19, 2015
Table of Contents
DU Refi Plus Program Guide ... 1
Fixed Rate ... 1
Table of Contents ... 1
Program Overview ... 3
Highlights ... 3
Credit Philosophy ... 3
Ability to Repay and Qualified Mortgage ... 3
Program Parameters ... 3
Eligible Programs/Options ... 3
Ineligible Programs/Options ... 3
Loan Limits ... 4
Loan to Value (LTV) Matrices ... 4
Automated Underwriting ... 4
Age of Documents ... 4
Assets ... 5
Borrower Eligibility ... 5
Adding or Deleting a Borrower ... 5
Employee Loan Policy ... 5
Trusts... 5
Credit and Liabilities ... 5
Mortgage Payment History ... 5
Modified Mortgages ... 6
Restructured Mortgages ... 6
Significant Derogatory Credit... 7
Collateral ... 7
Property ... 7
Valuations ... 7
Condominium and PUD Projects ... 8
Debt to Income ... 8
Maximum DTI ... 8
Qualifying Rate ... 9
Higher-Priced Mortgage Loans (HPML) and HPML Qualified Mortgage (QM) ... 9
Geographic Restrictions ... 9
Single Premium MI ... 11
Borrower-Paid MI (BPMI) ... 11
Lender Paid MI (LPMI) ... 12
Private Mortgage Insurance Documentation ... 12
Multiple Financed Properties ... 12
Number of Loans ... 12
Number of Financed 1-4 Unit Properties ... 13
Secondary Financing ... 13
Transaction Types ... 13
Maximum Loan Amount Calculation ... 13
Texas Home Equity ... 13
Net Tangible Benefit (NTB) ... 14
Existing Mortgage ... 14
Closing ... 14
Escrow Waivers ... 14
Pricing and Fees ... 15
Program Overview
The guidelines within this document only apply to Fannie Mae DU Refi Plus, which requires evaluation through DU. Fannie Mae also offers Refi Plus which allows for manual underwriting of a loan by the current servicer only. Refi Plus loans are not eligible for financing through Pacific Union Financial.
Highlights
Fannie Mae DU Refi Plus is an initiative under the federal government's Home Affordable Refinance Program (HARP). This program allows borrowers to refinance when home values may have declined and/or mortgage insurance may not be available.
This program allows for high LTVs, unlimited CLTV, and minimal income and asset documentation.
Loans with a note date on or before May 31, 2009 are eligible for DU Refi Plus. New loan application must be dated on or prior to December 31, 2016.
DU findings must state the loan is eligible for DU Refi Plus. New loan must be a fully amortizing fixed rate.
Non-Pacific Union to Pacific Union transactions: The existing loan must be current.
Credit Philosophy
Ability to Repay and Qualified Mortgage
Pacific Union is committed to complying with Ability-to-Repay and Qualified Mortgage rules (ATR/QM) by making a reasonable, good-faith determination that borrowers have a reasonable ability to repay the loan in accordance with the policies set forth within Fannie Mae guidelines. Factors considered in making this determination include the borrower’s income, assets and employment status (if relied on) against the mortgage loan payment, ongoing expenses related to the mortgage loan or the subject property, payments on simultaneous loans secured by the subject property, other debt obligations, and alimony and child-support payments as required by Fannie Mae. A borrower’s credit history is also considered in the evaluation and must comply with Fannie Mae policies. Pacific Union will utilize reasonably reliable third party sources of information.
Program Parameters
Eligible Programs/Options
Fully amortizing 10, 15, 20, 25 or 30 Year Fixed Rate
Loan Limits
Maximum and Minimum Loan Amounts
Maximum Conforming Balance High Balance1
Units Contiguous States Alaska and Hawaii Contiguous States Alaska and Hawaii
1 $417,000 N/A $625,500 N/A 2 $533,850 N/A $729,750 N/A 3 $645,300 N/A $729,750 N/A 4 $729,750 N/A N/A N/A
Minimum: None Maximum: Conforming loan amount plus $1
1. High Balance Loan Amounts: Refer to Maximum County Limits (select Fannie/Freddie in Limit Type field).
Loan to Value (LTV) Matrices
Occupancy Units LTV CLTV/HCLTV Credit Score DTI Ratio
Primary Residence Second Home 1
Investment Property 1-4 135% Unlimited Rely on DU Rely on DU Primary Residence 1 200% 200% Rely on DU Rely on DU 1. Second Homes limited to one unit dwellings
Automated Underwriting
DU performs the risk review, but the lender is responsible for final credit decision as to whether or not the borrower qualifies for the loan using the underwriting recommendation. Loan must receive an Approve/Eligible recommendation.
The DU recommendation and relief of representations and warranties are dependent upon the accuracy of the data entered into DU. This includes:
Property address, including unit numbers, must be exact as on the title report and 1003. Assets entered into DU must be accurately reflected in DU as per the most recent
verification. If verification of assets is not necessary, the assets must be accurate as per the 1003.
Income must be calculated as required by the Fannie Mae Selling Guide. Credit report must reflect all liabilities listed on the 1003.
Liabilities must be included in the DTI ratio unless they may be excluded per Fannie Mae’s polices.
All conditions of the DU Findings must be met. However, income and assets may be verified as outlined within this Program Guide.
Refer to DU Tolerances in the Conventional Program Guidelines for additional guidance regarding rerunning DU when material data changes occur.
Age of Documents
When there are consecutive documents in the loan file, the most recent document is used to determine the age. For example, when two consecutive monthly bank statements are provided, the most recent bank statement must be dated within 120 days of the Note Date.
Assets
Loans should be documented per DU requirements. When asset verification is required: Most recent asset statement (monthly, quarterly, or annual) should be used. Large deposits do not need to be investigated or explained.
Proof of liquidation of assets is not required even if assets are required for payment of closing costs.
Discounting of certain assets in accordance with standard Fannie Mae policies still applies
.
Borrower Eligibility
All types of borrowers are eligible. Restrictions only apply when adding or deleting a borrower or when vesting will be in the name of a trust. Each person who has an ownership interest in the property, even if the individual’s income is not used as qualifying income, must sign the security instrument.
Adding or Deleting a Borrower
Borrowers on existing loan may be removed from the new loan provided at least one original borrower remains on the loan.
A new borrower may be added to the loan, provided the existing borrower(s) are retained. Primary Residence: Income from the new borrower may only be used for qualifying if
the new borrower will occupy the dwelling.
Employee Loan Policy
Loans to the originating Broker and/or their employees are allowed subject to Second Level Review and approval by a Credit Risk Underwriter.
Trusts
Not permitted
Credit and Liabilities
Mortgage Payment History
DU applies the following guidelines to the processing of loans with mortgage delinquencies: Non-Pacific Union to Pacific Union transactions: The existing loan must be current. Loans will receive an Ineligible recommendation due to excessive prior mortgage
delinquency if the borrower has a mortgage tradeline that has one or more 60, 90, 120, or 150-day delinquency reported within the 12 months prior to the credit report date.
If an account is reported on the credit report as a non-mortgage tradeline, but the account is listed on the loan application as a mortgage, DU will analyze the credit history of the tradeline as a mortgage. For example, if the credit report identifies an account as a revolving account, and the account is listed as a HELOC on the loan application, DU will evaluate the credit history of the account as a mortgage. Any late payments in the credit report will be treated by DU as delinquent mortgage payments.
or more payments past due as of the date of the application and that it has not been past due by two or more payments in the last 12 months. If it is determined that the borrower does have a mortgage that is past due by two or more payments or has been past due by two or more payments in the last 12 months, the loan is not eligible.
Modified Mortgages
A modified mortgage is one in which a permanent change has been made to the original loan terms without any forgiveness of principal or accrued interest. This may include, but is not limited to:
A change in amortization term, A reduction in interest rate, or
A reduction in the scheduled monthly payment amount.
Modified mortgages may not be accurately reflected on the borrower’s credit report. If it is known or suspected that the borrower had a previous modification, the credit report must be updated and the loan re-scored and resubmitted to DU.
A copy of the modified note must be in the loan file.
SeeRestructured Mortgages, if applicable.
Eligibility
Transaction Eligibility
Refinance of a Modified Mortgage A previously modified mortgage is eligible for refinance subject to DU Refi Plus approval and,
The mortgage payment history must be reviewed to insure that there has not been one or more 60, 90, 120, or 150 day delinquencies within the 12 months prior to the report date.
The terms of the modified mortgage must be used to determine Net Tangible Benefit.
If the borrower was previously in a trial period plan, but was denied a permanent modification, the current terms of the loan must be used to determine Net Tangible Benefit.
Other Modified Mortgage(s) – Non-Subject Eligible with DU Refi Plus approval and,
The mortgage payment history must be reviewed to insure that there has not been one or more 60, 90, 120, or 150 day delinquencies within the 12 months prior to the report date.
Restructured Mortgages
A restructured mortgage is one that:
Provides forgiveness of a portion of principal and/or interest on either the first or second mortgage.
Application of a principal curtailment by or on behalf of the investor to simulate principal forgiveness.
Restructured mortgages may not be accurately reflected on the borrower’s credit report. If it is known or suspected that the borrower had a previous restructure, the credit report must be updated and the loan re-scored and resubmitted to DU.
A copy of the restructured note must be included in the loan file. See Modified Mortgages, if applicable.
Eligibility
Transaction Eligibility
Refinance of a Restructured Mortgage OR
Other Restructured Mortgage(s) – Non-Subject
Eligible with DU Refi Plus approval, and
The mortgage payment history must be reviewed to insure that there has not been one or more 60, 90, 120, or 150 day delinquencies within the 12 months prior to the report date.
Significant Derogatory Credit
DU will issue a message on loans for borrowers with a previous bankruptcy, foreclosure, deed-in-lieu of foreclosure, preforeclosure sale or mortgage charge-off indicating that DU identified the derogatory event and that the presence of the event does not impact eligibility, regardless of when the derogatory event occurred. DU will not require the investigation of judgments, bankruptcies, foreclosures, or lawsuits declared by the borrower in the Declarations section of the loan application.Collateral
Property
Eligible
1-4 unit dwellings complying with Fannie Mae polices PUDs
Mixed-use
Modular and Panelized Homes provided the home meets Fannie Mae property requirements
Properties currently listed for sale
Ineligible
Manufactured Homes Cooperative properties
Valuations
Loan must be documented in accordance with DU Findings. All data entered into DU must be accurate and complete.
The DU Findings will indicate if the loan is eligible for a Fieldwork Waiver:
If the findings indicate that the loan is eligible for a FWW, Fannie Mae accepts the property value estimate submitted to DU as the market value for the subject property. The property value the entered in DU may be based on:
Appraisal Not Obtained (FWW)
If the DU Findings indicate the loan is eligible for a Fieldwork Waiver (FWW), no appraisal is required. However, all of the following conditions must be met:
The DU Findings may not be more than 120 days old at closing. The DU Findings must state the loan is eligible for a FWW. A $75 fee will apply:
Must appear on Closing Disclosure as lender fee (not Fannie Mae fee).
The Broker must advise the borrower not to rely on the lack of an appraisal as assurance about the condition or value of the property.
The Broker may not represent to the borrower or to any third party to the transaction that Fannie Mae or any third party performed a property review, appraisal, or valuation of any sort.
The borrower may not be charged a fee for an appraisal, a collateral review, or any similar service as part of the new mortgage transaction.
The Broker must comply with all applicable laws and regulations related to the origination and servicing of the new mortgage, including, but not limited to, the Homeowners
Protection Act of 1998 (the “Act”). Certain borrower rights and lender obligations are based on the LTV ratio at the time of origination and at later dates. All parties are advised to consult with their legal counsel with regard to establishing the “original value” as defined by the Act.
Subject is not a Texas Home Equity 50(a)(6).
Appraisal Obtained
Loan must be documented in accordance with DU Findings, except that the following are not required:
Operating Income Statement (Form 216)
Single Family Comparable Rent Schedule (From 1007)
Underwriting review is limited to confirming one of the following based on the “as is” condition of the property (may not be subject to repairs being made):
Condition rating of C6; or Quality rating of Q6
Condominium and PUD Projects
No project review is required, however: The adequate insurance coverage must be in place and verified in accordance with Fannie Mae’s standard policies.
The 1008 must reflect: Condo Class V PUD Class E
Unit number for subject must be exactly as shown in the Fannie Mae Look Up Table. Underwriter must validate that the project is not a condotel, condo motel, co-op hotel or
motel, houseboat project, timeshare or segment ownership project. Cooperative Mortgages are not eligible.
Debt to Income
Maximum DTI
Rely on DU
Qualifying Rate
The qualifying rate is the Note Rate.
Higher-Priced Mortgage Loans (HPML) and HPML Qualified Mortgage (QM)
HPMLs and HPML Qualified Mortgages (QM) are loans secured by the borrower’s primary residence, second home or investment property that are priced at an Annual Percentage Rate (APR) that exceeds the Average Prime Offer Rate (APOR).
Based on the date the interest rate is set (locked or re-locked), the APR must be compared with the APOR index. The loan will be considered an HPML if the APR exceeds the index by 1.5% or more.
HPMLs or HPML QMs may be eligible subject to the following:
Borrower’s ability to repay is established and income and assets have been fully documented; and
An escrow account for taxes and insurance is established. For projects such as condominiums and PUDs where the property insurance is collected as part of the borrower’s HOA fee and remitted by the HOA to the insurance provider, the escrow account must be established for taxes and if applicable any mortgage insurance and any individual homeowner’s insurance policy.
All HPML and HPML QM loans must meet the following additional guidelines. Desktop Underwriter is not able to determine if a loan is an HPML or HPML QM, and will not be updated to reflect these guidelines, therefore these loans must be manually reviewed to insure compliance with these requirements.
Minimum 620 credit score Maximum 45% DTI
Verification of income source and amount is required.
Geographic Restrictions
Refer to theGeographic Matrix for additionalrestrictions
Income and Employment
All employment and income requirements will be included in DU Refi Plus messaging. Loans should be documented per DU requirements and the table below.
Income Type DU Refi Plus Documentation
All loans Verbal verification of employment Base Pay (salary or hourly) Paystub only
Bonus and Overtime Paystub only
Commission One paystub or one year personal tax return covering most recent year (regardless of percentage of commission earning) Self-Employment Personal tax return covering most recent year
Alimony or child support Copy of divorce decree, separation agreement, court order or equivalent documentation, and one month documentation of receipt
Employment-Related Assets as
Income Type DU Refi Plus Documentation
Rental Income Lease or one year personal tax return (Form 1007 is not required)
Applies to rental income from subject or other properties owned by the borrower
Retirement and Pension One of the following: award letter, one year personal tax return, W-2 or 1099 form, or one month bank statement reflecting direct deposit
Social Security One of the following: award letter, one year personal tax return, Form SSA-1099, or one month bank statement reflecting direct deposit
Temporary Leave Income Obtain the borrower’s written confirmation of his or her intent to return to work, and file must not evidence information from the borrower's employer indicating that the borrower does not have the right to return to work after the leave income.
Regardless of the date of return, the amount of the “regular employment income” the borrower received prior to the temporary leave must be used to qualify.
Automobile Allowance Boarder Income Capital Gains Income Disability Income –
Long-Term
Foreign Income Foster-Care Income Interest and Dividends
Income
Mortgage Credit Certificates Mortgage Differential
Payments Income Notes Receivable Income Public Assistance Income Royalty Payment Income Tip Income
Trust Income
Unemployment Benefits (seasonal or non-seasonal) VA Benefits Income
Lender must determine appropriate documentation.
Examples include (but are not limited to): an award letter or equivalent documentation or agreement, one paystub or equivalent documentation, one year personal tax return, IRS 1099 Form, or one month bank statement reflecting direct deposit.
4506-T must be signed by all borrowers at application and again at closing.
Verbal VOE
Verbal VOE must be completed by a Pacific Union Financial closer within five business days prior to closing.
Verbal VOE for Self-Employed Income:
The existence of the borrower’s business must be verified within 30 calendar days prior to the Note Date as follows:
From a third party, such as a CPA, regulatory agency, or the applicable licensing bureau, or
The source of the information and the name and title of the person obtaining the verification must be documented.
Active Military
A YTD Leave and Earnings Statement (LES) dated no more than 30 days prior to note date may be provided in lieu of a verbal VOE
Mortgage Insurance (MI)
If the LTV is >80% and DU findings indicate that the existing loan has mortgage insurance in place, the new loan must have MI. DU will determine if MI is required as follows:
If original LTV ≤80%, then MI is not required.
If original LTV >80% AND existing loan has active MI, obtain either amount of coverage on existing loan or standard coverage if obtaining the standard coverage provides a lower cost option for the borrower. If original LTV >80% AND existing loan does NOT have active MI, then MI is not required.
If MI has been cancelled, the file must include written evidence provided by the MI provider or current servicer to reflect cancellation of MI due to a decrease in LTV below the maximum acceptable limit.
Loans with MI
When the DU Findings indicate that MI is required, the existing MI must be transferred to the new loan, or the file must contain documentation to evidence the original MI was canceled. For loans where MI is required:
Eligible only if insured by one of the following providers: Radian
Genworth RMIC
United Guaranty (UG may require a full underwrite of the original loan. This process requires UG request the original file from the original lender, and the entire process may take 30 to 45 days.)
Triad PMI MGIC
Coverage amount of insurance remains as on the existing MI policy. However, the term of the insurance must cover the life of the new loan, or until cancellation or termination of coverage as required by law or Fannie Mae guidelines.
On transferred MI policies, the initial premium was paid when the existing loan closed and is not collected on the new loan.
A reasonable cost may be charged for the modification of the mortgage insurance policy. Escrow waivers are not permitted on monthly MI plans.
Single Premium MI
If the premium on the original loan was paid as a single premium, the coverage may not be converted to any other plan.
Borrower-Paid MI (BPMI)
On annual plans, the full annual premium is paid at closing. Any applicable refunds are processed by the MI provider.
Financed/ Split MI:
The existing coverage is continued on the new loan regardless of whether the initial premium was paid as a single financed premium or split upfront premium.
If the initial coverage was a Split MI plan, the monthly payment as reflected on the modification certificate must be entered in DataTrac.
If the transfer of the MI policy results in a refund to the borrower, as may be the case with a refundable annual premium. The MI provider will process the refund after the loan closes. The refund is not netted from the payoff.
Lender Paid MI (LPMI)
Single Pay LPMI plans may be transferred to the new loan. Monthly LPMI plans must be converted to a Borrower Paid plan. Existing Borrower Paid MI may not be converted to LPMI.
Private Mortgage Insurance Documentation
The following documentation is required on loans with Private Mortgage Insurance:
The DU Findings must indicate MI is required, identify the existing MI provider name, coverage details and certificate number.
The file must contain evidence that the MI provider will modify the policy to the new loan. This must be obtained prior to closing the loan and should be included in the submission package for all loans. The forms of evidence will vary from MI provider to MI provider. The Closing Disclosure must indicate the amount of the MI as follows:
If monthly premium, appropriate escrow cushions have been collected. Typically two months escrows are required unless prohibited by state regulations or the MI certificate indicates a zero monthly MI plan is in place.
On a HARP loan with MI, the monthly MI transfers from the old loan to the new loan. This may create a slight gap in payment of the MI premium to the MI provider during the transition period from original lender to the new lender. To ensure sufficient funds are available to make any back payments due the MI provider, an amount sufficient to cover the monthly MI due from the date of last mortgage payment made per the payoff statement and the date of closing, will be collected at closing. For example, if the loan was paid off in May and the first loan payment due Pacific Union Financial is July 1, then: If the May MI payment was not paid by the borrower to the original lender, collect
three months of premium to cover May, June and July’s MI premium.
If May payment was paid by the borrower to the original lender, collect two months of premium to cover the June and July monthly payments.
If annual premium, the full annual premium has been collected.
If any portion of the annual premium paid by the previous servicer is refundable, the refund will be processed by the MI provider.
If the subject is the borrower’s primary residence:
File must contain an amortization schedule illustrating when the MI will drop.
State required MI disclosures, where applicable, must also be included in the loan file. Borrower must be provided with a PMI Disclosure which explains how the borrower may
request MI cancellation, the borrower’s right to request cancellation, when MI will be automatically dropped and any exemptions to the general cancellation or termination policy.
Multiple Financed Properties
Number of Loans
Number of Financed 1-4 Unit Properties
There is no limit to the number of financed 1-4 unit properties a borrower may own.
Secondary Financing
Payoff of a subordinate lien, regardless of age, may not be included in the new loan amount.
New subordinate financing may be permitted only if the new subordinate lien is used to pay off an existing subordinate lien, provided that the new loan amount does not exceed the unpaid balance of the subordinate lien being paid off.
Existing subordinate financing may remain in place provided the loan is clearly subordinated to our first lien.
Loans with Property Assessed Clean Energy (PACE) subordinate liens are not eligible. Due to eligibility and delivery requirements, loans with Community Second subordinate
liens are not eligible.
Grant-like unsecured financing (Hardest Hit Funds) may be used to pay down a portion of the existing first lien. In this situation, the following policies apply:
Funds must be reflected on the 1003 and in DU (Section VII, Details of Transaction). The file must contain a copy of the promissory note.
The promissory note must state that no repayment is expected.
Closing Disclosure must reflect the transfer of loan proceeds.
Transaction Types
Transaction must be a rate/term refinance with proceeds being used to pay off an existing Fannie Mae first lien loan.
Maximum Loan Amount Calculation
The loan limit may not exceed the lesser of:
The maximum loan limit per the Maximum Loan Amount matrix; or The total of:
Payoff of the existing first lien (details of transaction section (line d) must match the balance of the lien being paid off in the liabilities section); plus
Payment of closing costs, late fees, prepaids and discount points; plus
When MI is being transferred, the MI provider may charge a reasonable MI transfer fee. Incidental cash back to the borrower at closing may not exceed $250. Cash back in excess of $250 must be applied as a principal reduction on the new loan.
The principal reduction must be made prior to delivery of the loan to Fannie Mae. The $250 limit does not include the reimbursement of documented fees paid outside of closing. Proceeds of loan may not be used to:
Pay off subordinate financing or any other lien. The file must contain a copy of the subordination agreement.
Buy out the interest of another borrower.
Texas Home Equity
Refer to the Texas Home Equity Program Guide for additional requirements.
Full appraisal required regardless of DU feedback.
Net Tangible Benefit (NTB)
Loan must provide a benefit to the borrower in accordance with any federal, state or local regulation. In addition, the loan must provide at least one of the following benefits to the borrower:
Reduction in borrower’s monthly principal and interest payment, Reduction in the interest rate,
Reduction in amortization term, or Results in a more stable product:
Interest-only to fully amortizing ARM to Fixed
Shorter Term: i.e., 30-yr Fixed to 15-, 20-, or 25-year Fixed
Existing Mortgage
Ineligible Existing Mortgages
The following mortgage types may not be paid off as part of this program:
Mortgage loans that are currently subject to any outstanding repurchase request from Fannie Mae
Reverse mortgages Second Mortgages Government Loans
Loans with an existing credit enhancement are not eligible. See DU Refinance Plus FAQs for additional details.
Closing
DU Refi Plus loans are closed in accordance with standard conventional policies except as follows: Cash back to the borrower may not exceed $250.
If borrower receives a principal curtailment to eliminate excess cash back:
Curtailment must not exceed the lesser of $2,500 or 2% of the original loan amount of the subject loan per Fannie Mae guidelines
Curtailment must be completed prior to delivery of the loan to Fannie Mae. If FWW is exercised:
$75 fee must appear on the Closing Disclosure File must contain a FWW disclosure
Escrow Waivers
Escrows for taxes and insurance are encouraged. Escrows may be waived regardless of LTV.
Escrow waivers are not allowed on:
Loans that include monthly Mortgage Insurance (MI) Loans that have been identified as a HPML.
Partial escrows are not allowed. If an escrow account is waived:
Borrower must be financially able to handle the future lump-sum payments.
File must contain a written disclosure advising of the implication of waiving an escrow account. At a minimum, the disclosure must:
Identify any fees associated with waiving escrow accounts.
Advise borrower that they are responsible for payment of taxes and insurance. Advise borrowers that if they do not make their taxes and insurances payment, the
lender has the right to force place an impound account.
Borrowers should be provided with an estimate of the first year taxes and insurance payments along with due dates for each.
Pricing and Fees
$75 fieldwork waiver fee required if DU findings indicate loan is eligible for FWW and FWW is exercised.
All other standard Pacific Union Financial fees apply.
A reasonable MI transfer fee may be charged by the MI provider and included in the loan amount.
