Conventional
Underwriting
Table of Contents
MiMutual Underwriting ___________________________________________________________________ 10
Philosophy ____________________________________________________________________________________ 10 Program Description ____________________________________________________________________________ 11
Requirements and Restrictions _____________________________________________________________ 12
Loan Requirements _____________________________________________________________________________ 12 Loan Restrictions (Ineligible) _____________________________________________________________________ 12 Debt-to-Income Ratios: __________________________________________________________________________ 12 Maximum LTV / CLTV / HCLTV ____________________________________________________________________ 12 Qualified Mortgages with Rebuttable Presumption ___________________________________________________ 13
Residual Income Evaluation Table __________________________________________________________________________ 14
Collateral Requirements __________________________________________________________________ 15
Eligible Collateral ______________________________________________________________________________ 15 Ineligible Collateral _____________________________________________________________________________ 15 Appraisals ____________________________________________________________________________________ 16
Appraiser Independence _________________________________________________________________________________ 16 Approved Appraiser List __________________________________________________________________________________ 16 Uniform Appraisal Dataset (UAD) __________________________________________________________________________ 16 Appraisal Order Process __________________________________________________________________________________ 17 Revisions Due to Sales Contract Amendments ________________________________________________________________ 17 Appraisal Delivery Requirements __________________________________________________________________________ 17 Appraisal Report Forms __________________________________________________________________________________ 18 Appraisal Exhibits ____________________________________________________________________________________ 19 Fannie Mae Property Inspection Waiver (PIW) _______________________________________________________________ 19 Value Reconsideration Request ____________________________________________________________________________ 19 Appraisal Portability _____________________________________________________________________________________ 20 Appraisal Validity Period _________________________________________________________________________________ 20
Modular Home Eligibility ________________________________________________________________________ 20 FEMA Declared Disaster Area Policy _______________________________________________________________ 21 Repair Escrows ________________________________________________________________________________ 21 Minimum Square Footage _______________________________________________________________________ 21 Acreage ______________________________________________________________________________________ 21 Age-Restricted Communities _____________________________________________________________________ 21 Estimated Remaining Economic Life _______________________________________________________________ 21 Commercial/Industrial Zoning ____________________________________________________________________ 21 Properties Listed For Sale within the Last 6 Months (Refinances) ________________________________________ 22
Cash Out Transactions ___________________________________________________________________________________ 22 Rate/Term Transactions__________________________________________________________________________________ 22
Properties Located on a Repaired Sinkhole __________________________________________________________ 22 Construction-to-Permanent ______________________________________________________________________ 23 Condominiums / PUDs ____________________________________________________________________ 24 Property Determination _________________________________________________________________________ 24 Condominiums _________________________________________________________________________________________ 24 PUDs _________________________________________________________________________________________________ 24 Eligibility Requirements _______________________________________________________________________________ 24
Project Approval _______________________________________________________________________________ 24 Insurance Requirements _________________________________________________________________________ 25
Hazard/Liability Insurance (Project Approval) ________________________________________________________________ 25 HO-6 (Loan Level) _______________________________________________________________________________________ 25 Fidelity Bond / Fidelity Insurance (Project Approval) ___________________________________________________________ 26 Flood (Project and Loan Level) ____________________________________________________________________________ 26
Site Condominiums _____________________________________________________________________________ 27 Project Types __________________________________________________________________________________ 28
Ineligible Project Types __________________________________________________________________________________ 28
Ineligible Project Characteristics __________________________________________________________________ 29
Calculation of Commercial Space __________________________________________________________________________ 30
Max LTV on Florida Condos ______________________________________________________________________ 30 Project Review Methods _________________________________________________________________________ 31
Limited Review _________________________________________________________________________________________ 31 Limited Review of Attached Units in Established Projects ____________________________________________________ 31 Documentation Requirements __________________________________________________________________________ 32 Full Review (using CPM) __________________________________________________________________________________ 32 Eligibility Requirements _______________________________________________________________________________ 32 Restrictions for Units in Florida _________________________________________________________________________ 34 Documentation Requirements __________________________________________________________________________ 34
Credit __________________________________________________________________________________ 35
Documentation Requirements ____________________________________________________________________ 35
Verification of Institutional Mortgage History ________________________________________________________________ 35 Verification of Rental Payment History ______________________________________________________________________ 35 Land Contract/Contract for Deed __________________________________________________________________________ 35 Lease with Option to Purchase ____________________________________________________________________________ 35
Credit Reports _________________________________________________________________________________ 35 Housing Payment History ________________________________________________________________________ 36 Land Contracts_________________________________________________________________________________ 36 Bankruptcy ___________________________________________________________________________________ 37 Chapter 7 Bankruptcy ___________________________________________________________________________________ 37 Chapter 13 Bankruptcy __________________________________________________________________________________ 37 Discharged Chapter 13 ________________________________________________________________________________ 37 Dismissed Chapter 13 _________________________________________________________________________________ 37 Exceptions for Extenuating Circumstances ________________________________________________________________ 37 Multiple Bankruptcy Filings _______________________________________________________________________________ 37 Exceptions for Extenuating Circumstances ________________________________________________________________ 37
Foreclosure ___________________________________________________________________________________ 38
Exceptions for Extenuating Circumstances ___________________________________________________________________ 38
Foreclosure and Bankruptcy on the Same Mortgage __________________________________________________ 38 Deed-in-Lieu of Foreclosure, Preforeclosure Sale, and Charged-Off Mortgages _____________________________ 38
Exceptions for Extenuating Circumstances ___________________________________________________________________ 38
Hardship Modifications _________________________________________________________________________ 39
Purchases _____________________________________________________________________________________________ 39 Refinances ____________________________________________________________________________________________ 39
Extenuating Circumstances for Derogatory Credit ____________________________________________________ 39 Requirements for Reestablishing Credit ____________________________________________________________ 39 Consumer Credit Counseling _____________________________________________________________________ 39 Credit Score ___________________________________________________________________________________ 40 Valid Credit Score ______________________________________________________________________________ 40 Borrowers/Co-Borrowers ________________________________________________________________________ 40
Occupying _____________________________________________________________________________________________ 40 Non-Occupying Co-Borrowers _____________________________________________________________________________ 40
Credit Inquiries within 90 days of Report Date _______________________________________________________ 41 Departure Residence Pending Sale ________________________________________________________________ 41 Accounts with No Monthly Payment Reported _______________________________________________________ 41
HELOCs _______________________________________________________________________________________________ 41
Open 30-Day Charge Accounts ____________________________________________________________________ 41 Contingent Liability _____________________________________________________________________________ 41 Joint/Co-Signed Debts by Applicants _______________________________________________________________ 42 Business Debt in Borrower’s Name ________________________________________________________________ 42 Installment Debt _______________________________________________________________________________ 42 Projected Obligations ___________________________________________________________________________ 43 Student Loans _________________________________________________________________________________ 43
Student Loans Currently in Repayment _____________________________________________________________________ 43 Student Loans Currently Deferred or in Forbearance __________________________________________________________ 43
Obligations Not Considered Debt __________________________________________________________________ 43 Calculating Housing Expense Ratio ________________________________________________________________ 44 Payoff or Paydown of Debt for Qualification _________________________________________________________ 44 Past-Due, Collections, and Charge-Off Accounts ______________________________________________________ 44 Judgments, Garnishments, and Liens _______________________________________________________________ 44
Employment/Income _____________________________________________________________________ 45
Documentation Requirements ____________________________________________________________________ 45 Hourly or Salaried Employees_____________________________________________________________________ 45 Overtime and Bonus Income _____________________________________________________________________ 45 Second Jobs/Part-Time Income ___________________________________________________________________ 45 Seasonal Employment __________________________________________________________________________ 46 Unemployment Benefits _________________________________________________________________________ 46 Union Employees ______________________________________________________________________________ 46 Commission Income ____________________________________________________________________________ 46 1099 Employees _______________________________________________________________________________ 46 Unreimbursed Business Expenses _________________________________________________________________ 47 Automobile Allowances _________________________________________________________________________ 47 Self-Employed _________________________________________________________________________________ 47 Alimony, Child Support, or Separate Maintenance ____________________________________________________ 48 Social Security Income __________________________________________________________________________ 49 Pension/Retirement Income _____________________________________________________________________ 49 Military Income, Entitlements, and Reserve Duty Income ______________________________________________ 50 Foster Care Income _____________________________________________________________________________ 50 Non-Taxable Income ____________________________________________________________________________ 50 Short Term Disability / Workman’s Comp ___________________________________________________________ 50 Projected Income ______________________________________________________________________________ 50 Foreign Income ________________________________________________________________________________ 50 Maternity Leave _______________________________________________________________________________ 51 Rental Income _________________________________________________________________________________ 52
Rental Income from the Subject Property ___________________________________________________________________ 52 When the Subject Property is the Primary Residence ________________________________________________________ 52 When the Subject Property is an Investment Property _______________________________________________________ 52 Rental Income from Property Other Than the Subject __________________________________________________________ 52 Conversion of Principal Residence Requirements _____________________________________________________________ 53 Partial or No Rental History on Tax Returns (Qualifying Exceptions) _______________________________________________ 53 Offsetting Monthly Obligations for Rental Property Reported through a Partnership or an S Corporation ________________ 54
Timing of Tax Returns ___________________________________________________________________________ 55
Assets _________________________________________________________________________________ 57
Borrower’s Own Funds to Close ___________________________________________________________________ 57
Bank Statements _______________________________________________________________________________________ 57 Verification of Deposit ___________________________________________________________________________________ 57 HUD-1 from Sale of Current Residence ______________________________________________________________________ 57
Retirement Accounts ___________________________________________________________________________ 57
Stocks, Stock Options, Bonds, and Mutual Funds ______________________________________________________________ 57
Large Deposits _________________________________________________________________________________ 58
Refinance Transactions __________________________________________________________________________________ 58 Purchase Transactions ___________________________________________________________________________________ 59
Cash Back on Purchases _________________________________________________________________________ 59 Sale of Personal Property ________________________________________________________________________ 59 Minimum Reserve Requirements __________________________________________________________________ 59 Business Assets ________________________________________________________________________________ 60 Gift Funds ____________________________________________________________________________________ 60
Acceptable Donors ______________________________________________________________________________________ 60 Gift Documentation _____________________________________________________________________________________ 60 Verifying Donor Ability of Funds and Transfer of Gift Funds _____________________________________________________ 61 Minimum Borrower Contribution Requirement from Borrower’s Own Funds _______________________________________ 61
Gift of Equity __________________________________________________________________________________ 62 Downpayment Assistance Programs _______________________________________________________________ 62 Collateralized Loans ____________________________________________________________________________ 62 Gift Funds/Grants by Charitable Organizations _______________________________________________________ 63 Donations from Entities _________________________________________________________________________ 63
Minimum Borrower Contribution Requirements ______________________________________________________________ 63
Subordinate Financing __________________________________________________________________________ 64
Acceptable Subordinate Financing Types ____________________________________________________________________ 64 Unacceptable Subordinate Financing Terms _________________________________________________________________ 64 Eligible Variable Payment Terms for Subordinate Financing _____________________________________________________ 64
Refinance Transactions ___________________________________________________________________ 65
Cash Out Refinances ____________________________________________________________________________ 65
Additional Underwriting and Eligibility Criteria _______________________________________________________________ 65
Rate & Term Refinances/Limited Cash Out __________________________________________________________ 66
Existing Debt ___________________________________________________________________________________________ 66 Refinances to Buy Out an Owner’s Interest __________________________________________________________________ 66 Additional Underwriting and Eligibility Criteria _______________________________________________________________ 66 Loan Seasoning _________________________________________________________________________________________ 67 Property Seasoning _____________________________________________________________________________________ 67
Property Seasoning _____________________________________________________________________________ 67
No Cash Out/Limited Cash Out ____________________________________________________________________________ 67 Cash-Out ______________________________________________________________________________________________ 67
Mortgage Payoffs ______________________________________________________________________________ 67 Texas Refinances _______________________________________________________________________________ 68
Non-Homestead Properties _______________________________________________________________________________ 68
Delayed Financing Exception _____________________________________________________________________ 69 Subordinate Financing __________________________________________________________________________ 70
Defining Refinance Transactions Based on Subordinate Lien Payoff _______________________________________________ 70
Cash Out and Principal Curtailments _______________________________________________________________ 71
Purchase Transactions ____________________________________________________________________ 72
Earnest Money Deposit (EMD) ____________________________________________________________________ 72 Short Sales ____________________________________________________________________________________ 72 Interested Party Contributions ____________________________________________________________________ 72
Principal Residence or Second Home _______________________________________________________________________ 72 Investment Property ____________________________________________________________________________________ 72
Property Seasoning _____________________________________________________________________________ 72 Personal Property ______________________________________________________________________________ 73 Identity of Interest Transactions/Non-Arm’s Length Transactions ________________________________________ 73
Borrower Acting as an Interested Party _____________________________________________________________________ 73
Determining Property Taxes on New Construction Dwellings ___________________________________________ 73 Reacquisition of a Formerly-Owned Property ________________________________________________________ 73 Seller Utilizing a Relocation Company ______________________________________________________________ 74
Relocation Company Takes Power of Attorney _______________________________________________________________ 74 Double Escrow _________________________________________________________________________________________ 74 Relocation Company Acts as Seller without Taking Title ________________________________________________________ 74
Expanded LTV/CLTV/HCLTV ________________________________________________________________ 75
Purchase Transactions __________________________________________________________________________ 75 Limited Cash Out Refinance Transactions ___________________________________________________________ 76
Private Mortgage Insurance (PMI) __________________________________________________________ 77
Minimum Credit Score __________________________________________________________________________ 77 Transaction Types ______________________________________________________________________________ 77 Coverage Options ______________________________________________________________________________ 77 Points and Fees Restriction ______________________________________________________________________ 77
General Provisions _______________________________________________________________________ 78
Documentation Requirements ____________________________________________________________________ 78 Citizenship ____________________________________________________________________________________ 78
Permanent Resident Aliens _______________________________________________________________________________ 78 Non-Permanent Resident Aliens ___________________________________________________________________________ 78 Required Visas _______________________________________________________________________________________ 78 Eligible Visa Classes ___________________________________________________________________________________ 79 Expired Visa Requirements _____________________________________________________________________________ 79 Employment Authorization Document (EAD) ______________________________________________________________ 80 Additional Immigration Status _____________________________________________________________________________ 80 North American Free Trade Agreement (NAFTA) Workers ______________________________________________________ 80 Diplomatic Immunity ____________________________________________________________________________________ 80
Social Security Number __________________________________________________________________________ 80 Translated Documents __________________________________________________________________________ 80 Legal Name ___________________________________________________________________________________ 81
Married Names ________________________________________________________________________________________ 81
Maximum Number of Financed Properties/Multiple Properties _________________________________________ 81 Maximum Number of Borrowers Allowed ___________________________________________________________ 81 Age of Borrower _______________________________________________________________________________ 81 Non-Occupant CoBorrowers ______________________________________________________________________ 81 Power of Attorney _____________________________________________________________________________ 82 Rescission ____________________________________________________________________________________ 82 Tax and Insurance Escrows _______________________________________________________________________ 82
Hazard Insurance_______________________________________________________________________________ 83 Non-Homestead Property Taxes __________________________________________________________________ 83 Title Companies/Settlement Agents _______________________________________________________________ 83 Title Requirements _____________________________________________________________________________ 84
Redemption Periods on Title ______________________________________________________________________________ 84 Schedule B ____________________________________________________________________________________________ 84
Delinquent Property Taxes _______________________________________________________________________ 84 Paying Debt at Closing __________________________________________________________________________ 84 Mortgage Payoffs ______________________________________________________________________________ 84 Verifications __________________________________________________________________________________ 84 Age of Documents ______________________________________________________________________________ 85 Non-Purchasing Spouse _________________________________________________________________________ 85 Electronic Signatures____________________________________________________________________________ 86
Ineligible Documents for eSignature ________________________________________________________________________ 86 Approved Vendors ______________________________________________________________________________________ 86
Trusts ________________________________________________________________________________________ 87
Eligible Borrowers ______________________________________________________________________________________ 87 Eligible Properties ______________________________________________________________________________________ 87 Required Documentation ________________________________________________________________________________ 87 Exception for Trust Certificate Authorized States______________________________________________________________ 87 Other Title and Closing Requirements ______________________________________________________________________ 88 Ineligible ______________________________________________________________________________________________ 88
LDP/GSA Lists _________________________________________________________________________________ 88 Debt-To-Income Ratios __________________________________________________________________________ 88 Credit Card Financing ___________________________________________________________________________ 88
ARMs __________________________________________________________________________________ 89 Product Description ____________________________________________________________________________ 89 Index ________________________________________________________________________________________ 89 Margin _______________________________________________________________________________________ 89 Caps _________________________________________________________________________________________ 89 Qualifying Rate ________________________________________________________________________________ 89 5/1 __________________________________________________________________________________________________ 89 7/1 __________________________________________________________________________________________________ 89
Maximum Loan Amount _________________________________________________________________________ 89 Maximum LTV/CLTV/HCLTV Ratios ________________________________________________________________ 90 Financing Types ________________________________________________________________________________ 90
Purchase ______________________________________________________________________________________________ 90 Rate/Term Refinance (Limited Cash Out) ____________________________________________________________________ 90 Cash Out Refinance _____________________________________________________________________________________ 90
Property Types ________________________________________________________________________________ 90
Condominiums _________________________________________________________________________________________ 90
Appraisal Requirements _________________________________________________________________________ 90
High-Balance Loans ______________________________________________________________________ 91
Minimum / Maximum Loan Amounts ______________________________________________________________ 91 Loan Amount and LTV Limitations _________________________________________________________________ 91 Minimum Credit Score __________________________________________________________________________ 91 Available Terms ________________________________________________________________________________ 91 Maximum Debt-to-Income Ratio (DTI)______________________________________________________________ 91 Occupancy ____________________________________________________________________________________ 91 Property Types ________________________________________________________________________________ 92
Private Mortgage Insurance (PMI) _________________________________________________________________ 92 Assets ________________________________________________________________________________________ 92
Minimum Borrower Investment (From Own Funds) ___________________________________________________________ 92 Gift Funds _____________________________________________________________________________________________ 92 Reserves ______________________________________________________________________________________________ 92 Appraisals ____________________________________________________________________________________ 92 Seller Contributions ____________________________________________________________________________ 92 DU Refi Plus™ ___________________________________________________________________________ 93 Available Terms ________________________________________________________________________________ 93 Maximum LTV/CLTV ____________________________________________________________________________ 93 Maximum Mortgage Amount _____________________________________________________________________ 93 Minimum Credit Score __________________________________________________________________________ 93 Qualifying Ratios _______________________________________________________________________________ 93 Credit ________________________________________________________________________________________ 93
Mortgage Payment History _______________________________________________________________________________ 93 Bankruptcy ____________________________________________________________________________________________ 93 Foreclosure ____________________________________________________________________________________________ 93 Occupancy ____________________________________________________________________________________ 94 Property Types ________________________________________________________________________________ 94 Benefit to Borrower ____________________________________________________________________________ 94 DU Findings ___________________________________________________________________________________ 94 Escrow Waivers ________________________________________________________________________________ 94 Credit Documentation Requirements ______________________________________________________________ 94
Income _______________________________________________________________________________________________ 94 Assets ________________________________________________________________________________________________ 95
Mortgage Insurance ____________________________________________________________________________ 95 Appraisal Requirements _________________________________________________________________________ 95 Subordinate Financing __________________________________________________________________________ 95 Additional Important Notes ______________________________________________________________________ 96
Repair Escrows __________________________________________________________________________ 97
Introduction __________________________________________________________________________________ 97 Requirements _________________________________________________________________________________ 97 Restrictions ___________________________________________________________________________________ 97 New or Proposed Construction ___________________________________________________________________ 98 Existing Construction ___________________________________________________________________________ 98 Appraisal Requirements: ________________________________________________________________________ 99 Completion of Repairs __________________________________________________________________________ 99 Texas 50(a)(6) __________________________________________________________________________ 100 Available Terms _______________________________________________________________________________ 100 LTV/CLTV/HCLTV ______________________________________________________________________________ 100 Subject Property ______________________________________________________________________________ 100 Required Forms _______________________________________________________________________________ 100
“Notice Concerning Extensions of Credit” (12 Day Disclosure Notice) ____________________________________________ 100 Affidavit of Fair Market Value ____________________________________________________________________________ 100 Additional Signature Requirements _______________________________________________________________________ 101
Homestead Limitations _________________________________________________________________________ 101 Fee Limitations _______________________________________________________________________________ 101
AUS Requirements ____________________________________________________________________________ 102 Additional Requirements _______________________________________________________________________ 102 HomeReady ___________________________________________________________________________ 103 Program Overview ____________________________________________________________________________ 103 Available Terms _______________________________________________________________________________ 103 Max LTVs ____________________________________________________________________________________ 103 Income ______________________________________________________________________________________ 104 Income Limitations _____________________________________________________________________________________ 104 Non-Occupant CoBorrowers _____________________________________________________________________________ 104 Non-Borrower Household Income ________________________________________________________________________ 104 Boarder Income _______________________________________________________________________________________ 104 Income from Accessory Units ____________________________________________________________________________ 105 Sweat Equity __________________________________________________________________________________________ 105
Assets _______________________________________________________________________________________ 105 Additional Underwriting and Eligibility Criteria ______________________________________________________ 105 Homeownership Education _____________________________________________________________________ 106 Mortgage Insurance ___________________________________________________________________________ 106
MI Coverage Requirements ______________________________________________________________________________ 106
Automated Underwriting System __________________________________________________________ 107
Approve/Eligible Risk Classification _______________________________________________________________ 107 Approve/Ineligible Risk Classification _____________________________________________________________ 107 System Overrides and Manual Downgrades ________________________________________________________ 107
Previous Mortgage Foreclosure___________________________________________________________________________ 107 Delinquent Federal Debt ________________________________________________________________________________ 107
Upfront Disclosure Policy _______________________________________________________________________ 107
Underwriting Status/Decisions ____________________________________________________________ 108
Pre-Qualification ______________________________________________________________________________ 108 Incomplete __________________________________________________________________________________ 108 Submitted ___________________________________________________________________________________ 108 Suspended ___________________________________________________________________________________ 108 Approved with Conditions ______________________________________________________________________ 108 Withdrawn __________________________________________________________________________________ 108 Declined _____________________________________________________________________________________ 108 Clear to Close ________________________________________________________________________________ 108
MiMutual Underwriting
Philosophy
MiMutual underwrites and purchases all types of residential mortgages. These programs and products can be found in our Product Matrices (located on MiMutual’s website) and on our daily rate sheet. The Product Matrices will reference specific product features and requirements (such as maximum Loan-to-Value ratios and minimum credit score requirements, if any). This guide is intended to address unique underwriting situations.
MiMutual uses Automated Underwriting Systems (AUS). Generally, underwriters validate to the conditions set forth by the AUS. However, there are circumstances where underwriters will need to add conditions to the loan. These guidelines are meant to serve as a guide for obtaining adequate documentation to enable us to satisfy those conditions.
MiMutual underwrites a borrower’s creditworthiness based solely on information that we believe is indicative of the applicant’s willingness and ability to pay the debt they would be incurring. We prudently underwrite to agency standards and guidelines. Due to a multitude of factors involved in a loan transaction, no set of guidelines can contemplate every potential situation. Therefore, each case is weighed individually on its own merits. MiMutual’s underwriting philosophy is to weigh all risk factors inherent in the loan file, giving consideration to the individual transaction, borrower profile, the level of documentation provided and the property used to collateralize the debt.
Our commitment to fairness and equal opportunity is clear and unequivocal. The application of fair and consistent underwriting practices is mandated in the underwriting guidelines outlined in this guide. All loans considered for denial will be subject to a second level review prior to a final decision.
As our guidelines and processes are impacted by external market conditions, it will be necessary for us to reevaluate the guidelines in this manual from time to time. Occasionally, revisions will be made. As applicable, corporate written notifications and updates will be provided to you and incorporated into these guidelines.
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Program Description
These underwriting guidelines describe FNMA underwriting guidelines for one to four family conventional mortgages. This set of underwriting guidelines does not represent the entire FNMA underwriting manual The underwriting information contained in this section is intended for use in conjunction with FNMA Guidelines. Unless otherwise stated all FNMA loans must conform to applicable FNMA one-to-two family housing requirements as well as federal, state and local law compliance. MiMutual reserves the right to deny any loan which does not meet these guidelines/requirements. To the extent that any conflicts exist between the provisions set forth in FNMA guidelines and MiMutual’s guidelines described here, then MiMutual’s guidelines should be followed.
In addition to program eligibility and prudent underwriting, MiMutual requires all loans to meet the Ability to Repay rules established by the Consumer Financial Protection Bureau (CFPB). The ATR Rule requires that a reasonable, good faith determination is made before or when the loan is consummated, and that the consumer has a reasonable ability to repay the loan. The eight underwriting factors established by the CFPB must be considered, and the loan must be documented accordingly.
1. The borrower’s current or reasonably expected income or assets; 2. The borrower’s current employment status;
3. The borrower’s monthly payment on the covered transaction; 4. The borrower’s monthly payment on any simultaneous loan;
5. The borrower’s monthly payment for mortgage-related obligations; 6. The borrower’s current debt obligations, alimony, and child support; 7. The borrower’s monthly debt-to-income ratio or residual income; and 8. The borrower’s credit history
Additionally, MiMutual will only underwrite/close loans that are Qualified Mortgages (QMs) which meet the criteria for Safe Harbor.
No risky features permitted (we do not currently offer loans with features the CFPB considers “risky”, so our products will not change)
“Higher-Priced Mortgage Loans” (loans which, at the time the interest rate was set, the APR was 1.5% or more over the Average Prime Offer Rate (APOR)) are only permitted when the loan meets the criteria as outlined in the guidance for HPMLs
All loans will be prudently underwritten by MiMutual and must be of sound investment quality. Loans having serious credit and/or property deficiencies may be denied at the option of MiMutual.
Back to Top Note: Guidance contained in this document assumes the loan received an Approve/Eligible recommendation. Manual underwrites are not permitted on Conventional loans.
Requirements and Restrictions
Loan Requirements
10, 15, 20, 25 and 30 year fixed rate terms available.
5/1 and 7/1 LIBOR ARMs available (30 year term).
Minimum 640 credit score for all 1-2 unit properties, and 680 for all 3-4 unit properties and cash out transactions on investment properties, regardless of AUS decision.
Minimum loan amount is $40,000 ($75,000 for investment properties).
Maximum mortgage amount of $417,000 for a Single Family Residence, $533,850 for a 2-family property, $645,300 for a 3-family property, and $801,950 for a 4-family property (unless borrower/loan qualifies for the High Balance program). Fannie Mae County Loan limits can found at https://www.fanniemae.com/singlefamily/loan-limits
Maximum number of borrowers allowed on a loan is 4
DU findings reflecting Approve/Eligible (Version 9.2 or 9.3)
Maximum 95% LTV (unless borrower qualifies for the Expanded LTV/CLTV/HCLTV program) on all Purchases and Rate/Term Refinances (for borrowers that qualify for Mortgage Insurance)
CLTV Maximums must meet MiMutual requirements for subordinate financing on purchase and refinance transactions. See individual product descriptions below for CLTV limitations.
Loan Restrictions (Ineligible)
Loans approved based on non-traditional credit history (a traditional credit report with valid credit scores is required)
Loans requiring manual underwrites (loans that receive a Refer or that do not otherwise receive an Approve/Eligible)
Refinance loans that have been restructured due to a financial hardship / in forbearance / short payoff loans
Debt-to-Income Ratios:
As determined by the AUS, unless otherwise specified by product type
Maximum LTV / CLTV / HCLTV
Access the applicable link to view the most current LTV Matrix (excludes DU Refi Plus and High-Balance Loans):
DU v9.2
DU v9.3
Qualified Mortgages with Rebuttable Presumption
This policy is intended for loans that are considered Qualified Mortgages (QM) with rebuttable presumption, and therefore do not meet QM safe harbor requirements.
Conventional loans that are considered Higher Priced Mortgage Loans (HPMLs) because they exceed the section 35 calculation (APR that exceeds the APOR at the time the rate was set, by 1.5% or more) are permitted, providing the following criteria are met:
Loan passes QM Points and Fees test
Approve/Eligible findings
HPML disclosure must be signed by borrower at least 24 hours prior to closing
An appraisal must be obtained by a certified or licensed appraiser who conducts a physical visit of the interior of the subject property (n/a for DU Refi Plus)
An additional appraisal by a separate appraiser may be needed if:
o The seller acquired the property 90 days or less prior to the consumer agreement was signed and the agreement exceeds the seller’s acquisition price by more than 10%, or
o The seller acquired the property 91 to 180 days prior to the consumer agreement and the price exceeds the seller’s acquisition price by more than 20%
Cannot waive appraisal delivery timing – borrower must receive appraisal at least 3 days prior to closing
An escrow account for payment of property taxes and insurance premiums is required
Residual Income Evaluation (RIE) must be performed, with results determining eligibility requirements per the table on the following page. Any losses reflected on 1040 transcripts must be considered
when completing the RIE.
DU Refi Plus loans must have a maximum 45% back-end ratio, regardless of AUS findings.
Jumbos are not permitted as HPMLs
Residual Income Evaluation Table
Primary Residence
If monthly residual income is… Then the minimum reserves required are…
$2,500 or greater
No minimum reserve requirement based on the residual income evaluation. Loan must still comply with the minimum reserve requirements for the base loan program.
≥ $800 < $2,500
The greater of:
3mos liquid* PITI reserves are required,
OR
Minimum reserve requirements for the base loan program. Additional reserves should be considered for loans with higher layered risks
< $800 n/a. The loan is not eligible for HPML/rebuttable presumption
Second Homes and Investment Properties
If monthly residual income is… Then the minimum reserves required are… $2,500 or greater Loan is eligible with acceptable RIE in file
≥ $800 < $2,500
The greater of:
6mos liquid* PITI reserves are required,
OR
Minimum reserve requirements for the base loan program. Additional reserves should be considered for loans with higher layered risks
< $800 n/a. The loan is not eligible for HPML/rebuttable presumption Back to Top
Collateral Requirements
To be eligible for financing, a property is to be free of health and safety hazards and major structural problems.
Eligible Collateral
Single Family Residences and 2-4 unit dwellings
Planned Unit Developments (PUDs)
Townhome/Rowhome
Condominiums
Log; Dome; Berm Homes; Pier Foundations; Auxiliary/Accessory Dwelling Units; Homes with extreme functional obsolescence (i.e. one bedroom). Must be common and typical for the area and have like comparable sales
Modular Homes
Properties located in age-restricted communities. Must be common and typical for the area and have like comparable sales
Agricultural zoned properties (not income-producing farms)
Ineligible Collateral
Properties containing greater than 4 units
Mobile/Manufactured Homes
Investment Condos in Florida
Commercial/Industrial use
Income producing properties/Mixed Use Properties
Leasehold Properties (title must be held in Fee Simple interest only)
Properties currently listed for sale (refinances)
Time-Share Units
Construction Financing
Properties vested in any Life Estates or LLCs (refinance transactions)
Multiple dwellings on a single parcel of Land
Unwarrantable Condominiums
New construction homes purchased at auction
Properties located in Coastal Barrier Resource Systems (CBRS)
Cooperative units
Appraisals
Appraiser Independence
MiMutual conforms to Appraiser Independence and as such, is prohibited from accepting appraisals prepared by appraisers who are selected, retained or compensated in any manner by a mortgage broker (or any member of a lender’s staff who is compensated on a commission basis). MiMutual requires that all conventional appraisals are ordered through your designated Appraisal Management Company (AMC). Please note that Appraiser Independence does not apply when a Form 2075 is obtained (per the DU Findings).
Approved Appraiser List
MiMutual does not use an approved appraiser list. Therefore, a copy of the appraiser’s license and current Errors & Omissions insurance will be required. All appraisals will be underwritten on a case-by-case basis.
Uniform Appraisal Dataset (UAD)
Effective for residential property appraisals with an effective date (date of inspection) of September 1, 2011 or after, appraisal reports must be completed in compliance with the Uniform Appraisal Dataset (UAD). This rule applies to all Conventional mortgage loans.
The UAD defines all fields required for an appraisal submission for specific appraisal forms and standardizes definitions and responses for a key subset of fields. UAD was formulated to improve the quality and consistency of appraisal data. The UAD does not change the look of the existing appraisal forms, but some fields on the forms are being extended to include additional information.
The appraisal forms that must be UAD-Compliant effective September 1st are:
Uniform Residential Appraisal Report (FNMA Form 1004)
Individual Condominium Unit Appraisal Report (FNMA Form 1073)
Exterior-Only Inspection Individual Condominium Unit Appraisal Report (FNMA Form 1075)
Exterior-Only Inspection Residential Appraisal Report (FNMA Form 2055)
Back to Top NOTE: MiMutual is unable to accept properties with a Condition Rating of C5 or C6, nor a Quality Rating of Q6.
Appraisal Order Process
MiMutual requires that all Conventional appraisals are ordered through one of our designated Appraisal Management Companies (AMCs). MiMutual provides links on our website to order appraisals.
Begin at the MiMutual website home page (www.michiganmutual.com) to order your appraisal through your assigned AMC.
Place the appraisal order in the name of MiMutual Inc., and enter all pertinent data including payment information. All appraisals must be paid for with a credit card at the time order is placed.
Upload any required documents such as the Purchase Agreement.
The AMC will schedule the appointment with the borrower or realtor as appropriate and complete the appraisal report.
Upon completion of the appraisal report, the AMC will upload the appraisal to MiMutual’s system, and an email notification will be generated to inform the broker that it has been received.
Revisions Due to Sales Contract Amendments
If the sales contract is amended, the updated contract must be provided to the appraiser to ensure that the appraiser has been given the opportunity to consider any changes and their effect on value. If the appraiser determines that there is no impact to value, then no additional commentary is required from the appraiser.
Appraisal Delivery Requirements
Under the Dodd Frank Act, Regulation B has been revised for all applications taken on/after January 18, 2014. The borrower is required to receive a copy of all valuation documents developed in connection with an application for a loan that is secured by a first lien on a dwelling. This includes:
Appraisals
Desk reviews
AVMs / BPOs
MiMutual will deliver the valuation documents directly to the borrower. This will occur promptly upon completion of the documents or no later than three days prior to closing, whichever is earlier, unless the borrower chooses to waive their right to receive the valuation documents prior to closing on the Appraisal Delivery Timing Waiver disclosure. In this case, the valuation documents are not required to be delivered 3 days prior to closing, but must always be delivered at the time of consummation (at the latest).
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Appraisal Report Forms
Uniform Residential Appraisal Report (Form 1004): For appraisals of one-unit properties and units in
PUDs (including those that have an illegal second unit or accessory apartment) based on interior and exterior property inspections. Form 1004 also may be used for two-unit properties, if each of the units is occupied by one of the co-borrowers as his or her principal residence or if the value of the legal second unit is relatively insignificant in relation to the total value of the property (as might be the case for a basement unit or a unit over a garage). In addition, appraisals for units in condo projects that consist solely of detached dwellings may be documented on Form 1004, if the appraiser includes an adequate description of the project and information about the homeowners’ association fees and the quality of the project maintenance. Appraisals reported on Form 1004 must be completed in accordance with the UAD Specification.
Small Residential Income Property Appraisal Report (Form 1025): For appraisals of two- to four-unit
properties (including two- to four-unit properties in PUDs) based on interior and exterior property inspections
Individual Condominium Unit Appraisal Report (Form 1073): For appraisals of one-unit properties in
condo projects based on interior and exterior property inspections. Appraisals reported on Form 1073 must be completed in accordance with the UAD Specification
Exterior-Only Residential Appraisal Report (Form 2055): For appraisals of one-unit properties and
units in PUDs based on exterior-only property inspections. Appraisals reported on Form 2055 must be completed in accordance with the UAD Specification
Exterior-Only Inspection Individual Condominium Appraisal Report (Form 1075): For appraisals of
one-unit properties in condo projects based on exterior-only property inspections. Appraisals reported on Form 1075 must be completed in accordance with the UAD Specification
Desktop Underwriter Property Inspection Report (Form 2075): Used for single family properties,
including an individual unit in a PUD project or a site condominium when determined by the AUS findings.
Appraisal Update and/or Completion Report (Form 1004D): For appraisal updates and/or completion
reports for all one- to four-unit appraisal reports. Properties must be appraised within the 12 months that precede the date of the Note and Mortgage. When an appraisal report will be more than four months old on the date of the note and mortgage, regardless of whether the property was appraised as proposed or existing construction, the appraiser must inspect the exterior of the property and review current market data to determine whether the property has declined in value since the date of the original appraisal. This inspection and results of the analysis must be reported on the Appraisal Update and/or Completion Report (Form 1004D).
o If the appraiser indicates on the Form 1004D that the property value has declined, then a new appraisal for the property must be obtained.
o If the appraiser indicates on the Form 1004D that the property value has not declined, then MiMutual may proceed with the loan in process without requiring any additional fieldwork.
The original appraiser should complete the appraisal update; however, a substitute appraiser may be used. When updates are completed by substitute appraisers, the substitute appraiser must review the original appraisal and express an opinion about whether the original appraiser’s opinion of market value was reasonable on the date of the original appraisal report. MiMutual must note in the file why the original appraiser was not used. At a minimum, when completing the Appraisal Update portion of the report, a photograph of the front of the subject property must be included.
Back to Top NOTE: The appraisal update must occur within the four months that precede the date of the Note and Mortgage
Appraisal Exhibits
Market Conditions Addendum (Form 1004MC): Required for all one- to four-unit properties. Form
1004MC is intended to provide the lender with a clear and accurate understanding of the market trends and conditions prevalent in the subject neighborhood. The form provides the appraiser with a structured format to report the data and to more easily identify current market trends and conditions. There are several shaded areas in the form to recognize that all the requested data may not be available from the data sources used by the appraiser and therefore the information may not be provided. The lack of completion of these areas is acceptable as long as the appraiser provides an explanation as to why these sections of the form are not complete. However, if the data is available, the appraiser must include the data in the analysis
Comparable Rent Schedule (Form 1007): Required in conjunction with the applicable appraisal
report if the property is a one-unit property and the borrower is using rental income to qualify.
Operating Income Statement (Form 216): Required when rental income from the subject property
is being used to qualify and the borrower can document a qualifying exception, whether it is the borrower’s primary residence (2-4 unit) or investment property
In addition to the above full appraisal options, there will be loan casefiles that receive the property fieldwork waiver option.
Fannie Mae Property Inspection Waiver (PIW)
This may be used if the DU Findings Property and Appraisal Information section indicate a finding stating DU accepts the value submitted as the market value for the subject property and the loan is eligible for delivery to Fannie Mae without an appraisal. A $75 fee will be charged to exercise this waiver. If the waiver is not exercised, at least the minimum level of fieldwork recommended for the transaction must be obtained. The Property Inspection Waiver may not be used on: Investment Properties, New/Proposed
Construction and bank/HUD/Fannie Mae/Freddie Mac owned properties.
Value Reconsideration Request
Reconsideration requests must be uploaded for review by the underwriter, and include at least one of the following in order to qualify for the continuance of the appeal process:
Provide a previous appraisal dated no more than twelve (12) months prior to the effective date of the appraisal being appealed. Comps in the previous appraisal will not be assessed if sale dates are > 90 days from the new appraisal effective date; however, information in the appraisal regarding amenities, square footage, etc will be given consideration.
Provide a minimum of 2 and up to 5 alternate open market sales, including all available data and MLS ticket, which have closed within 90 days of the appraisal effective date. Active listings and closed sales after the effective date of the appraisal will not be accepted.
If the underwriter agrees that a reconsideration of value is warranted, they will forward to the AMC. A request for value reconsideration does not guarantee an adjustment in value.
Appraisal Portability
MiMutual will accept transferred appraisals on Conventional loans. The appraisal must be emailed to [email protected] by the previous lender and must also contain the invoice, Appraiser Independence certificate, UCDP certificates for both Fannie Mae and Freddie Mac, and a letter from the lender authorizing the transfer. If any of the documents above cannot be provided, a new appraisal ordered through one of MiMutual’s approved AMCs will be required. All transferred appraisals will be subject to an acceptable desk review ordered by MiMutual.
Appraisal Validity Period
Conventional appraisals will be valid for 120 days for all property types: existing, proposed construction and under construction (formerly 6 months for existing property that is complete and 12 months for proposed and under construction). The Appraisal Update and/or Completion Report (FNMA Form 1004D) will be required to extend the validity period of an existing appraisal that is due to expire for existing, proposed, or new construction that is incomplete. The appraisal will then be valid for an additional 120 days. The appraisal may only be updated one time.
Modular Home Eligibility
MiMutual allows loans secured by modular homes built in accordance with the Uniform Building Code administered by state agencies responsible for adopting and administering building code requirements for the state in which the modular home is installed. Loans secured by on-frame modular construction are not eligible for financing with MiMutual. On-frame modular construction is defined as having a permanent chassis, but no evidence of compliance with the June 15, 1976, Federal Manufactured Home Construction and Safety Standards.
Loans secured by prefabricated, panelized, or sectional housing are eligible. These properties do not have to satisfy HUD’s Federal Manufactured Home Construction and Safety Standards or the Uniform Building Codes that are adopted and administered by the state in which the home is installed. The home must conform to local building codes in the area in which it will be located.
Factory-built housing not built on a permanent chassis such as modular, prefabricated, panelized, or sectional housing is not considered manufactured housing and is eligible under the guidelines for one-unit properties. These types of properties
must assume the characteristics of site-built housing,
must be legally classified as real property, and
must conform to all local building codes in the jurisdiction in which they are permanently located. The purchase, conveyance, and financing (or refinancing) must be evidenced by a valid and enforceable first-lien mortgage or deed of trust that is recorded in the land records, and must represent a single real estate transaction under applicable state law.
MiMutual affords modular, prefabricated, panelized, or sectional housing homes the same treatment as site-built housing. Therefore, MiMutual does not have minimum requirements for width, size, roof pitch, or any other specific construction details.
Back to Top NOTE: Transferred appraisals not permitted with a Collateral Underwriter (CU) risk score of 4 or greater.
FEMA Declared Disaster Area Policy
The FEMA Declared Disaster Area Policy applies to all areas eligible for individual assistance due to a federal government disaster declaration.
If the subject property has had an appraisal completed prior to a declared disaster, prior to the end date of a declared disaster, or after a declared disaster with no comments addressing the post-disaster condition of the property from the appraiser, a 1004D with photos will be required to recertify the value/condition of the subject property.
For properties located in a declared disaster area, where the AUS recommendation allows for a reduced property inspection (Property Valuation Update, PIW, 1075, 2055, 2075, 2095), a full appraisal (interior/exterior inspection) will be required for up to 90 days after the disaster incident period end date. The date of approval will be used to determine if sufficient time has elapsed.
Repair Escrows
Permitted. See Repair Escrows chapter for details.
Minimum Square Footage
All properties must have a minimum of 750 square feet.
Exceptions will be considered for properties between 650 and 749 square feet if two thirds of the comparables also have <750 square feet.
Acreage
No maximum number of acres; however, property cannot have agricultural use and comparables must have similar acreage.
Age-Restricted Communities
Certification from the HOA will be required, verifying:
Community must be intended and operated for occupancy by persons 55 years of age and older
At least 80% of the occupied units must be occupied by at least 1 person who is 55 years of age or older
Estimated Remaining Economic Life
The appraiser is required to indicate the estimated remaining economic life of the subject property as a single number or as a range (must be deemed acceptable for at least the term of the new mortgage).
Commercial/Industrial Zoning
While there are no zoning classification restrictions, the property must have residential use and all comparable sales must have similar influence. The Zoning Compliance must be Legal or Legal Non-Conforming. The highest and best use of the subject property as improved (or as proposed) must be the present use. Illegal properties are not eligible for Conventional financing.
Properties Listed For Sale within the Last 6 Months (Refinances)
Cash Out Transactions
The MLS listing is required to be cancelled at least six months prior to disbursement or the loan is subject to a maximum 70% LTV. In all circumstances, listing agreements must be cancelled prior to loan disbursement. The listing agreement, evidence of cancellation, and signed/dated explanation from the borrower with the reason why the property was for sale is required.
Rate/Term Transactions
The MLS listing is required to be cancelled prior to disbursement (with the exception of DU Refi Plus loans). The listing agreement, evidence of cancellation, and signed/dated explanation from the borrower with the reason why the property was for sale is required.
Properties Located on a Repaired Sinkhole
Properties with repaired sinkholes/sinkhole activity may be determined to be eligible with the following items:
Evidence the remediation was satisfactorily completed
Evidence the proper permits were pulled at the time of repair, and were signed off on by a qualified engineer
Copies of the initial engineering report, the repair reports, and the engineering certification
Evidence of sinkhole insurance – either included on the borrower’s standard property insurance policy or a separate policy
Any property with sinkhole damage that has not yet been repaired or cannot meet the criteria described above is ineligible for financing.
Back to Top NOTE: These properties pose an increased risk to MiMutual, therefore may be subject to additional documentation and/or limitations.
Construction-to-Permanent
Two-closing construction-to-permanent mortgage transactions utilize two separate loan closings. The first is to obtain the interim construction financing (and may include the purchase of the lot), and the second closing is to obtain the permanent financing upon completion of the improvements. MiMutual does not provide construction financing; however, will allow a loan that provides the permanent financing as two-closing Construction-to-Permanent transactions.
The new mortgage used to provide the permanent financing may be closed as:
A limited cash-out refinance
A cash-out refinance
Both transaction types are subject to the maximum LTV/CLTV/HCLTV ratios as stated in the LTV Matrix. The length of time the borrower has owned the lot is not a factor in calculating the LTV ratios; however, the borrower must have held legal title to the lot for at least six months prior to the closing of the permanent mortgage to be eligible for a cash-out refinance. All other standard cash-out refinance eligibility and underwriting requirements apply. The as-completed appraised value may be used to calculate the LTV ratios. All construction work, including any work that could entitle a party to file a mechanics’ or materialmen’s lien, must be completed and paid for, and all mechanics’ liens, materialmen’s liens, and any other liens and claims that could become liens relating to the construction must be satisfied at the time of the closing of the permanent financing.
