Conventional Loan Program Guide
Fixed Rate, 5/1 ARM and 7/1 ARM
Wholesale Lending
December 14, 2015
Program Overview ... 5
Credit Philosophy ... 5
Ability to Repay and Qualified Mortgage ... 5
Program Parameters ... 6
Eligible Programs ... 6
Ineligible Programs/Options ... 6
Program Details ... 6
ARM Program Information ... 6
ARM Closing Documents ... 6
Credit Score Requirements ... 7
Loan Limits ... 7
Loan to Value (LTV) Matrices ... 7
Fixed Rate LTV Matrix ... 7
5/1 and 7/1 ARM LTV Matrix ... 9
LTV >95% to 97% - Fannie Mae only ... 9
DU Submission/Resubmission ... 10
Mortgage Insurance ... 10
Automated Underwriting Systems (AUS) ... 10
Loan Prospector (LP) – Fixed Rate only ... 10
Desktop Underwriter (DU) ... 12
Social Security Validation ... 16
Assets ... 16
Asset Documentation ... 16
Business Accounts ... 17
Borrower’s Commission on Subject Transaction ... 17
Cash Reserves ... 18
Cash Deposit on Sales Contract (Earnest Money) ... 19
Credit Card Charges, Cash Advances and Unsecured Lines of Credit – Desktop Underwriter
(DU) ... 19
Credit Card Charges, Cash Advances and Unsecured Lines of Credit – Loan Prospector (LP)20
Employer Assistance ... 20
Gift from a Related Person ... 21
Gift of Equity ... 22
Gift or Grant from an Agency ... 22
Ineligible Source(s) of Funds ... 23
Large Deposits ... 23
Proceeds from the Sale of Real Property ... 26
Rent Credit/Option to Purchase ... 27
Retirement Accounts ... 27
Secured / Unsecured Loans ... 28
1031 Tax Deferred Exchange ... 28
Trust Accounts ... 29
Verification of Assets for Non-U.S. Citizens ... 29
Borrower Contribution from Own Funds ... 29
Borrowers ... 30
Age of Borrower ... 30
Borrower Eligibility... 30
Borrower in the Construction Industry ... 31
Non-Borrowing Spouse ... 31
Non-Occupying Co-Borrowers ... 31
Non-U.S. Citizens ... 32
Separated Borrowers ... 32
Social Security Number (SSN) Validation ... 32
Credit / Underwriting ... 32
Age of Documents ... 33
Authorized User Accounts ... 33
Bankruptcy - Multiple Filings – Desktop Underwriter (DU) only ... 33
Borrowers without a Usable Credit Score ... 34
Collection, Past Due, and Charge-Off Accounts ... 34
Consumer Credit Counseling (CCCS) ... 34
Disputed Tradelines ... 34
Judgments and Garnishments ... 34
Mortgage Payment History ... 35
Modified Mortgages ... 35
Multiple Financed Properties – Desktop Underwriter (DU) only ... 36
Multiple Financed Properties – Loan Prospector (LP) only ... 38
Restructured Mortgages ... 39
Foreclosure – Desktop Underwriter (DU) ... 40
Mortgage Charge-Off - Desktop Underwriter (DU) ... 41
Short Sale/Preforeclosure Sale/Deed-in-Lieu of Foreclosure - Desktop Underwriter (DU) ... 42
Significant Derogatory Credit ... 43
Tax Liens ... 44
Collateral... 44
General Property Eligibility Requirements ... 44
Appraisal Requirements ... 45
Re-use of an Appraisal for a Subsequent Transaction ... 45
Appraisal Forms ... 46
Appraisal Transfers ... 48
Borrower Acknowledgement ... 49
Escrow Holdback ... 49
Flip Properties ... 49
Inspections and Certification Requirements ... 51
Property Affected by a Disaster ... 52
Property Listed for Sale ... 52
Property Overlays ... 53
Resale Restricted Properties – Freddie Mac Fixed Rate loans only ... 53
Unique Property Types ... 53
Condominiums ... 54
Documentation Requirements ... 54
Debt to Income Ratios/Qualifying ... 54
Qualifying Rate ... 54
Maximum Debt to Income Ratio (DTI) ... 54
Higher-Priced Mortgage Loans (HPMLs) and HPML Qualified Mortgages ... 55
Geographic Restrictions ... 55
High Balance Loans in Alaska ... 55
Income and Employment ... 56
Assets as a Basis for Mortgage Qualification – Loan Prospector (LP) only ... 56
Automobile Allowance ... 57
Borrower Employed by a Family Member or Party to the Transaction... 58
Capital Gains Income ... 58
Child Support, Alimony, Separate Maintenance ... 58
Commission Income... 59
Continuity of Income ... 59
Employment Offers or Contracts - Desktop Underwriter (DU) only ... 60
Employment-Related Assets as Qualifying Income – Desktop Underwriter (DU) only ... 60
Foreign Income – Desktop Underwriter (DU) only ... 62
Foster Care Income ... 62
Housing or Parsonage Allowance ... 62
IRS Form 4506-T ... 62
Use of IRS Tax Transcripts in Lieu of Income Documentation ... 62
Long-term Disability Income ... 63
Mortgage Differential Payments ... 63
Newly Employed Borrowers ... 64
Non-Taxable Income ... 64
Notes Receivable ... 64
Re-entering the Workforce – Loan Prospector (LP) only ... 64
Rental Income... 64
Retirement, Government Annuity and Pension Income – Desktop Underwriter (DU) only ... 68
Retirement, Government Annuity and Pension Income – Loan Prospector (LP) only ... 69
Royalty Income ... 70
Seasonal Employment and Unemployment Compensation ... 70
Secondary / Part-time Employment ... 70
Self-Employed Borrowers ... 70
Significant Increase or Decrease in Income Level ... 72
Social Security Income ... 72
Stable Monthly Income ... 73
Temporary Leave Income ... 73
Tip Income ... 75
Liabilities ... 77
Alimony, Child Support or Separate Maintenance Payments ... 77
Business Debt in Borrower’s Name... 77
Contingent Liability ... 77
Debt Secured by Financial Assets ... 78
Deferred Payments (includes Deferred Student Loans) ... 78
Installment Debt ... 78
Lease Payments ... 78
Open-End (30-day) Accounts ... 79
Revolving Debt ... 79
Sale or Conversion of Primary Residence – Desktop Underwriter (DU) only ... 80
Sale or Conversion of Primary Residence – Loan Prospector (LP) only ... 80
Student Loans ... 83
Unreimbursed Employee Business Expenses ... 83
Mortgage Insurance (MI) ... 83
Mortgage Insurance Coverage Requirements ... 83
Mortgage Insurance Plans ... 83
Mortgage Insurance Providers ... 84
Occupancy ... 84
Primary Residence ... 84
Second Home... 84
Investment Property ... 85
Property Insurance ... 86
Secondary Financing ... 86
Ineligible Subordinate / Second Mortgages ... 86
Purchase Transactions ... 86
HELOCs ... 87
Seller Carried Secondary Financing ... 87
Refinance Transactions ... 87
Seller/Interested Party Contributions ... 88
Transactions ... 89
Purchase ... 89
Rate/Term (“No Cash-Out”) Refinance ... 89
Cash-out Refinance ... 90
Continuity of Obligation ... 90
Delayed Financing ... 91
Land Contract or Contract for Deed ... 92
Net Tangible Benefit ... 93
Non-Arm’s Length Transactions ... 93
Purchase of Fannie Mae HomePath (REO) Properties – Fannie Mae Only ... 93
Refinance to Buyout a Co-Owner ... 94
Miscellaneous Policies ... 94
Borrower Paid Fees ... 94
Fees and Services ... 94
Pacific Union Financial, LLC
Program Overview
This Program Guide provides an overview of the conventional products and policies eligible for delivery to Pacific Union Financial, LLC for financing consideration. The details are based on the policies outlined in the Freddie Mac Single Family Seller/Servicer Guide (“Freddie Mac Seller Guide”) and/or the Fannie Mae Single Family Selling Guide (“Fannie Mae Seller Guide”). This document also identifies overlay restrictions specific to Pacific Union Financial. Overlay restrictions are indicated by green shading. The guidelines within this document apply to all loans evaluated using LP (Fixed Rate only) or DU unless stated otherwise.
Credit Philosophy
The Pacific Union Financial philosophy is to offer our products with minimal overlays to our clients. All loans are evaluated in accordance with the following principles:
All loans require an Automated Underwriting System (AUS) approval as follows: Conventional Fixed Rate products must be evaluated using DU.
Fannie Mae Only products must be evaluated using DU.
Freddie Mac Only Fixed Rate products must be evaluated using LP. An LP Accept/Eligible or DU Approve/Eligible recommendation is required. Loans that receive the following recommendations are not eligible:
LP Caution Risk Class with or without A-Minus eligibility DU Refer with Caution
Loans that are submitted to LP or DU and do not receive credit approval may not be submitted to the other underwriting system.
Manual underwriting is not allowed. Each loan is evaluated in accordance with:
Freddie Mac or Fannie Mae policies as defined in the applicable Seller Guide. Loan Prospector or Desktop Underwriter feedback/findings.
Policies as outlined within this Program Guide.
Each loan applicant is underwritten individually, and all credit standards are applied consistently to each borrower.
All factors are weighed in when evaluating a loan file. The underwriting decision is not based on any single item or factor.
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 and Freddie Mac guidelines. Factors considered in making this determination include the borrower’s income, assets and
Pacific Union Financial, LLC
Program Parameters
Eligible Programs
Conforming Balance and High Balance loan amounts 10, 15, 20, 25 and 30 year Fully Amortizing Fixed Rate
5/1 and 7/1 Fully Amortized LIBOR ARMs (Fannie Mae/Desktop Underwriter only)
Ineligible Programs/Options
Interest Only
Temporary Buydowns Energy Efficient Mortgages
Fannie Mae MyCommunityMortgage Fannie Mae HomeStyle Renovation
Program Details
All programs are fully amortizing. Temporary Buydowns are not permitted.
ARM Program Information
Index: The index is the average of interbank offered rates for one-year U.S. dollar denominated deposits in the London market (“LIBOR”), as published in the Wall Street Journal.
Margin: The base margin is 2.25%. Refer to the rate sheet for applicable margin add-ons. Floor: The margin is the floor.
5/1 ARM caps:
2% at first adjustment (Initial Periodic Cap)
2% at each subsequent adjustment (Subsequent Periodic Cap) 5% over initial note rate (Lifetime Cap)
7/1 ARM caps:
5% at first adjustment (Initial Periodic Cap)
2% at each subsequent adjustment (Subsequent Periodic Cap) 5% over initial note rate (Lifetime Cap)
Conversion Option: Not convertible Interest Rate / Payment Change Date:
The first interest rate and payment adjustment is at 60 months for the 5/1 ARM and 84 months for the 7/1 ARM. Subsequent adjustments occur every 12 months.
The payment change date is the first day of the month following an interest rate change date. It is the date in which a payment change due to an interest rate change becomes effective.
Fannie Mae ARM Plan Numbers:
Fully Amortized 5/1 ARM with 2/2/5 caps: FM GENERIC, 5 YR Fully Amortized 7/1 ARM with 5/2/5 caps: FM GENERIC, 7 YR
ARM Closing Documents
Note: Fannie Mae Form 3528 or state specific version
Rider: Fannie Mae Form 3187 – Non-convertible Fully Amortizing 5/1, 7/1 or 10/1 LIBOR Adjustable Rate Rider.
Pacific Union Financial, LLC
Credit Score Requirements
Loan Prospector (LP) Desktop Underwriter (DU) Determined by LP.
For LTV >80%, the minimum score required by the MI provider must be met.
Determined by DU, but not less than 620. For LTV>80%, the minimum score required by
the MI provider must be met.
Loan Limits
Conforming Balance and High Balance loan amounts are available as shown below. Maximum and Minimum Loan Amounts
Maximum Conforming Balance High Balance 1
Units Contiguous States Alaska and Hawaii 3 Contiguous States Alaska and Hawaii 3
1 $417,000 $625,500 $625,500 $938,250
2 $533,850 $800,775 $800,775 $1,201,1502
3 $645,300 $967,950 $967,950 $1,451,9252
4 $801,950 $1,202,9252 $1,202,9252 $1,804,3752
Minimum-Conforming: None
Minimum-High Balance: Conforming loan amount plus $1
1. High Balance: Refer to Maximum County Limits (select Fannie/Freddie in Limit Type field) 2. Conventional and Freddie Mac (Fixed Rate only): Maximum $1,000,000 loan amount.
3. HI is not permitted. AK: Refer to Appraisal Forms for High Balance appraisal and field review requirements.
Loan to Value (LTV) Matrices
The loan to value is the base loan amount divided by the lesser of the appraised value or the purchase price.
Fixed Rate LTV Matrix
Effective for loan submissions to Desktop Underwriter 9.3. For loan submissions
to Desktop Underwriter 9.2, refer to the following:
Fannie Mae DU 9.2 LTV Matrix.
Fixed Rate
Occupancy Purpose Loan
Pacific Union Financial, LLC
Fixed Rate
Occupancy Purpose Loan
Amount 3 Units Conventional 1 DU Only LTV/(H)CLTV Freddie Mac LP Only LTV/(H)CLTV Fannie Mae 1 DU Only LTV/(H)CLTV Cash-Out Conforming 1 80%/80% 80%/80% 80%/80% 2-4 75%/75% 75%/75% 75%/75% Cash-Out High Balance ≤$625,500 1 75%/75% 75%/75% 80%/80% High Balance 2-4 65%/65% 65%/65% 75%/75% Second Home Purchase and Rate/Term Conforming 1 85%/85% 85%/85% 90%/90% Cash-Out Conforming 1 75%/75% 75%/75% 75%/75% Purchase and Rate/Term High Balance ≤$625,500 1 80%/80% 80%/80% 90%/90%
Cash-Out Balance High
≤$625,500 1 65%/65% 65%/65% 75%/75% Investment Property Purchase Conforming 1 85%/85% 85%/85% 85%/85% 2-4 75%/75% 75%/75% 75%/75% Rate/Term Conforming 1-4 75%/75% 75%/75% 75%/75% Cash-Out Conforming 1 75%/75% 75%/75% 75%/75% 2-4 70%/70% 70%/70% 70%/70% Purchase High Balance ≤$625,500 1 80%/80% 80%/80% 85%/85% High Balance 2-4 70%/70% 70%/70% 75%/75% Rate/Term High Balance ≤$625,500 1 75%/75% 75%/75% 75%/75% High Balance 2-4 70%/70% 70%/70% 75%/75% Cash-Out High Balance ≤$625,500 1 65%/65% 65%/65% 75%/75% High Balance 2-4 65%/65% 65%/65% 70%/70%
1. LTV/CLTV and credit score restrictions apply if the subject property is a Second Home or Investment Property and the borrower owns 5-10 financed properties. Refer to Multiple Financed Properties - Desktop Underwriter (DU) only.
2. See LTV >95 to 97% for eligibility requirements.
Pacific Union Financial, LLC
5/1 and 7/1 ARM LTV Matrix
Effective for loan submissions to Desktop Underwriter 9.3. For loan submissions
to Desktop Underwriter 9.2, refer to the following:
Fannie Mae DU 9.2 LTV Matrix.
5/1 and 7/1 ARM – Fannie Mae (DU) only
Occupancy Purpose Loan Amount Units LTV/(H)CLTV DU Only 1
Primary Purchase and Rate/Term Conforming and High Balance 1 90%/90% 2 75%/75% 3-4 65%/65%
Cash-Out Conforming High Balanceand 1 75%/75%
2-4 65%/65%
Second Home
Purchase and
Rate/Term Conforming High Balanceand 1 80%/80%
Cash-Out Conforming High Balanceand 1 65%/65%
Investment Property
Purchase Conforming High Balanceand 1 75%/75%
2-4 65%/65%
Rate/Term Conforming and
High Balance 1-4 65%/65%
Cash-Out Conforming and
High Balance
1 65%/65%
2-4 60%/60%
1. LTV/CLTV and credit score restrictions apply if the subject property is a Second Home or Investment Property and the borrower owns 5-10 financed properties. Refer to Multiple Financed Properties - Desktop Underwriter (DU) only.
LTV >95% to 97% - Fannie Mae only
Effective with the DU 9.2 Release, Fannie Mae will allow up to 97% LTV on certain purchase and Rate/Term refinance transactions as described below.
Allowed on:
Fixed Rate Fannie Mae product only. One unit Primary Residence
Conforming loan amounts DU Approve/Eligible Purchase transactions:
Maximum 97% LTV/CLTV/HCLTV
At least one borrower must be a first-time home buyer, as indicated on the loan application (Form 1003) in Section VIII., when at least one borrower responds “No” to question M regarding ownership interest in a property in the last three years.
Rate/Term Refinance transactions:
The existing loan must be owned by Fannie Mae. The Fannie Mae Loan Look-Up Table
may be used to determine if Fannie Mae owns the loan. A screen print of the results must be included in the loan file.
When submitting the loan to DU, “Fannie Mae” must be entered in the “Owner of Existing Mortgage” field in DU.
Pacific Union Financial, LLC
DU Submission/Resubmission
Loans may be submitted to DU effective with the DU 9.2 release. If the 97% option is desired on an existing DU loan, a new casefile must be created and the loan must be submitted to DU 9.2 as a new loan.
Mortgage Insurance
35% MI coverage is required. LPMI is not allowed.
Refer to the MI Matrix or MI provider website as some MI providers have credit score overlays for 97% LTV loans.
Automated Underwriting Systems (AUS)
Loan Prospector (LP) – Fixed Rate only
Loans submitted to Loan Prospector (LP) must receive an Accept/Eligible Risk Class. Loans that receive a Risk Class of “Caution”, with or without A-Minus eligibility, are not eligible. Loans that do not receive credit approval through DU may not be resubmitted to LP. Loans that are evaluated using LP must be coded and priced as Freddie Mac Only.
“Loan Prospector” guidelines within this program guide apply to Fixed Rate loans only. ARM loans may not be underwritten through Loan Prospector.
Note: Loans may not be resubmitted to Loan Prospector after the loan has closed.
Disputed Tradelines
When LP issues a message stating that multiple disputed tradelines have been identified on the borrower’s credit report, the accuracy of disputed tradelines must be confirmed. If it is determined that the information is accurate, ensure that the disputed tradelines are
considered in the credit risk assessment by obtaining a new credit report with the tradeline(s) no longer reported as disputed and resubmitting the loan casefile to LP. If LP does not issue the disputed tradeline message, no further investigation is required.
However, if the account does belong to the borrower, ensure that the monthly payment, if any, has been included in the DTI ratios.
Documentation Levels
Loans may be documented in accordance with LP Findings. Loans approved by LP will receive either a “Streamlined Accept” or “Standard” documentation level and must be documented based on requirements indicated on the Feedback Certificate. Sections 37.22 and 37.33 of the Freddie Mac Seller Guide provide more information regarding these documentation levels.
Invalid, Ineligible, or Incomplete Evaluation Status
Pacific Union Financial, LLC
Maximum Number of Borrowers
Loan Prospector cannot evaluate more than five borrowers on a single application.
Minimum Assessment Feedback (MAF)
The Minimum Assessment Feedback (MAF) shown in the LP Feedback Certificate indicates the least comprehensive appraisal or inspection report required for the submitted loan. The MAF also indicates whether a loan is eligible for Property Inspection Alternative (PIA). A more
comprehensive appraisal or inspection report may be obtained if desired. Refer to the Collateral
topic.
Resubmission Requirements
The final Risk Class and Documentation Level must be based on submission of accurate data to LP prior to the closing of the Mortgage. Resubmission to LP prior to the closing of the Mortgage is required if:
Information on the previous submission was not true, complete or accurate.
The most recent submission (including the date of the LP credit report) will be more than 120 days prior to the Note Date.
Any information used by LP changes; however, a change from the previous submission involving the following does not require resubmission.
Debts/Income:
The monthly debt payment (including monthly housing expense) decreases. The income for any borrower increases.
The income for any borrower decreases and/or the monthly debt payment (including monthly housing expense) increases, and
The total difference does not change the total debt-to-income ratio by more than 3%, and
The total debt-to-income ratio on the previous submission did not exceed 45%.
Assets/Reserves:
The amount of verified assets increases. The amount of verified reserves increases.
The amount of verified reserves decreases by no more than 10%
Effective with submissions or resubmissions on or after 7/26/2015: The amount of verified reserves decreases to an amount that is no less than the reserves required to be verified by LP.
Loan Amount:
The loan amount decreases by no more than 1% on a refinance transaction and at the time of the most recent LP submission mortgage insurance is not required on the Mortgage. The loan amount decreases by no more than 1% on a refinance transaction and at the time
of the most recent LP submission mortgage insurance on the Mortgage is required, and The change does not impact the amount of the mortgage insurance coverage, and The amount of the mortgage insurance premium collected is based on the new loan
amount and a new mortgage insurance certificate is obtained.
Any other changes in the information used by Loan Prospector require resubmission.
For example
Pacific Union Financial, LLC
submission was 38%. Based on the revised monthly debt payment and income figures, the total debt-to-income ratio increased by 4%.
This Mortgage must be resubmitted to LP because the borrower's income decreased and the change in the debt payment-to-income ratio was more than 3%. If the only change in the Mortgage had been a decrease in the monthly debt payment (including the monthly housing expense), resubmission would not have been required.
If a Mortgage is resubmitted to LP, the Risk and/or Documentation Classes might change. However, LP minimizes the number of times that the Documentation Class will change, even if the Risk Class changes. Documentation must comply with the requirements of the last Feedback Certificate.
Significant Inaccurate Information
If it is determined that the repository file used to create the borrower(s) credit report contains significant inaccurate information, the LP decision must be determined to be Invalid, and the loan will not be eligible.
Desktop Underwriter (DU)
Loans submitted to Desktop Underwriter (DU) must receive an Approve/Eligible recommendation. Loans that receive a Refer with Caution or Approve/Ineligible recommendation are not eligible. Loans that do not receive credit approval through LP may not be resubmitted to DU. Fixed Rate loans evaluated using Desktop Underwriter (DU) may be coded and priced under the Conventional or Fannie Mae program.
Note: Loans may not be resubmitted to Desktop Underwriter after the loan has closed.
Retirement of DU Version 9.1
DU Version 9.1 has been retired. Existing loan applications and DU Underwriting Findings reports that were created in DU Version 9.1 will continue to be available for viewing only.
If an updated DU underwriting recommendation is required, a new casefile must be created and submitted to DU.
Disputed Tradelines
When DU issues a message stating that DU identified a disputed tradeline and that tradeline was not included in the credit risk assessment, the accuracy of disputed tradelines reported on the borrower's credit report must be confirmed.
Effective for loans submitted or resubmitted to DU on or after April 18, 2015:
DU will issue a disputed tradeline message only when the credit report reflects disputed tradelines with delinquencies that occurred within two years of the credit report date. Only the disputed tradelines listed in the DU message must be addressed.
If it is determined that the disputed tradeline information is accurate, ensure that the disputed tradelines are considered in the credit risk assessment by obtaining a new credit report with the tradeline no longer reported as disputed and resubmitting the loan casefile to DU.
Pacific Union Financial, LLC
Documentation Requirements
Pacific Union Financial will accept loans documented as outlined in the DU Findings. DU indicates the minimum verification documentation requirements required. While DU may offer a reduced level of documentation, a more comprehensive level of documentation is acceptable when circumstances in the loan file warrant it.
Errors in Credit Data
If the credit report contains derogatory information, and DU does not recognize or consider the derogatory information and does not reflect the derogatory information in the Underwriting Findings Report, the DU decision must be determined to be Invalid, and the loan will not be eligible.
High Balance Loan Requirements
Effective for new loan submissions or resubmissions to Desktop Underwriter 9.3, Desktop Underwriter will attempt to standardize the subject address in order to determine the county to use when applying the loan limit. When DU is able to standardize the address, a message will be issued specifying the county used to determine the loan limit that was applied to the loan casefile. When DU is not able to standardize the subject address, or the address standardization returns an incorrect county, the lender may provide the Federal Information Processing Standard (FIPS) code on the online loan application and resubmit the loan to DU. The FIPS code is a unique code assigned to all geographic areas by the U.S. Census Bureau. The county can be identified by using the complete 11-digit FIPS code for the area in which the property is located, where the first two digits are the state number, the next three are the county number, and the last six are the census tract number. The census tract is provided on the appraisal, and can also be found using other geocoding technology (i.e. the Census Geocoder on the U.S. Census Bureau website). When the FIPS code entered on the loan application is used to derive the county and loan limit used to determine the loan’s eligibility, DU will issue a message requiring the lender to document the subject is located in the specified county.
When the FIPS code is provided and DU is not able to find a corresponding FIPS code in the loan limit file, a message will be issued indicating that the FIPS code provided on the loan application is invalid. DU will then attempt to standardize the address and use the county obtained. If DU is not able to standardize the address, DU will use the state loan limit and issue a message stating that DU could not verify the submitted subject property address in order to determine the county in which the property is located so the state loan limit was used.
Maximum Number of Borrowers
Desktop Underwriter cannot evaluate more than four borrowers on a single application.
Non-Applicant Debts/Accounts
Pacific Union Financial, LLC
Out of Scope Recommendations
An Out of Scope recommendation indicates that DU is unable to underwrite the particular product, mortgage, or borrower submitted. Any mortgage that receives an Out of Scope recommendation is not eligible.
Property Fieldwork Recommendation
DU will recommend the use of one of three levels of property fieldwork: an appraisal based on an interior and exterior property inspection; an appraisal based on an exterior-only property
inspection; or an exterior-only property inspection. Refer to the Collateral topic for Pacific Union Financial requirements.
Potential Red Flag Messages
DU provides a number of “potential red flag” messages designed to help detect inconsistencies in the loan casefile as well as potentially fraudulent transactions. Neither the presence nor absence of these messages changes the responsibility to ensure accurate information in all areas of the loan process or otherwise comply with applicable law, including the Fair Credit Reporting Act. The appearance of these messages does not affect the underwriting recommendation from DU. The messages are to be used as an aid in detecting inconsistencies and potentially fraudulent transactions. The absence of any of these messages does not indicate or imply Fannie Mae’s acceptance of the data submitted to DU, including the appraised value.
Potential red flag messages include:
Rapid appreciation: Help to identify purchase and refinance transactions with subject property values that, according to a recent prior sale, appear to have an excessive rate of appreciation.
Quality control: Identifies transactions that have risk characteristics that historically have been found to contribute to an inflated property valuation.
Excessive Resubmissions: Alert provided when an unusually high number of loan resubmissions may be the result of data manipulation.
Excessive value: Helps identify refinance transactions where the initial value estimate appears to be excessive.
Refer to DU Potential Red Flag Messages for additional information.
Resubmission Requirements
The final DU recommendation must reflect the loan as it was closed, including occupancy type, product type, amortization, loan term, property type, loan purpose, sales price, and appraised value. Verification documents must be reviewed and the verified values compared to the data submitted to DU. The terms of the closed loan must match the terms of the final loan casefile submission to DU or fall within the following tolerances.
Data Attribute and
Description Trigger Action Required
Interest rate increase Discrepancies between
the credit report payments and balances and those listed on the loan application, including the presence of debt that
The changes cause the debt-to-income (DTI) ratio to:
Exceed 45%, or
Increase by 3% or more (if the recalculated DTI ratio is less than 45%)
Pacific Union Financial, LLC
Data Attribute and Description
Trigger Action Required
is not on the credit report but is on the application Additional debt(s)
disclosed by the borrower or identified by the lender during the mortgage process
Verified income is less than the income on the loan application
submitted to DU Loan Amount increase or decrease
The loan amount may increase by the lesser of $500 or 1% of the loan amount.
The loan amount may decrease by 5% of the loan amount. The above loan amount tolerances are permitted
provided the new LTV/CLTV does not result in:
Changes to the amount of required MI coverage, or Different loan-level price
adjustments, or
Changes to the loan eligibility.
Loan must be resubmitted to DU
Interest rate on fixed-rate and adjustable rate mortgages
Interest rate decreases, not as a result of a permanent interest rate buydown
No resubmission required Interest rate decreases as a
result of a permanent interest rate buydown
Loan must be resubmitted to DU Assets – Funds required to
close The actual amount of the assets required to close the transaction exceeds the amount of “Funds Required to Close” per the DU findings
If sufficient liquid assets to cover the actual amount of assets required to close the transaction has been
documented, no resubmission required Otherwise, loan casefile must be resubmitted to DU
Assets – Reserves required to be verified
Due to changes in the actual amount of assets required to close the transaction, the verified amount of reserves is less than the “Reserves Required to be Verified” per the DU Underwriting Findings report
If the lender has documented reserves that equal at least 90% of the
Reserves Required to be Verified per the DU Underwriting Findings report, no resubmission required
Pacific Union Financial, LLC
Social Security Validation
DU may identify data integrity issues pertaining to the borrower’s Social Security number, including numbers not issued, borrower age/issue date discrepancies, or Social Security numbers not associated with the borrower.
If the DU messaging is received and the Social Security issue is not resolved, the borrower would not be eligible for financing with Pacific Union Financial.
If Social Security number inconsistencies cannot be resolved:
Lenders must validate the Social Security number with the Social Security
Administration (SSA). Direct validation with SSA by a third party is acceptable. SSA Form 89 must be used for this purpose. Lenders must ensure that when utilizing third-party vendors, the vendors are going directly to the SSA to validate the Social Security numbers. It is important to note that most standard vendor reports are not direct SSA validations and do not satisfy Fannie Mae’s requirements.
If the Social Security number cannot be validated with the SSA, the loan is not eligible for delivery to Fannie Mae.
Assets
The borrower must have sufficient cash assets to cover the minimum down payment, closing costs, and any required reserves. Requirements for certain asset types are detailed below. Refer to the Freddie Mac or Fannie Mae Seller Guide(s) for additional information on eligible sources of borrower funds guidelines not addressed in this section.
Asset Documentation
Assets must be documented in accordance with LP or DU requirements.
Loan Prospector: Refer to the LP Feedback Certificate and/or the Loan Prospector
Documentation Matrix.
Desktop Underwriter: The DU Findings will identify the funds that require verification.
DU requires, at a minimum, asset statements covering the most recent full two-month period of account activity (or, if account information is reported on a quarterly basis, the most recent quarter).
Verification of Deposit (VOD)
VODs must be on a standard verification form and must be sent directly from the loan originator to the financial institution and returned directly from that entity.
Faxed verification forms are acceptable if it is clear from the document that the information was sent by fax transmission directly from the source to the originator.
The original documents must not contain any alterations, erasures, correction fluid or correction tape.
The loan file must include legible copies of the originals.
The VOD form must identify all of the following, when applicable: The name of the financial institution
Account number Account owner(s) Type of account Account open date Current account balance
Average balance for the previous two months Outstanding loans
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The title, signature, and phone number of the individual completing the VOD. Funds must be properly sourced when an account is opened within 90 days of the VOD
and/or when the current account balance is significantly greater than the average balance. If a portion of the borrower's funds were to be saved by the borrower between the date of
the loan application and the date of the loan closing, the loan file documents must show that funds were accumulated and on deposit prior to closing.
Electronic Asset Verification
An electronic verification is a computer generated document, accessed and printed from an Intranet or Internet, and may include on-line bank statements or investment account statements.
Electronic verifications are acceptable provided the on-line statement reflects all of the following:
URL from which the statement was obtained Date obtained
Financial institution
Borrower’s name and account number Account balance
Last activity date
Business Accounts
When business assets are used for down payment, closing costs, financing costs, prepaids/ escrows, and/or reserves, the assets must be verified per LP or DU documentation
requirements and must be related to a documented borrower owned business. The borrower must be listed as an owner of the business account.
Because the withdrawal of assets from a sole proprietorship, partnership or corporation may have a negative impact on the ability of the business to continue operating, the impact of the withdrawal must be considered in the analysis of the borrower’s self-employed income. A cash flow analysis must be documented using individual and/or business tax returns, as
applicable.
The cash flow analysis may be in any format that allows a determination that the withdrawal of the funds will not have a detrimental effect on the business.
The cash flow analysis must be included in the loan file.
Borrower’s Commission on Subject Transaction
The following guidelines apply when the borrower is a real estate agent and is earning a commission on the subject transaction:
Desktop Underwriter (DU) Loan Prospector (LP) The funds may be used only to pay closing costs
and/or prepaids.
The funds may not be used to meet any applicable reserve requirements.
Fannie Mae treats these funds as an Interested Party Contribution (IPC); therefore, the funds must be submitted to DU as such and must be considered when determining if the transaction meets IPC guidelines.
The funds must be shown as a credit on the Closing Disclosure.
The funds may not be used to meet the assets required for down payment, closing costs, prepaids, or reserves.
The funds must be shown as a credit on the Closing Disclosure, but only after the required funds have been submitted to LP and
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Cash Reserves
See Sale or Conversion of Primary Residence - Loan Prospector (LP) only.
See Multiple Financed Properties.
Minimum Reserve Requirements
Units/Occupancy Desktop Underwriter
(DU) Loan Prospector (LP) One unit Primary Residence Determined by DU None 2
2-4 unit Primary Residence Determined by DU Six months 2 Second Home Determined by DU Two months 2 Investment Property Determined by DU Six months 2
Reserve Requirements for Multiple Financed Properties Desktop
Underwriter (DU) 3
Two to Four Financed
Properties Two months for each additional financed Second Home or Investment Property 1 Five to Ten Financed
Properties 3
Six months for each additional financed Second Home or Investment Property 1 Loan
Prospector (LP)
Two to Four Financed
Properties Two months for each additional financed Second Home or Investment Property 1 Five to Six Financed
Properties 4
Two months for each additional financed Second Home or Investment Property 1 Five to Ten Financed
Properties 4 Not allowed
1. In addition to reserves required for the subject transaction, as determined by the AUS.
2. Represents the minimum reserve requirements; however, all reserves required by Loan Prospector must be verified and documented.
3. Effective for submissions or resubmissions to DU on or after October 26, 2015, the borrower may own or be obligated on up to six financed properties for the Conventional Fixed Rate product.
4. Effective for submissions or resubmissions to LP on or after October 26, 2015, the borrower may own or be obligated on up to six financed properties.
Determination of Monthly Housing Expense (PITI)
The following expenses must be included when determining the monthly housing expense to be used in calculation of reserve requirements:
Principal and interest (P&I)
Hazard, flood, and mortgage insurance premiums (as applicable) Real estate taxes
Leasehold payment or ground rent Special assessments
Homeowner’s association dues (including utility charges that are attributable to the common areas, but excluding any utility charges that apply to the individual unit) Any subordinate financing payments on mortgages secured by the subject property.
Assets Considered in Cash Reserves
Checking or savings accounts.
Vested portion of retirements accounts.
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available to the public (NYSE, NASDAQ, etc.). The value of the funds or securities must be readily verified through financial publications, and documentation of the borrower’s
ownership of the securities must be provided.
Cash Value of vested life insurance. The borrower must be the owner of the policy, and not the beneficiary.
Borrower’s portion of undistributed trust funds.
Assets Not Considered in Cash Reserves
Funds in which the borrower is not vested.
Funds that cannot be withdrawn under circumstances other than the account holder’s retirement, employment termination, or death.
Non-financial assets such as collectibles, coins, stamps, and art work that would require appraisal and/or liquidation.
Stocks issued by, or notes/loans receivable from, a privately held company. Stock options (Loan Prospector)
Non-vested restricted stock and non-vested stock options.
Proceeds from a cash-out refinance transaction on the subject property. Personal unsecured loans.
Interested Party Contributions.
Retirement accounts (subject to limitations). See Retirement Accounts.
Cash Deposit on Sales Contract (Earnest Money)
The funds for the earnest money deposit must be from an eligible source and must be documented per the topics within this section of the program guide or the applicable Seller Guide.
Ensure that the funds are not counted twice in the evaluation of the mortgage loan by deducting the amount from funds to close and including the funds as an asset.
Desktop Underwriter (DU)
When earnest money is entered in Section VI Assets, DU does not consider it liquid. Therefore, in order to give the borrower credit for earnest money that is not reflected in a liquid account, the earnest money must be entered as follows:
If the earnest money has not cleared the borrower’s bank account, the amount may be included in the depository account balance.
If the earnest money has cleared the borrower’s bank account and verification is included in the loan file, the amount may be entered as Other Credit in Section VII.
Credit Card Charges, Cash Advances and Unsecured Lines of Credit – Desktop
Underwriter (DU)
The amount charged by the borrower on a credit card, or a cash advance taken by the borrower on a revolving credit card account or unsecured line of credit, may be considered in borrower funds when the funds are used to pay fees related to the mortgage process. Use of these funds is subject to the following:
The amount charged may not exceed 2% of the loan amount.
The amount charged or advanced must be included in the borrower’s total outstanding debt and the repayment of such amount must be included when determining the borrower’s monthly debt-to-income ratio. A payment of 5% of the new balance on the credit card or unsecured line of credit must be included in the borrower’s DTI ratios, unless direct verification of the new payment amount is obtained; or
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reserves as required); however, the borrower is not required to pay off these charges at closing.
A copy of the credit card receipt must be included in the loan file. This policy must be applied manually, by either:
Including the fees charged to the borrower’s credit card on line f of the Details of
Transaction and removing any “Borrower Paid Fees” entered in the Other Credits section of the Details of Transaction for the fees paid outside of closing; or
By increasing the monthly credit card payment in the liabilities section of the loan casefile submitted to DU to include the charges if not reflected in the credit report. The Closing Disclosure must reflect a paid outside closing (POC) credit to the borrower for
the amount charged.
Credit Card Charges, Cash Advances and Unsecured Lines of Credit – Loan
Prospector (LP)
Effective for submissions or resubmissions to LP prior to October 26, 2015:
The amount charged by the borrower on a credit card, or a cash advance taken by the borrower on a revolving credit card account or unsecured line of credit, may be considered in borrower funds when the funds are used to pay fees related to the mortgage process. Use of these funds is subject to the following:
The amount charged may not exceed the higher of 2% of the loan amount or $1,500. The amount charged or advanced must be included in the borrower’s total outstanding debt
and the repayment of such amount must be included when determining the borrower’s monthly debt-to-income ratio. A payment of 5% of the new balance on the credit card or unsecured line of credit must be included in the borrower’s DTI ratios, unless direct verification of the new payment amount is obtained.
The borrower must have sufficient verified liquid funds to pay these fees (in addition to the funds needed for the down payment, prepaids, other closing costs, financing costs and reserves as required); however, the borrower is not required to pay off these charges at closing.
A copy of the credit card receipt must be included in the loan file.
Effective for submissions or resubmissions to LP on or after October 26, 2015:
The amount charged by the borrower on a credit card, or a cash advance taken by the borrower on a revolving credit card account or unsecured line of credit, may be considered in borrower funds when the funds are used to pay fees related to the mortgage process. Use of these funds is subject to the following:
The amount charged may not exceed the higher of 2% of the loan amount or $1,500. The amount charged or advanced must be included in the borrower’s total outstanding debt
and the repayment of such amount must be included when determining the borrower’s monthly debt-to-income ratio. A payment of 5% of the new balance on the credit card or unsecured line of credit must be included in the borrower’s DTI ratios, unless direct verification of the new payment amount is obtained; or
The borrower must have sufficient verified liquid funds to pay these fees (in addition to the funds needed for the down payment, prepaids, other closing costs, financing costs and reserves as required); however, the borrower is not required to pay off these charges at closing.
A copy of the credit card receipt must be included in the loan file.
Employer Assistance
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minimum borrower contribution requirements. Employer assistance can also be used for financial reserves for all types of assistance with the exception of unsecured loans (which may only be used for the down payment and closing costs). Employer assistance funds are not allowed on a Second Home or an Investment Property.
Borrower must meet minimum contribution requirements from own funds. See Borrower Contribution from Own Funds.
The employer assistance may be in the form of: A grant,
A direct, fully repayable second mortgage or unsecured loan, A forgivable second mortgage or unsecured loan, or
A deferred-payment second mortgage or unsecured loan.
Funds must come directly from the employer. This may include an employer-affiliated credit union.
If the assistance is in the form of a secured second mortgage or unsecured loan, the transaction must meet the requirements for loans with subordinate financing.
If the secured second mortgage or unsecured loan does not require regular payments of either principal and interest or interest only, a payment does not need to be included in the monthly DTI ratios.
Gift from a Related Person
Allowed on Primary Residence and Second Home.
If LTV is >80%, the borrower must make a minimum 5% down payment from own funds. See Borrower Contribution from Own Funds for exceptions:
Desktop Underwriter: One-unit Primary Residence Conforming Balance only. Loan Prospector: One-unit Primary Residence only.
Gift funds may be provided only by an immediate family member, spouse, fiancé, fiancée, or domestic partner of the borrower.
A letter signed by the donor, evidence of the donor’s ability to provide the gift, and
documentation of the gift funds per the table below is required. Brokers are encouraged but not required to use the Pacific Union Financial Gift Letter.
DONOR(S) MUST PROVIDE EVIDENCE OF THEIR ABILITY TO DONATE GIFT FUNDS AND EVIDENCE OF RECEIPT OF THOSE GIFT FUNDS FROM THE DONOR’S ACCOUNT MUST BE PROVIDED PER THE FOLLOWING.
If the gift funds ... Then the required documentation is ... Are in the borrower’s account
and the loan is AUS approved Document according to AUS findings Are to be provided at closing
AND
In the form of a certified check from donor’s account
Bank statement showing the withdrawal from the donor’s account disclosed in the gift letter, AND
Copy of the certified check made payable to escrow company Are to be provided at closing
AND
Are in the form of a cashier’s check, money order, official check, or other type of bank check
Have the donor provide a withdrawal document or cancelled check for the amount of the gift, evidencing that the funds came from the donor’s personal account disclosed in the gift letter, AND
A copy of the check, AND
Borrower’s deposit slip or bank statement that shows the deposit and new balance OR the check may be given directly to the Title Company or Realtor who must provide written acknowledgment identifying the specific check received & being held in escrow by the Title Company
Are to be provided at closing
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Are in the form of an electronic wire transfer to /or cashier’s check deposited with the closing agent
Written acknowledgement that the specific check or wire transfer was received and is being held in escrow by the Title Company Are being borrowed by the
donor, AND
Documentation from the bank or other savings account is not available
Written evidence provided by the donor to evidence that the funds were borrowed from an acceptable source. Funds may not be provided by an interested party to the transaction, including the lender.
Borrower’s deposit slip or bank statement showing the deposit and new balance OR
Written acknowledgment that the specific check was received and is being held in escrow by the Title Company.
Gift of Equity
A gift of equity is permitted for purchase of a Primary Residence or Second Home. With a gift of equity, no cash changes hands. Instead, the seller agrees to donate a portion of the equity in the subject property in lieu of all or a portion of the down payment.
The LTV should be calculated based on the purchase price or appraised value ‐ whichever is less. The gift of equity may not be deducted from the sales price before calculating LTV. To be eligible as a source of funds for a down payment, the following requirements must be
met:
The gift of equity must be provided by a relative (i.e., the borrower’s spouse, child, or other dependent, or any other individual related to the borrower by blood, marriage, adoption, or legal guardianship), a fiancé, or a domestic partner.
The donor may not be or have any affiliation with the builder, developer, real estate agent or any other interested party to the transaction.
A gift letter explaining the type of gift is required.
Refer to Borrower Contribution from Own Funds to determine the minimum required borrower contribution.
The gift of equity must be identified in the Sales Contract.
The gift of equity must be transferred to the buyer as a credit in the transaction, and the final equity exchange must be documented on the fully executed Closing Disclosure. The gift of equity is not subject to interested party contribution requirements.
Gift or Grant from an Agency
Allowed on Primary Residence only.
A gift or grant from an Agency is an eligible source of borrower funds, provided that: The funds were provided by a municipality, profit religious organization, or
non-profit community organization. The funds do not have to be repaid.
The gift or grant is given pursuant to an established program. The Agency is not an interested party to the transaction.
The funds were not obtained from an interested party to the transaction. Loan Prospector (LP) Desktop Underwriter (DU) Allowed on Primary Residence or Second
Home.
The loan file must include evidence that the funds were received by the borrower or by the property seller in the borrower’s behalf. Acceptable documentation includes:
Copy of grant program materials. Awards Letters.
Allowed on Primary Residence only. The donated gift or grant must be
documented with either:
A copy of the letter awarding the gift or grant to the borrower, or
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Terms and conditions provided to the borrower.
Documentation must provide the donor’s mailing address.
The documentation must include language indicating that repayment of the gift or grant is not expected, and how the funds will be transferred to the borrower, lender, or closing agent.
Evidence of the transfer of the gift or grant must be included in the loan file, such as: Copy of the donor’s canceled check, or Copy of the settlement statement showing
receipt of the check.
Ineligible Source(s) of Funds
Signature loan(s).
Gifts that must be repaid.
Cash for which the source cannot be verified (cash on hand). Salary advances.
Sweat equity (contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash).
Unverified sources of funds. Reverse mortgages.
Large Deposits
Loan Prospector (LP) Desktop Underwriter (DU) Except as stated below, documentation of
the sources of unverified deposits for purchase or refinance transactions is not required. However, when qualifying the borrower, any liabilities resulting from borrowed funds must be considered. For purchase transactions, document the
source of funds for any single deposit exceeding 50% of the total monthly qualifying income for the mortgage if the deposit is needed to meet the
requirements for funds to close and/or reserves.
When a deposit is not documented and is not needed for funds to close and/or required reserves, reduce the funds used for qualifying purposes by the amount of the unverified deposit and enter the reduced amount of the asset into Loan Prospector.
When a single deposit consists of both verified and unverified portions, the unverified portion may be used when determining whether the deposit exceeds the 50% requirement.
When the source of funds can be clearly identified from the deposit information on the account statement (e.g., direct payroll deposits) or other documented income or asset source in the loan file (e.g. tax refund amounts appearing on the tax
Refinance transactions:
Documentation or explanation for large deposits is not required.
However, if the funds were borrowed funds, any related liability must be considered. When appropriate, evidence that no new liability has been created may be required.
Purchase transactions:
Single deposits exceeding 50% of the total monthly qualifying income for the loan must be documented.
If the funds are to be used for down payment, closing costs, or reserves, document that the funds are from an acceptable source. If the borrower does not have all of the
documentation required to confirm the source of a deposit, use reasonable judgment based on the available documentation as well as the borrower’s debt-to-income ratio and overall income and credit profile.
Examples of acceptable documentation include the borrower’s written explanation, proof of ownership of an asset that was sold, or a copy of a wedding invitation to support receipt of gift funds.
Written documentation of the rationale for using the funds must be included in the loan file.
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Loan Prospector (LP) Desktop Underwriter (DU) returns in the file), additional
documentation is not required.
Document the source of a deposit of any amount regardless of the transaction type if there is any indication that the funds are borrowed or are not from an eligible source.
When using direct account verification (VOD), include documentation of the source of funds when an account is opened within 90 days of verification and/or when the current balance in an account is significantly greater than the average balance.
If a portion of the borrower’s funds were to be saved by the borrower between the date of the loan application and the date of the loan closing, the loan file must include documents showing that funds were accumulated and on deposit prior to closing.
(as defined above), and the remaining funds must be sufficient for the down payment, closing costs, and reserves. When a reduced amount (net of the undocumented large deposit) is used, the reduced amount must be used for underwriting purposes.
When a deposit has both sourced and
unsourced portions, only the unsourced portion must be used to calculate whether or not it must be considered a large deposit. Examples:
Scenario 1: Borrower has monthly income of $4,000 and an account at ABC Bank with a balance of $20,000. A deposit of $3,000 is identified, but $2,500 of that deposit is documented as coming from the borrower's federal income tax refund. Only the unsourced $500 [the deposit of $3,000 minus the documented $2,500] must be considered in calculating whether it meets the large deposit definition. The unsourced $500 is 12.5% of the borrower’s $4,000 monthly income, falling short of the 50% definition of a large deposit. Therefore, it is not considered a large deposit and the entire $20,000 balance in the ABC Bank account can be used for underwriting purposes. Scenario 2: Using the same borrower
example, a deposit of $3,000 is identified, but only $500 is documented as coming from the borrower’s federal income tax refund, leaving $2,500 unsourced. In this instance, the unsourced $2,500 is 63% of the
borrower’s $4,000 monthly income, which does meet the definition of a large deposit. Therefore, the unsourced $2,500 must be subtracted from the account balance of $20,000 and only the remaining $17,500 may be used for underwriting purposes.
Life Insurance – Cash Value
Net proceeds from a loan against the cash value or from the surrender of a life insurance policy are an acceptable source of funds for down payment, closing costs, and reserves. If the funds are needed for down payment or closing costs, the cash value of the policy and
the borrower’s receipt of the funds must be documented by obtaining either a copy of the check from the insurer or a copy of the payout statement from the insurer.
If used for reserves only, the cash value must be documented but evidence of liquidation is not required.
Marketable/Publicly Traded Securities (Stocks, Bonds and Mutual Funds)
Provide documentation to support the borrower’s ownership and value of the asset at the time of sale or liquidation, if applicable.
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Documentation Requirements
Asset Type Loan Prospector (LP) Desktop Underwriter (DU)
Bonds A written statement from a financial institution must include all of the following:
Confirmation that a representative of the financial institution has seen the bond(s),
Borrower is owner of the bond(s),
Date of maturity, type and amount of the bond(s), and
Lists all serial numbers of the borrower’s bond(s).
The value of government bonds must be based on the purchase price unless the redemption value can be documented.
Stocks and Mutual Funds
Provide most recent stock or brokerage account statement covering a one-month period or direct account verification (i.e., VOD), or
If the borrower does not receive a stock/security account statement:
Provide documentation verifying the number of vested shares owned by the borrower, and
Document the current stock price from a published source to determine the value.
Determine the value of the asset (net of any margin accounts) with one of the following:
The most recent monthly or quarterly stock/securities statement, or
A copy of the stock certificate in the borrower’s name, accompanied by a newspaper stock list that is dated at or near the time of loan application.
Vested Stock Options
Effective with submissions or resubmissions to Loan Prospector (LP) on or after December 14, 2015:
Provide most recent account statement covering a one-month period or direct account verification (i.e., VOD) confirming the number of vested shares and current value; or
If the borrower does not receive a stock/security account statement for the stock options:
Provide the employer generated documentation showing the number of shares granted and vesting dates or a letter from the employer verifying the number of vested shares owned by the borrower, and
Document the current stock price from a published source to determine the value.
Provide a recent statement that lists the number of options and the option price, and
Use the current stock price to determine the net gain realized from the exercise of the option and sale of the optioned stock.
Liquidation Requirements
Loan Prospector (LP) Desktop Underwriter (DU) Down Payment and Closing Costs: Down Payment and Closing Costs:
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If the asset is required for down payment and/or closing costs, evidence of liquidation is required.
Effective with submissions or
resubmissions to Loan Prospector (LP) on or after December 14, 2015:
If the value of the asset (as determined above) is at least 20% more than the amount of funds needed for down payment and/or closing costs, evidence of liquidation is not required.
If the value of the asset (as determined above) is less than 20% more than the amount of funds needed for down payment and/or closing costs, evidence of liquidation is required.
Reserves:
100% of the value of the assets (as determined above) may be considered for reserves.
Evidence of liquidation is not required.
needed for down payment and/or closing costs, evidence of liquidation is not required.
If the value of the asset (as determined above) is less than 20% more than the amount of funds needed for down payment and/or closing costs, evidence of liquidation is required.
Reserves:
100% of the value of the assets (as determined above) may be considered for reserves.
Evidence of liquidation is not required.
Note: Desktop Underwriter (DU) messaging will be updated August 15, 2015 to align with the policy. Until that time, DU messaging requiring the liquidation of the asset may be disregarded, provided it meets the value requirement above.
Pooled Funds
Pooled Funds are funds on deposit provided by the borrower and other member(s) of a group of related persons who have resided together for at least one year, and:
Will continue to reside together in the subject property, and Are “pooling” their funds to purchase the subject property.
Documentation must be provided to evidence that the borrower and the Related Person have resided together for at least one year.
In addition, the borrower must attest, by written statement executed at application, to the: Source of the pooled funds, and
The fact that the pooled funds are not borrowed, and
The relationship between the borrower and the related person. The borrower must also attest that the related person:
Has resided with the borrower for the past year, and
Intends to continue to reside with the borrower in the subject property for the foreseeable future.
The written statement(s) are not required to be notarized or acknowledged, but must be retained in the loan file.
Pooled funds provided by related person who do not reside with the borrower are considered gift funds.
Proceeds from the Sale of Real Property
Settlement statements or evidence of sale of assets (bill of sale or Closing Disclosure form) must: Be computer generated or typed
Identify the Borrower as the seller of the property Identify the property sold
Show the proceeds to the property seller
Show the disposition of all liens against the property
Be signed by the buyer and the seller, or their authorized agents. Desktop Underwriter (DU)
