Conventional Conforming Underwriting Updates
Effective immediately, NewRez will align with Freddie Mac Bulletins 2020-31 and 2020-36 and Fannie Mae Announcements SEL-2020-04 and SEL-2020-05. See agency announcements for complete details.
Below is a highlight of these clarifications and updates, along with additional NewRez guideline updates.
Freddie Mac SEL-2020-31
New Construction Real Estate Taxes
- New construction properties: When the real estate tax amount is not yet available, the real estate tax amount included in the monthly housing expense must be based on the value of the improvements plus the land value.
Mortgages Secured by Second Homes and Investment Properties
- Clarification that if the borrower does not own a primary residence, the borrower’s monthly rent payment must be included in the monthly housing expense-to-income ratio.
- Rental history must be documented with one of the following:
- Direct verification of rent from a management company, or
- Direct verification of rent from an individual landlord supported by two months of canceled checks or other evidence of two months’ payments, or
- A copy of the current, fully executed lease agreement supported by two months of canceled checks or other evidence of two months’ payments, or
- Six months of canceled checks or bank statements supporting consistent payments in the amount used in qualifying
- A rent-free letter is required if the borrower lives rent free.
Mortgages with a Non-occupant Co-borrower
- The monthly housing expense (PITIA) for each borrower’s primary residence must be included in the monthly housing expense-to-income ratio.
- Rental history must be documented with one of the following:
- Direct verification of rent from a management company, or
- Direct verification of rent from an individual landlord supported by two months of canceled checks or other evidence of two months’ payments, or
- A copy of the current, fully executed lease agreement supported by two months of canceled checks or other evidence of two months’ payments, or
- Six months of canceled checks or bank statements supporting consistent payments in the amount used in qualifying
- A rent-free letter is required if the borrower lives rent free.
Debts with Ten (10) or Fewer Payments
- Clarification that alimony and child support, with proper documentation, may be excluded from the DTI.
Appraisal Requirements
- Building sketch is required for interior and exterior inspections.
- The building sketch requirement that each unit’s entry way be included on the building sketch exhibit for all 2- to 4-unit properties has been removed.
- When any subject property has a floor plan that is unusual or is functionally obsolete, the appraiser is required to provide a floor plan sketch that reflects this.
Freddie Mac 2020-036
Cash-out Refinance: Leasehold Mortgages
- Leasehold Estate: At least one borrower must have been lessee on the ground lease or lease agreement for at least six (6) months.
Social Security Income
- Social Security income can be grossed up 15% (i.e., retirement income, disability benefits, survivor benefits and Supplemental Security Income) without documentation validating that the portion of the Social Security income is tax exempt. Existing documentation requirements continue to apply when using more than 15% of Social Security income for qualifying.
Mortgages with Resale Restrictions
- Freddie Mac is extending the right of first refusal time period requirements not to exceed 120 days (From 90 days).
Wedding Gifts
- Wedding gift funds are an eligible source of funds for a primary residence when the gift funds were deposited in the borrower’s account within 90 days (previously 60 days) of the date of the marriage license or certificate.
Property with an Accessory Dwelling Unit (ADU)
- The following clarifications are being provided:
- Only one ADU is permitted.
- ADU must be subordinate in living size and contribute less to the property than the primary dwelling unit.
- Appraiser must consider, among other things, the unit’s utility, and highest and best use.
- Legal or legal non-conforming zoning: One comparable sale with an ADU, if available, should be provided.
- Illegal zoning: At least two comparable sales with an ADU must be provided.
- Delegated Correspondent Clients: A manufactured home ADU is permitted subject to all of Freddie Mac Bulletin 2020-36 guidelines.
- Non-Delegated Clients: Manufactured Home ADUs are not eligible.
Fannie Mae SEL-2020-04
Solar Panels
- NewRez is currently reviewing the Fannie Mae solar panel guidance and will issue a separate announcement.
Fannie Mae SEL-2020-05
Property with an Accessory Dwelling Unit
- Fannie Mae has clarified and updated the following for properties with an ADU:
- Only one ADU is permitted
- The ADU must:
- be subordinate in size to the primary dwelling
- have separate means of ingress/egress, kitchen, sleeping area, bathing area and bathroom
- A kitchen is defined as having cabinets, countertop, sink, stove, or stovetop hookup (hotplates, microwaves, toaster ovens are not stove substitutes).
- An independent second kitchen by itself does not constitute and ADU.
- The removal of a stove does not change the ADU classification.
- Illegal zoning: At least two comparable sales with an ADU with the same non-compliant zoning is required.
- Delegated Correspondent Clients: A manufactured home ADU is permitted subject to all of Fannie Mae Announcement SEL-2020-05.
- Non-Delegated Clients: Manufactured Home ADUs are not eligible.
Additional Product Guidance
Year-to-Date Profit and Loss Statement and Balance Sheet
- NewRez will align with the Fannie Mae and Freddie Mac COVID-19 temporary guidance permitting a year-to-date profit and loss statement and balance sheet dated no more than 60 days prior to the Note date (previously 30-days).Visa Eligibility
- NewRez added the following eligible Visa types have been added to the Conventional Conforming product profiles:
E-1, E-2, E-3, E-3D, G-1, G-2, G-3, G-4, G-5, H-1B, H-1B1, H-1B2, H-1B3, H-1C, H-4,L-1A, L-1B, L-2, O-1A, O-1B, TN