February 04, 2022

Bulletin 2022-018 Conforming Temporary COVID-19 Overlay Removals and Updates

Conforming Temporary COVID-19 Overlay Removals and Updates

Newrez Approved Correspondent Clients: Newrez is aligning with the removal of the temporary COVID-19 requirement for self-employed borrowers announced in Fannie Mae Lender Letter 2021-03 (Updated 02/02/2022) and Freddie Mac Bulletin 2022-3 shown on the next page. These changes are effective immediately and will apply for loans closed on or after February 2,2022.

 

The following temporary COVID overlays will remain in effect until further notice:

  • Verification that the borrower’s business remains operational must be done within 20 days of the Note date.
  • Temporary eligibility requirements for purchase and refinance transactions
    • Continue to review the borrower’s credit report to determine the status of all mortgage loans.
    • Apply due diligence for each mortgage for which the borrower is obligated, including co-signed mortgages and mortgages not related to the subject transaction, to determine whether the payments are current as of the Note date of the new transaction.
    • Current means the borrower has made all mortgage payments due in the month prior to the Note date of the new loan transaction by no later than the last business day of that month.
    • Continue to apply guidance in Newrez Announcement 2020-033.

 

Conforming Removals and Guideline Updates

Topic

Current Guideline

New Guideline

Self Employed Income

Chapter 1I Employment and Income

Fannie Mae 2021-03

Freddie Mac 2022-3

Profit and Loss Statement dated no more than 60 calendar days prior to the Note date.

 

Option One

  • Unaudited 2020 YTD P&L, signed by the borrower. Month to month, quarterly or additional documentation may be necessary to show income trending
  • Three (3) months of business bank statements no older than the latest three (3) months shown on the YTD P&L
    • Example: YTD P&L is through October 2020 account statements can be no older than August, September, and October. Personal bank statements eligible for small business that does not have a separate business account.
    • If the business bank statements do not support or conflict with information in the P&L, obtain additional statements or other documentation to determine trending and cash flow

 

Option Two

  • Audited 2020 YTD P&L
  • Year-to-Date Profit and Loss Statement must contain all of the following information:
    • Signed by borrower
    • Cover most recent month preceding application date
    • Dated no more than 60 calendar days prior to Note date

If the borrower filed their 2020 individual income and business tax returns, these temporary COVID requirements do not apply.

If the borrower has not filed their 2020 individual income tax returns, the below documentation continues to be required.

Profit and Loss Statement dated no more than 60 calendar days prior to the Note date.

 

Option One

  • Unaudited 2021 YTD P&L, signed by the borrower. Month to month, quarterly or additional documentation may be necessary to show income trending
  • Three (3) months of business bank statements no older than the latest three (3) months shown on the YTD P&L
    • Example: YTD P&L is through October 2021 account statements can be no older than August, September, and October. Personal bank statements eligible for small business that does not have a separate business account.
    • If the business bank statements do not support or conflict with information in the P&L, obtain additional statements or other documentation to determine trending and cash flow.

 

Option Two

  • Audited 2021 YTD P&L
  • Year-to-Date Profit and Loss Statement must contain all of the following information:
    • Signed by borrower
    • Cover most recent month preceding application date
    • Dated no more than 60 calendar days prior to Note date