Bulletin 2027-074 Conforming and Government Overlay Revisions, Removals and Underwriting Updates

Cash-out Refinance Credit Score
(excluding manufactured housing)

640 credit score

620 credit score

Unique Properties

Not permitted

· Permitted per agency guidelines

· Not permitted

o Container homes

o Tiny homes not permitted

o List not all inclusive

HomeReady and Home Possible Boarder Income

Boarder income permitted for refinance only

Boarder income permitted for purchase and refinance

Cryptocurrency

Ineligible source of funds

Ineligible source of funds; however may be liquidated and deposited into a traditional bank account and be used for down payment, closing costs and reserves with proper documentation.

Gift Funds

Guideline Update

(Freddie Mac Bulletin 2021-25)

Gift for an earnest money deposit must be transferred to the borrower from donor.

· Earnest money deposit may be paid by the donor directly to the builder or real estate agent.

· Transfer of funds from the donor’s account in a financial institution to the earnest money deposit holder is required.

Bank Statements for Refinance Transactions

Guideline Update

(Fannie Mae SEL-2021-06)

For rate and term refinance and cash-out refinance transactions, the most recent two month’s bank statements with 60 days’ account activity is required to document bank statements or investment portfolio statements

For rate and term refinance and cash-out refinance transactions, the most recent one-month’s bank statement with 30-days account activity is required to document bank statements or investment portfolio statements

Rate and Term Refinance

(Fannie Mae SEL-2021-07)

Guideline Update

Effective for loan applications dated on or after September 1, 2021

NA

A rate and term refinance transaction is not eligible if the borrower completed a cash-out refinance transaction with a Note date 30 days or less prior to the application date of a new refinance secured by the same property.

Credit Card Reward Points

Guideline Update

(Fannie Mae SEL-2021-07)

NA

· Credit card reward points are acceptable funds for use towards closing costs, down payment, and financial reserves, provided the reward points are converted to cash prior to closing.

· The credit card reward points must be converted to cash and deposited into the borrower’s depository account (for example, checking or savings)

RETIRING AGENCY COVID-19 OVERLAYS – EFFECTIVE IMMEDIATELY

· Freddie Mac Bulletin 2021-28

· Fannie Mae LL-2021-03

Age of Documentation

Income and asset documentation 60 days old

All documents must not be more than four months (DU) or 120 days (LPA) old as of the Note date.

Stocks and Mutual Funds – Evidence of Liquidation

Required when funds are used for closing

Required when funds are needed for closing unless combined asset value ≥ 20% of amount needed for closing

Stocks and Mutual Funds –Reserves

When used for reserves, only 70% of the value of the asset may be considered.

No balance reduction required

FHA, VA, USDA Transaction Overlay Removals

Topic

Current Guideline

New Guideline

Age of Income and Asset Documentation

(Non-Delegated Clients)

60 days old as of the Note date

· FHA and USDA: 120 days

· VA: 120 days and 180 days for new construction

Eligible Properties

Not permitted

· Live-work units

· Property with manufactured homes on site being used as storage

Permitted per FHA, VA, and USDA guidelines

FHA Transactions – Non-Delegated Client Overlay Removals

Subordinate financing

Not permitted

Permitted per FHA guidelines

Purchase CLTV

96.5% CLTV

100% CLTV per agency guidelines with subordinate financing

Down Payment Assistance

Not permitted

Permitted per FHA guidelines

Prior Mortgage Reject loans

Not permitted

Permitted with supporting documentation to overcome the prior mortgage reject decision.

VA Transaction Overlay Removal

Short Sale and Deed-in-Lieu

Short Sales with or without mortgage late payments that were completed over one year, but less than two years will require a letter of explanation and supporting documentation to establish an extenuating circumstance and to confirm short sale was not due to credit negligence or taking advantage of a declining market

· For a short sale or DIL, document the facts and circumstances in which the borrower(s) voluntarily surrendered the property.

· If the borrower’s payment history was not affected before the short sale or deed in lieu and was voluntarily communicating with the servicer or holder, then a waiting period from the date transfer of the property may not be necessary.

· If short sale or DIL was on a VA-guaranteed loan, then a borrower may not have full entitlement available for the new VA loan. Ensure that the borrower’s COE reflects sufficient entitlement.

USDA Transaction Overlay Removals

Streamlined Refinance

640 credit score

620 credit score

Streamlined Assist Refinance

640 credit score

600 credit score