by usezloan | Aug 12, 2021 | Financial study
융자지식201- VA A UNDERWRITING GUIDELINES
A UNDERWRITING GUIDELINES
• VA Pamphlet 26-7 – Lenders Handbook
• VA Loan Guaranty Circulars
• VA Loan Limits
OVERLAYS
4506-C
• A fully executed IRS Form 4506-C must be included in all loan files.
• 1040 transcripts are required for the following income types:
o Self-employed
o Rental income documented on Schedule E
o Employed by family
o Fixed income types such as disability, social security, retirement, child support, alimony,
etc., when the 1040s are obtained in lieu of alternative documentation such as award letters,
1099s, bank statements, etc.
ASSETS
SWEAT EQUITY
Not allowed
CLOSING
CLOSING IN TRUST
• For loans closing in a trust, a Certificate of Trust, Doc. #3954 or similar form is required. For
properties located in California, the California Trust Certificate, Doc. #3951 or similar form may
be used.
VERIFICATION OF EMPLOYMENT
• Reverification of employment related income must be completed within 10 days prior to the date
of the note, excluding non-credit qualifying IRRRL refinances. Verbal re-verification of
employment is acceptable. Third party verifications such as Work Number are acceptable.
CREDIT SCORES
MINIMUM CREDIT SCORES
Loan
Purpose Purchase Cash-Out Refinance 1
Cash-Out Refinance 2 IRRRL
Units 1-2 Units 3-4 Units 1-2 Units 3-4 Units 1-2 Units 3-4 Units
Minimum
Credit
Score
620 620 620 620 620 620
1. VA Cash-out refinance in which borrower does not receive cash back and only paying off mortgage debt.
2. Borrower receives cash back and/or consolidates non-mortgage debt.
VA Underwriting Guidelines
VI. Underwriting Guidelines 4 of 13 06/17/2021
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DOWN PAYMENT
• All community second and grant programs must be Flagstar-eligible – Refer to Gift/Grant Programs,
Doc. #5935 or Community Seconds Programs, Doc. #5932.
• Due to GNMA’s prohibition, the down payment may not be derived from a second mortgage on the
property.
ENERGY EFFICIENT MORTGAGES
Ineligible
ESCROW HOLDBACKS
• Closing documents must be prepared through Flagstar’s Web-Based Closing Documents (WBCD)
and all repair escrows for Flagstar-underwritten loans are held by Flagstar
• Two bids required
o Holdback will be 1 ½ times the highest bid. Bids may not exceed $6,666 for a maximum
escrow holdback of $10,000
• One draw only permitted upon completion of repairs
FUNDING FEE
Due to system constraints, the funding fee must be fully financed or fully paid at closing
INSURANCE
HO-6 POLICY
• If Flagstar underwrites the loan, HO-6 insurance coverage for condominiums and PUDs having
any coverage maintained under a master policy must be at least 20% of the property’s
appraised value or replacement cost
JOINT LOANS
• Due to system constraints, the following joint loans are ineligible transactions:
o All veterans are using entitlement and one is exempt from paying the funding fee but all
others are required to pay a funding fee
o Two or more unmarried veterans are borrowers on a loan but only one is using entitlement
o Two or more veterans are using entitlement but one or more of the veterans’ funding fee
factors differs from the others (i.e. One veteran’s funding fee factor is 2.15% and the other
veteran’s funding fee factor is 3.30%)
o Borrowers are a veteran and non-veteran who is not the veteran’s spouse and the veteran is
subject to paying a funding fee
• All veterans must occupy the property
LTV/CLTV
CASH-OUT REFINANCE
• 3-4 unit: 90% – Borrower receives cash back and/or consolidates non-mortgage debt
• 3-4 unit: 100% – Borrower does not receive cash back and only paying off mortgage debt
• Maximum CLTV is 150%
VA Underwriting Guidelines
VI. Underwriting Guidelines 5 of 13 06/17/2021
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MANUALLY UNDERWRITTEN TRANSACTIONS
• Non-Traditional, Alternative Credit or No Credit Score loans are ineligible.
• 3-4 Units are ineligible
• Loans receiving an AUS refer response or required to be manually downgraded will be eligible
provided the loan meets all manual underwriting criteria of the VA Lenders Handbook.
MAXIMUM LOAN AMOUNTS
• Loan amounts <$1,000,000 to $1,500,000 require a minimum 620 credit score.
• Loan amounts >$1,500,000 to $2,000,000 require a minimum 660 credit score.
MAXIMUM NUMBER OF FLAGSTAR BANK LOANS
Flagstar will not approve and close loans for borrowers having more than five loans with Flagstar Bank or
having an aggregate loan amount of $4,000,000. The maximum number of loans and aggregate loan
amount calculations include all of the following:
• Non-closed loans with Flagstar Bank and
• Loans that are closed and currently serviced by Flagstar Bank and
• Loans that were closed with Flagstar Bank but the servicing rights have been sold to another lender
within the most recent 24 months
NON-OCCUPANT CO-BORROWERS
Not permitted
POWERS OF ATTORNEY
• Not permitted for cash-out
• Unless Flagstar has experience with the borrower and can compare the signature to a previous
transaction, there must be more than one borrower on a transaction with a POA, and at least on
borrower must be present at closing
PROPERTY ELIGIBILITY
INELIGIBLE
• Properties with a PACE lien that will not be paid off prior to or at closing. Note: HERO loans are
issued under the PACE Program
• Properties located in Puerto Rico
• 3 to 4-unit properties when one or more of the borrowers does not have credit scores
• Properties having both a stick-built and manufactured home located on the same parcel or
property unless the manufactured home is unoccupied and utilities are not hooked up
• Manufactured homes unless the loan is a Flagstar to Flagstar IRRRL:
o Manufactured homes are not permitted in the following states: Colorado, Illinois,
Kentucky, Louisiana, Missouri, New York, Pennsylvania, Texas, or U.S. Virgin Islands
• Condominiums without Homeowner’s Associations are ineligible for Flagstar financing
RATIOS
• Maximum ratio for manually underwritten loans – 47%
• Maximum ratio for loans that receive an AUS approve/accept – 60%
VA Underwriting Guidelines
VI. Underwriting Guidelines 6 of 13 06/17/2021
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RECENTLY LISTED PROPERTIES
• Cash-out and rate and term refinance: Property must be off the market at least one day prior to
application
REFINANCE TRANSACTIONS
• Transactions in which one veteran substitutes entitlement for another veteran are ineligible
• Cash-Out Refinance
o Maximum cash-in-hand 1-2 Unit – Follow AUS
o Maximum cash-in-hand 3-4 Units – $300,000
PROCESSES AND PROCEDURES
4605-C
• If the 4506-C transcripts do not match the borrower’s income and the borrower is a victim of
taxpayer identification theft, the following conditions must be met in order to validate the borrower’s
income:
o Proof of identification theft as evidenced by one of the following:
Proof ID theft was reported to and received by the IRS (IRS form 14039) OR
Copy of notification from the IRS alerting the taxpayer to possible identification theft
o In addition to one of the documents above, all applicable documents below must be
provided:
W2 or 1099 transcripts which match the W2 or 1099 income shown on the 1040s
1099 mortgage interest must match the reported interest on Schedule A or Schedule
E
1099G unemployment must match the reported amount of unemployment
1099 dividend and interest income must match the reported dividend and interest
Validation of prior tax year’s income (income for current year must be in line with
prior years)
APPRAISAL
PROPERTY ADDRESSES
The property addresses on the appraisal, mortgage, note, flood certification and in Loantrac must be
identical. However, abbreviation of “Street,” “Road,” etc. is acceptable, even if “Street” or “Road” is fully
spelled in another document. This is the only acceptable variance.
• Use the standardized USPS address unless the address in the legal description on the title
commitment differs. If the legal address differs, use the legal address
• Appraisers are required to state the USPS address as the property address on the first line of
the appraisal. If the legal address differs from the USPS address, the appraiser must reference
the legal address in a comment on the appraisal or an addendum to the appraisal
PURCHASES AND CASH-OUT REFINANCES
• Appraisals are ordered through WebLGY in the Veteran’s Information Portal. VA provides
access to the portal to lenders who possess a current VA Agent ID and a VA PIN. For additional
information, refer to memo #14050 – Order VA Appraisals/Case Numbers and memo #15067 –
VA LIN, Certificate of Eligibility, CAIVR and Appraisal Processes
VA Underwriting Guidelines
VI. Underwriting Guidelines 7 of 13 06/17/2021
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o Lenders must notify Flagstar when the appraisal has been uploaded to WebLGY by VA.
Email vaappraisal@flagstar.com
• For lenders who have not yet received an Agent ID from VA, Flagstar will order the case
number and appraisal. Lenders must complete VA Case Number/Appraiser Assignment, Doc.
#9701 and forward to fsgovlend@flagstar.com
o If Flagstar orders the appraisal, we will upload the appraisal invoice to the paperless file,
and Flagstar must be paid the appraisal fee
APPRAISAL DISPUTE PROCEDURES
• E-mail at least three additional comps to Flagstar at vaappraisal@flagstar.com
o Provide valid comparables, including MLS data
o The SAR will review the additional comps for similarity, proximity, closing date, etc.
o Upon determination that the new comps are similar to the subject property, the SAR will
submit them to the appraiser for consideration. Appraiser turn time is up to five business
days
• On a limited basis, we will submit the appraisal and appraiser’s rebuttal to VA for consideration
of a higher or lower value. VA’s turn time is ten to 15 business days
o In the event Flagstar believes the appraised value is too high, the loan may be denied
CERTIFICATE OF ELIGIBILITY
A Certificate of Eligibility is required for all VA transactions. The following information is included on a
Certificate of Eligibility:
• Veteran’s full name – The veteran’s name on the Certificate of Eligibility must match the veteran’s
name in WebLGY, Loantrac, the loan guaranty certificate and the note and mortgage
o The following name discrepancies are the only acceptable variations:
James Everett Brown, James E. Brown, James Brown
William Smith Jr., William Smith, William R. Smith, William Ryan Smith, Jr., William
Ryan Smith, William R. Smith, Jr.
o The following name discrepancies must be resolved prior to the loan closing (this list is not
all-inclusive and name discrepancies are reviewed on a case-by-case basis):
Name discrepancies due to marriage (C of E shows Mary Smith, but documentation
in Loantrac, WebLGY and/or the note and mortgage shows Mary Jones) – A copy of
the marriage license is sufficient documentation
Hyphenated name discrepancies (C of E shows Bill Smith, but documentation in
Loantrac, WebLGY and/or the note and mortgage shows Bill Smith-Jones)
Middle name discrepancies (C of E shows Bill John Smith, but documentation in
Loantrac, WebLGY and/or the note and mortgage shows Bill Robert Smith)
First name discrepancies (C of E shows Bill Smith, but documentation in Loantrac,
WebLGY and/or the note and mortgage shows William Smith)
Last name prefix discrepancies (C of E shows Bill St. Pete, but documentation in
Loantrac, WebLGY and/or the note and mortgage shows Bill Stpete)
CLOSING REQUIREMENTS
• Fees must be itemized on the Closing Disclosure per VA Circular 26-17-11.
• Interest credit allowed – Loan must close by the 7th calendar day of the month preceding the first
payment date.
VA Underwriting Guidelines
VI. Underwriting Guidelines 8 of 13 06/17/2021
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• All conditions must be collected and provided in the closing package
o Down payment assistance funds are typically wired to the closing agent – Wire transfer
documentation must be included in the file prior to funding or purchase
• Any changes to loan amount, funding fee, cash-to-close, interest rate, points, PITI, etc. must be
reviewed by underwriter prior to closing and disbursing loan
• Principal reductions are required when the total of lender and/or seller credits reflected on the
Closing Disclosure exceeds the total of the actual closing costs, pre-paid expenses and discount
points
• Principal reductions are required when the borrower receives any cash back at a purchase
transaction closing
o Documented funds paid by the borrower outside of closing for items such as EMD or
appraisal and credit report may be refunded to the borrower at closing – Document funds
paid outside of closing with one of the following:
Cancelled checks
Bank statement showing transfer of funds – If the statement does not indicate the
payee, a copy of the check is also required
Money order receipts and evidence of source of funds
• Principal reductions are required when the borrower is receiving more than $500 cash at closing on
an interest rate reduction refinancing loan.
NOTARY POLICY
Refer to the Notary Policy stated in Settlement/Closing Requirements, Doc. #4601
CONFLICT OF INTEREST
Transactions in which the realtor and the originator are the same individual are eligible.
CREDIT REPORTS
All credit reports must be imported to Loantrac, including credit reports for IRRRL transactions.
AGE OF CREDIT REPORTS
• To achieve Flagstar’s and VA’s minimum credit requirements, a new credit report may be repulled after a borrower has repaired derogatory credit, and Flagstar will honor the new credit
score. The new credit report must be imported to Loantrac
• The following credit report discrepancies require a new credit report:
o Social Security number is incorrect
o Last name is incorrect
o Middle initial is incorrect
o Misspelled first names and/or missing or incorrect suffixes (Jr./Sr.) require a new credit
report unless the name variation appears in the AKA section of the credit report
DE CUSTOMERS ONLY
• Credit report must contain Office of Foreign Assets Control (OFAC) screening
• If credit report indicates a potential OFAC match, the credit report must be e-mailed to
delegated.underwriting@flagstar.com for review by Flagstar Bank’s Secrecy Act Compliance
VA Underwriting Guidelines
VI. Underwriting Guidelines 9 of 13 06/17/2021
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Department – The loan may not close without clearance from Flagstar’s BSA Department
(violation of this policy is a federal crime)
ELECTRONIC SIGNATURES
• Electronic signatures are permitted for all VA loan documents except the following:
o Powers of attorney
o Form SSA-89
o Note and Mortgage – While VA accepts these, at this time, GNMA does not
ESCROWS
• Escrow waivers not allowed
• Generally, property tax escrows for all new construction properties must be calculated based on the
fully assessed property value. Obtain actual tax amounts from the local tax assessor’s office. If the
new construction property taxes charged by the municipality will not be based on the fully improved
property within 12 months of closing, escrows may be based on one of the following. Note:
Regardless of assessment dates, ratios and reserves must be calculated based on the fully
assessed property value.
o Lot only or
o A partial assessment or
o Actual or estimated amount based on fully assessed value
o The Closing Department will require the borrower(s) to confirm that once the property is fully
assessed, they are aware of the potential escrow shortage
• For purchases of new and existing properties in California only, property taxes may be calculated
using 1.25% of the purchase price or the actual tax rate
ESCROW HOLDBACKS
• Allowed only for exterior property repairs that cannot be completed due to inclement weather
• Fully executed Escrow Holdback Agreement, Doc. #3655 required in closing package
IMMIGRATION STATUS
• DACA c(33) is a work status that is under a deferred action and does not provide lawful status,
therefore, Individuals that are working under DACA authorization are not eligible
INDUSTRY LINKS/FLAGSTAR LINKS AND CONTACTS
• VA Lender’s Handbook – VA Pamphlet 26-7
• VA Circulars
• VA Construction and Valuation
• VA Loan Limits
• VA Lender’s, Servicers and Real Estate Professionals Page
• VA-Approved Condos Search Engine
• VA-Registered Builders Search Engine
• VA Construction and Valuation – State Requirements
• WebLGY User Administration Guide
VA Underwriting Guidelines
VI. Underwriting Guidelines 10 of 13 06/17/2021
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• DFAS My Pay – For Leave and Earnings Statements – Veteran’s PIN required
• Active-Duty Verbal Verifications of Active Duty
o Army or Air Force – 888-729-2769
o Marines – 888-332-7411
o Navy – 888-332-7411
o Civilian Defense – 800-729-3277
• About.com – US Military Pay – Defines Abbreviations and provides Pay Charts, etc.
• Federal Income Tax Tables
o IRS Federal Tax Tables
• State Income Tax Tables
o Bank Rate – State Tax Roundup
• Flagstar Bank Government Underwriting Help Desk
o E-Mail: governmentuw@flagstar.com
o Phone: 866-945-9872: Select option 1 for Underwriting and option 2 for Government
Underwriting
INSURANCE
HAZARD INSURANCE
Hazard Insurance Requirements, Doc. #4602
FLOOD INSURANCE
• Flood Insurance Requirements, Doc. #4603
• Eligible Flood Provider Companies- FEMA Flood Insurance Company List
• Private flood insurance meeting the requirements of the Biggert-Waters Flood Insurance Reform
Act of 2012, however, all improvements, including detached structures must be insured.
LOAN TERM
FIXED RATE MORTGAGES
10, 15, 20, 25 and 30-year fixed rate mortgages
ARMS
3/1 and 5/1 CMT adjustable-rate mortgages without temporary buydowns
MAXIMUM LOAN AMOUNTS
LOAN AMOUNT RESOURCES
• 2021 VA County Loan Limits for High Cost Counties
• VA Guaranty Calculation Examples
• VA Mortgage Calculation Worksheet – Purchase Loan Amounts ≤ $144,000, Doc. #9740
• VA Mortgage Calculation Worksheet – Purchase Loan Amounts > $144,000, Doc. #9741
• VA Mortgage Calculation Worksheet – Refinance Loan Amounts ≤ $144,000, Doc. #9742
• VA Mortgage Calculation Worksheet – Refinance Loan Amounts > $144,000, Doc. #9743
VA Underwriting Guidelines
VI. Underwriting Guidelines 11 of 13 06/17/2021
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NET TANGIBLE BENEFIT
A net tangible benefit form must be completed when required by the state and for any Cash-Out and
Interest Rate Reduction Refinance (IRRRL).
POWERS OF ATTORNEY
All signatures on the power of attorney must be notarized, and the power of attorney must be reviewed by
a Flagstar underwriter. All signatures must match the signatures in the file.
QUALIFIED MORTGAGES (QM)
With the exception of the VA IRRRLs described below, VA’s Interim QM Rule classifies all VA loans as
Safe Harbor Qualified Mortgages.
IRRRLS
IRRRLs meeting all of the following criteria are classified as Safe Harbor QMs:
• The note date of the refinance loan must be on or after the later of:
• The date that is 210 days after the due date of the first monthly payment on the mortgage being
refinanced, and
• The date on which 6 consecutive full monthly payments have been made on the mortgage being
refinanced
• The veteran has not been more than 30 days past due during the six months preceding the new
loan’s closing date and
• The number of months to recoup the allowable fees and charges associated with the loan does
not exceed 36 months
o All of the following costs are included in the recoup calculation:
Fees paid on behalf of the veteran through lender credits and premium pricing
may be excluded from the calculation if they offset allowable fees listed in
Chapter 8 of VA Pamphlet 26-7
The funding fee is excluded.
Pre-paid expenses that would have been payable under the loan being
refinanced are not included in the recoupment calculation. Examples of pre-paid
expenses are property taxes, homeowner’s insurance premiums and HOA dues
o If the payment increases due to a decreased loan term or conversion of an ARM to fixed
rate mortgage, the Veteran cannot incur any fess, closing costs or expenses (other than
taxes, amounts held in escrow, and fees paid under Chapter 37, e.g. VA Funding Fee)
o The number of months to recoup is calculated using VA Net Tangible Benefit & Loan
Disclosure, Doc. #9723-A and Doc. #9723-B
IRRRLs not meeting the criteria above are not acceptable to VA.
For additional info, refer to Interim Final Rule – Ability to Repay Standards and QM Definition
TITLE
Effective date of title commitment must be no older than 90 days as of initial underwrite and within 120
days of the note.
VA Underwriting Guidelines
VI. Underwriting Guidelines 12 of 13 06/17/2021
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ENERGY LOAN TAX ASSESSMENT PROGRAM (ELTAP) LIENS
Not permitted
UNEXPIRED RIGHTS OF REDEMPTION – ALL STATES EXCEPT ALABAMA
• Unless the property is located in the State of Alabama, Flagstar will not approve and/or
purchase any loan having an unexpired right of redemption unless the purchase agreement, title
and appraisal all show the same seller who is the original mortgagor
o Title may show lis pendens notices from the bank or mortgagee
• Purchase contract may indicate a short sale
• Unexpired Rights of Redemption – Alabama Only
o Purchase agreement, title and appraisal will be in the name of the lender and not the
original mortgagor.
o Title commitment will show one or both of the following acceptable recorded deeds:
Foreclosure from John Doe (original mortgagor) to Anybank (foreclosing lender)
followed by the date on the deed and the recording date
When the foreclosing lender deeds the property to HUD, Fannie Mae, Freddie
Mac, VA or GNMA, there will be a special warranty deed from Anybank
(foreclosing lender) to one of the GSEs listed above followed by the date on the
deed and the recording date
o If the above referenced deeds are dated within the most recent 12 months, the title
commitment must contain a specific exception for the unexpired right of redemption and
affirmatively insure, without qualification, the mortgagee (Flagstar Bank) against all
losses arising out of the exercise of any outstanding right of redemption
UNDERWRITING
VA PRIOR APPROVAL
The following loans require submission of the loan to VA for underwriting and approval prior to loan
closing:
• Joint Loans (See Joint Loan section for definition and additional information, including joint loan
eligibility/ineligibility)
• Loans to veterans who receive non-service-connected pensions
• Loans to veterans who have been rated incompetent by VA
• IRRRL loans made to refinance delinquent VA loans
VA REGIONAL LOAN CENTERS
NATIONAL CALL CENTER – 877-827-3702
• Select 1 if you know your party’s extension
• Select 2 if you are calling regarding VA funding fee
• Select 3 if you are a veteran or a lender obtaining or processing a VA loan
• Select 4 if you are a homeowner having difficulty making your mortgage payment or are in
foreclosure, or if you are a servicer.
• Select 5 if you have questions about the Specially Adapted Housing Grant through VA
• Select 6 if you have questions about an appraisal, building ID or condominium project approval
VA Underwriting Guidelines
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• Select 7 regarding Certificate of Eligibility. Note: Most Certificates of Eligibility can be obtained online by the Veteran through eBenefits or the lender through WebLGY
• Select 0 if you are calling concerning other benefits such as Education, Health Care or Disability
Benefits
For options 2 and 3, calls will be answered on a nationwide basis by the next RLC representative. Calls for
options 4 and 5 will be answered by the RLC with jurisdiction based on the caller’s area code.
CLEVELAND REGIONAL LOAN CENTER
Ohio, Michigan, Indiana, Pennsylvania, New Jersey, Delaware, Connecticut, Maine, Massachusetts, New
Hampshire, New York, Rhode Island, Vermont
HOUSTON REGIONAL LOAN CENTER
Texas, Arkansas, Oklahoma, Louisiana
ST. PAUL REGIONAL LOAN CENTER
Minnesota, Iowa, Illinois, Kansas, Missouri, North Dakota, Nebraska, South Dakota, Wisconsin
ATLANTA REGIONAL LOAN CENTER
Georgia, South Carolina, North Carolina, Tennessee
DENVER REGIONAL LOAN CENTER
Colorado, Alaska, Idaho, Montana, Oregon, Utah, Washington, Wyoming
PHOENIX REGIONAL LOAN CENTER
Arizona, California, Nevada, New Mexico
ROANOKE REGIONAL LOAN CENTER
Virginia, District of Columbia, Kentucky, Maryland, West Virginia
ST. PETERSBURG REGIONAL LOAN CENTER
Florida, Alabama, Mississippi, Puerto Rico, U.S. Virgin Islands
HONOLULU REGIONAL OFFICE
Hawaii, Guam, American Samoa Commonwealth of the Northern Mariana Islands
by usezloan | Aug 12, 2021 | Financial study
융자지식200- FHA UNDERWRITING GUIDELINES/PROCESSES AND PROCEDURES
PROCESSES AND PROCEDURES
Processes and Procedures describe how to use Flagstar’s systems and tools to achieve FHA, GNMA and
Flagstar requirements.
4506-C
• If the 4506-C transcripts do not match the borrower’s income and the borrower is a victim of
taxpayer identification theft, the following conditions must be met in order to validate the borrower’s
income.
FHA Underwriting Guidelines
VI. Underwriting Guidelines 7 of 18 04/16//2021
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o Proof of identification theft as evidenced by one of the following:
Proof ID theft was reported to and received by the IRS (IRS form 14039) OR
Copy of notification from the IRS alerting the taxpayer to possible identification theft
o In addition to one of the documents above, all applicable documents below must be
provided:
W2 or 1099 transcripts which match the W2 or 1099 income shown on the 1040s
1099 mortgage interest must match the reported interest on Schedule A or Schedule
E
1099G unemployment must match the reported amount of unemployment
1099 dividend and interest income must match the reported dividend and interest
Validation of prior tax year’s income (income for current year must be in line with
prior years)
APPRAISALS
The required method for ordering appraisals is based on each lender’s approval type with Flagstar and
FHA.
• If Flagstar must be the client on the appraisal, order the appraisal through Loantrac Appraisal
Management
• For additional information and links to Flagstar-approved appraisal management companies, refer
to Appraisal Management Companies, Doc. #4903
Description Underwriting Close in Own Name Client on Appraisal
FHA Authorized Agent Flagstar Yes Flagstar or Correspondent 1,3
FHA Test Case Phase Lender Yes Correspondent 3
FHA Direct Endorsement Lender Yes Correspondent 3
FHA Sponsored Originator Flagstar No Flagstar
TCP2 Dual/Sponsored Originator Flagstar Yes Correspondent 3
TCP2 Dual/Sponsored Originator Lender Yes Correspondent 3
FHA Dual/AA Flagstar Yes Flagstar or Correspondent 1
FHA Dual/AA Lender Yes Correspondent 3
FHA SO AA Flagstar Yes Correspondent 3
1. Flagstar must approve the correspondent for appraisal independence compliance. If the correspondent is not approved for appraisal independence
compliance, the appraisal must be ordered through Loantrac Appraisal Management.
2. TCP refers to an FHA lender in its test case phase.
3. Appraiser must be Flagstar-eligible and must not be on Flagstar’s ineligible or denied appraiser list. If the eligible appraiser search indicates the
appraiser is inactive, expired or suspended, prior to ordering the appraisal, submit the appropriate documentation to Appraiser.Approval@flagstar.com.
PORTABILITY
• To transfer a Flagstar appraisal to another lender, refer to the Transfer Appraisal From Flagstar
to Another Lender section of Conventional Underwriting Guidelines
• Appraisals already performed for a case number that was subsequently transferred to Flagstar
must be emailed in .xml format to appraisal.review@flagstar.com by one of the following:
o The original DE lender to whom the loan was initially submitted or
FHA Underwriting Guidelines
VI. Underwriting Guidelines 8 of 18 04/16//2021
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o The appraisal management company providing the appraisal or
o The appraiser
PROPERTY ADDRESSES
The property addresses on the appraisal, case number assignment, flood certification, mortgage, note
and in Loantrac must be identical. However, abbreviation of Street, Road, etc. is acceptable, even if
Street or Road is fully spelled in another document. This is the only acceptable variance.
• Use the standardized USPS address. Compare the USPS address to the legal description on
the title commitment and use the address in the legal description if that differs from the USPS
address
• Appraisers are required to state the USPS address as the property address on the appraisal. If
the legal address differs from the USPS address, the appraiser must reference the legal
address in a comment on the appraisal or an addendum to the appraisal
SECOND APPRAISAL POLICY – DEFICIENT APPRAISALS
Flagstar DE underwriters adhere to the following policies and processes when determining whether an
appraisal contains material deficiencies:
• If the underwriter determines there are flaws and/or material deficiencies, he or she contacts the
appraiser and requests necessary revisions, clarification, additional supporting documentation
and/or missing data
• If the appraiser fails to provide the information or provides insufficient data and the appraisal still
contains material deficiencies, the appraisal is forwarded to the Appraisal Review team for
analysis
• A prior-to-close condition indicating the appraisal has been forwarded to Appraisal Review is
added to the loan
• Upon receipt of the Appraisal Review team member’s comments, the DE underwriter
determines whether a new appraisal is warranted
o If not warranted, the conditional commitment is issued based on the original appraisal
o If the original appraisal contains significant flaws, the DE Underwriter requests a second
Appraisal through the Appraisal Review team. Even if the originating lender has been
approved for Appraiser Independence Compliance, second appraisals due to significant
flaws may never be ordered by anyone other than the DE Underwriter
BORROWERS
BORROWER’S NAME
• The borrower’s name on the case number assignment must match the borrower’s name in
Loantrac and the note and mortgage
o The following name discrepancies are the only acceptable variations:
James Everett Brown, James E. Brown, James Brown
William Smith Jr., William Smith, William R. Smith, William Ryan Smith, Jr.,
William Ryan Smith, William R. Smith, Jr.
o The following name discrepancies must be resolved prior to the loan closing (this list is
not all-inclusive and name discrepancies are reviewed on a case-by-case basis):
Name discrepancies due to marriage (Case number shows Mary Smith, but
documentation in Loantrac and/or the note and mortgage shows Mary Jones)
FHA Underwriting Guidelines
VI. Underwriting Guidelines 9 of 18 04/16//2021
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Hyphenated name discrepancies (Case number shows Bill Smith, but
documentation in Loantrac and/or the note and mortgage shows Bill SmithJones)
Middle name discrepancies (Case number shows Bill John Smith, but
documentation in Loantrac and/or the note and mortgage shows Bill Robert
Smith)
First name discrepancies (Case number shows Bill Smith, but documentation in
Loantrac and/or the note and mortgage shows William Smith)
Last name prefix discrepancies (Case number shows Bill St. Pete, but
documentation in Loantrac and/or the note and mortgage shows Bill Stpete)
CASE NUMBER ASSIGNMENT/TRANSFER
CASE NUMBER FUNCTIONS
• Case numbers for Sponsored Originators must be ordered through Flagstar Bank’s Loantrac
System.
• Case numbers for lenders in “eligible for pre-closing” status with FHA (test case phase) must be
ordered by Flagstar. Submit a completed Case Number Assignment Request, Doc. #9301 to
fsgovlend@flagstar.com.
• If the case number cannot be ordered through Loantrac because the loan was submitted to
underwriting prior to case number assignment or update of an existing Flagstar case number is
required, complete FHA Case Number Assignment Request, Doc. #9301 and submit to
fsgovlend@flagstar.com.
• To obtain a copy of the Refinance Authorization screen for FHA to FHA refinance transactions,
complete FHA Refinance Credit Query/Authorization Request, Doc. #9353 and submit to
fsgovlend@flagstar.com. Note: When requesting an FHA to FHA refinance case number
through Loantrac, a Refinance Authorization is automatically provided.
• To obtain a case number transfer from Flagstar to another DE lender, complete FHA Case
Number Transfer Request, Doc. #9352 and submit to fsgovlend@flagstar.com.
• If a Flagstar case number requires cancellation, email fsgovlend@flagstar.com. The email
request must contain the borrower’s name, loan number, FHA case number and reason for case
cancellation.
• Flagstar cannot perform case number functions for case numbers that are not already in
Flagstar’s name. The DE lender to whom the case number is assigned is responsible for all
case number functions.
CASE NUMBER ASSIGNMENT – DATA ENTRY
When entering the case number assignment date in Loantrac, enter the “Case Received” date from the
Case Query screen in FHA Connection.
CLOSING REQUIREMENTS
NOTARY POLICY
Refer to the Notary Policy stated in Settlement/Closing Requirements, Doc. #4601
ESCROW CREDITS
• For refinances of Flagstar serviced loans only, the borrower’s existing escrow balance on the
payoff may be used for one of the following purposes:
o Reduce the payoff amount
FHA Underwriting Guidelines
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When calculating the maximum mortgage amount, escrow credits applied for this
purpose must be deducted from the existing balance
The payoff amount on the Closing Disclosure will be reduced by the amount of
the existing escrow balance
o As a credit to the closing costs on the new loan
The credit must appear on the Closing Disclosure
The maximum mortgage is calculated using the existing principal balance on the
payoff statement
If, instead of entering a credit on the Closing Disclosure, the payoff amount is
reduced by the amount of the escrow credit, the borrower’s authorization must be
updated and the maximum loan amount must be recalculated. If the loan closes
prior to adjustment, a principal reduction will be required
o As a credit toward the establishment of the new refinance loan’s escrow account
The credit must appear on the Closing Disclosure
The maximum mortgage is calculated using the existing principal balance on the
payoff statement
If, instead of entering a credit on the Closing Disclosure, the payoff amount is
reduced by the amount of the escrow credit, the borrower’s authorization must be
updated and the maximum loan amount must be recalculated. If the loan closes
prior to adjustment, a principal reduction will be required
o In all cases, borrowers wishing to use their existing escrow balance for one or more of
the above purposes must complete FHA Escrow Account Authorization, Doc. #9356.
Borrowers who do not complete the form prior to the loan being cleared to close are
ineligible for escrow credits.
CLOSING – MISCELLANEOUS
• For FHA to FHA refinance transactions, the up-front mortgage insurance premium refund must
be credited to the borrower on the Closing Disclosure
• All closing/funding conditions must be collected and provided in the closing package
• Any changes to loan amount, upfront MIP, cash-to-close, interest rate, points, PITI, etc. must be
reviewed by underwriting prior to closing and disbursing loan
• Principal reductions are required when the total of lender and/or seller credits reflected on the
Closing Disclosure exceeds the total of the actual closing costs, pre-paid expenses and
discount points
• Principal reductions are required when the borrower is receiving more than $500 cash at closing
on a rate and term or streamline refinance loan. However, if the borrower has requested to
apply the existing escrow balance to the closing costs and pre-paid expenses on the new loan
and the existing escrow balance exceeds the amount required to pay closing costs and
establish the new escrow account by more than $500, the borrower may receive the excess
funds in cash at closing. This is the only acceptable reason for a borrower to receive more than
$500 cash back at closing on a rate and term or streamline refinance.
• Closing documents must be signed and notarized on or before the closing date indicated on the
closing documents, regardless of the state in which the property is located and/or whether it’s
an escrow state
FHA Underwriting Guidelines
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CONFLICT OF INTEREST
The loan officer cannot receive compensation from any other person or entity involved in the mortgage
transaction, (i.e. compensation as the real estate agent).
CREDIT REPORTS
AGE OF CREDIT REPORTS
• To achieve Flagstar’s and FHA’s minimum credit requirements, a new credit report may be repulled after a borrower has repaired derogatory credit, and Flagstar will honor the new credit
score. The new credit report must be imported to Loantrac
• The following credit report discrepancies require a new credit report:
o Social Security number is incorrect
o Last name is incorrect
o Middle initial is incorrect
o Misspelled first names and/or missing or incorrect suffixes (Jr./Sr.) require a new credit
report unless the name variation appears in the AKA section of the credit report
DE CUSTOMERS ONLY
• Credit report must contain Office of Foreign Assets Control (OFAC) screening
• If credit report indicates a potential OFAC match, the credit report must be e-mailed to
Delegated.Underwriting@Flagstar.com for review by Flagstar Bank’s Secrecy Act Compliance
Department – The loan may not close without clearance from Flagstar’s BSA Department
(violation of this policy is a federal crime)
DISCLOSURES/FORMS
REQUIRED DISCLOSURES AND FORMS
• In addition to the other forms listed in Government Forms and Disclosures, Doc. #9005,
HUD/VA Addendum to Uniform Residential Loan Application, HUD Form 92900-a is required for
all FHA loans. Lender and sponsor information on the form is based on the originating lender’s
relationship with FHA and/or Flagstar Bank. Complete the fields described below in the following
manner:
o Sponsored Originators (TPOs), including loans underwritten by Flagstar for an
Authorized Agent who is still in their test case phase and has only conditional FHA
approval (pre-closing review status)
Page 1:
• Box 13 – Enter Flagstar’s FHA Lender ID – 7127400001
• Box 14 – Leave Blank
• Box 15 – Enter Flagstar’s name and address: Flagstar Bank, 5151
Corporate Drive, Troy, MI 48098
• Box 16 – Leave Blank
• Box 17 – Enter Flagstar’s phone number: (800) 945-7700
• FHA Sponsored Originations Section – Enter the loan originating lender’s
company name, company Tax ID and company NMLS ID
• A Flagstar officer must sign page one at the time the loan is insured – No
originator signature is required – Must not be signed prior to the borrower
signing page 2
FHA Underwriting Guidelines
VI. Underwriting Guidelines 12 of 18 04/16//2021
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Page 2:
• No Lender/sponsor info
• Form must be signed by borrower(s) at initial application
Page 3:
• Form is signed by Flagstar’s underwriter
Page 4:
• Mortgagee – Flagstar Bank
• Title of Lender’s Officer and Signature – A Flagstar officer must sign at
the time of insuring – No originator signature is required
• Form must be signed by borrower(s) at closing
o Loans Underwritten by Flagstar as Authorized Agent for an FHA-approved DE Lender
who has completed their test cases and is unconditionally approved by FHA
Page 1:
• Box 13 – Enter originating lender’s FHA lender ID
• Box 14 – Enter Flagstar’s FHA Lender ID – 7127400001
• Box 15 – Enter originating lender’s name and address
• Box 16 – Enter Flagstar’s name and address: Flagstar Bank, 5151
Corporate Drive, Troy, MI 48098
• Box 17 – Enter originating lender’s phone number
• FHA Sponsored Originations – Leave Blank
• An officer (not the loan officer or originator) of the originating lender’s
company must sign – No originator signature is required – Must not be
signed prior to the borrower signing page 2
Page 2:
• No Lender/sponsor info
• Form must be signed by borrower(s) at initial application
Page 3:
• No Lender/Sponsor info
• Form is signed by Flagstar’s underwriter
Page 4:
• Mortgagee – Originating lender’s name
• An officer (not the loan officer or originator) of the originating lender’s
company must sign – No originator signature is required
• Form must be signed by borrower(s) at closing
o Loans Underwritten by Flagstar-approved DE Delegated Correspondents
Page 1:
• Box 13 – Enter DE Delegated correspondent’s FHA lender ID
• Box 14 – Leave blank
• Box 15 – Enter DE Delegated correspondent’s name and address
• Box 16 – Leave Blank
• Box 17 – Enter DE Delegated correspondent’s phone number
FHA Underwriting Guidelines
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• FHA Sponsored Originations – Leave Blank
• An officer (not the loan officer or originator) of the DE Delegated
correspondent’s company must sign – No originator signature is required
-– Must not be signed prior to the borrower signing page 2
Page 2:
• No Lender/sponsor info
• Form must be signed by borrower(s) at initial application
Page 3:
• Form is signed by DE Delegated correspondent’s underwriter
Page 4:
• Mortgagee – DE Delegated correspondent’s name
• An officer (not the loan officer or originator) of the DE Delegated
correspondent’s company must sign – No originator signature is required
• Form must be signed by borrower(s) at closing
For additional FHA document and disclosure requirements, refer to Government Forms and
Disclosures, Doc. #9005.
ELECTRONIC SIGNATURES
Electronic signatures are permitted for all FHA loan documents except the following:
• Powers of attorney
• Form SSA-89
• Note
ESCROW STATES
• Arizona
• California
• Colorado
• Hawaii
• Idaho
• Montana
• Nevada
• New Mexico
• Oregon
• Utah
• Washington
• Wyoming
ESCROWS
• Escrow waivers not allowed
• Escrows are required for all of the following:
o Real estate taxes
FHA Underwriting Guidelines
VI. Underwriting Guidelines 14 of 18 04/16//2021
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o Monthly mortgage insurance premiums
o Hazard insurance premiums, including flood insurance, wind insurance, etc.
o Special assessments
o Ground rents
• Unless the loan has one of the following characteristics, property tax escrows are calculated using
the taxes stated on the title commitment, regardless of the rate used to calculate the borrower’s
debt-to-income ratios:
o When calculating the real estate tax payment for existing (not new construction) properties,
the following documentation may be used:
Taxes listed on the title commitment or property tax bill/cert or
Evidence from the local assessor’s office of the current tax rate
o For properties being purchased from a seller who paid non-homestead taxes, the title
commitment will indicate the non-homestead tax rate. Homestead tax rates may be used to
calculate the borrower’s ratios, provided evidence of the homestead tax rate is obtained
from the local tax assessor’s office. Lenders must collect escrows based on the amount
shown on the title commitment.
o Generally, property tax escrows for all new construction properties must be calculated based
on the fully assessed property value. Obtain actual tax amounts from the local tax
assessor’s office. If the new construction property taxes charged by the municipality will not
be based on the fully improved property within 12 months of closing, escrows may be based
on one of the following. Note: Regardless of assessment dates, ratios and reserves must
be calculated based on the fully assessed property value.
Lot only; or
A partial assessment; or
Actual or estimated amount based on fully assessed value
o The Closing Department will require the borrower(s) to confirm that once the property is fully
assessed, they are aware of the potential escrow shortage
o For purchases of new and existing properties in California only, property taxes may be
calculated using 1.25% of the purchase price or the actual tax rate
ESCROW HOLDBACKS – REPAIRS
In addition to FHA’s repair escrow requirements and Flagstar’s overlays above, the following
documents and clarifications apply:
• Fully executed Escrow Holdback Agreement, Doc. #3655 required in closing package
• For additional repair escrow information, refer to Escrow Holdback Procedures, Doc. #4634
• For new construction properties, items such as pools, decks, sod, etc. may remain incomplete
due to weather-related situations. Escrow holdback will be amount indicated on building
agreement, contract and/or vendor agreement.
For purchases of bank-owned properties, approval of repair escrow is granted on a case-bycase basis for completion of exterior repairs that cannot be completed due to inclement
weather.
HIGHER PRICED MORTGAGE LOANS (HPML)
Loans having an APR that is ≥ 1.5% above the APOR on the date the loan locked are classified as an
HPML. All HPMLs must meet the following requirements:
FHA Underwriting Guidelines
VI. Underwriting Guidelines 15 of 18 04/16//2021
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• Pre-payment penalties are not permitted
• The interest rate cannot adjust within the first seven years of the loan – FHA ARMs classified as
HPMLs are ineligible
• Escrows must be collected for the life of the loan
• Streamline refinance transactions are eligible, provided they are credit qualified
• For FHA transactions that are considered Safe Harbor QM that are HPML for purposes of Section
35, please reference Higher Priced Mortgage Loans (HPML), Doc. #4813. Loans that have a QM
status of Rebuttable Presumption are required to have a Residual Income Worksheet, this form is
not applicable to delegated loans.
INDUSTRY LINKS/FLAGSTAR LINKS/CONTACTS
• FHA Mortgage Limits Search Engine
• FHA Approved Condos Search Engine
• HUD Training Archives
• HUD Training and Events Page
• HUD’s Lender Page
• FHA Connection
• Government Services Administration (GSA) Excluded Parties Search Engine
• Limited Denials of Participation (LDP) Excluded Parties Search Engine
• Flagstar Bank Wholesale Website
• Flagstar Bank Government Underwriting Help Desk
o E-Mail: GovernmentUW@Flagstar.com
o Phone: 866-945-9872, Option 1 for Underwriting, then Option 2 for Government
Underwriting
• HUD’s Listserv email distribution that announces FHA changes and available training:
o Email answers@HUD.gov
INSURANCE
HAZARD INSURANCE
Hazard Insurance Requirements, Doc. #4602
FLOOD INSURANCE
• Flood Insurance – Broker & Non-Delegated Correspondent, Doc. #4603
• Eligible Flood Provider Companies, – FEMA Flood Insurance Company List
• Flood insurance policy must be a NFIP policy and must cover all improvements, including
detached structures. Flood insurance provided by private providers is not permitted
• If the subject property is a condominium-unit, the NFIP policy must be obtained by the
homeowner’s association. Borrower purchased flood insurance is not permitted unless the
property is a site condominium. Loans must be denied if the HOA does not maintain adequate
flood insurance, regardless of FHA condominium approval status
CONDOMINIUM FIDELITY/LIABILITY INSURANCE
• Hazard Insurance Requirements, Doc. #4602
FHA Underwriting Guidelines
VI. Underwriting Guidelines 16 of 18 04/16//2021
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• Each project must have $1,000,000 business liability insurance coverage with the HOA named
as the insured
• Projects having > 20 units must show evidence of Fidelity (employee dishonesty) coverage ≥
three months HOA income with the HOA named as the insured
• Site Condominiums – Liability insurance is not required
• Must be provided prior-to-close
HO-6 POLICY
For coverage requirements, refer to Hazard Insurance Requirements, Doc. #4602
LOAN TERMS
FIXED RATE MORTGAGES
10, 15, 20, 25 and 30-year fixed rate mortgages
ARMS
3/1 and 5/1 CMT adjustable-rate mortgages
MAXIMUM LOAN AMOUNT
Maximum Loan calculations are published in the 9000 series of our Sellers Guide:
• FHA Maximum Mortgage Worksheet – Purchase, Doc. #9328
• FHA Maximum Mortgage Worksheet – Rate & Term Refinance, Doc. #9342
• FHA Maximum Mortgage Worksheet – Simple Refinance, Doc. #9346
• FHA Maximum Mortgage Worksheet – Cash-Out Refinance, Doc. #9345
• FHA Maximum Mortgage Worksheet – Streamline Refinance, Doc. #9347
NET TANGIBLE BENEFIT
NET TANGIBLE BENEFIT CALCULATION WORKSHEETS
To calculate the borrower’s net tangible benefit for Streamline refinances, use FHA Refinance Net
Tangible Benefit Worksheet, Doc. #9348.
STATE-REQUIRED NET TANGIBLE BENEFIT FORMS
FHA Refinance Net Tangible Benefit Worksheet, Doc. #9348 may not be used in lieu of any staterequired net tangible benefit forms. When a state requires a net tangible benefit form, the appropriate
form must be completed.
POWER OF ATTORNEY
• All signatures on the power of attorney must be notarized, and the power of attorney must be
reviewed by a Flagstar underwriter. All signatures must match the signatures in the file
• Unless the POA is a military Durable POA, the POA must be specific to Flagstar Bank’s loan and
indicate the property address
• POA is not allowed for single borrower transactions unless Flagstar Bank has borrower experience
and the underwriter can compare signatures from previous transaction(s)
FHA Underwriting Guidelines
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REFINANCE TRANSACTIONS
STREAMLINE REFINANCES AND CASH-OUT REFINANCE LOANS
• Refinances must meet all FHA 4000.1 occupancy requirements; and
• Must meet the following seasoning requirements when the loan being paid off is a government
loan (FHA, VA or USDA); and
• The borrower made at least six consecutive monthly payments on the loan being refinanced,
beginning with the date the payment was made for the first payment due date; and
• The first payment due date of the refinance loan occurs no earlier than 210 days after the first
payment due date of the initial loan.
SHORT PAYOFF ON A RATE AND TERM REFINANCE
A specific written principal reduction (short payoff) agreement between the existing lender and borrower
is required. The agreement must reference the borrower and the loan being paid off.
SOCIAL SECURITY AND DISABILITY BENEFITS
When the Notice of Award or equivalent document does not have a defined expiration, the Mortgagee
must not inquire or request additional documentation for continuance of the nature of the disability or the
medical conditions. If any disability income from (Social Security Administration (SSA), Department of
Veterans Affairs (VA), or a private disability insurance provider) is due to expire within three years from the
date of mortgage application, that income cannot be used as Effective Income. Refer to HUD Single
Family Handbook 4000.1 for complete details.
TITLE
The title commitment must be dated within 90 days of closing. If greater than 90 days, a gap letter will be
required, which will allow the title to be extended an additional 90 days
ENERGY LOAN TAX ASSESSMENT PROGRAM (ELTAP) LIENS
Not permitted
MINERAL RIGHTS – EXCEPTIONS TO TITLE
Exceptions to title for Mineral Rights are acceptable as long as the title company states in writing that
there are no active mineral rights on the property at the time of loan closing
DEED RESTRICTIONS
• In addition to any deed restriction that does not meet FHA’s requirements, deed restrictions with
the following characteristics are ineligible:
o Single-family use restrictions when the property is a two- to four-family property
o Deed restriction creates or provides for a lien that would be prior to the lien of the home
mortgage or provides for the elimination of the home mortgage lien
• The terms and provisions of the restrictive agreements or restrictive covenants must be
commonly acceptable to the private institutional mortgage investors in the area where the
mortgaged premises are located
• Title company must provide an endorsement to the title policy that affirmatively insures that no
violation of any such restrictive agreement or restrictive covenant exists and that any future
violation shall not result in forfeiture or reversion of title is required
FHA Underwriting Guidelines
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UNEXPIRED RIGHTS OF REDEMPTION
• All States Except Alabama:
o Unless the property is located in the State of Alabama, Flagstar will not approve and/or
purchase any loan having an unexpired right of redemption unless the purchase
agreement, title and appraisal all show the same seller who is the original mortgagor
Title may show lis pendens notices from the bank or mortgagee
Purchase contract may indicate a short sale
• Alabama Only:
o Purchase agreement, title and appraisal will be in the name of the lender and not the
original mortgagor.
o Title commitment will show one or both of the following acceptable recorded deeds:
Foreclosure from John Doe (original mortgagor) to Anybank (foreclosing lender)
followed by the date on the deed and the recording date
When the foreclosing lender deeds the property to HUD, Fannie Mae, Freddie
Mac, VA or GNMA, there will be a special warranty deed from Anybank
(foreclosing lender) to one of the GSEs listed above followed by the date on the
deed and the recording date
• If the above referenced deeds are dated within the most recent 12 months, the title commitment
must contain a specific exception for the unexpired right of redemption and affirmatively insure,
without qualification, the mortgagee (Flagstar Bank) against all losses arising out of the exercise
of any outstanding right of redemption
UNDERWRITING TURN TIMES
Current underwriting turn times are posted on Flagstar’s website.
by usezloan | Aug 12, 2021 | Financial study
융자지식199- FHA UNDERWRITING GUIDELINES/OVERLAYS
FHA UNDERWRITING GUIDELINES
• HUD Handbook 4000.1 – Single Family Housing Policy Handbook
• FHA Single Family Housing Policy Handbook Glossary
OVERLAYS
4506-C
• A fully executed IRS Form 4506-C must be included in all loan files, except for FHA Non-Credit
Qualifying Streamlines
• 1040 transcripts are required for the following income types:
o Self-employed
o Rental income documented on Schedule E
o Employed by family
o Fixed income types such as disability, social security, retirement, child support, alimony,
etc., when the 1040s are obtained in lieu of alternative documentation such as award letters,
1099s, bank statements, etc.
APPRAISALS
APPRAISAL MANAGEMENT COMPANIES
If Flagstar will underwrite the loan, appraisals for the following properties must be ordered through a
Flagstar approved appraisal management company:
• Property is a doublewide manufactured home
• Borrower is an employee in the sales or production function of any mortgage originating branch
or company
ASSETS
SWEAT EQUITY
Not allowed
BUY-DOWNS
Ineligible
GIFT FUNDS/DPA
• Gift Funds – FHA transactions using gift funds the maximum DTI will follow AUS and allow gift
funds from blood relatives, employers and close friends only.
• Down Payment Assistance (DPA) with credit scores below 680: The total debt-to-income (DTI)
cannot exceed 43%.
CLOSING
CLOSING IN TRUST
• For loans closing in a trust, a Certificate of Trust (Lending), Doc. #3954 or similar form is
required. For properties located in California, the California Trust Certificate, Doc. #3951 or
similar form may be used.
FHA Underwriting Guidelines
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ESCROW CREDITS
• If the refinance transaction pays off any servicer other than Flagstar, escrow credit for the
borrower’s existing escrow balance is not permitted.
• Flagstar does not provide an interest-free advance for the payment of closing costs or
establishing escrows
CONDOMINIUMS
Flagstar does not participate in DELRAP
CREDIT REPORTS
Credit reports for Streamline refinances must be tri-merge credit reports
CREDIT SCORES
MINIMUM CREDIT SCORES
Minimum FHA Credit Scores
Loan Purpose Minimum Credit Score
Purchase 1-2 Unit/PUD/Condo/203k 1 620
Purchase 3-4 Units (excludes 203k) 660
Rate and Term Refinance and Simple Refinance 1-2 Unit/PUD/Condo/203k 1 620
Rate and Term Refinance and Simple Refinance 3-4 Units (excludes 203k) 660
Cash-Out Refinance 1-2 Unit/PUD/Condo 2 620
Cash-Out Refinance 3-4 Units 2, 3 660
Streamline Refinance 1-2 Unit/PUD/Condo 620
Streamline Refinance 3-4 Units 660
1. 203k available for approved DE Delegated Correspondents only
2. Cash-out refinances maximum DTI cannot exceed 50%
3. Cash-out refinances 3-4 Unitsmaximum cash-in-hand $300,000
DOWN PAYMENT ASSISTANCE
All community second and grant programs must be Flagstar-eligible. Refer to Gift/Grant Programs, Doc.
#5935 or Community Seconds Programs, Doc. #5932.
ESCROW HOLDBACKS – REPAIRS
• Closing documents must be prepared through Flagstar’s Web-Based Closing Documents (WBCD),
and all repair escrows for Flagstar-underwritten loans are held by Flagstar
• Two bids required for all repair escrows except HUD REO
o Escrow holdback will be 1½ times the highest bid – Bids may not exceed $6,666 for
maximum escrow holdback of $10,000. Note: Overlay does not apply to purchases of HUD
REO properties where FHA permits $10,000 in repairs and $11,000 repair escrow or
properties subject to disaster repairs where FHA limits the repair escrow to $5,000.
• One draw only permitted upon completion of repairs
FHA Underwriting Guidelines
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INSURANCE
If Flagstar underwrites the loan, HO-6 insurance coverage for condominiums and PUDs having any
coverage maintained under a master policy must be at least 20% of the property’s appraised value or
replacement cost.
MANUALLY UNDERWRITTEN TRANSACTIONS
Manual Underwrites/Refer Responses/Non-Traditional, Alternative Credit or No Credit Score loans are
currently suspended.
MAXIMUM NUMBER OF FLAGSTAR BANK LOANS
Flagstar will not approve and close or purchase loans for borrowers having more than five loans with
Flagstar Bank or having an aggregate loan amount ≥ $4,000,000. The maximum number of loans and
aggregate loan amount calculations include all of the following:
• Non-closed loans with Flagstar Bank
• Loans that are closed and currently serviced by Flagstar Bank
• Loans that were closed with Flagstar Bank but the servicing rights have been sold to another lender
within the most recent 24 months
MCC CREDITS
Permitted for Correspondent lenders who close in their own names
POWER OF ATTORNEY
• Permitted for purchase or rate and term refinance only. Cash-out transactions may not close with
any power of attorney other than a military durable power of attorney
• Powers of Attorney may not be e-signed
PRODUCTS AND PROGRAMS
INELIGIBLE PROGRAMS
• 203(K) and Limited 203(K)
• Title I Loans
• Home Equity Conversion Mortgages (Reverse Mortgages)
• Section 247 – Hawaiian Homelands
• Section 248 – Indian Reservations
• Section 184 – Indian Home Loan Guarantee Program
• Section 223(e) – Declining Neighborhoods
• FHA Negative Equity Refinance (ADP Codes 821, 822, 831, 832)
• Energy Efficient Mortgages
PROPERTY ELIGIBILITY
INELIGIBLE
• Properties with a PACE lien that will not be paid off prior to or at closing. Note: HERO loans
are issued under the PACE financing program.
• Properties located in Puerto Rico
FHA Underwriting Guidelines
VI. Underwriting Guidelines 6 of 18 04/16//2021
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• Manufactured homes unless the loan is a Flagstar to Flagstar rate and term or Streamline
refinance:
o Manufactured homes are not permitted in the following states: Colorado, Illinois,
Kentucky, Louisiana, Missouri, New York, Pennsylvania, Texas, or U.S. Virgin Islands
• 3-4 unit properties when one or more borrowers does not have credit scores
• Properties having both a stick-built and manufactured home located on the same parcel or
property unless the manufactured home is unoccupied and utilities are not hooked up
• Investment properties under the HUD REO program
PROPERTY INSPECTIONS FOR PRESIDENTIALLY DECLARED DISASTER AREAS
If the Streamline refinance pays off any servicer other than Flagstar, an inspection meeting FHA’s disaster
inspection requirement is required when the loan is cleared to close within 120 days of the disaster
inspection.
PURCHASES
PURCHASES OF SHORT SALES
• Copy of the fully executed short sale agreement is required
• Must be an arms-length transaction
RATIOS
• If the credit score is below 660 and the loan receives an AUS approve/accept the maximum DTI
ratio cannot exceed 55%.
RECENTLY LISTED PROPERTIES
Cash-out, rate and term and Simple refinance:
• Property must be off the market at least one day prior to application
REFINANCE TRANSACTIONS
CASH-OUT REFINANCE
• Maximum cash-in-hand for 1-2 Unit – Follow AUS
• Maximum cash-in-hand for 3-4 Units – $300,000
• Maximum DTI ratio for cash-out 1-4 Unit refinances cannot exceed 50%.
SECTION 8 HOUSING VOUCHERS
Due to system constraints, subsidies paid directly to the servicer are not permitted and may not be
deducted from the borrower’s proposed housing payment when calculating the ratios.
by usezloan | Aug 12, 2021 | Financial study
융자지식198- CONVENTIONAL UNDERWRITING OVERLAYS
CONVENTIONAL UNDERWRITING OVERLAYS
Bulk correspondent transactions are not subject to Flagstar’s underwriting overlays except in the following
categories: credit score, LTV/CLTV/HCLTV, purpose, property type, and AUS response.
CHINESE DRYWALL
If Chinese Drywall is currently or previously existed in the home, the property is ineligible
MANUFACTURED HOMES
• Manufactured homes are only allowed on Flagstar-to-Flagstar refinances
• Property must be a double-wide (multi-width) manufactured home
• Not permitted in CO, IL, KY, LA, MO, NY, PA, TX or VI
• Subordinate financing is not allowed
• All closing documents must be ordered through Flagstar Bank’s Web-Based Closing Documents
(WBCD)
• Manufactured homes that have been deconstructed and moved to another property are not eligible
MANUFACTURED HOME AS AN ACCESSORY UNIT ONLY
• Manufactured home accessory unit must be recorded on title as real property prior to closing or at
time of purchase.
• An appraisal is required to verify compliance with all manufactured home standards, regardless of
DU/LPA response offerings for an appraisal waiver
• The addition of or improvements to a manufactured home accessory unit are not eligible under the
Homestyle Renovation product.
MULTIPLE LOANS TO THE SAME BORROWER
Flagstar Bank will not approve or close more than 5 loans to any one borrower or an aggregate loan
amount total of $4,000,000. When determining if the limit has been met, new loan submissions for a
borrower must take into consideration any of that borrower’s outstanding loans with Flagstar Bank that are:
• Non-closed
• Closed and currently serviced by Flagstar Bank, or
• Closed but the servicing rights have been sold within the last 24 months.
If a borrower is applying for more than one loan through Flagstar Bank, all loans must be submitted to
Underwriting at the same time and each loan must reference the other loan(s).
OCCUPANCY
If the borrower applies for an owner occupied transaction after closing on a previous owner occupied
transaction with Flagstar on a different property in the last 12 months, the new transaction will be ineligible.
This guideline will not apply if the previous property has been sold or refinanced as a non-owner occupied
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residence. For owner occupied transactions, the borrower warrants he or she will occupy the property for at
least 12 months.
POWER OF ATTORNEY
• Purchase or rate/term refinance transaction only.
• Not allowed on cash-out transactions. Freddie Mac allows the use of a POA Fannie Mae does not.
However, no exceptions regardless of targeted investor.
• Not allowed on investment transactions.
TITLE COMMITMENT EFFECTIVE DATE
Generally, title commitments have a 90 day effective date, however a title commitment cannot exceed 120
days. If the title commitment exceeds 120 days, the title insurer is required to provide a gap letter (good for
an additional 60 days) or an updated/new title commitment. Under no circumstances can a title
commitment with a gap letter exceed 180 days.
by usezloan | Aug 12, 2021 | Financial study
융자지식197- REPAIR ESCROWS FOR POSTPONED OR INCOMPLETE IMPROVEMENTS
REPAIR ESCROWS FOR POSTPONED OR INCOMPLETE IMPROVEMENTS
New construction and existing properties with repair conditions, which do not impact the ability to obtain an
occupancy permit (if applicable) may be eligible for a repair escrow if the following requirements are met:
Requirements for Postponed or Incomplete Improvements
Requirement Fannie Mae with Approve Freddie Mac with Accept
Loan Purpose Purchase Transactions
Occupancy • All occupancy types are acceptable
• LTV/CLTV/HCLTV based on product limitations
Property Type Manufactured Homes are not eligible
Mortgage
Insurance
MI is available through
• Arch
• MGIC
• Genworth
• Radian
Repair Limits
Escrow costs of improvements must not
exceed 10% of the ‘as completed’ value of the
property
One-unit Owner Occupied and Second
Homes only, the costs may not exceed 15% of
the ‘as completed’ value of the of property
Escrow costs of improvements must not
exceed 10% of the value of the property
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Requirements for Postponed or Incomplete Improvements
Requirement Fannie Mae with Approve Freddie Mac with Accept
Eligible
Repairs
Improvements must not affect the livability, soundness or structural integrity of the property.
New construction:
• Valid reason for postponed completion including weather related delays in cold weather
states (e.g. cement work for driveways and sidewalks or landscaping such as sod or
sprinklers) or shortage of materials (shortage must be verified by builder); and
• Do not impact the ability to obtain an occupancy permit (if applicable)
• Fannie Mae only- swimming pools are eligible for one-unit owner occupied and second
homes
Existing construction:
• Minor exterior repairs with weather related delays in cold weather states (e.g. siding
repairs); and/or
• Minor interior repairs such as carpet, minor plumbing leaks, cracked window glass, that
are typically due to normal wear and tear; and
Interior repairs are not eligible unless subject is an REO property.
Ineligible
Repairs
Repairs affecting soundness and safety are ineligible, including but not limited to:
• Plumbing, electrical, septic, or HVAC systems not fully functional
• Kitchen not fully functional
• Foundation cracks or settlement issues
• Water in basement
• Siding or fascia along eaves that is missing or has significant damage
• Mold of any significance
Roof Repairs or replacement including past or present leaks.
Sales Contract
Sales contract must be inclusive of all repairs
and improvements.
One-unit Owner Occupied and Second
Homes new construction only, improvements
may be contracted through a third party (e.g.
swimming pool or landscaping) however the
third party contract cost may not be
considered in the calculation of interested
party contribution limits.
Investment property with a separate sales
contract for construction of the pool by a third
party, refer to Fannie Mae HomeStyle
Renovation, Doc. #5719.
Sales contract must be inclusive of all repairs
and improvements.
Escrow Funds
Determination
Equal to 120% of the repair cost as determined by the following:
• Two bids obtained. The higher of the two bids estimates will be used.
• Fully executed contract for improvements.
For new construction, if the builder offers a guaranteed-fixed price contract for completion of
improvements, the funds held only need to equal the amount of the contract price.
Note: Funds are an overage above the loan amount and does not factor into the max loan or
LTV
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Requirements for Postponed or Incomplete Improvements
Requirement Fannie Mae with Approve Freddie Mac with Accept
Escrow
Account
All repair escrows are to be held by Flagstar Bank, No exceptions.
• For seller funded repairs, any funds remaining after the repairs must be applied to the
principal balance.
• Funds contributed from borrower’s own funds may be returned to the borrower if any
remain after completion of repairs.
Completion of
Repairs All repairs and improvements must be completed with 180 days of the Note date.
Appraisal
The initial appraisal must be made subject to the completed improvements and repairs. All
contracts and addendums must be provided to the appraiser.
A final inspection by the appraiser, with photos, to confirm repairs have been completed will be
required after closing
Underwriting
Process
All repair escrows require underwriting manager approval
The following must be completed:
• Full amount of escrow holdback to be added to fee screen as Misc. Fee line 1319
(escrow holdback)
• The following at close conditions will apply:
o Borrower to sign the Flagstar Escrow Holdback Agreement, Doc. #3655. A
repair escrow to be established for $_____________ for the following
repairs:__________________.
o Final inspection by the appraiser, with photos, to confirm completion of the
following repairs: ___________________. Repairs to be completed within 180
days of closing date. For repairs involving mechanical work such as electrical,
plumbing or heating, proof of permit required prior to escrow disbursement.
Waiver of
Escrow
Account
For one-unit owner occupied and second
homes, an Escrow Account may be waived
with the following requirements being met:
• The improvements are related to
inclement weather or shortage of
building materials, or lack of qualified
labor: and
• The cost does not exceed the lesser
of $6,000 or 2% of the ‘as completed’
appraised value.
If the postponed improvements are related to
a lack of qualified labor, the following must be
documented:
• A copy of the contract signed by
borrower and contractor which shows
the date the remaining work will begin
or the anticipated date of completion,
or
• A letter from the contract indicating
they are not available to begin the
remaining work until a specified date.
Not applicable
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Requirements for Postponed or Incomplete Improvements
Requirement Fannie Mae with Approve Freddie Mac with Accept
Special
Feature Code SFC 263
Annotation of “Incomplete Improvements with
Escrow Account” must be included on the
Transmittal
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