by usezloan | Aug 12, 2021 | Financial study
융자지식176- PRIVATE MORTGAGE INSURANCE
PRIVATE MORTGAGE INSURANCE
All private mortgage insurance should be ordered in Flagstar Bank’s name if table-funded. MI underwriting
services are available only through Arch, MGIC, Radian, and Genworth. Delegated customers should refer
to the current welcome package located on our TPO website for terms and conditions for loans with
mortgage insurance.
It is the responsibility of the loan originator to properly disclose all fees and charges to all applicants and to
ultimately ensure that the lowest premium insurance is being offered. Flagstar Bank is not responsible for
ensuring that the borrower is disclosed and that the loan closes with the correct MI coverage and
premiums. If a loan closes with insufficient MI coverage, regardless if Flagstar Bank ordered the certificate,
the originating broker or correspondent will be responsible for purchasing additional MI coverage to satisfy
the investor’s coverage requirement.
Private MI is required for all loans in excess of 80% LTV. The LTV and CLTV will be determined by the
lesser of the appraised value or sales price. Refer to the New York Properties section for a deviation to this
guideline regarding certain loans originated in New York.
Anytime a loan has an increase in the interest rate, the MI Company must approve the increase prior to
closing and the file returned to the underwriter to be reviewed. MI must be disclosed on the Loan Estimate,
First Payment Letter and Closing Disclosure.
STANDARD MORTGAGE INSURANCE
Refer to Flagstar Bank product descriptions for the standard required coverage levels for mortgage
insurance for each individual product.
MONTHLY MORTGAGE INSURANCE
MI companies offer a monthly MI program. This program offers the same coverage as yearly premiums,
but is billed monthly instead of prepaid annually. Flagstar Bank now orders all MI a Zero Initial Premium
(ZIP/ZOMP), unless otherwise requested. This allows the borrower to pay zero up-front MI at the time
of closing. The MI must still be disclosed on both the updated LE, disclosing new loan terms, such as
new rate and/or MI premiums, and First Payment Letter.
FINANCED SINGLE PREMIUM MORTGAGE INSURANCE
MI guidelines apply to the LTV; MI pricing is based on the base loan amount. Program eligibility and
mortgage pricing are determined based on the gross loan amount, the TLTV including Single Financed
Mortgage Insurance (SFMI). Refer to Single Financed MI Matrix, Doc. #5010 for additional TLTV
parameters.
• The level of required MI coverage may be based on the LTV of the mortgage before the
financed MI premium is added.
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• The mortgage amount after adding the financed MI premium cannot exceed the maximum
mortgage amount limits set forth in the Maximum Mortgage Amounts section.
• The mortgage insurance policy must include an endorsement, generally referred to as the
“financed mortgage insurance premium endorsement.”
• The initial mortgage premium or the one-time single premium may be paid, not financed, by the
lender, the borrower’s employer, or the property seller. If the lender or the seller pays the
mortgage insurance, the contribution must be included in the calculation of the total value of the
financing concessions limits.
Radian
For Single Premium Mortgage Insurance, loans with a DTI that exceeds 45% will require a
minimum credit score of 700 and is limited to a 95% LTV.
Fannie Mae Single Financed MI Requirements
• The coverage has been obtained based on the LTV ratio after any IPC adjustments, if
required, have been made.
Freddie Mac Single Financed MI Requirements
• The mortgage insurance premium must be paid with a single premium payment.
LENDER PAID MORTGAGE INSURANCE (LPMI)
Refer to product descriptions for details
• MI Certificate must be ordered at the time interest rate is locked to insure correct pricing
• If loan is locked prior to obtaining the LPMI certificate, loan may be subject to re-pricing
NEW YORK PROPERTIES
The handling of MI coverage for purchase transactions with a property address in the state of New York
are handled differently than the rest of the country. The rule for loans with a property address in the
state of New York is as follows:
Policy for Determining If Mortgage Insurance is Required
Property Type Loan Purpose Policy
SFR, 2 to 4-Unit,
Condo and PUD
Purchase and all
refinance transactions
The appraised value is used to determine if mortgage
insurance is required.
Co-op Purchase The sales price is used to determine if mortgage insurance
is required.
Co-op Refinance The appraised value is used to determine if mortgage
insurance is required.
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Policy for Determining the Level of Mortgage Insurance Coverage
Property Type Policy
LTV ratio based on the lower of the sales price or
appraised value (standard LTV ratio calculation)
for all property types
Irrespective of the use of appraised value or sales price for
determining whether mortgage insurance is required, the
standard LTV ratio calculation must be used to determine
the level of mortgage insurance coverage that is required.
REDUCED AND LOW-COST MORTGAGE INSURANCE
Not available.
INELIGIBLE TRANSACTIONS
• Any LTV above 97%
• Split Mortgage Insurance
• Loans with potential negative amortization
• Interest-only loans
• Manufactured homes
• Properties in the Virgin Islands
• Refinances with reduced payoffs (short refinance/payoff)
• Borrower(s) using an ITIN
Always check the MI Company website for details and restrictions.
INCOME AND EMPLOYMENT
Employment and income are essential for loan repayment. Qualifying income should be stable, predictable,
and likely to continue. The applicant must demonstrate the financial wherewithal to repay the proposed loan
transaction as well as other obligations.
Verification of income and employment will depend upon product requirements, DU/LPA messaging and
current Flagstar Bank policy (i.e. when a 4506-C is required, what type of verbal verification must be
performed). The income information must be input correctly not only in terms of amount, but categorically, e.g.
commission income in appropriate section, borrower indicated as self-employed, etc.
Loans underwritten in conjunction with LPA or DU, you must indicate to the automated underwriting system the
non-occupancy of the co-borrower. If correctly identified with a non-occupant co-borrower, LPA and DU will
determine the acceptability of housing and debt ratios. The maximum LTV/CLTV/HCLTV for loans with a nonoccupant co-borrower underwritten with LPA or DU is 95% if an Accept or Approve response is received.
by usezloan | Aug 12, 2021 | Financial study
융자지식175- SUBORDINATE FINANCING
SUBORDINATE FINANCING
Generally, we can approve first mortgages that are subject to first mortgage subordinate financing held by
another investor as long as the subordinate lien is recorded and will be clearly subordinate to our mortgage
lien. The loan file must disclose subordinate financing repayment terms to the underwriter and the
appraiser. Any subordinate lien(s) secured by the subject, regardless of the obligated party, must be
considered when calculating the CLTV/HCLTV.
PURCHASE TRANSACTIONS
For purchase transactions, a copy of the approval of the subordinate financing is required to confirm
eligible terms prior to closing. A copy of the note and mortgage/deed of trust will be required at time of
closing.
REFINANCE TRANSACTIONS
For refinance transactions, a copy of the current note and mortgage/deed of trust must be provided. A
recorded subordination agreement is required for all loans closing with subordinated financing.
ACCEPTABLE SUBORDINATE FINANCING TYPES
• Variable payment mortgages that comply with the following terms:
o With the exception of HELOCs, when the repayment terms provide for a variable interest
rate, the monthly payment must remain constant for each 12-month period over the term
of the subordinate lien mortgage. For HELOCs, the monthly payment does not have to
remain constant.
o The monthly payments for all subordinate liens must cover at least the interest due so
that negative amortization does not occur.
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o If the subordinate financing is from the borrower’s employer, financing may be either an
unsecured loan or a mortgage and does not have to require regular payments of either
principal and interest or interest-only.
• Mortgages with regular payments that cover at least the interest due so that negative
amortization does not occur.
• Mortgage terms that require interest at a market rate. If financing provided by the property seller
is more than 2% below current standard rates for second mortgages, the subordinate financing
must be considered a sales concession and the subordinate financing amount must be
deducted from the sales price.
• Refer to product guidelines for the Community Second Program, Doc. #5932, and Gift/Grant
Program, Doc. #5935.
ELIGIBLE VARIABLE PAYMENT TERMS
Variable payments for subordinate financing are eligible if the following provisions are met:
• With the exception of HELOCs, when the repayment terms provide for a variable interest rate,
the monthly payment must remain constant for each 12-month period over the term of the
subordinate lien mortgage. For HELOCs, the monthly payment does not have to remain
constant.
• The monthly payments for all subordinate liens must cover at least the interest due so that
negative amortization does not occur, with the exception of employer subordinate financing that
has deferred payments.
ELIGIBLE REPAYMENT TERMS FOR EMPLOYER SUBORDINATE FINANCING
If the subordinate financing is from the borrower’s employer, it does not have to require regular
payments of either principal and interest or interest-only. Employer subordinate financing may be
structured in any of the following ways:
• Fully amortizing level monthly payments
• Deferred payments for some period before changing to fully amortizing level payments
• Deferred payments over the entire term
• Forgiveness of the debt over time
The financing terms may provide for the employer to require full repayment of the debt if the borrower’s
employment is terminated, either voluntarily or involuntarily, before the maturity date of the subordinate
financing.
UNACCEPTABLE SUBORDINATE FINANCING
• Subordinate financing with wrap-around terms that combine the indebtedness of the first
mortgage with that of the subordinate mortgage.
• Mortgages with negative amortization with the exception of employer subordinate financing that
has deferred payments.
• Subordinate financing that does not fully amortize under a level monthly payment plan where
the maturity or balloon payment date is less than five years after the note date of the new first
mortgage, with the exception of employer subordinate financing that has deferred payments.
Subordinate loans with less than five years remaining will be acceptable if the balance owing on
subordinate lien is less than 20% of the balance owed on the 1st mortgage or if the borrower
has sufficient reserves to pay off subordinate financing.
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• Community Second liens cannot be subordinated on cash-out transactions for conventional
loans.
• ELTAP lien
• PACE liens, except for properties in CA, where the PACE obligation will subordinate
• Equity Sharing liens that are not structured as an eligible Community Second program
MAXIMUM TOTAL LOAN-TO-VALUE RATIO
• The TLTV ratio is determined by combining the unpaid principal balances of the first mortgage
and all subordinate mortgages and dividing that sum by the property’s value, which is the lower
of sales price or appraised value.
• HELOC: For mortgages that are subject to subordinate financing under a home equity line of
credit, the HTLTV is obtained by dividing the sum of the first lien mortgage amount and the total
HELOC credit line limit and any other secondary financing, by the lesser of the purchase price
or appraised value.
o If the credit line is being reduced to qualify, documentation must be provided prior to
closing.
SMALL BUSINESS ADMINISTRATION LOANS (SBA)
Fannie Mae
Small business administration loans secured by the subject property must be treated as
subordinate financing and be included in the calculation of the CLTV and HCLTV ratios. The
monthly payment of the subordinate lien must also be included in the borrower’s DTI ratio
calculation unless the requirements of business debt in the borrower’s name can be met.
Freddie Mac
The SBA must be included in the TLTV and borrower must qualify with the payment.
DEFINING REFINANCE TRANSACTIONS BASED ON SUBORDINATE LIEN PAYOFF
The table below provides the underwriting considerations related to subordinate financing under
refinance transactions.
Underwriting Considerations
Refinance transaction includes payoff
of the first lien and
Then lenders must underwrite
the transaction as a Comments
The payoff of a purchase money second
with no cash-out Limited cash-out refinance N/A
The payoff of a non-purchase money
second, regardless of whether additional
cash-out is taken
Cash-out refinance N/A
The subordinate financing is being left in
place, regardless of whether the
subordinate financing was used to
purchase the property and the borrower is
not taking cash-out except to the extent
permitted for a limited cash-out refinance
transaction
Limited cash-out refinance
The subordinate financing
must be factored into the
comprehensive risk
assessment based on the
CLTV, HCLTV and total debtto-income ratio.
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Underwriting Considerations
Refinance transaction includes payoff
of the first lien and
Then lenders must underwrite
the transaction as a Comments
The subordinate financing is being left in
place, regardless of whether the
subordinate financing was used to
purchase the property and the borrower is
taking cash-out
Cash-out refinance
The subordinate lien must be
re-subordinated to the new
f
by usezloan | Aug 12, 2021 | Financial study
융자지식174- CONSTRUCTION-TO-PERMANENT FINANCING – FANNIE MAE
CONSTRUCTION-TO-PERMANENT FINANCING – FANNIE MAE
Construction-to-permanent financing involves the granting of a long-term mortgage to a borrower for the
purpose of replacing interim construction financing, a short-term loan for the actual construction of the
property (may or may not include the purchase of the lot), which ordinarily matures upon completion of the
subject property. Under two-closing construction-to-permanent mortgages, the construction financing may
be provided from a different lender than the one providing the long-term permanent mortgage. The
construction-to-permanent loan must be underwritten based on the terms of the permanent mortgage. The
following requirements must be met:
• The borrower must hold title to the lot and paying off interim construction financing, though may
include the pay-off of additional mechanic liens used to complete the construction of the property.
• The loan file must document the appraiser’s certificate of completion and a photograph of the
completed property. A clear certificate of occupancy is required, unless the appraisal is completed
‘as is’ or there is validation that the city/county does not issue a C of O.
• The loan is only eligible through Fannie Mae and must be interfaced with a loan purpose of
Construction-to-Permanent to Desktop Underwriter.
• When the borrower is purchasing a completed property from a builder, the transactions must be
treated as a purchase and do not fall under these guidelines.
• Cash-out refinances are not eligible.
• New construction properties are not eligible for an Appraisal Waiver.
• Detached (Site), Desktop Underwriter will return an Approve/Ineligible, with the reason for
ineligibility being the detached condominium as the property type. If the Approve/Ineligible response
incudes any other reasons the loan is not eligible. The loan must be delivered with Special Feature
Code 588.
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MAXIMUM MORTGAGE AMOUNTS
2021 FANNIE MAE/FREDDIE MAC CONVENTIONAL LOAN LIMITS
General Loan Limits
Units Contiguous States, District of Columbia and
Puerto Rico Alaska, Guam, Hawaii and US Virgin Islands
One $548,250 $822,375
Two $702,000 $1,053,000
Three $848,500 $1,272,750
Four $1,054,500 $1,581,750
The high-cost area loan limits are established for each county (or equivalent) and published on the
Fannie Mae and Freddie Mac websites along with the FHFA website. The maximum limits for 2021 are:
High-Cost Area Loan Limits1
Units Contiguous States, District of Columbia and
Puerto Rico Alaska, Guam, Hawaii and US Virgin Islands
One $822,375
Not Applicable
Two $1,053,000
Three $1,272,750
Four $1,581,750
1 A number of states (including Alaska and Hawaii), Guam, Puerto Rico, and the U.S. Virgin Islands do not have any high-cost areas in 2021. Flagstar does not
currently lend in Puerto Rico or Guam.
by usezloan | Aug 12, 2021 | Financial study
융자지식173- REFINANCE
REFINANCE
RATE-AND-TERM (LIMITED CASH-OUT) REFINANCES
A limited cash-out refinance transaction enables a borrower to pay off his or her existing mortgage by
obtaining a new first mortgage that is secured by the same property. A limited cash-out refinance will
include only those loans that involve:
• The payoff of the outstanding principal balance of an existing first mortgage
• The payoff of the outstanding principal balance of an existing subordinate mortgage that was
used in whole to acquire the subject property
o Freddie Mac only- A pay-down of the subordinate lien used to acquire the subject
property is acceptable under a limited cash-out as long as the borrower qualifies with the
remaining balance and the lien is subordinated.
• The payoff of non-delinquent real estate taxes and insurance.
• Fannie Mae – The financing of closing costs, including prepaid expenses, if an escrow account
is being established and cash back to the borrower in an amount no more than the lesser of 2%
of the balance of the new refinance or $2,000, except Texas.
• Freddie Mac – The financing of closing costs, including prepaid expenses, if an escrow account
is being established and cash back to the borrower in an amount no more than the greater of
1% of the balance of the new refinance or $2,000, except Texas.
• A short-term refinance mortgage loan that combines a first mortgage and a non-purchase
money subordinate mortgage into a new first mortgage is considered a cash-out transaction.
Any refinance of that loan within six months will also be considered a cash-out transaction.
• Properties currently listed for sale must be taken off the market and documentation to support
the property is no longer listed must be provided prior to loan being in place in a Final Clear to
Close status for loans underwritten by Flagstar and prior to note date for Delegated
Correspondent.
• Transactions that pay off builder financing, refinancing a property from the builder’s company to
the builder’s personal name, are not eligible.
REFINANCES TO BUY OUT AN OWNER’S INTEREST
Fannie Mae
A transaction that requires one owner to buy out the interest of another owner (for example, as a
result of a divorce settlement or dissolution of a domestic partnership) is considered a limited cashout refinance if the secured property was jointly owned for at least 12 months preceding the
disbursement date of the new mortgage loan.
All parties must sign a written agreement that states the terms of the property transfer and the
proposed disposition of the proceeds from the refinance transaction. Except in the case of recent
inheritance of the subject property, documentation must be provided to indicate that the security
property was jointly owned by all parties for at least 12 months preceding the disbursement date of
the new mortgage loan.
Borrowers who acquire sole ownership of the property may not receive any of the proceeds from
the refinancing. The party buying out the other party’s interest must be able to qualify for the
mortgage pursuant to Fannie Mae’s underwriting guidelines.
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PROPERTY ASSESSED CLEAN ENERGY LOANS (PACE)
When paying off a Property Assessed Clean Energy (PACE) loan or other debt, secured or unsecured,
that was used solely for energy improvements, the transaction may be treated as a rate and term
refinancing if the following has been met.
• For a PACE loan originated prior to July 6, 2010, there is no limit on how much of the limited
cash-out refinance loan amount may be used to pay off the PACE loan; or
• For a PACE loan originated on or after July 6, 2010, or other debt used for energy
improvements, the payoff amount included in the limited cash-out refinance is limited to 15% of
the appraised value of the property; and
• All other rate and term guidelines have been met.
CASH-OUT REFINANCES
A cash-out refinance transaction enables a borrower to pay off his or her existing mortgage by
obtaining a new first mortgage that is secured by the same property, or enables the property owner to
obtain a mortgage on a property that does not already have a mortgage lien against it. The borrower is
able to take out much of the equity he or she has in the property and to use the proceeds for any
purpose subject to applicable LTV restrictions. The mortgage amount for cash-out refinance
transactions may include the unpaid principal balance of the existing first mortgage, closing costs,
points, the amount required to satisfy any outstanding subordinate mortgage liens of any age and
additional cash that the borrower may use for any purpose.
• Fannie Mae and Freddie Mac consider any transaction paying off a junior lien not acquired in
whole for the initial purchase transaction to be a cash-out refinance.
• All transactions that involve the payoff of a blanket mortgage (multiple properties secured under
one lien) will be treated as a cash-out refinance loan and the entirety of the blanket mortgage
must be paid in full.
• A property must have been purchased, or acquired, by the borrower at least six months prior to
the disbursement date of the new mortgage loan except for the following:
o There is no waiting period if the lender documents that the borrower acquired the
property through an inheritance or was legally awarded the property, e.g. divorce,
separation, or dissolution of a domestic partnership.
o The delayed financing requirements are met.
o Fannie Mae – If the property was owned prior to closing by a limited liability corporation
(LLC) that is majority-owned or controlled by the borrower(s), the time it was held by the
LLC may be counted towards meeting the borrower’s six month ownership requirement.
In order to close the refinance transaction, ownership must be transferred out of the LLC
and into the name of the individual borrower(s).
• Properties that were listed for sale must have been taken off the market and documentation to
support the property is no longer listed must be provided prior to loan being in place in a Final
Clear to Close status for loans underwritten by Flagstar and prior to note date for Delegated
Correspondent.
STUDENT LOAN CASH-OUT REFINANCES – FANNIE MAE
The student loan cash-out refinance feature allows for the payoff of student loan debt through the
refinance transaction with a waiver of the cash-out refinance LLPA if all of the following requirements
are met:
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• The loan must be underwritten in DU. DU cannot specifically identify these transactions, but will
issue a message when it appears that only subject property liens and student loans are marked
paid by closing. The message will remind underwriters about certain requirements below;
however, the underwriter must confirm the loan meets all of the requirements outside of DU.
• The standard cash-out refinance LTV, CLTV, and HCLTV ratios apply, refer to applicable
product description.
• At least one student loan must be paid off with proceeds from the subject transaction with the
following criteria:
o Proceeds must be paid directly to the student loan servicer at closing;
o At least one borrower must be obligated on the student loan(s) being paid off, and
o The student loan must be paid in full – partial payments are not permitted.
• The transaction may also be used to pay off one of the following:
o An existing first mortgage loan (including an existing HELOC in first-lien position); or
o A single-closing construction-to-permanent loan to pay for construction costs to build the
home, which may include paying off an existing lot lien.
• Only subordinate liens used to purchase the property may be paid off and included in the new
mortgage. Exceptions are allowed for paying off a PACE loan or other debt (secured or
unsecured) that was used solely for energy improvements.
• The transaction may be used to finance the payment of closing costs, points, and prepaid items.
With the exception of real estate taxes that are more than 60 days delinquent, the borrower can
include real estate taxes in the new loan amount as long as an escrow account is established,
subject to applicable law or regulation.
• The borrower may receive cash back in an amount that is not more than the lesser of 2% of the
new refinance loan amount or $2,000.
• Unless otherwise stated, all other standard cash-out refinance requirements apply.
• Loans must be delivered with Special Feature Code (SFC) 003 and SFC 841.
RESTRUCTURE MORTGAGE LOANS
The payoff of a restructured mortgage is eligible for refinance without additional documentation.
DELAYED FINANCING
Borrowers who purchased the subject property within the past six months, measured from the date on
which the property was purchased to the disbursement date of the new mortgage loan, are eligible for a
cash-out refinance if all of the following requirements are met:
Delayed Financing Requirements for Eligibility
Requirement Fannie Mae Freddie Mac
The new loan amount may be not more than the actual
documented amount of the borrower’s initial investment in
purchasing the property, plus the financing of closing costs,
prepaids, and points, less any gift funds used to purchase the
property.
Funds received as a gift used to purchase the subject may not
be reimbursed with the proceeds of the new mortgage loan
√ √
The purchase was an arms-length transaction √ √
The original purchase price is documented with a settlement
statement, which confirms that no mortgage financing was used
to obtain the subject property
√ √
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The preliminary title search must not reflect any existing liens on
the subject property √ √
If the source of funds used to acquire the property was an
unsecured loan or a loan secured by an asset other than the
subject property (e.g. Heloc on another property) the Closing
Disclosure for the refinance transaction must reflect that all
cash-out proceeds be used to pay off or pay down, as
applicable, the loan used to purchase the subject. Any payments
on the balance remaining from the original loan must be
included in the debt-to-income ratio.
√ √
The source of the funds for the purchase transaction must be
documented √ √
The “as is” appraised value is used to determine the
LTV/CLTV/HCTLV √ √
All other cash-out eligibility requirements must be met and cashout pricing is applied √ √
The borrower(s) may have been initially purchased the property
as one of the following:
• A natural person
• An eligible revocable trust, when the borrower is both
the individual establishing the trust and the beneficiary
of the trust
• An LLC or partnership in which the borrower(s) have an
individual or joint ownership of 100%
√ N/A
LAND CONTRACT REFINANCES
Purchase
When the proceeds of a mortgage loan are used to pay off the outstanding balance on an
installment land contract, also known as contract or bond for deed, that was executed
(signed)within the 12 month proceeding the date of the loan application the transaction will be
treated as a purchase.
The LTV ratio for the mortgage loan must be determined by dividing the new loan amount by the
lesser of the total acquisition cost, defined as the purchase price indicated in the land contract, plus
any costs the borrower expended for rehabilitation, renovation, or energy conservation
improvements, or the appraised value of the property at the time the new mortgage loan is closed.
The expenditures included in the total acquisition cost must be fully documented by the borrower.
Rate and Term Refinance
When the proceeds of a mortgage loan are used to pay off the outstanding balance on an
installment land contract, also known as contract or bond for deed, that was executed (signed)
more than 12 months before the date of the loan application the transaction will be treated as a rate
and term refinance. 12 months seasoning must be verified with a copy of the signed land contract
and 12 months canceled checks.
The LTV ratio for the mortgage will be determined by dividing the new loan amount by the
appraised value of the property at the time the new mortgage loan is closed.
Cash-Out Refinance
Cash-out refinances are not eligible when paying off a land contract.
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CONTINUITY OF OBLIGATION
If a property being refinanced is owned free and clear, we must have satisfactory title work prior to
closing evidencing no liens.
Freddie Mac
For all refinance transactions, a continuity of obligation must exist. An acceptable continuity of
obligation, assuming that there is an outstanding lien against the property, exists when one of the
following conditions is met:
• At least one borrower on the refinance mortgage was a borrower on the mortgage being
refinanced; or
• At least one Borrower on the refinance mortgage held title to and resided in the mortgaged
Premises as a Primary Residence for the most recent 12-month period and the mortgage file
contains documentation evidencing that the borrower, either:
o Has been making timely mortgage payments, including the payments for any
secondary financing, for the most recent 12-month period
o Is a Related Person to a borrower on the mortgage being refinanced
• At least one borrower on the refinance mortgage inherited or was legally awarded the
mortgaged Premises (for example), in the case of divorce, separation or dissolution of a
domestic partnership)
• If none of the Borrowers have been on the title to the subject property for at least six months
prior to the note date of the cash-out refinance mortgage, the following requirement(s) must
be met:
o At least one borrower on the refinance mortgage inherited or was legally awarded
the subject property (for example, in the case of divorce, separation or dissolution of
a domestic partnership); or
o Must meet the delayed financing requirements
RIGHT OF RESCISSION
Refer to Compliance, Doc. #4801 for information regarding right of rescission.
REFINANCE SCENARIOS
If delinquent taxes are shown on title work, the loan must be submitted to underwriting and the loan
purchase commitment may be null and void.
For all refinance loans, Underwriting may require the payoff letter to be reviewed prior to closing. For all
refinances with a loan-to-value ratio between greater than 80%, Flagstar Bank may require two full
payments cash reserve in the bank after refinance costs. Complete the details of transaction section for
all refinances. Properties that have been refinanced within the last 12 months can be scrutinized by our
underwriter.
To help illustrate when a loan is a rate-and-term refinance and when it is a cash-out refinance, when a
junior lien is present, either new or existing, the following table presents common loan scenarios and
the appropriate agency treatment:
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Common Loan Scenarios
Scenario Fannie Mae and Freddie Mac Treatment
Paying off an existing first mortgage with a new first and second,
receiving no more than the rate and term cash back limit on the
new first mortgage.
Rate/Term Refinance
Paying off an existing first mortgage and a purchase money
second mortgage with a new first mortgage, receiving no more
than the rate and term cash back limit on the new first mortgage.
Rate/Term Refinance
Paying off an existing first mortgage and a purchase money
second with a new first and second, receiving no more than the
rate and term cash back limit on the new first mortgage.
Rate/Term Refinance
Paying off an existing first and non-purchase money second
(regardless of seasoning). Cash-out Refinance
Paying off an existing first mortgage with a new first and second,
receiving more than the rate and term cash back limit on the new
first mortgage.
Cash-out Refinance
Paying off an existing first mortgage and a purchase money
second with a new first and second, receiving more than the rate
and term cash back limit on the new first mortgage.
Cash-out Refinance
Paying off an existing first mortgage and a purchase money
second with a new first and second receiving more than the rate
and term cash back limit on the second mortgage.
Rate/Term Refinance (1st mortgage)
Cash-out Refinance (2nd mortgage)
Paying off an existing first mortgage with a new first mortgage and
a new second mortgage, receiving less than the rate and term
cash back limit on the new first mortgage but receiving more than
the rate and term cash back limit on the new second mortgage.
Rate/Term Refinance (1st mortgage)
Cash-out Refinance (2nd mortgage)
NEW YORK CEMA
Refer to NY CEMA Procedures, Doc #4250, for refinance requirements.
TEXAS REFINANCES
All refinance loans in the State of Texas will be reviewed to determine the applicable guidelines under
which they must be originated, underwritten, and closed. The underwriter must conduct a review of the
title commitments to verify if any prior lien was a Texas Home Equity or 50(a)(6) lien.
Refinance Eligibility
Refinance loan applications must be reviewed for eligibility as follows:
• If the existing loan(s) is not a Texas Home Equity lien, the subject transaction may be
considered a rate and term transaction without applying Texas Home Equity, TX (a)(6),
requirements if the following criteria is met:
o New loan amount is less than or equal to the unpaid principal balance plus reasonable
closing costs and prepaids;
o New loan amount is also paying off a purchase money second;
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o New loan is also paying off or down an existing secured home improvement loans
(mechanic lien);
o New loan is used to satisfy a court ordered divorce equity buyout. See Exception
requirements below;
o No cash back may be received at closing
• If it is determined that any subordinate financing to be paid off with the proceeds of the loan is
not a purchase money second and also not classified as a Texas Home Equity lien, the new
loan will be treated as an agency cash-out transaction however identified as non-Texas Home
Equity cash-out refinance.
• If the title commitment shows a lien was originated as a Texas Home Equity lien, TX (a)(6) lien,
the following criteria must be followed:
o If the existing lien is being paid off from the proceeds of the new first mortgage, the loan
will be underwritten as a Texas Home Equity cash-out refinance transaction. Even if no
new cash-out is sought, the refinance is subject to the same disclosures and closing
requirements as new Texas Home Equity loans as listed below.
o If an existing Texas Home Equity or 50(a)(6) lien is being fully subordinated, (only non-
(a)(6) loan(s) being paid off), the new loan can be underwritten as a rate/term.
• A refinance Conversion of a TX 50(a)(6) into a Non-TX 50(a)(6) standard refinance must meet
the following:
o The refinanced loan is signed at least a year after the original home equity loan was
signed
o The refinanced loan cannot provide any additional money to the borrower other than to
cover the costs to do the refinancing
o The refinanced loan cannot exceed 80% of the fair market value of the house
o The borrower must be provided with the Notice Concerning Refinance of Existing Home
Equity loan to Non-Home Equity Loan Disclosure within 3 days of the application and at
least 12 or more days before the date of refinance.
Eligible Homesteads
• The subject property must be a one-unit primary residence that is the borrower’s
homestead, as that term is defined under Texas law. The subject property must be
residential and not be a farm, ranch or used for any agricultural purposes.
• Second homes and investment properties are ineligible and must have homestead
exemption removed prior to closing
• Eligible property types are attached or detached dwellings, a unit in a condominium project
or a unit in a Planned Unit Development. Eligible property types may be further restricted by
the applicable loan program guidelines.
• Homesteads located in urban areas must be no larger than 10 acres and may consist of one
or more contiguous lots, together with any improvements thereon. A homestead is
considered to be urban if the property is:
o Located within the limits of a municipality or its extraterritorial jurisdiction or a platted
subdivision
o Served by police protection, paid or volunteer
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Eligibility Criteria for all Texas 50(a)(6) Transactions
• Refinance lien, fixed-rate or intermediate term ARM with an initial fixed-rate period of not
less than 2 years, fully amortizing, level payment, conventional mortgage. Balloon
mortgages and short-term ARMs are not eligible.
• The maximum LTV/CLTV allowable is 80% (or less based on the applicable loan program
guidelines)
• Full appraisal is required on either Form 1004 or Form 1073
• All other Fannie Mae, Freddie Mac, or non-Agency guidelines must be met.
• See Texas Homestead Cash-Out Refinance product description for eligible products,
additional fee limitations and closing requirements.
Applications with New Cash-Out
Loan applications intended to refinance existing mortgage indebtedness, if any, and to withdraw
equity from the property will be underwritten as Texas Home Equity cash-out refinance
transactions. Such loans must be originated under the guidelines laid out in Section 50(a)(6), Article
XVI, of the Texas Constitution and accompanying regulations.
Exception
Fannie Mae considers a buy-out as a result of a divorce settlement to be treated as a rate-and-term
refinance and allows up to a 90% LTV as long as the borrower who will be acquiring sole ownership
of the property receives no cash-out of the proceeds from the transaction. A copy of the final
divorce decree mandating the buy-out is necessary. Freddie Mac considers such transactions a
standard cash-out refinance, non-Texas Home Equity cash-out refinance. The type of cash-out
transaction, Texas Home Equity or non-Texas Home Equity, will determine the eligible loans
programs, property types, loan-to-value ratios, and the disclosures and closing requirements that
must be observed.
Loan applications that are not determined to fall under the requirements of Section 50(a)(6) of the
Texas Constitution will follow the same eligibility standards outlined within the applicable loan
program guidelines.
Miscellaneous Provisions
• All borrowers and all owners on title and their respective spouses, regardless of whether or
not owners on title or spouses are also borrowers on the loan, must each sign a Notice
Concerning Extensions of Credit, Doc. #3640 or VMP Form 8032 (TX), as defined by
Section 50(a)(6), Article XVI, Texas Constitution) as a Prior to Close condition.
• Non-occupant co-borrowers are not allowed; all borrowers must occupy the subject property
as their primary residence.
• Power of Attorney may not be used on a Texas Home Equity loan
• Borrowers may only obtain one (1) Texas Home Equity loan in any 12-month period.
• Borrowers may only obtain one (1) Texas Home Equity loan filed against the property.
Cooling Off Period
Each Texas Home Equity/50(a)(6) loan requires a cooling off period of at least 12 days prior to
closing. The cooling off period begins from the latter of the application date or the date the last
borrower, owner or spouse signs the Notice Concerning Extensions of Credit, Doc. #3640 or VMP
Form 8032 (TX) (as defined by Section 50(a)(6), Article XVI, Texas Constitution).
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Title Insurance
At closing, each Texas Home Equity/50(a)(6) loan requires a commitment of title insurance
provided on Form T-2 and must include all standard endorsements plus the following:
• Equity Loan Mortgage Endorsement (Form T-42)
• Supplemental Coverage Equity Loan Mortgage Endorsement (Form T-42.1)
Texas Home Equity/50(a)(6) Right of Rescission
In addition to the Federal Right of Rescission for primary residence refinance transactions, Section
50(a)(6), Article XVI, of the Texas Constitution provides for an additional rescission period under
state law for Texas Home Equity/50(a)(6) loans.
The Texas 3-day right of rescission and Federal 3-day right of rescission must run after closing. The
Texas 3-day right of rescission refers to calendar days, while the Federal 3-day right of rescission
refers to business days. Therefore, compliance with the Federal rescission period satisfies the
Texas rescission period.
by usezloan | Aug 12, 2021 | Financial study
융자지식172- PURCHASE
PURCHASE
FANNIE MAE HOMEOWNERSHIP EDUCATION REQUIREMENTS
Fannie Mae requires at least one borrower complete homebuyer education for the following
transactions:
• HomeReady Program, Doc #5318, purchase transactions when all occupying borrowers are
first-time homebuyers, regardless of the LTV
• Purchase transactions with LTV/CLTV/HCLTV greater than 95% when all borrowers are firsttime homebuyers.
Definition of Homeownership Education and Counseling
• Homeownership Education- Education with an established curriculum and instructional
goals, provided in a group or classroom setting or via other formats, that covers such
homeownership topics as the home-buying process, how to maintain a home, budgeting,
and the importance of good credit.
• Housing Counseling- One-on-one assistance that addresses unique financial circumstances
and housing issues, and focuses on overcoming specific obstacles to achieve housing goals
such as repairing credit, locating cash for a down payment, recognizing predatory lending
practices, understanding fair lending or fair housing requirements, avoiding foreclosure or
resolving a financial crisis.
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All housing counseling involves the creation of a budget and a written action plan, and includes a
homeownership education component.
Meeting the Homeownership Education Requirements
At least one borrower must complete the Framework Homeownership. LLC (Framework) online
education program, or one of the below alternatives, prior to the loan closing. A copy of the
certificate of completion for homeownership education must be retained in the mortgage loan file.
See https://www.knowyouroptions.com or https://homeready.frameworkhomeownership.org.
The following exceptions provide alternatives for borrowers to meet the homeownership education
requirements using a source other than Framework:
• For borrowers where online education may not be appropriate due to disability, lack of
Internet access or other issues may indicate that a borrower is better served through other
methods such as in-person classroom education, telephone conference call, etc. can call
Framework at 855-659-2267 to be referred to a HUD approved counseling agency that can
meet their needs.
• Borrowers may receive homeownership education from a Community Second or Down
Payment Assistance Program (DPAP) provider as long as the provider is a HUD-approved
counseling agency and the first mortgage loan involves a Community Second or DPAP.
• Borrowers may also meet the homeownership education requirement by obtaining
customized one-on-one assistance from a HUD-approved nonprofit counseling agency. The
assistance must be completed before the borrower executed the sales contract, meet HUD
standards and cover the content detailed on the Certificate of Pre-purchase Housing
Counseling (Fannie Mae Form 1017), which must be signed by the borrower and the HUD
counselor and retained in the loan file.
FREDDIE MAC HOMEOWNERSHIP EDUCATION REQUIRMENTS
Freddie Mac requires at least one borrower to complete homeownership education for the following
transactions:
• HomePossible, Doc #5335, when all occupying borrowers are first-time homebuyers
• HomeOne, Doc #5339, when all borrowers are first-time homebuyers
Meeting the Homeownership Education Requirements
At least one qualifying borrower must complete homeownership education prior to the Note date. A
copy of the certificate of completion for homeownership education must be retained in the mortgage
loan file. Education must be provided by one the following:
• An approved Mortgage Insurance Company- Arch, Genworth, MGIC, or Radian
• A program that meets the standards of the National Industry Standards for Homeownership
Education and Counseling (www.homeownershipstandards.com)
• Freddie Mac education curriculum, CreditSmart Homebuyer U
(http://www.freddiemac.com/creditsmart/tutorial.html).
by usezloan | Aug 12, 2021 | Financial study
융자지식171- OCCUPANCY
OCCUPANCY
PRINCIPAL RESIDENCE
A one-to-four family property that is the borrower’s primary residence. At least one of the borrowers
must occupy the property.
A primary residence is the residential property physically occupied by an owner as the principal home
domicile. Among the criteria one should consider in evaluating whether a property is a principal home
are the following:
• It is occupied by the owner for the major portion of the year
• It is in a location relatively convenient to the owner’s principal place of employment
• It is the address of record for such activities as federal income tax reporting, voter registration,
occupational licensing, and similar functions
• It possesses the physical characteristics to accommodate the owner’s immediate dependent
family
• The borrower states an intention to occupy the property as a primary residence within 60 days
of closing
o Freddie Mac will deem the property as owner occupied if the borrower occupies the
property no later than 90 days after the Note date when a borrower is purchasing the
property under an employee relocation program.
Applications for an owner-occupied transaction after closing on a previous owner-occupied transaction
with Flagstar on a different property within the last 12 months will be ineligible. This guideline will not
apply if the previous subject property has been sold or refinanced as a non-owner-occupied residence.
For owner occupied transactions, the borrower warrants they will occupy the property for at least 12
months.
MORTGAGED PREMISES OCCUPIED BY BORROWER’S PARENT OR DISABLED CHILD
The following describes the conditions under which the subject may be considered a primary residence
even though the borrower will not be occupying the property.
In the Declarations section, the non-occupying borrower may select Yes for the question, Does the
Borrower intend to occupy the property as his/her primary residence?
Flagstar, at its discretion, may determine that a property is not a primary residence.
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Fannie Mae
Principal Residence Conditions
Borrower Types Requirements for Owner-Occupancy
Parents wanting to provide housing
for their disabled adult child
If the child is unable to work or does not have sufficient income to
qualify for a mortgage on his or her own, the parent is considered
the owner/occupant.
Children wanting to provide housing
for elderly parents
If the parent is unable to work or does not have sufficient income
to qualify for a mortgage on his or her own, the child is
considered the owner/occupant. Parents must take title to
property being purchased. Must provide 1 year Tax Return for
parents to support on fixed income and unable to qualify for
housing.
Freddie Mac
Principal Residence Conditions
Borrower(s) may provide mortgage financing for their parents
Borrower(s) may provide mortgage financing for a disabled individual when the borrower is the parent of
legal guardian
SECOND HOMES
Second homes must meet the following criteria:
• Must be located a reasonable distance away from the borrower’s principal residence
• Must be occupied by the borrower for some portion of the year
• Restricted to 1-unit dwellings
• Must be suitable for year-round occupancy
• The borrower must have exclusive control over the property
• Must not be subject to any timeshare arrangement or other shared ownership agreement
• Cannot be subject to any agreements that give a management firm control over the occupancy
of the property
• Must not be used as a rental property. When a property is classified as a second home, rental
income may not be used to qualify the borrower.
Freddie Mac
• Allow property with seasonal limitations on year-round occupancy (e.g. lack of winter
accessibility) provided the appraiser includes at least one comparable with similar seasonal
limitations to demonstrate marketability
• Property may be rented out on a short-term basis provided the following requirements are
met:
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o The borrower must keep the subject property available for personal use for more
than half of calendar year; and
o The property is not subject to rental pools or agreements that require the borrower to
rent, give a management company or entity control over occupancy of the property
or involve revenue sharing between owner and developer or another party.
Underwriting validation must be completed to confirm (e.g. property cannot be listed
on a rental property management site such as Airbnb.com, tax returns do not
indicate payments to a management company which controls occupancy)
o Rental income from the subject property may not be used
Properties occupied by a party other than the borrower will be considered an investment property.
The determination of the second home status’s acceptability may be scrutinized and Flagstar Bank, in
its discretion, may determine that a property is not a second home.
INVESTMENT PROPERTIES
A one-to-four family property that the borrower does not occupy.
While rent information may not be required by AUS when the borrower qualifies without any rental
income from the property, the monthly rent information is required when delivering the loan to Fannie
Mae and Freddie Mac. One of the following documents are required:
• Lease agreement
• Form 1007/1000
• Letter from seller, realtor, or borrower indicating the estimated market rent
• For refinance transactions, the amount from the REO section of the 1003 can be used
• The income listed on the schedule E from the borrower’s 1040’s
• Zestimate from Zillow.com. The Zestimate must be retained in the mortgage file.
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