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Announcement 2019-109: Conforming, FHA and VA Overlay Removals or Modification

NewRez is reducing or changing our overlays for Conforming, FHA and VA products, effective immediately

Conforming, FHA and VA Overlay Removals or Modifications

The list below highlights most of the overlay removals but is not all inclusive. See the Product Profiles for complete guidelines.

 

Conforming Transactions

  • Credit score 620 no longer a requirement for LPA loans. Follow the LPA Feedback Certificate.
  • LPA loans are eligible for borrowers with a credit event with extenuating circumstances (bankruptcy, foreclosure, etc.)
  • Manufactured Homes may comply with Fannie Mae or Freddie Mac for the following requirements:
    • Follow DU/LPA for credit score; 660 no longer required
    • Second Homes LTV/CLTV may follow DU/LPA
    • A minimum 5% of borrower’s own funds into transaction is no longer required.
    • Structurally modified units or units that have an addition are permitted; subject to compliance with Fannie Mae and Freddie Mac guidelines. A structural engineer’s report will be required.
    • Transferred appraisals will be permitted
  • Manually underwritten loans are permitted
  • Freddie Mac transactions: The 5% reduction to LTV when subordinate financing exists is no longer required.
  • Properties listed for sale must not be listed at time of disbursement. It is no longer required to cancel the listing by the application date.
  • Short sales are permitted per Fannie Mae or Freddie Mac guidelines.
  • Self-employed borrowers: Follow DU/LPA requirements for tax return requirements.
  • Employment Verification: IRS Form 4506-T is now required to be signed at closing for the following:
    • For each borrower whose income is used to qualify
      • Borrower(s) whose income has been validated through DU validation service or AIM must sign IRS Form 4506-T at closing even if DU or LPA waives the requirement
    • For the business tax return transcript(s) when the business returns are used for qualification.

 

FHA Transactions

  • Credit score has been reduced to 580 for manually underwritten loans; follow FHA guidelines for ratios and compensating factors
  • Chapter 13 bankruptcy may follow FHA guidelines; it is no longer a requirement that the bankruptcy is discharged
  • Extenuating circumstances for reduced seasoning on bankruptcies, foreclosure, DIL or short sales are permitted per FHA guidelines
  • Removed requirements when using business assets for down payment and closing costs. FHA is silent; it is incumbent upon you to properly document the use of these funds
  • The following programs are now eligible:
    • Building on Own Land
    • Energy Efficient Mortgages
    • HUD-approved secondary residences
    • Mortgage Credit Certificates
  • Manufactured homes may comply with FHA guidelines for the following requirements:
    • Minimum 660 credit score removed; see product profiles for minimum credit score
    • Housing payment history to follow FHA guidelines
    • May be manually underwritten per FHA guidelines
    • Singlewide permitted
  • Employment verification: IRS Form 4506-T is now required to be signed at closing for the following:
    • For each borrower whose income is used to qualify
    • For the business tax return transcript(s) when the business returns are used for qualification
    • Not required for FHA Non-Credit Qualifying Refinance

 

VA Transactions

  • Minimum 580 credit score to $1,000,000; 700 credit score to $1,500,000 (excluding manufactured homes)
  • Minimum 620 credit score for IRRRLs
  • VA credit guidelines may be followed, including non-traditional credit, bankruptcies, foreclosures, extenuating circumstances, DTI, etc.
  • Employment verification: IRS Form 4506-T is now required to be signed at closing for the following:
    • For each borrower whose income is used to qualify
    • For the business tax return transcript(s) when the business returns are used for qualification
    • Not required for VA IRRRL

 

Please reference our Product Profiles page for the changes outlined in this announcement.