FHA and Conforming Underwriting Guide Updates
Newrez LLC "Newrez" Approved Correspondent Clients: Newrez is updating our FHA and Conforming underwriting guidelines effective immediately unless otherwise noted.
In accordance with FHA Mortgagee Letter 2021-13, Newrez is updating the student loan calculation for inclusion in the DTI.
The monthly payment may be excluded the DTI where when documentation from the student loan program, creditor, or student loan servicer indicates that the loan balance has been forgiven, canceled, discharged, or otherwise paid in full.
If the payment used for the monthly obligation is less than the monthly payment reported on the credit report, obtain the following from the student loan servicer.
- Written documentation of the actual monthly payment;
- Payment status;
- Evidence of the outstanding balance; and
- Evidence of the terms of the student loan from the creditor. To calculate the monthly payment, use one of the following:
- The payment reported on the credit report; or the actual documented payment, when the payment amount is above zero; or
- 0.5% of the outstanding balance, when the monthly payment reported on the credit report is zero.
Freddie Mac 202-16
Newrez is aligning with the updates announced in Freddie Mac Bulletin 2021-16, including:
Rate and Term Refinance 30-Day Seasoning Requirement
The Note date of the loan being paid off must not be less than 30 days prior to the Note date of the rate and term refinance transaction. The loan file must contain documentation confirming the 30-days (e.g., credit report, title commitment).
This policy is effective for loans closed on or after July 5, 2021.
Cash-out Refinance Transactions
Loans where title has been held by a Limited Liability Company (LLC) or Limited Partnership (LP) are eligible for a cash-out refinance subject to the following:
- When at least one (1) borrower has held title to the subject property for a minimum of six (6) months prior to the Note date may be satisfied by the time the property was titled in the name of the LLC or LP, provided that:
- The borrower is a majority owner or had control of the LLC or LP since the date the property was acquired by the LLC or LP; and
- Title is transferred into the borrower’s name prior to the Note date.
Future Long-Term Disability
The use of future long-term disability income that will begin after the first mortgage payment due date is permitted with all of the following:
- The borrower is currently receiving short-term disability benefits that will subsequently convert to long-term benefits;
- The borrower is qualified on the lesser amount of either the long-term or short-term disability payments; and
- All documentation requirements are met.
When short term disability is converting to long-term disability, the following is required:
- Document the source, type, amount, and payment frequency of both the short-term and long-term payments; and
- Obtain verification of current receipt of the short-term disability payments and verification that the borrower will continue to receive the payments until the date to conversion to long-term disability.If the long-term disability policy has a pre-determined expiration date (e.g., certain disability policies provided by employers, private insurers), obtain a copy of the certificate of coverage, or other equivalent documentation evidencing the policy term.Extended Dates for Age of Tax Returns RequirementsIn response to the Internal Revenue Service (IRS) extending the filing deadline for individual tax returns from April 15, 2021 to May 17, 2021, we are updating our requirements for the age of tax returns as follows:
- References to the Application Received Dates of April 15, 2021 are extended to May 17, 2021.
- References to the Note Dates of May 31, 2021 are extended to June 30, 2021.
- For loans in states with IRS filing extensions beyond May 17, 2021, the Application Received Date is the IRS income tax filing due date.
- For loans in States with IRS filing extensions beyond May 17, 2021, the Note Date is the last day of the month following the month of the IRS income tax filing due date (e.g., if the IRS tax filing due date is June, the Note Date is July 31).
Freddie Mac 2021-20
Newrez is aligning with the updates announced in Freddie Mac Bulletin 2021-20, including:
Multiple Parcels Policy
The current multiple parcel policy requires that multiple parcels be adjoined. Freddie Mac will now allow an exception to this policy when the following is met:
- The parcels are divided by a road; and
- The parcel without a residence is non-buildable (such as waterfront properties where the parcel without the residence provides access to the water). The loan file must contain evidence from the local municipality that the lot is non-buildable. Evidence may not be supplied by the appraiser.
Condo Units Exempt from Review
The following condo units/projects may be exempt from review:
- 2- to 4- Unit Condo Projects
- Detached Condo Projects
- Freddie Mac owned “No Cash-out” refinance Condo Unit
While the above projects are exempt from review, as a reminder, they must not be:
- A condominium hotel or similar type of transient housing, houseboat project, timeshare project or project with segmented ownership;
- The condo project must not include manufactured homes; and
- Condo project insurance requirements still apply.
- Power of Attorney requirements have been aligned with Fannie Mae SEL-2021-02 and Freddie Mac 2021-9
- Added additional red flags when reviewing bank statement to the Fraud chapter
- Transactions do not add up to equal the ending balance.
- Borrower-provided online bank statement with no URL.