Due to the under-performance of loans with scores between 620-639, we have concluded that additional underwriting overlays are necessary.  Effective for all new submissions beginning Monday, February 13, the following restrictions will apply to all government loans (FHA, VA, USDA) with low middle credit scores between 620-639:

(1) DU Approve/Eligible only (no manual underwriting).

(2) Housing history must be 0x30 last 12 months.

(3) Maximum LTV as follows:

Transaction Type With documented housing history* Without documented housing history
Purchase max 90%
Rate/Term Refi max 90%
Cash-out Refi max 75%

*Documented housing history is defined as canceled rent checks, money orders, or institutional VOR if the borrower is renting; mortgage rated on credit report or canceled mortgage checks if the borrower currently owns.  A refinance of a private mortgage must have canceled checks payable to the Note holder.

(4) Two months PITI reserves if the transaction is a purchase with an LTV greater than 90%.

(5) No gifts or grants of any kind if the transaction is a purchase with an LTV greater than 90%.  This includes PITI reserves.

(6) Payment shock not to exceed 50%.  Rent checks or a VOR (if the LTV is 90% or less) must be provided.

(7) Max DTI of 45%.

(8) FHA Streamlines and VA IRRRLs are not eligible.

It should be noted that in almost all cases, GUS (USDA AUS) will not approve loans below  640, so for all intents and purposes the minimum credit score for USDA is 640.

If you have any questions, please contact your AE.