August 8, 2014

REMN Wholesale is updating its guidelines to align with the release of Fannie Mae’s DU 9.1 updates.  Fannie Mae will be updating a number of policies and DU messaging the weekend of August 16, 2014.

DU Foreclosure Message Updates

The initial release of DU 9.1 included an enhancement to DU that allowed users to instruct DU to disregard foreclosure information on the credit report when the credit report listed both a foreclosure and a pre-foreclosure sale subject to documenting the foreclosure information was inaccurate (i.e. the property was actually subject to a deed-in-lieu or pre-foreclosure sale/short sale).

NOTE:  The ability to disregard the foreclosure is only eligible when both a foreclosure and pre-foreclosure are listed on the credit report.

DU Findings with Foreclosure AND Pre-foreclosure Identified

With the DU 9.1 update additional information pertaining to the inaccurate foreclosure information on the credit report may be added to DU as noted below:

  • Foreclosure information is inaccurate: The REMN Wholesale underwriter will add “Confirmed CR FC Incorrect” to question “C” in the Explanation field of the Fannie Mae online loan application.
  • Foreclosure was due to documented extenuating circumstances: The REMN Wholesale underwriter will add “Confirmed CR FC EC” to question “C” in the Explanation field of the Fannie Mae online loan application.

Once this information has been added the casefile is resubmitted to DU and the new DU messaging will indicate the foreclosure information was not used in the eligibility assessment completed by DU.

The following applies when instructing DU to disregard foreclosure information.

  • Foreclosure information is inaccurate:

– Document the foreclosure was completed a minimum of 7 years from the disbursement date of the new loan, or
– Document the property did not go to foreclosure (i.e. a pre-foreclosure sale or deed-in-lieu occurred prior to the foreclosure proceedings).

  • Foreclosure due to extenuating circumstances:

–  Document the extenuating circumstance. Extenuating circumstance must comply with Fannie Mae’s definition (see Extenuating Circumstances topic on page 3), and
– Document the foreclosure was completed a minimum of 3 years prior to the disbursement date of the new loan, and
– Ensure all other Fannie Mae requirements applicable to extenuating circumstances on a foreclosure are met.

NOTE:   With the DU 9.1 update the time frame is now measured from the disbursement date of the new loan (previously measured from the credit report date).

Pre-Foreclosure and Deed-in-Lieu Waiting Periods – New Requirement

Fannie Mae is revising the waiting periods for borrowers with a pre-foreclosure or deed-in-lieu with applications taken on or after August 16, 2014 as follows:

Waiting Period

Waiting period = event date to new loan disbursement date

4 years  regardless of the LTV

Waiting Period with Extenuating Circumstances*

2 years with extenuating circumstances

Applications dated prior to August 16, 2014 will continue to follow current guidelines:

Waiting Period and Requirements

Waiting period = event date to new loan disbursement date

2 years – Maximum 80% LTV or program limit,  whichever is less
4 years – Maximum 90% LTV or program limit, whichever is less
7 years – Maximum LTV per program guidelines

Waiting Period with Extenuating Circumstances*

2 years – Maximum 90% LTV or program limit, whichever is less

Extenuating Circumstances – Applies to Foreclosures/Pre-foreclosures/Deed-in-Lieu

An extenuating circumstance is defined by Fannie Mae as a non-recurring event that was beyond the borrower’s control that resulted in a sudden, significant and prolonged significant reduction in income (e.g. job loss, divorce, serious illness, etc.) or a catastrophic increase in financial obligations (e.g. large medical bills).

An extenuating circumstance must be fully documented. Copies of any paperwork substantiating the event such as divorce decree, job layoff notice, severance papers, medical bills, etc. must be provided.

Additionally copies of any documents substantiating the borrower’s inability to resolve the problems resulting from the event such as insurance claims, unemployment paperwork, listing agreements,  tax returns (covering the period of the event; before, during and immediately after) etc., must be provided.

A letter of explanation from the borrower, explaining the event and the relevance of the documentation provided is also required.

Mortgage Account Charge-off – Applications Dated on or after August 16, 2014

Mortgage accounts that are identified as a charge-off account are subject to a 4 year waiting period or 2 year waiting period with documented extenuating circumstances.  Waiting period is measured from the event date to the disbursement date of the new loan.

Mortgage Debt Discharged Through Bankruptcy

Mortgage debt discharged through a bankruptcy, even if there is a subsequent completed foreclosure action, may follow bankruptcy waiting periods instead of foreclosure waiting periods.  If documentation cannot be provided to substantiate the mortgage debt was discharged through the bankruptcy, the greater of the applicable bankruptcy or foreclosure waiting period is applied.  This updated policy applies to 9.1 casefiles submitted or resubmitted to DU on or after the weekend of August 16, 2014.

The Agency Conforming and High Balance matrices have been updated with this information and posted on the REMN Wholesale website at www.remnwholesale.com

Links

To read the Fannie Mae information in its entirety refer to:

Fannie Mae DU 9.1 Update Release Notes

Fannie Mae Announcement SEL 2014-10

If you have any questions, please contact your Account Executive.

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