This announcement describes significant changes to the following:

(1) Elimination of overlays for 620-639 scores on FHA loans

(2) Acceptance of FHA loans with scores between 600-619

(3) New FHA price adjusters for loans with scores below 640

(4) Elimination of FHA “thin credit” guidelines

(5) Elimination of FHA gift donor relationship documentation requirement

(6) Acceptance of FHA property transfers less than 91 days

(7) Acceptance of gifts for purchase flipped properties for FHA loans

(8) Increase of maximum LTV for conventional condos

(9) Acceptance of conventional 2-4 unit NOO properties

(10) Increase of conventional max LTV on NOO and second homes

ELIMINATION OF UNDERWRITING OVERLAYS FOR FHA LOANS WITH 620-639 SCORES

THIS GUIDANCE HAS BEEN REPLACED BY OVERLAYS DETAILED IN ANNOUNCEMENT 12-02

Effective immediately, the existing underwriting overlays described in Announcement 11-04 are hereby eliminated for files with DU Approve/Eligible findings.  Keep in mind that although there are no longer REMN overlays, we will still analyze the borrower’s credit history when underwriting the loan; while Approve/Eligible findings allow the income ratios to exceed 31/43 with no compensating factors, they do not guarantee a credit approval by the underwriter.  This is true for all FHA loans, regardless of score.

No manual underwriting is permitted below 640.  Not applicable to high-balance loans.  This guidance affects loans already in the REMN pipeline.

NEW UNDERWRITING OVERLAYS FOR FHA LOANS WITH 600-619 SCORES

Effective immediately, REMN will accept new submissions of FHA loans with scores between 600-619 with the following restrictions:

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

(2) Cannot exceed standard county statutory limit (no High-Balance loans).

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

(4) Maximum LTV as follows:

Transaction Type With documented
housing history
Without documented
housing history
Purchase 96.5% 90%
Rate/Term Refi 97.75% 90%
Cash-out Refi 85% 75%

(5) Documented housing history is defined as canceled rent checks, money orders, or institutional VOR (or mortgage rated on credit report or canceled mortgage checks).

(6) Two months PITI reserves.

(7) No major derogatory credit in the last 24 months.  “Major derogatories” are defined as judgments, tax liens, non-medical collections, or any account 60+ days delinquent.

(8) Payment shock not to exceed 50%.

(9) Gifts cannot be used for down payment.

(10) Max ratios 31/43

NEW PRICE ADJUSTERS FOR FHA LOANS WITH SCORES BELOW 640

Effective for all new submissions beginning May 6, 2011, the following adjusters will apply:

Score Old
Adjustment
New
Adjustment
620-639 1.000 1.500
600-619 n/a 2.000

ELIMINATION OF FHA THIN CREDIT GUIDELINES

Effective immediately, the existing “thin credit” overlays described in Announcement 10-04 are hereby eliminated for files with DU Approve/Eligible findings.  Manually-underwritten files still must meet the existing guidelines.  This guidance affects loans already in the REMN pipeline.

ELIMINATION OF FHA GIFT DONOR RELATIONSHIP DOCUMENTATION

Effective immediately, the existing requirement to document the relationship between a borrower and a donor that is a non-immediate family member, as described in Announcement 09-26, is hereby eliminated.  This guidance affects loans already in the REMN pipeline.

FHA PROPERTY FLIPS WITH TRANSFER OF OWNERSHIP IN LESS THAN 91 DAYS

Effective immediately, REMN will accept new submissions of FHA loans with a property transfer occurring in less than 91 days with the following restrictions:

(1) The transfer time is measured from the date the seller acquired title to the property and the date the Contract was executed.

(2) “Simultaneous” closings and/or “Contract Assignments” are prohibited.  The seller on the Contract of Sale must be the owner of record prior to settlement.

(3) Arms-length transactions only.  There can be no relationship between the buyer and seller outside the transaction.

(4) The borrower’s occupancy of the subject property must be deemed reasonable, at the sole discretion of REMN.  There will be substantially less latitude in this area than there would be with a standard purchase.

(5) Multiple transfers are prohibited.

(6) The amount of repairs must be sufficient to justify the increase in value.  For example, new paint and carpet would not justify a large increase in sales price.  All repairs must be documented with receipts and substantiated by the appraiser.

(7) Per FHA guidelines, a full home inspection is required.  Any repairs not listed by the appraiser, but affecting health or safety, must be completed and a final inspection from the appraiser must be obtained.

(8) Two full FHA appraisals must be obtained, both firmly supporting value.  If the values differ, the lower value must be used.

(9) All FHA guidelines, as described in the Waiver issued by the FHA, must be adhered to for this type of transaction. [wp_lightbox_prettyPhoto_anchor_text_pdf link=”http://ww3.remnwholesale.com/documents/FlipWaiver.pdf” width=”800″ height=”1100″ title=”Waiver” text=”Click Here to View the Waiver”]
(10) Minimum score 640.

(11) 2-4 Unit property and rowhouses are ineligible.

(12) All other REMN guidelines pertaining to property transfers occurring in less than one year still apply

USE OF GIFTS TO PURCHASE FLIPPED PROPERTIES USING AN FHA LOAN

Effective immediately, the existing REMN overlay prohibiting the use of gifts to purchase a property being transferred in less than one year is eliminated.  However, if a gift is being utilized, the donor’s bank statement must be provided, evidencing that the gift funds have been seasoned for at least thirty days.  This is in addition to the standard FHA gift documentation requirements.

MAXIMUM LTV FOR CONVENTIONAL CONDOMINIUMS

Effective immediately, REMN has increased the maximum LTV from 80% to 95% LTV for standard conventional loans, in all states except Florida.  Please note, all loans over 80% LTV will require MI approval of the condominium.  MI approval will be sought after all other REMN underwriting conditions have been cleared.  These changes do not apply to high-balance loans.

ELIGIBILITY AND MAX LTV FOR CONVENTIONAL NOO AND SECOND HOMES

Effective immediately, our maximum LTVs and eligibility for standard conventional loans are as described below:

Type Purchase/
Rate/Term
Cash-Out
Refi
NOO single-family* 80% Purchase
75% Rate/Term
75%
NOO 2-4 units 75% 70%
Second Homes (single family only)** 90% 75%
*excluding Florida condos (not available)
**Florida condos limited to 60%

These changes do not apply to high-balance loans.

If you have any questions, please contact your AE.

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