Search for current regulatory changes & updates from Fannie, Freddie, FHA, VA, and USDA.
Effective: | February 1, 2019 |
Industry: | Mortgage Servicing |
Source: | Freddie Mac Freddie Mac Bulletin 2018-19 → |
Tags: | Servicing Transfers, Certification, Endorsement, and Delivery, Closing |
CONCURRENT TRANSFERS OF SERVICING
In our continuing effort to create operational efficiencies and streamline the Transfer of Servicing process, we are eliminating the mandatory expiration date on the CTOS Agreement, which results in Sellers no longer needing to submit a new CTOS Agreement annually.
Effective today, the expiration date field on the CTOS Agreement is optional. CTOS Agreements where the expiration date field is left blank will remain in effect until either Freddie Mac, the Transferor Servicer (Seller), or the Transferee Servicer terminate the CTOS Agreement.
In lieu of reviewing and approving CTOS Agreements annually, Freddie Mac will monitor the financial condition and performance of the Transferor Servicer (Seller) and the Transferee Servicer and may, in our discretion, rescind or suspend approval of the CTOS Agreement.
The Transferor Servicer or Transferee Servicer may terminate the CTOS Agreement by first providing notice to the other (Transferor Servicer or Transferee Servicer as applicable) and then to Freddie Mac via e-mail to TOS@freddiemac.com at least five Business Days prior to the requested termination date.
In addition to making the expiration date on the CTOS Agreement optional, we are updating the form to remove the aggregate UPB field, references to Senior Subordinate Mortgages, and references to remittance types and cycles that Freddie Mac no longer supports. The terms and conditions were also updated to be consistent with the Servicing Contract.
With the Transferee Servicer’s agreement, Freddie Mac will remove the expiration date on all CTOS Agreements currently with expiration dates of November 1, 2018 or later. To effect this change, Freddie Mac will provide the Transferee Servicer with a list of existing CTOS Agreements that they have with each Transferor Servicer (Seller) and ask the them to indicate on the list which agreements should no longer be subject to an expiration date and which agreements should remain subject to their existing expiration date. The Transferee Servicer must return the list via e-mail to TOS@freddiemac.com no later than December 14, 2018 and must copy the Transferor Servicer (Seller) on such e-mail. Freddie Mac will deem those CTOS Agreements that the Transferee Servicer indicated to be no longer to be subject to an expiration date to continue in effect until terminated by the Transferor Servicer (Seller), Transferee Servicer, or Freddie Mac in accordance with the updated Form 960.
If the Transferee Servicer does not provide the list to Freddie Mac by the December 14, 2018 indicating that they wish to remove the expiration date of their CTOS Agreement(s), then such agreements will expire in accordance with their expiration dates.
The Transferor Servicer’s delivery of Mortgages to Freddie Mac and CTOS of the related Servicing Rights to the Transferee Servicer after the expiration date on the related CTOS Agreement, which the Transferee Servicer has indicated should no longer be subject to an expiration date, shall be deemed to be the Transferor Servicer’s acceptance of the Freddie Mac’s and the Transferee Servicer’s removal of the expiration date.
All other CTOS requirements in Guide Chapter 7101 remain unchanged.
Guide impacts: Sections 7101.2, Form 960 and Directory 3
SETTLEMENT/CLOSING DISCLOSURE STATEMENT
Currently, the Guide permits the use of any settlement or closing disclosure required by applicable federal, State or local law. However, Freddie Mac and Fannie Mae (“GSEs”) have jointly agreed to require the Uniform Closing Dataset XML file, with the embedded PDF document of the Closing Disclosure required under the federal Truth-in-Lending Act (“TILA”), be delivered on all Mortgages with Note Dates on and after September 25, 2017. To meet this requirement, Sellers must create or obtain (in the event the Seller does not originate, but purchases the Mortgage or otherwise acquires it from a Correspondent or Mortgage Broker) the Closing Disclosure form for each Mortgage, regardless of whether another form might also be required by a State or local law. As a result, we are revising the Guide Glossary definition of “Settlement/Closing Disclosure Statement” to state:
Settlement/Closing Disclosure Statement
Except as provided below in connection with certain Servicing transactions, the Settlement/Closing Disclosure Statement means the closing disclosure required under the federal TILA for Mortgages subject to the TILA/Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure (“TRID”) rules, whether or not the TRID rules apply to the transaction.
With respect to an all-cash short sale or other Servicing transactions for which no settlement and/or closing disclosure is required by applicable law, the term Settlement/Closing Disclosure Statement means (i) a closing disclosure under the TRID rules, or (ii) any other settlement statement or closing disclosure that the Servicer determines would have otherwise been required by applicable State or local law should the TILA disclosure not be required.
Several sections of the Guide require the Settlement/Closing Disclosure Statement to be provided for transactions other than the Mortgage being sold to Freddie Mac (e.g., to document closing costs paid at closing of a simultaneous secondary financing). We are updating these Guide sections to require the Settlement/Closing Disclosure Statement or an alternative form required by law, without requiring that it must be the TILA-compliant form.
We are also specifying that any related documentation must be:
• Provided with the Settlement/Closing Disclosure Statement in the Mortgage file submitted for Freddie Mac Quality Control (QC) review; and
• Reviewed with the Settlement/Closing Disclosure Statement by the Seller during its post closing QC review This is intended to capture instances where:
• Another type of closing disclosure is required by a State or local law in addition to the TILA-compliant form
• Any other related documentation is obtained in connection with closing the Mortgage
Additionally, we are removing the requirement that for Mortgages with Application Received Dates prior to October 3, 2015, the Mortgage file must include the estimated and final Settlement/Closing Disclosure Statements signed by all parties since such Mortgages should already have been sold to us.
Loan Product Advisor feedback messages have been updated to reflect these changes.
Guide impacts: Sections 2402.2, 3401.20, 3401.25, 3401.26, 3402.7, 4204.1, 4204.2, 4301.5, 4602.12, 5501.3, 5801.1, 6302.7 and Glossary R-Z
Effective: | February 1, 2019 |
Industry: | Mortgage Lending |
Source: | Freddie Mac Freddie Mac Bulletin - 2018-19 → |
Tags: | Underwriting, Certification, Endorsement, and Delivery |
Effective for Mortgages with Settlement Dates on and after February 1, 2019
In Bulletin 2017-17, we announced that we were planning to retire special LTV/TLTV/HTLTV ratio requirements for a "no cash-out" refinance of a Mortgage owned or securitized by Freddie Mac due to the implementation of the Freddie Mac Enhanced Relief Refinance® Mortgage offering.
We are now updating the Guide to remove the special LTV/TLTV/HTLTV ratio requirements for a "no cash-out" refinance of a Mortgage owned or securitized by Freddie Mac. This includes the removal of related special delivery requirements in Section 6302.16, which currently requires the delivery of ULDD Data Point, Investor Feature Identifier (IFI) (Sort ID 368) and enter the valid value of “D99.”
Loan Selling Advisor® will be updated by February 1, 2019 to prevent the delivery of IFI D99.
Guide impacts: Sections 4203.4, 4301.4, 5701.7, 6302.16 and Guide Exhibit 34
Effective: | February 1, 2019 |
Industry: | Mortgage Lending, Mortgage Servicing |
Source: | Fannie Mae SVC-2018-09 → |
We have moved our corporate headquarters and updated the Guide and related forms to reflect our new address:
Fannie Mae
Midtown Center
1100 15th Street, NW
Washington, DC 20005
Effective: | February 6, 2019 |
Industry: | Mortgage Lending |
Source: | Fannie Mae Selling Guide Announcement SEL-2019-01 → |
Tag: | Underwriting |
Loan Quality Connect
Cost of Funds Index (COFI) Retirement
Miscellaneous Selling Guide Updates
Effective: | February 6, 2019 |
Industry: | Mortgage Lending |
Source: | Freddie Mac Selling Bulletin 2019-4 → |
Condominium Projects
Income
Uniform Loan Delivery Dataset
Certificate of Incumbency
Investor Reporting Change Initiative
Additional Guide updates
EFFECTIVE DATE
All of the changes announced in this Bulletin are effective immediately unless otherwise noted.
CONDOMINIUM PROJECTS
In response to Seller feedback, we are updating our requirements for Condominium Projects as follows:
Topic | Revision |
---|---|
Freddie Mac Condo Project AdvisorSM | We are clarifying that for a Condominium Unit Mortgage in an Established Condominium Project to be eligible for a Project Waiver Request (PWR), Sellers must comply with the project eligibility requirements for Established Condominium Projects set forth in Section 5701.5 as well as all other applicable requirements in Guide Chapter 5701. |
Condominium Project review requirements | Previously, Sellers were required to review and determine that a project complies with Freddie Mac's Condominium Project eligibility requirements prior to the Note Date. To provide additional flexibility, we are updating the Guide to state that if a Mortgage secured by a unit in a Condominium Project does not comply with the eligibility requirements for the applicable project review type on the Note Date, the Seller may deliver the Mortgage at the time the Condominium Project meets the project eligibility requirements provided the Mortgage also meets all other applicable requirements. |
Established Condominium Projects and New Condominium Projects – budget (Sections 5701.5 and 5701.6) | Previously, when calculating the amount of replacement reserves, Sellers were permitted to exclude income in reserve accounts but not permitted to exclude income allocated to reserve accounts. We now are allowing Sellers to exclude both income in reserve accounts and income allocated to reserve accounts. |
New Condominium Projects – engineer's report | For conversions involving a Non-Gut Rehabilitation (as defined in Section 5701.1), the review requirements for an engineer's report (or functionally equivalent documentation) now apply to buildings legally created within the past three years (reduced from five years). |
Guide impacts: Sections 5701.1, 5701.2, 5701.5 and 5701.6
INCOME
Commission income
Following recent tax law changes, unreimbursed employee expenses of commissioned employees will no longer be documented on federal individual tax returns. Consequently, we are removing the requirements that when the Borrower's commission income is greater than or equal to 25% of the total income from the commissioned employment that the Seller:
As a result of this change, the documentation and income calculation requirements will be the same for all commission income, regardless of its percentage of the total income from the commissioned employment.
The applicable Loan Product Advisor® feedback messages will be updated at a later date to reflect these changes. Until then, Sellers may disregard the feedback messages requiring tax returns covering a two-year period when commission income is greater than or equal to 25% of the total income from the commissioned employment.
Guide impacts: Sections 5302.4, 5303.3 and 5303.4
Automated income assessment eligibility
Effective for submissions and resubmissions to Loan Product Advisor on and after March 24, 2019
As a result of the above changes to our requirements for commission income, all commission income, regardless of its percentage of total income from the employment, will also be eligible for automated income assessment, which is part of Loan Product Advisor asset and income modeler (AIM). This expands the income sources eligible for this capability to include commission income greater than or equal to 25% of the total income from the commissioned employment.
Guide impact: Section 5901.2
Guide Form 91, Income Calculations
We are updating Form 91 to reflect line item changes in tax documents resulting from the new tax law.
Separately, we are adding a note reminding Sellers that completion of the form does not replace the Section 5304.1(d) requirement for business review and analysis to support that the business has sufficient liquidity and is financially capable of producing stable monthly income for the Borrower.
For more information, register for our new webinar, "Self-Employed: Beyond the Basics," which includes case studies as well as information about business review and analysis. For additional self-employed resources, access the Freddie Mac Learning Center.
Guide impact: Form 91
REMINDER ON FREDDIE MAC INVESTOR REPORTING CHANGE INITIATIVE IMPLEMENTATION
In Bulletin 2016-15, we announced our Investor Reporting Change Initiative that will convert Freddie Mac's single-family investor reporting requirements to be closer to an industry standard and change our remittance cycles. As highlighted in Bulletins 2017-4 and 2017-15, after April 30, 2019 Freddie Mac will no longer utilize the Gold remittance cycle, Accelerated Remittance Cycle (ARC), Super ARC and the First Tuesday remittance cycle. Effective with implementation of the initiative in May 2019, the Standard Remittance Cycle will apply to all Mortgages serviced for Freddie Mac.
As a reminder, for Guarantor and MultiLender Swap Contracts, Loan Selling Advisor® will be updated on March 2, 2019 to include the Standard Remittance Cycle. For Guarantor and MultiLender Swap Contracts taken out on and after March 2, 2019 with Settlement Dates on and after May 1, 2019, Sellers will be able to select only the Standard Remittance Cycle.
While Sellers will continue to select currently available remittance cycles for Cash Contracts taken out on or before April 30, 2019, Cash Contracts with Funding Dates on and after May 1, 2019 will fund with the Standard Remittance Cycle regardless of when the Cash Contract was taken out. For Cash Contracts, Loan Selling Advisor will be updated on May 1, 2019 to require the Standard Remittance Cycle.
The table below provides remittance cycle details by contract type and the date the contract is taken out:
Contract type | Taken out on and after March 2, 2019 and on and before April 30, 2019 | Taken out on and after May 1, 2019 |
---|---|---|
Guarantor/MultiLender | All current remittance options will be available for contracts with Settlement Dates before May 1, 2019; however, the Standard Remittance Cycle will apply to those loans beginning May 1, 2019. | Only the Standard Remittance Cycle will be available. |
Cash | No Change. All current remittance options will be available until April 30, 2019; however, the Standard Remittance Cycle will apply to those loans beginning May 1, 2019. |
|
UNIFORM LOAN DELIVERY DATASET
As announced in the November 20, 2018 Single-Family News Center article, Freddie Mac published the Uniform Loan Delivery Dataset (ULDD) specification addendum included in Appendix A – Freddie Mac XML Data Requirements V.4.2.3 ("ULDD Addendum").
We are making the following updates to Chapter 6302 to align with updates to the ULDD Addendum:
Loan Selling Advisor will be updated on March 25, 2019 to include the new valid values for ULDD Data Points Escrow Item Type/Escrow Item Type Other Description. Sellers may deliver these new valid values beginning March 25, 2019 and will be required to do so, if applicable, with the ULDD Phase 3 mandate of May 20, 2019.
The ULDD Addendum also includes additional updates announced in prior Bulletins.
Sellers should review the ULDD Addendum in its entirety to determine impacts to their systems or processes and for applicable effective dates. Sellers should visit our ULDD web page to view the ULDD Addendum and other resources and to stay abreast of ULDD Addendum updates.
Guide impacts: Sections 6302.5, 6302.8, 6302.14, 6302.20, 6302.21, 6302.26 and 6302.41
SELLER/SERVICER CERTIFICATES OF INCUMBENCY
We are updating our Certificate of Incumbency (COI) forms for Seller/Servicers' convenience as follows:
We are deleting Forms 988ASF and 989ASF, as they are no longer necessary. While Seller/Servicers may continue to submit the old COI forms, Freddie Mac will not make them available.
Guide impacts: Sections 2101.12, 2201.1, 2201.2, 2403.11, 2405.1, 6203.8, 6204.8, 6205.8, 6301.10, 6303.2, 6305.8 through 6305.10, 8303.3, 8303.34, 8303.35, 9102.1, Forms 988SF, 988SF-2, 988ASF, 989SF and 989ASF
ADDITIONAL GUIDE UPDATES
Super conforming Home Possible® Mortgages
In response to Seller feedback and for easier reference, we are revising the chart for maximum loan-to-value (LTV), total LTV (TLTV) and Home Equity Line of Credit (HELOC) TLTV (HTLTV) ratios for Home Possible® Mortgages in Section 4501.10 to include the LTV, TLTV and HTLTV ratio limits for super conforming Home Possible Mortgages.
Guide impact: Section 4501.10
Seller representations and warranties regarding the Mortgaged Premises
We are updating the Guide to align the language with how Loan Collateral Advisor® assesses an appraisal. We are specifying that to be eligible for appraised value representation and warranty relief, an appraisal must be submitted to the Uniform Collateral Data Portal® (UCDP®) which allows Loan Collateral Advisor to assess the appraisal for such relief. The UCDP feedback message FRE4000 (corrected from FRE0000) must be returned to the Seller to indicate eligibility for the appraised value representation and warranty relief.
We are also specifying the type of representation and warranty relief that is provided through Loan Collateral Advisor (relief for appraised value) and automated collateral evaluation (ACE) (relief for value, condition and marketability).
Guide impacts: Sections 4407.2 and 5601.9
Loan Collateral Advisor and ACE: Mortgages secured by Mortgaged Premises subject to resale restrictions
For Mortgages assessed through Loan Collateral Advisor, we are revising the list of Mortgages that are ineligible for appraised value representation and warranty relief to remove Mortgages secured by properties subject to income-based restrictions and add Mortgages secured by Mortgaged Premises subject to all resale restrictions.
We also are revising the list of Mortgages ineligible for an appraisal waiver through ACE to remove certain Mortgages secured by properties subject to income-based resale restrictions because all Mortgages secured by Mortgaged Premises subject to resale restrictions were already ineligible.
Guide impacts: Sections 4407.2 and 5601.9
Credit report inquiries
Bulletin 2018-13 announced that effective September 9, 2018, the required time frame for evaluating inquiries on a Borrower's credit report was reduced from 120 days to 90 days.
Since this change applies to requirements for a Seller's in-house quality control program, we are updating Sections 3402.5 and 3402.8 to reflect the 90-day period.
Guide impacts: Sections 3402.5 and 3402.8
Mortgaged Premises occupied by Borrower's parent or disabled child
In Bulletin 2018-15, we updated the Guide to permit a Borrower who is a parent or legal guardian of someone with a physical or developmental disability and is occupying the home as a Primary Residence to be considered an occupying Borrower.
Since the intent of this language is to include all disabilities, we are removing the terms "physical" or "developmental" from the language to reflect that intent.
Guide impact: Section 5103.8
Investment Property Mortgages
In response to Seller inquiries, we are updating Section 4201.16 for Investment Property Mortgages. Freddie Mac does not permit Borrowers of Investment Property Mortgages for newly constructed homes that are purchase transactions to be affiliated with or related to the builder, developer or property seller. We are specifying that, for these purposes, the Borrower may not have an ownership interest in or employment with the builder, developer or property seller.
Guide impact: Section 4201.16
Guide Exhibit 33, Acknowledgment Agreement Incorporated Provisions
In Bulletin 2018-26, we adopted a definition of Conveyance as set forth in Exhibit 33 and updated Section 1101.2(c) to prohibit such Conveyances without Freddie Mac's consent. Consistent with the language set forth in Section 1101.2(c) that was in effect prior to Bulletin 2018-26, we are updating the definition of Conveyance in Exhibit 33to include conveyances of the Seller/Servicer's rights and obligations under the Guide or any of the Seller/Servicer's Purchase Documents.
Guide impact: Exhibit 33
Loan Product Advisor asset and income modeler
As announced in our December 11 Single-Family News Center article, Loan Product Advisor asset and income modeler (AIM) is our solution for automating the manual processes of assessing Borrower assets and income. We are updating our Guide chapters on automated income assessment and automated asset assessment to incorporate references to AIM.
Guide impacts: Sections 5901.1 and 5902.1
Freddie Mac Loan AdvisorSM
Freddie Mac Loan Advisor Suite® is now Freddie Mac Loan AdvisorSM: a new name with a renewed focus on the value each of our tools and capabilities bring our Sellers – every day. More than ever, we are committed to providing innovation and insights and collaborating to help Sellers become more efficient and cut costs; giving them an edge – The Freddie EdgeSM. We are updating the Guide to reflect Freddie Mac Loan Advisor, where applicable.
Guide impacts: Sections 1301.11, 2402.2 and 5701.1
GUIDE UPDATES SPREADSHEET
For a detailed list of the Guide updates associated with this Bulletin and the topics with which they correspond, refer to the Bulletin 2019-4 (Selling) Guide Updates Spreadsheet available at http://www.freddiemac.com/sing....
CONCLUSION
If you have any questions about the changes announced in this Bulletin, please contact your Freddie Mac representative or call the Customer Support Contact Center at 800-FREDDIE.
Effective: | February 13, 2019 |
Industry: | Mortgage Lending |
Source: | VA https://benefits.va.gov/WARMS/docs/admin26/m26-07/M26_7_Ch1_LenderApprovalGuidelines.doc → |
Tag: | Underwriting |
Purpose
Attached is a copy of VA Pamphlet 26-7, Lender’s Handbook, Chapter 1, Lender Approval Guidelines, which has been revised in its entirety.
Changes
Chapter 1 has been revised to provide lenders with updated information to assist them in obtaining automatic authority from VA, to encourage lenders with automatic authority to use it to the maximum extent possible and to incorporate all applicable outstanding Circulars. Key changes include:
Chapter 1, Topic 4 reflects updated acceptable qualifications for underwriters, the AMP (Accredited Mortgage Professional) and CRU (Certified Residential Underwriter) designations from the Mortgage Bankers Association (MBA).
Chapter 1, Topic 7 requires that the lender request VA recognition of any agents who are performing loan-related functions for the lender. The previous version of this handbook permitted lenders to use an agent up to four times a year without being recognized by VA. Lenders who do not have automatic authority from VA may not use the services of an agent.
Additional Copies
Additional copies may be downloaded at https://benefits.va.gov/warms/pam26_7.asp.
Rescissions
Chapters 1-9 of the Lenders Handbook cover Loan Processing topics. All outstanding Circulars have been incorporated into the revised chapters. Once all revised chapters have been released, the outstanding Circulars will be rescinded.
Effective: | February 13, 2019 |
Industry: | Mortgage Servicing |
Source: | Fannie Mae SVC-2019-01 → |
Tag: | Foreclosure |
We have updated A1-4.2-02, Compensatory Fees for Delays in the Liquidation Process and F-2-03, Compensatory Fee Calculation Examples to reflect changes recently communicated in Announcement SVC-2018-10. The changes update our policies and processes related to assessing compensatory fees for delays in foreclosure.
See also: Compensatory Fees – Foreclosure Time Frame Delays FAQs
Effective: | February 15, 2019 |
Industry: | Mortgage Lending |
Source: | VA Interim Final Rule → |
Tag: | Underwriting |
[Please see final rule for complete details]
Effective: | February 15, 2019 |
Industry: | Mortgage Lending |
Source: | VA VA Circular 26-18-30 → |
Tags: | Underwriting, Refinance |
1. Purpose.
This purpose of this Circular is to announce the Department Veterans Affairs’ (VA) new policies regarding VA-guaranteed cash-out refinancing loans, including refinancing of construction loans (construction-to-permanent).
2. Background.
On December 17, 2018, VA published an interim final rule addressing VA guaranty requirements for cash-out refinance loans (83 FR 64459). This rule implements section 309 of Public Law 115-174, The Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act). Section 309 of the Act provides new statutory criteria to determine when VA may guarantee a refinancing loan. The Act required VA to promulgate regulations for cash-out refinancing loans, specifically refinancing loans in which the loan amount will exceed the payoff amount of the loan being refinanced. This rule amends VA regulations pertaining to all cash-out refinancing loans (38 CFR 36.4306). This includes refinancing of construction loans (construction-to-permanent loans), regardless of whether there is a change in the principal loan amount. VA is accepting public comments on the interim final rule through February 15, 2019, and encourages lenders to submit official comments and/or suggestions through the Federal Register at https://www.regulations.gov.
3. Effective.
The rule is effective on February 15, 2019, and will apply to VA cash-out refinance loan applications taken on, or after, this date.
4. Action.
a. VA-guaranteed cash-out refinancing loans must meet the requirements of the new law. VA has categorized refinancing loans as the following:
(1) Interest Rate Reduction Refinancing Loan (IRRRL): a refinancing loan made to refinance an existing VA-guaranteed home loan at a lower interest rate.
(2) TYPE I Cash-Out Refinance: a refinancing loan in which the loan amount (including VA funding fee) does not exceed the payoff amount of the loan being refinanced.
(3) TYPE II Cash-Out Refinance: a refinancing loan in which the loan amount (including VA funding fee) exceeds the payoff amount of the loan being refinanced.
b. This rule does not apply to VA regulations pertaining to IRRRLs. Updates to VA’s IRRRL regulations will be published separately from this Circular. Lenders and VA Regional Loan Center (RLC) personnel should continue to follow current IRRRL regulations and VA policy guidance shown in VA Circular 26-18-13.
c. All cash-out refinancing loan applications taken on or after February 15, 2019, as reflected by the application date, that do not meet the following requirements will not be eligible for guaranty by VA:
(1) Loan-to-Value (LTV). VA will no longer guaranty refinancing loans when the LTV exceeds 100 percent. If the Veteran chooses to close a loan in which the loan amount exceeds 100 percent of the reasonable value of the property, the Veteran must pay the amount which exceeds 100 percent of the property value at loan closing.
(a) LTV Calculation. Divide the total loan amount (including VA funding fee, if applicable) by the reasonable value on the Notice of Value of the property determined by the appraiser.
(2) Net Tangible Benefit Test (NTB). Lenders must ensure that all cash-out refinancing loans pass a NTB, which includes providing the Veteran with the following information no later than the third business day after receiving the Veteran’s loan application, and again at loan closing:
(a) The refinancing loan satisfies at least one of the following eight NTB:
(i) The new loan eliminates monthly mortgage insurance, whether public or private, or monthly guaranty insurance;
(ii) The term of the new loan is shorter than the term of the loan being refinanced;
(iii) The interest rate on the new loan is lower than the interest rate on the loan being refinanced;
(iv) The payment on the new loan is lower than the payment on the loan being refinanced;
(v) The new loan results in an increase in the borrower’s monthly residual income;
(vi) The new loan refinances an interim loan to construct, alter, or repair the home;
(vii) The new loan amount is equal to or less than 90 percent of the reasonable value of the home, or;
(viii) The new loan refinances an adjustable rate loan to a fixed rate loan.
(b) A comparison of key loan characteristics or terms for the existing and refinancing loan, including: (i) Refinancing loan amount vs. the payoff amount of the loan being refinanced.
(ii) Loan type (i.e., fixed, adjustable) of the refinancing loan vs. the loan being refinanced.
(iii) Interest rate of the refinancing loan vs. the loan being refinanced.
(iv) Loan term of the refinancing loan vs. the loan being refinanced.
(v) The total the Veteran will have paid after making all payments (principal and interest), and mortgage insurance, as scheduled, for both the refinancing loan and the loan being refinanced.
(vi) LTV of the refinancing loan vs. the loan being refinanced
(c) An estimate of the home equity being removed from the home as a result of the refinance and explain how the removal of home equity may affect the Veteran.
(3) Loan Seasoning. VA will not guarantee a refinancing loan if the loan being refinanced has not been properly seasoned. This requirement applies to TYPE I refinancing loans made to refinance an existing VA-guaranteed home loan and all TYPE II refinancing loans. A loan is considered seasoned on the later of the date that is:
(a) 210 days after the first monthly payment is made, and
(b) Six monthly payments have been made on the loan.
(4) Fee Recoupment. The recoupment period of all fees, closing costs, expenses (other than taxes, escrow, insurance, and like assessments), and incurred costs must not exceed 36 months from the date of loan closing. The lender must certify the recoupment period to VA to obtain a Loan Guaranty Certificate. This requirement only applies to TYPE I cash-out refinancing loans made to refinance an existing VA-guaranteed home loan.
(a) Recoupment Calculation. Divide all fees, closing costs, expenses, and incurred costs (excluding taxes, escrow, insurance, and like assessments), by the reduction of the monthly principal and interest payment as a result of the refinance. If the loan being refinanced has been modified, the principal and interest reduction must be computed/compared to the modified principal and interest monthly payment.
5. Rescission: This Circular is rescinded January 1, 2020.
Effective: | February 15, 2019 |
Industry: | Mortgage Lending |
Source: | VA VA Circular 26-19-05 → |
Tag: | Underwriting |
3. Effective date. The rule is effective on February 15, 2019, and will apply to VA cash-out refinance loan applications taken on, or after, this date. Loan applications taken prior to the effective date that were submitted to an Automated Underwriting System (AUS) either before or after the effective date, where subsequent and/or final AUS submissions result in a Refer recommendation, require manual underwriting.
4. Action. All-VA guaranteed cash-out refinancing loans must comply with the Act and AQ42. All refinancing loan applications taken on or after the effective date that do not meet the following requirements may be subject to indemnification or the removal of the guaranty. Failure to provide initial disclosures to the Veteran within 3 business days from the initial application date and at closing may result in indemnification of the loan up to 5 years. There are three categories of refinance loans; Interest Rate Reduction Refinancing Loans (IRRRL), TYPE I Cash-Out Refinance, and TYPE II Cash-Out Refinance.
a. Definitions.
(1) An Interest Rate Reduction Refinancing Loan (IRRRL) is a refinancing loan made to refinance an existing VA-guaranteed home loan at a lower interest rate.
(2) TYPE I Cash-Out Refinance is a refinancing loan in which the loan amount (including VA funding fee) does not exceed the payoff amount of the loan being refinanced.
(3) TYPE II Cash-Out Refinance is a refinancing loan in which the loan amount (including VA funding fee) exceeds the payoff amount of the loan being refinanced.
b. Loan-to-Value (LTV). VA will no longer guaranty refinancing loans when the LTV exceeds 100 percent. Inclusion of any funding fee that is financed, in part or whole, cannot cause the loan to exceed the reasonable value of the property.
(1) LTV Calculation. Divide the total loan amount (including VA funding fee, if any) by the reasonable value of the property determined by the appraiser.
c. Net Tangible Benefit (NTB). NTB standards apply to all cash-out refinancing loans. It consists of the NTB test, Loan Comparison, and Home Equity Disclosure
(1) NTB Test. All cash-out refinancing loans must past pass the NTB test. This requirement is met if the refinancing loan satisfies at least one of the following:
(a) The new loan eliminates monthly mortgage insurance; or
(b) Loan term of the new loan is less than the loan term of the loan being refinanced; or
(c) Interest rate of the new loan is less than the interest rate of the loan being refinanced. (Note: If the loan being refinanced had an adjustable interest rate or was modified, the current interest rate must be used when determining if this requirement has been met.); or
(d) The monthly (principal and interest) payment of the new loan is less than the monthly (principal and interest) payment of the loan being refinanced; or
(e) The Veteran’s monthly residual income is higher as a result of the new loan. (residual income, including refinancing monthly PITI (principal, interest, taxes, and insurance) payment vs. current residual income, including monthly PITI payment of the loan being refinanced.) In cases where TI amounts are changing between the application date and the closing date of the refinance transaction, the new TI amount will be used in determining residual income for both the current and refinanced loan); or
(f) The new loan is used to payoff the Veteran’s interim construction loan; or
(g) The new loan LTV is equal to or less than 90 percent of the reasonable value of the home, i.e. LTV ≤ 90%; or
(h) Refinance of an adjustable-rate mortgage to a fixed-rate mortgage.
(2) Loan Comparison Disclosure. The lender must provide the Veteran a comparison of the new loan to the existing loan being refinanced. VA requires lenders to generate two loan comparison disclosures, one within 3 business days from the initial date of the loan application and at loan closing. The borrower must certify receipt of both disclosures (i.e. signature, e-signature, email from borrower certifying receipt, email read receipts, system time/date stamp where a borrow certified receipt, etc).
(a) Initial 3-Day Disclosure. Lender’s shall provide a reasonable estimate within 3 business days of loan application. Reasonably accurate estimates, may involve the use of borrower documentation, such as their mortgage statement, closing documents, their own estimation of the existing loan terms, online property valuation tools, and manual calculations. Lenders are encouraged, but not required, to continually update the disclosure as additional, and more accurate, information becomes available throughout the origination process.
(b) Final Loan Closing Disclosure. The final loan comparison disclosure provided at loan closing shall be accurate with respect to the new loan information, while the initial loan information may be a generally accurate representation of the existing loan, given that payments may be in transit, tax and insurance amounts may be pending, and payoffs may fluctuate when the final closing date has not been determined.
(c) Contents of the Initial 3-Day Disclosure and the Final Loan Closing Disclosure. VA has provided a sample disclosure in Exhibit A that includes both the loan comparison and home equity provisions stated in this Circular. The following information will be provided in the disclosures:
1. Refinancing loan amount (including VA funding fee, if financed into the loan) vs. the payoff amount (including fees, escrow shortages, and prorated interest) of the loan being refinanced.
2. Interest Rate
3. Mortgage Loan Type (i.e., fixed, adjustable)
4. Loan term of the refinancing loan vs. the remaining term of the loan being refinanced. The term may be expressed in months or years and months.
5. The total payments the Veteran will have paid after making all payments (principal and interest) as scheduled on the refinancing loan vs. the total remaining payments the Veteran will have paid after making all remaining payments of principal, interest, and mortgage insurance (if applicable) as scheduled on the loan being refinanced.
6. LTV of the refinancing loan vs. loan payoff (including fees, escrow shortages, and prorated interest) to current value of the loan being refinanced.
(3) Home Equity Disclosure. The lender must disclose the amount of home equity being removed from the home as a result of the new loan to the Veteran within 3 business days from the initial date of the loan application and at loan closing. The disclosure must also explain to the Veteran how the removal of home equity may affect the sale or refinance of the home in the future. Similar to the Loan Comparison Disclosure, the borrower must certify receipt of the Home Equity Disclosure (i.e. signature, e-signature, email from borrower certifying receipt, email read receipts, system time/date stamp where a borrow certified receipt, etc.). VA has provided a sample disclosure in Exhibit A that includes both the loan comparison and home equity provisions stated in this Circular.
(a) For the initial home equity disclosure, lenders may use estimated loan payoff or unpaid principal balance and estimated current property value to determine the home equity being removed from the home. However, the lender must use the final payoff amount (including fees, escrow shortages, and prorated interest) and the reasonable value shown on the Notice of Value (NOV) to determine the home equity being removed from the home on the home equity disclosure provided to the Veteran at loan closing.
d. Loan Seasoning. Loan seasoning applies to all cash-out refinancing loans made to refinance a VA-guaranteed home loan (VA-to-VA). A cash-out refinancing loan, Type I nor Type II, is not eligible for guaranty by VA, if the VA-guaranteed loan being refinanced has not been seasoned as of the date of closing. A loan is considered seasoned if both of the following conditions are met as of the date of loan closing:
(1) The first monthly payment of the loan being refinanced was made 210 days or more prior to the closing date of the refinancing loan; and
(2) Six monthly payments have been made on the loan being refinanced.
(3) For loans being refinanced within 1 year from the date of closing, lenders must obtain a payment history/ledger from the servicing lender documenting all payments. If the loan is selected for audit by VA, the lender must include the payment ledger/history of the loan being refinanced in the loan file for VA review.
e. Fee Recoupment. Fee recoupment applies to TYPE I cash-out refinancing loans made to refinance a VA-guaranteed home loan (VA-to-VA). To obtain a Loan Guaranty Certificate (LGC) the lender must certify that the recoupment period of fees, expenses, and closing costs (included in the loan and paid outside of closing), do not exceed 36 months from the date of the loan closing.
(1) Recoupment Calculation: The recoupment period is calculated by dividing all fees (not including VA funding fee per), expenses, and closing costs included in the loan and paid outside of closing by the reduction of monthly principal and interest (PI).
(a) Example:
PI (VA loan being refinanced): $654.00
PI (new VA refinancing loan): - $604.00
Reduction of monthly PI:
= $ 50.00
If the loan being refinanced loan has been modified, the reduction of monthly PI should be computed using the modified monthly PI of the loan being refinanced.
(b) Example:
Fees/expenses/closing cost: $1,436.49
Reduction of monthly PI: ÷ $ 50.00
Fee Recoupment Period: = 29 months (28.72 months rounded)
(c) Escrow and prepaid expenses, such as, insurance, taxes, special assessments, and homeowners’ association (HOA) fees shall be excluded from the recoupment calculations.
(d) VA allowable fee as established in 38 C.F.R. § 36.4313 offset by lender credits and/or premium pricing may also be excluded from the recoupment calculation.
4. Rescission: This Circular is rescinded April 1, 2021.
Effective: | February 15, 2019 |
Industry: | Mortgage Lending |
Source: | FHA Mortgagee Letter 2019-01 → |
Tags: | Underwriting, Income, Assets |
This guidance applies to all FHA Title II forward mortgages and Home Equity Conversion Mortgages (HECM).
[Please see Mortgagee Letter for complete details of all changes relating to acceptance of TPV services]
Effective: | February 15, 2019 |
Industry: | Mortgage Lending |
Source: | Freddie Mac February-March Updates → |
Tag: | Underwriting |
Loan Product Advisor® is being updated with changes, effective February 15, 2019. These changes will align with the new Department of Veterans Affairs (VA) policies for VA-guaranteed cash-out refinancing loans.
Read VA Circular 26-18-30 [PDF] for full details.
Effective: | February 15, 2019 |
Industry: | Mortgage Lending |
Source: | USDA PN 521 → |
Chapter 4: Chapter 4 is partially revised to update regulatory references, remove unnecessary or repetitive language and to update the lender’s reporting and oversight requirements.
Under 4.4, replaced ‘‘RESPA’’ with ‘‘Bureau of Consumer Financial Protection (BCFPB).’’
Under 4.6 (A), added guidance on accessing duplicate copies of the LNG electronically.
Under 4.8, added lender responsibility in managing counterparty and third-party providers.
Under 4.12, changed the lenders reporting requirements from quarterly to monthly and updated the email address to the NFAOC. Minor formatting and other errors were corrected.
Effective: | February 16, 2019 |
Industry: | Mortgage Lending |
Source: | Fannie Mae Release Notes → |
Tag: | Underwriting |
Effective: | February 20, 2019 |
Industry: | Mortgage Servicing |
Source: | Fannie Mae Excess Attorney Fee/Cost Guidelines → |
Tags: | Claims Processing, Foreclosure |
Effective: | February 23, 2019 |
Industry: | Mortgage Lending, Mortgage Servicing |
Source: | Fannie Mae Release Notes → |
Tag: | Secondary |
During the weekend of Feb. 23, EarlyCheck™ version 5.8 will introduce new and modified edits to align with existing Loan Delivery edits and upcoming Loan Delivery edit changes. EarlyCheck updates include new edits for condo project type, credit score, and MI as well as edit severity changes.
Effective: | February 25, 2019 |
Industry: | Mortgage Lending |
Source: | Freddie Mac Selling Mortgages for Cash Using Loan Selling Advisor User Guide → |
Tag: | Secondary |
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