COVID-19 Guidance

Due to current market conditions, temporary changes to our employment re-verification process are necessary to manage risk.  The changes below apply to loans underwritten.

HUD announced today that they have changed the effective date.  The new guidelines are now effective with any case assignment dated on or after August 12th.

Income
Wage Earners

• A Verbal Verification will remain a requirement before docs and at time of funding.
• In those instances where a traditional VVOE is unable to be completed, an email from the employer as an alternative will suffice, with the following restriction.
  • Be from the borrower’s direct Supervisor/Manager or the employer’s HR department and; 
  • Contain all the standard information required on a verbal verification of employment, including the name, title, and phone number of the person verifying.
• As an additional step, the following questions must be asked while completing the Verbal Verification of Employment form:
  • Is the company still open and in operation?
  • Is the borrower still employed?
  • Is the borrower on a leave of absence or furloughed?
  • Has the borrower’s income been affected?
• We will also require the borrowers most recent pay stub or a Written VOE dated within 15 calendar days of note date.
  • Underwriter’s will add this as a PTD condition.
  • The most recent pay stub or WVOE may be moved to PTF in Dry States
• If the hours worked have been reduced, the reduced hours will be utilized for qualifying purposes.
• If a borrower is on temporary leave, we are unable to proceed until the borrower has returned and received at least one full pay stub.  The pay stub will be analyzed to check for any reduced wages.
• Unemployment Income due to recent events is not an acceptable income source.
• These additional steps do not apply to non-credit qualifying FHA Streamline or VA IRRRL transactions.

Self Employed – Full Doc Conventional

• An audited year to date profit and loss statement, reporting business revenue, expenses and net income up to and including the most recent month preceding the loan application; or
• An unaudited year to date profit and loss statement signed by the borrower reporting business revenue, expenses and net income up to and including the most recent month preceding the loan application date, and two business(can be co-mingled personal) depository account(s) statements no older than the latest two months represented on the year to date profit and loss statement.
  • For example, the business depository statement can be no older than May and June for a year to date profit and loss statement through June 30, 2020.
  • The underwriter will review the two most recent depository account(s) statements to support and/or not to conflict with the information presented in the current year to date profit and loss statement.  Otherwise, the underwriter must obtain additional statements or other documentation to support the information from the current year to date profit and loss statement.
    • The signed year-to-date profit and loss statement must be no older than 45 days as of the note date.
• Underwriters must review the profit and loss statement, and business depository accounts, if required, and other relevant factors to determine the extent to which business has been impacted by COVID-19.  The underwriter can use the FNMA guidance when performing the assessment of business operations and stability and must complete the business income assessment based on the minimum additional documentation above.  In some instances, the underwriter may find it necessary to obtain supplemental documentation.

Self Employed – Full Doc VA

• A signed unaudited year to date profit and loss statement signed by the borrower reporting business revenue, expenses and net income up to and including the most recent month preceding the note date.
• Underwriters must review the profit and loss statement and other relevant factors to determine the extent to which business income has been impacted by COVID-19.  The underwriter can use the FHA/VA/USDA guidance when performing the assessment of business operations and stability and must complete the business income assessment based on the minimum additional documentation above.  In some instances, the underwriter may find it necessary to obtain supplemental documentation.

Self Employed – Full Doc FHA/USDA

• A signed unaudited year to date profit and loss statement signed by the borrower reporting business revenue, expenses and net income up to and including the most recent month preceding the note date.
• Evidence of current work (executed contracts or signed invoices that indicate the business is operating on the day borrower’s business is verified.
  • Evidence of current business receipts within 10 days of the note date (payment for services performed)
• Account Manager to certify in writing that the business is open and operating or
• Business website demonstrating activity supporting current business operations (timely appointments for estimates or service can be scheduled)
• Underwriters must review the profit and loss statement and other relevant factors to determine the extent to which business has been impacted by COVID-19.  The underwriter can use the FHA/VA/USDA guidance when performing the assessment of business operations and stability and must complete the business income assessment based on the minimum additional documentation above.  In some instances, the underwriter may find it necessary to obtain supplemental documentation.

Rental Income Support

• If rental income is being used for qualifying purposes
  • Refinance
    • Copy of current fully executed lease
  • Purchase
    • If the property is not currently rented, utilize the rent from the Appraisal 1007.  If the property is currently rented, will need current, fully executed lease and verification of most current 2 months rent received:
      • Can be letter from the seller, as seller is the one receiving rent
      • Rent must be addressed in the purchase contract, is borrower being assigned the lease agreements or are they evicting the tenants.  If eviction, utlilize the Appraisal 1007

Rental Income Support – FHA

• Reduce the effective income associated with the calculation of rental income by 25% or 
• Verify 6 months PITI in reserves or
• Verify the borrower has received the previous 2 months rental payments as evidence by the borrower’s bank statement showing the deposit
  • This option is only applicable for borrowers with a history of rental income from the property

Forbearance – Conventional Loans

Borrowers who are currently or have been in forbearance, are acceptable in certain cases:

• The borrower(s) must provide a copy of the forbearance agreement and documentation of which method was used to bring the loan current.
• Borrower(s) must be current on all mortgages for all properties owned through the month of closing.
• Borrower(s) must document that they have been removed from forbearance on any mortgage loan, including our subject and any other property.
• If the borrower(s) brought the loan current through reinstatement (payment in full of the deferred amount).
• If the reinstatement was completed after the application date on our subject, the source of funds must be documented.
• Borrower(s) who were unable to bring their forbearance current through reinstatement and used on the following methods (this applies to all properties owned), may be eligible if they have made a minimum of 3 timely payments from the date of the repayment plan/agreement.  Payments may not be made in advance of the due dates.
  • Repayment Plan
  • Modification Agreement (except those that qualify per our Modification guides)
  • Payment Deferral
• Copy of the repayment plan, payment deferral agreement or modification is required.

Forbearance – FHA, VA, USDA Loans

• Borrower(s) must be current on all mortgage for all properties owned through the month of closing.
• Borrower(s) must document that they have been removed from forbearance on any mortgage loan, including our subject and any other property.
• Any 30 day or more lates must fit within product parameters or the loan is ineligible for financing.

Temporary Appraisal Guidance-Conventional Loans

A Drive by Appraisal is acceptable if the loan fits within the below metrics:

• Purchases-LTV equal to or less than 85% for all occupancy types
• Limited Cash Out refinances – If existing loan is owned by either FNMA or FHLMC
  • Loans not owned by either FNMA or FHLMC must have a full appraisal
• Cash Out refinances-ineligible, must have a full appraisal
• Below are both FNMA and FHLMC owned loans-look up tools
  • https://www.knowyouroptions.com/loanlookup
  • https://ww3.freddiemac.com/loanlookup/

Appraisal Guidance-FHA/VA/USDA Loans

FHA/USDA:

• Exterior only appraisals are eligible on Purchase and Rate and Term refinance transactions 
• Full Appraisals are required on all Cash out transactions
• 1004D-With the exclusion of New Construction transactions, LoanStream will permit a letter signed by the borrower confirming that the work was completed along with photographs of the completed work, paid invoices indicating completion, occupancy permits, or other substantially similar documentation.

VA:

• Use of an Exterior appraisal is limited to the maximum 2020 FHLMC Conforming Loan Limit for a one unit property in the county area.
• Appraiser must state on page 1 of the appraiser report under Map Reference, whether the report was completed as an Exterior Only or Desktop.  Appraisers must bodly and inconspicuously state “Per Department of Veterans Affairs, no interior inspection was provided due to COVID-19.”
  • A Full Appraisal is still required when:
    • VA Purchase Transaction on a Vacant Property, when the appraiser’s assigned geographic jurisdiction does not have restrictions imposed by authorities prohibiting individuals from leaving their home.
    • VA Purchase or Refinance Transaction on a borrower occupied property, when the appraiser’s assigned geographic jurisdiction does not have restrictions imposed by authorities prohibiting individuals from leaving their home.  As long as the following criteria is met:
      • Either party has not been instructed by health authorities to stay home or practice social distancing or
      • Does not have flu like symptoms or
      • Has not been quarantined under direction of public health authorities and
      • No parties are within the CDC guidance of high risk
• A 1004D is required for all requested repairs.
• All NOV conditions must be cleared prior to closing.

Age of Documentation- Conventional Products

• All asset statements must be dated within 60 calendar days of the note date.
• For quarterly statements, the most recent quarterly statement is required.
• As a reminder, we already require the most recent pay stub, Written VOE (within 15 calendar days of note date) or YTD P&L (within 45 calendar of note date).  We also already require an independently verified VVOE before docs and at time of funding, including verification that any self-employed business is open and operating.  Any change in status or income, the loan must be sent back to underwriting.
• Expiration dates for credit, title, appraisals and other documents remain unchanged.

Age of Documentation- FHA/VA/USDA Products

• Remain unchanged
• As a reminder, we already require the most recent pay stub, Written VOE (within 15 calendar days of note date) or YTD P&L (within 45 days of note date).  We also already require an independently verified VVOE before docs and at time of funding, including verification that any self-employed business is open and operating.  Any change in status or income, the loan must be sent back to underwriting.

COVID-19 Borrower Certification:

• We have implemented a certification form where borrowers must attest to ability to repay prior to funding.  This is required to be executed by all borrowers on a transaction.  Funding will not commence otherwise.  Funders will be required to review all answers.  Any negative answers will require the funding be held and the loan go back to underwriting.