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Presenting The FHA Product Workshop. Fran Wagner National Trainer 5151 Corporate Drive Troy, MI 48098 1 (800) 945-7700 Wholesale.Flagstar.Com. TODAYS AGENDA  . 1. Brief Introduction  2. Flagstar Bank’s Mission and Responsibility 3. How To Sell the FHA Product & Recent Changes

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presenting the fha product workshop

PresentingThe FHA Product Workshop

Fran Wagner

National Trainer

5151 Corporate Drive

Troy, MI 48098

1 (800) 945-7700

Wholesale.Flagstar.Com

slide2

TODAYS AGENDA  

  • 1. Brief Introduction 
  • 2. Flagstar Bank’s Mission and Responsibility
  • 3. How To Sell the FHA Product & Recent Changes
  • 4. Borrowers, Co-borrowers and Citizenship
  • 5. Credit, Credit & Credit
  • 6. Income Sources
  • 7. Debts & Liabilities
  • 8. Excessive Ratio Compensating Factors
  • 9. Assets & Funds to Close
  • 10. Appraisal Updates and Revisions
slide3
Flagstar’s Responsibility to the Borrower
  • Eliminate the risk of a future delinquency, default or foreclosure

Flagstar’s Responsibility to HUD

  • Help support community development
  • Maintain excellent understanding of products and updates
  • Protect their insurance fund with quality credit and property analysis
  • Evaluate credit performance through the Neighborhood Watch Credit System

Flagstar’s Responsibility to the Lender

  • Provide credit and property analysis based on FHA guidelines
  • Provide training tools with up-to-date changes, forms and disclosures
  • Provide excellent customer service with quality and knowledgeable underwriting staff
  • Provide state-of-the-art technology and credit decisions in a timely manner
  • Provide credit decisions to protect lender from being terminated by the Neighborhood Watch System
how to sell the fha product
How to Sell the FHA Product
  • Low down payment.
  • Borrower investment of only 3%
  • Gifts are permitted for entire 3% borrower investment
  • Gifts are permitted for all closing costs & pre-paid items
  • Seller paid contributions permitted up to 6% of sales price
  • Down Payment Assistance (DPA) programs permitted
  • Seller-Funded DPA not allowed if base loan amount exceeds $362,790.
  • Seller-Funded DPA in declining markets – Minimum Credit Scores for all borrowers = 620
  • Permits combination of DPA, seller contributions and gifts funds
  • Mortgage Insurance Premiums based on combined risk factors of LTV and Credit Scores
  • Up-Front Mortgage Insurance Premium (MIP) can be financed
  • Base loan amount (+) Up-Front MIP (=) Gross Loan Amount
  • UFMIP and Annual MIP are calculated using the base loan amount and the appropriate basis points
  • Annual MIP is paid monthly and is lower than many conventional and EA programs
  • No reserves required unless 3-4 unit property or non-traditional credit
calculating the maximum loan amount for an fha purchase
Maximum Loan-to-Value Percentages

LOW CLOSING COST STATES

98.75% For properties with values/sales prices  $50,000

97.65% For properties with values/sales prices > $50,000 – $125,000

97.15% For properties with values/sales prices > $125,000

HIGH CLOSING COST STATES

98.75% For properties with values/sales prices  $50,000

97.75% For properties with values/sales prices > $50,000

PART 1

A. Lesser of Sales Price or Value $______________

B. Appropriate Loan to Value X______________

C. Maximum Base Loan Amount =______________

PART 2

D. Minimum Cash Investment: A (x) 3 Percent $______________

E. Minimum Down Payment: A (-) C $______________

F. Minimum Borrower Paid Closing Costs: D (-) E $______________

G. Borrower’s Minimum Cash Investment: E (+) F $______________

Calculating the Maximum Loan Amountfor an FHA Purchase
how to sell the fha product9
How to Sell the FHA Product
  • No income limits
  • Permits non-occupying co-borrowers without separate qualifying ratios
  • Minimum credit score of 580 (620 if located in declining market using DPA)
  • Credit scores between 550-579 are eligible with a Total Scorecard “Approve” or “Accept” response - Applies to Purchases and Rate & Term Refinances only
  • Minimum credit score of 580 on Cash-Out refinances over 85% LTV, regardless of Total Scorecard response
  • Liberal qualifying ratios of 31/43
  • Automated underwriting available through the FHA Total Scorecard System
  • Provides CREDIT waiver with “Accept” or “Approve” responses through Total Scorecard
  • Provides RATIO waiver with “Accept” or “Approve” responses through Total Scorecard
  • Does not require collections to be paid off as condition of approval on “Accept” or “Approve” responses through Total Scorecard
  • Allows “Manual” underwriting for a “Refer” response. Refer does not mean REJECT !
mortgagee letter 2005 15 total scorecard tolerance levels
Mortgagee letter 2005-15Total Scorecard Tolerance Levels
  • Does not require rescore when the verified reserves are no more than 10% less than amount listed on 1003
  • Does not require rescore when the verified income is no more than 5% less than income listed on 1003
  • Does not require rescore when the ratios do not result in more than a 2% ratio increase due to estimated taxes & insurance vs. the actual taxes & insurance
mortgagee letter 08 16 risk based mortgage insurance premiums
Mortgagee Letter 08-16Risk-Based Mortgage Insurance Premiums
  • Both UFMIP and Annual MIP are now based on the borrower’s Decision Credit Score and LTV – Flagstar Bank score floors remain in effect, regardless of the the availability of mortgage insurance
    • LTV is calculated by dividing base loan amount by the lesser of the sales price or appraised value
    • Decision Credit Score is calculated using the following methodology:
      • Three available scores – middle value is used
      • Two available scores – lower value is used
      • One available score – use that score
      • Multiple Borrowers – use decision credit score for borrower with LOWEST decision credit score
      • Multiple Borrowers/One Without Credit Score(s) – use highest UFMIP/Annual Premium Calculations
        • If mortgage insurance premiums are higher for borrowers using non-traditional scores, use non-traditional UFMIP and Annual MIP calculations
        • If mortgage insurance premiums are higher for borrower that has credit scores, use UFMIP and Annual MIP calculations for borrower with credit scores
        • If one or more borrowers fall into an LTV/Decision Credit score category for which MI is not available, it’s acceptable to remove the non-qualifying borrower. Remaining borrower must qualify for loan on his or her own. UFMIP and Annual MIP are determined using remaining borrower’s decision credit score
mortgagee letter 08 16 risk based mortgage insurance premiums12
Mortgagee Letter 08-16Risk-Based Mortgage Insurance Premiums
  • Borrowers without credit scores must provide acceptable non-traditional credit references according to requirements in ML 08-11
  • Borrowers who meet UFMIP/Annual Mortgage Insurance requirements but receive a Total Scorecard “Refer” Response must meet all other FHA qualifying guidelines related to credit, ratios, compensating factors, etc. – Loans may not be approved solely based on the availability of risk-based MI for a decision score/LTV combination
  • First-time homebuyers
    • Borrower has had no homeownership in most recent three years prior to purchase agreement execution or
    • Borrower has only owned a principal residence with a former spouse while married or
    • Borrower has only owned a principal residence not permanently affixed to a permanent foundation or a property that was not in compliance with state, local, or model building codes and cannot be brought into compliance for less than the cost of constructing a permanent structure
mortgagee letter 08 16 risk based mortgage insurance premiums13
Mortgagee Letter 08-16Risk-Based Mortgage Insurance Premiums
  • Refinance Transactions
    • Rate and Term Refinances, including FHA to FHA and Conventional mortgages that are current at the time of refinance – UFMIP/Annual MIP are calculated using new decision credit score and LTV and Risk-Based Premium Charts in effect at time of refi
    • Cash-Out Refinances - UFMIP/Annual MIP are calculated using new decision credit score and LTV and Risk-Based Premium Charts in effect at time of refi
    • FHA Secure for mortgage loans that are currently delinquent
      • UFMIP is 225 basis points for all LTVs and credit scores
      • Annual MIP is 55 basis points for all credit scores and LTVs > 95%
      • Annual MIP is 50 basis points for all credit scores and LTVs 95% or less
      • First subsequent refi must be credit qualifying – UFMIP/Annual MIP will be calculated using new credit score and LTV and Risk-Based Premium Charts in effect at time of refi
      • eligible for Streamline refi after credit qualifying refinance
    • Streamline Refinances – New case number ordered before July 14, 2008
      • Current Streamline Refi – UFMIP is 150 basis points and Annual MIP is 50 basis points
      • Subsequent Streamline Refis – UFMIP will be 100 basis points and Annual MIP will be 50 basis points
mortgagee letter 08 16 risk based mortgage insurance premiums14
Mortgagee Letter 08-16Risk-Based Mortgage Insurance Premiums
  • Refinance Transactions, Cont’d
    • Streamline Refinances – New case number ordered on or after July 14, 2008 but existing case number issued prior to July 14, 2008
      • Current Streamline Refi – UFMIP is 100 basis points and Annual MIP is 50 basis points
      • Subsequent Streamline Refis – UFMP will be 100 basis points and Annual MIP will be 50 basis points
    • Streamline Refinances – Streamline Refi of Purchase or Credit Qualifying Refi where existing case number (for loan being refinanced) was ordered on or after July 14, 2008
      • UFMIP/Annual MIP are calculated using Risk-Based Premium Charts in effect at time of refi – LTV and Credit Scores are based on previous loan’s LTV and Scores and can be found through the “Case Query” screen in FHA Connection
mortgagee letter 08 16 risk based mortgage insurance premiums15
Mortgagee Letter 08-16Risk-Based Mortgage Insurance Premiums
  • In order to be eligible for the reduced UFMIP, first-time homebuyer pre-purchase counseling must meet the following criteria:
    • Must have been completed within 12 months prior to borrower signing purchase contract
    • Must be completed one-on-one, in person by a HUD approved Housing Counselor
    • Must consist of the following minimum components:
      • Budgeting and credit, including an analysis of the household’s unique financial/credit situation
      • Assessing homeownership readiness, including an evaluation of home and monthly payment affordability
      • Development of a written action plan outlining the steps the household and the counselor will take to help the household meet their goals
      • Financing a home, including a discussion of alternative types of mortgage loans/features and special financing products, common lending documents, and steps in the loan application, approval, and closing processes
      • Shopping for a home, including understanding the professionals involved in the process
      • Maintaining a home, including preventive maintenance, taxes, and insurance
mortgage letter 08 13 fha secure expansion
Mortgage Letter 08-13FHA Secure Expansion
  • Comprehensive re-structuring of FHA’s current refinance program (Streamline Refinance transactions excluded)
  • Permits lenders to refinance borrowers who are delinquent on existing non-FHA adjustable rate mortgages because of a rate reset
  • Includes borrowers who experienced some delinquencies on non-FHA ARMs in the 12 months leading up to the rate reset
  • Includes borrowers who have been delinquent on non-FHA ARMs due to extenuating circumstances
  • Permits qualifying mortgage arrearages to be included in refinance
fha secure expansion
FHA Secure Expansion

FHA Secure

All non-FHA to FHA Rate and Term Refinances

  • Conventional Fixed Rate or ARM loans where the mortgage payments are current
    • Max Mortgage – FHA county limit or appropriate LTV calculation
    • Max LTV – Standard LTV Calculation
    • Satisfactory mortgage payment history verified through mortgage servicer or canceled checks
    • New, existing or modified subordination agreements allowed - Max CLTV 100%
    • Minimum credit score 580 with Total Scorecard “Refer” response
    • Minimum credit score 550 with Total Scorecard “Accept” or “Approve” response
    • Ratios 31/43 – Ratios may be exceeded with Total Scorecard “Accept” or “Approve” response or compensating factors
    • Max Cash-in-hand $500
    • UFMIP and monthly MIP based on Risk Based Pricing Matrixes in effect at time of refi
fha secure expansion18
FHA Secure Expansion
  • Delinquent non-FHA ARMS – Delinquency was caused by ARM reset or extenuating circumstances AND meets one of the following criteria – delinquent non-FHA fixed rate mortgages are not eligible for refinance
    • Borrower made monthly mortgage payments in the month due for the most recent six months prior to rate reset or
    • No more than one 60-day or two 30-day late mortgage payments in the 12 months prior to the rate reset or extenuating circumstance that caused the delinquency or
    • No more than one 90-day or three 30-day late mortgage payments in the 12 months prior to the rate reset or extenuating circumstance that caused the delinquency and LTV is 90% or less
    • Borrowers delinquent on interest-only loans or payment option ARMS may not have had any 30-day lates in the most recent six months prior to rate reset
    • Borrowers with less than 12 months mortgage history must demonstrate that all payments were made within the month due for the most recent six months prior to rate reset or extenuating circumstance
    • FHA Secure inclusion of currently delinquent mortgages is set to expire with originations on or before 12/31/08
    • Only FHA refinance for mortgage loans that are currently delinquent – Current mortgage being refinanced must be a non-FHA ARM
    • Maximum LTV – Standard LTV Calculation
fha secure expansion19
FHA Secure Expansion

FHA Secure Cont’d

  • Maximum CLTV 100%
  • Loan amount may not exceed the lower of FHA’s county limit or $500,000
  • LTV is calculated using current appraised value, regardless of seasoning
  • UFMIP is 225 basis points for all currently delinquent mortgages
  • Annual MIP is 55 basis points for all currently delinquent mortgages that exceed 95% LTV and 50 basis points for LTVs 95% and less
  • Qualifying Ratios are 31/43 for borrowers who have no more than one 60-day or two 30-day mortgage lates in most recent 12 months prior to reset. 31/43 ratios may be exceeded with an “Approve” or “Accept” rating through Total Scorecard orastrong compensating factors(s)
  • Borrowers with one 90-day or 3 30-day mortgage lates in most recent 12 months prior to reset may not exceed ratios of 31/43, regardless of Total Scorecard response and/or compensating factors
  • Non-Occupant Co-Borrowers permitted
  • Loan amount may include mortgage arrearages incurred after reset or extenuating circumstances
  • Loan amount may include 2nd mortgages seasoned at least one year. For Home Equity lines of credit, there may not have been any draws in excess of $1000 in the most recent 12 months
  • Max cash-in-hand $500
fha secure expansion20
FHA Secure Expansion

FHA to FHA Rate and Term Refinance

  • Borrower must be current on existing mortgage debts and have acceptable mortgage payment histories
  • Maximum LTV – Standard LTV Calculation
  • Maximum CLTV 100%
  • Loan Amount may not exceed FHA county limit
  • LTV is calculated using current appraised value, regardless of seasoning
  • Qualifying ratios are 31/43 but may be exceeded with “Accept” or “Approve” response through Total Scorecard or with compensating factor(s)
  • Non-occupant co-borrowers permitted
  • Loan amount may include 2nd mortgages seasoned at least one year. For Home Equity lines of credit, there may not have been any draws in excess of $1000 in the most recent 12 months
fha secure expansion21
FHA Secure Expansion
  • FHA 85.01 - 95% Cash-Out Refinance

All FHA to FHA or non-FHA to FHA Cash-Out Refinances

    • Property must have been owned for at least the most recent 12 months
    • All existing Mortgages must have been current in the most recent 12 months
    • 1-2 Unit Properties
    • Max Loan amount $417,000
    • Appraised Value is used to determine LTV
    • Max CLTV 100% when re-subordinating or modifying existing subordinate financing
    • New subordinate financing not allowed
    • Ratios 31/43 – May be exceeded with Total Scorecard “Accept” or “Approve” response or compensating factors
    • Non-Occupant Co-Borrowers not permitted for LTVs > 85%
    • Minimum Credit Score 580
    • Manufactured Home – Minimum Score is 580 and Total Scorecard “Accept” or “Approve” response
    • Cash-in-hand limited to $200,000
    • If property is located in a declining market, max LTV is 90%
    • Borrowers in arrears on their current mortgage are not eligible
fha secure expansion22
FHA Secure Expansion

FHA Cash-Out Refinances with LTVs 85% or Less

  • Loan amount may not exceed FHA county limit
  • 1-4 unit properties
  • No seasoning required
  • Non-occupant co-borrowers permitted
  • Max CLTV 100% when re-subordinating or modifying existing subordinate financing
  • New subordinate financing not allowed
  • Ratios 31/43 – May be exceeded with Total Scorecard “Accept” or “Approve” response or with compensating factors(s)
  • Minimum Credit Score 580 for Total Scorecard “Refer” responses
  • Minimum Credit Score 550 for Total Scorecard “Accept” or “Approve” responses
  • Maximum cash-in-hand is $200,000
  • Borrowers in arrears on their current mortgage are not eligible
streamline refinances
Streamline Refinances
  • FHA to FHA Refi – Intended to lower monthly P & I payments
  • May be originated with or without appraisal
  • Cash back at closing limited to $500.
  • A delinquent mortgage is generally not eligible for streamline refinancing until the loan is brought current. However, if the mortgage is delinquent by no more than two monthly payments, the re-financing lender may pay the borrower’s mortgage to bring the payments current provided no obligation is placed on the borrower to repay the funds used to bring the mortgage current.
    • If the mortgage is delinquent by more than two months, refer to ML 94-30.
    • If the loan is an ARM to fixed rate loan, all mortgage payments must have been made within the month due for the past twelve months or period of time that the loan has been in force if shorter.
    • On an ARM-to-fixed rate streamlined refinance, if the new fixed-rate mortgage will be at a rate lower than the existing rate of the ARM, the 30 days late, rule is not applicable.
  • Flagstar Bank will order and review a credit report on all streamline refinances without an appraisal – minimum credit score = 550 unless loan is Flagstar Bank to Flagstar Bank streamline refinance
  • Flagstar Bank will complete a verbal verification of employment for all streamline refinances without an appraisal
  • VOM or other documentation is required which includes principal balance, date loan originated, names of original borrowers and type of loan
streamline refinances cont d
Streamline Refinances, Cont’d
  • Max CLTV - Subordinate financing may remain in place without regard to the total indebtedness (the combined amounts of the first and subordinate mortgages may exceed the maximum mortgage limit for the area but may not exceed 100% CLTV)
  • Social Security Numbers must be verified for all borrowers.
  • A pay-off statement from the current lender showing the unpaid principal must be included in the endorsement binder.
  • The amount of the existing first mortgage may not include delinquent interest.
  • Original principal balance must be verified from the Refinance Authorization screen in the FHA Connection since this will reflect any principal reductions for the previous loan.
  • An ARM may by refinanced to another ARM, provided that an immediate payment reduction occurs AND that the maximum interest rate of the new mortgage does not exceed the maximum interest rate of the loan that’s being refinanced
  • An ARM may be refinanced to a fixed-rate mortgage, provided the interest rate on the new fixed-rate mortgage will be no greater than 2 percentage points above the current rate of the ARM. In addition, all mortgage payments in the most recent 12 months must have been made within the month due (or for the time the mortgage has been in force, if shorter) If the new mortgage rate will be lower than the existing ARM rate, the “within the month due” is not applicable
streamline refinances cont d25
Streamline Refinances, Cont’d
  • A Hybrid Arm, (3/1 and 5/1 ARMS) may be streamline refinanced to a fixed rate mortgage, with or without appraisal, provided that the payment will not increase more than 20% and all mortgage payments have been made within the month due for at least the past 12 months or the period the mortgage has been in force, if shorter.
  • Any streamline refinance of a 30-year mortgage on a principal residence may be refinanced to a shorter term mortgage as long as the new monthly principal and interest does not increase more than 20%.
  • A fixed-rate mortgage may be refinanced to a one-year ARM, provided the interest rate of the new mortgage is at least 2 percentage points below the interest rate of the current mortgage
  • A fixed-rate mortgage or any ARM loan may be refinanced to a hybrid (3/1 and 5/1 ARM), provided that an immediate payment reduction occurs.
  • A holding period of six months applies when: (1) the borrower obtained the loan via non-qualifying assumption; or (2) when a borrower is deleted due to devise or descent of law (e.g., divorce, death, etc.) and a quit-claim of interest has been executed. Full credit qualifying is required if held less than six months and/or if due-on-sale clause is triggered (1-12-C)
streamline with appraisal
Streamline WITH Appraisal
  • Term of the new loan can be up to 30 years.
  • If an appraisal is ordered but the borrower decides to proceed with a streamline without an appraisal, the appraisal may be voided. The case type in FHA Connection must be changed to reflect that the case number is now a streamline without an appraisal
streamline without appraisal
Streamline WITHOUT Appraisal
  • Term of the new mortgage is the lesser of 30 years or the un-expired term of the existing mortgage plus 12 years
  • This is the ONLY type of refinance that can be accomplished in condominium projects that are no longer approved
fha secure delinquent non fha arm to fha
FHA Secure Delinquent Non-FHA ARM to FHA

Use the LOWER of the following three calculations:

$______________ Appraised Value

Multiplied by Appropriate LTV Factor

Low Closing Cost States - 98.75% - Property Value $50,000 or less

97.65% - Property Value > $50,000 - $125,000

97.15% - Property Value > $125,000

High Closing Cost States

98.75% - Property Value  $50,000

X_______________ 97.75% - Property Value > $50,000

=_______________ Maximum Mortgage Before UFMIP

OR

fha secure delinquent non fha arm to fha29
FHA Secure Delinquent Non-FHA ARM to FHA

$_______________ Principal Balance on Existing First Lien (includes existing balance, pre-payment penalties, late payment charges, attorney fees, inspection fees, and other charges traditionally associated with servicing mortgages.

+_______________ PITI arrearages incurred after rate reset or extenuating circumstances (if incurred prior to rate reset or extenuating circumstance, may not be included)

+_______________ Allowable Borrower-Paid Closing Costs

+_______________ Junior liens over 12 months old – No seasoning requirement for purchase money seconds. Equity lines in excess of $1000 advanced in last 12 months are not eligible for inclusion (unless documented for repair/renovation of subject property

+_______________ Appraiser-Required Repairs

+_______________ Equity to Ex-Spouse

+_______________ Prepaid Expenses

+_______________ Reasonable Discount Points

=_______________ Maximum Mortgage Before UFMIP

OR if borrower has one 90-day or three 30-day delinquencies prior to rate reset or extenuating circumstance

fha secure delinquent non fha arm to fha30
FHA Secure Delinquent Non-FHA ARM to FHA

$________________ Appraised Value

X________________ 90%

=________________ Maximum Mortgage Before UFMIP

fha secure non fha to fha not delinquent
FHA SecureNon-FHA to FHA – Not Delinquent

Use the LOWER of the following two calculations:

$______________ Appraised Value

Multiplied by Appropriate LTV Factor

Low Closing Cost States

98.75% - Property Value $50,000 or less

97.65% - Property Value > $50,000 - $125,000

97.15% - Property Value > $125,000

High Closing Cost States

98.75% - Property Value  $50,000

X_______________ 97.75% - Property Value > $50,000

=_______________ Maximum Mortgage Before UFMIP

OR

fha secure non fha to fha not delinquent32
FHA SecureNon-FHA to FHA – Not Delinquent

$_______________ Principal Balance on Existing First Lien (includes existing first lien, prepayment penalties, late payment charges, attorney fees, inspection fees, and those other charges traditionally associated with servicing mortgages) – arrearages may not be included

+_______________ Allowable Borrower-Paid Closing Costs

+_______________ Junior liens over 12 months old – No seasoning requirement for purchase money seconds. Equity lines in excess of $1000 advanced in last 12 months are not eligible for inclusion (unless documented for repair/renovation of subject property)

+_______________ Appraiser-Required Repairs

+_______________ Equity to Ex-Spouse

+_______________ Prepaid Expenses

+_______________ Reasonable Discount Points

=_______________ Maximum Mortgage Before UFMIP

fha fha rate and term refi
FHA – FHA Rate and Term Refi

Use the LOWER of the following two calculations:

$______________ Appraised Value

Multiplied by Appropriate LTV Factor

Low Closing Cost States

98.75% - Property Value $50,000 or less

97.65% - Property Value > $50,000 - $125,000

97.15% - Property Value > $125,000

High Closing Cost States

98.75% - Property Value  $50,000

X_______________ 97.75% - Property Value > $50,000

=_______________ Maximum Mortgage Before UFMIP

OR

fha fha rate and term refi34
FHA – FHA Rate and Term Refi

$_______________ Principal Balance on Existing First Lien (includes existing first balance, prepayment penalty, up to one month monthly MIP, the mortgage payment that was due on the first if not already paid, up to 30 days interest for the current month, late charges, and escrow shortages) – arrearages may not be included

+_______________ Allowable Borrower-Paid Closing Costs

+_______________ Junior liens over 12 months old – No seasoning requirement for purchase money seconds. Equity lines in excess of $1000 advanced in last 12 months are not eligible for inclusion (unless documented for repair/renovation of subject property)

+_______________ Appraiser-Required Repairs

+_______________ Equity to Ex-Spouse

+_______________ Prepaid Expenses

+_______________ Reasonable Discount Points

-_______________ MIP Refund, if applicable

=_______________ Maximum Mortgage Before UFMIP

cash out refinances
Cash-Out Refinances

Use the appropriate calculation:

$_______________ Appraised Value

X_______________ 95% - if owned > 1 year prior to loan application

=_______________ Maximum Mortgage Before UFMIP

OR when property is owned < 1 year prior to loan application

$_______________ Appraised Value

X_______________ 85%

=_______________ Maximum Mortgage Before UFMIP

streamline refi without appraisal
Streamline Refi Without Appraisal

Use the LOWER of the following two calculations:

$______________ Original Principal Balance (from “refinance authorization” screen in FHA Connection)

OR

$_______________ Principal Balance on Existing First Lien (includes existing balance, up to one month monthly MIP, the mortgage payment that was due on the first if not already paid, up to 30 days interest for the current month, late charges, and escrow shortgages) – arrearages may not be included

+_______________ Allowable Borrower-paid Closing Costs

+_______________ Prepaid Expenses

+_______________ Reasonable Discount Points

- _______________ MIP Refund, if applicable

=_______________ Maximum Mortgage Before UFMIP

streamline refi with appraisal
Streamline Refi With Appraisal

Use the LOWER of the following two calculations:

$______________ Appraised Value

Multiplied by Appropriate LTV Factor

Low Closing Cost States

98.75% - Property Value $50,000 or less

97.65% - Property Value > $50,000 - $125,000

97.15% - Property Value > $125,000

High Closing Cost States

98.75% - Property Value  $50,000

X_______________ 97.75% - Property Value > $50,000

=_______________ Maximum Mortgage Before UFMIP

OR

streamline refi with appraisal38
Streamline Refi With Appraisal

$________________ Principal Balance on Existing First Lien (includes existing balance, up to one month monthly MIP, the mortgage payment that was due on the first if not already paid, up to 30 days interest for the current month, late charges, and escrow shortgages) – arrearages may not be included

+_______________ Allowable Borrower-paid Closing Costs

+_______________ Prepaid Expenses

+_______________ Reasonable Discount Points

-_______________ MIP Refund, if applicable

=_______________ Maximum Mortgage Before UFMIP 

mortgagee letter 2006 04 revised borrower s closing costs guidelines
Mortgagee Letter 2006-04Revised Borrower’s closing costs guidelines
  • Lenders may charge and collect fees that are reasonable and customary
  • These fees may be used as part of the borrower’s 3% investment, excluding discount points
  • Borrowers may not pay a Tax Service Fee
    • Flagstar Bank’s tax service fee is $69
  • Seller contributions still remain at 6%
  • Flagstar Bank charges an Admin Fee for all FHA loans (“commitment fee” for properties located in New Jersey and North Carolina)
    • Broker - $550
    • Correspondent - $520
    • FHA DE - $150
    • When Flagstar Bank prepares closing docs, add $150
basic qualifications
Basic Qualifications
  • Must be able to afford the mortgage payment
  • Must meet FHA credit requirements (Refer Response only)
  • Must meet Flagstar Bank’s credit score requirements
  • Must meet employment requirements
  • Must meet required cash investment from own funds or other acceptable source
  • Must occupy property as primary residence
  • Sales price must be supported by appraisal
  • Property may not have any visible health or safety issues
  • Financing available on 1-4 unit properties with owner occupancy
products available
Products Available
  • Fixed rate with 15, 20, 25 & 30 year terms
  • 1 year, 3/1 and 5/1 Adjustable rate loans
  • Cash out refinances up to 95% LTV
  • Rate & Term Refinances, Cash-out Refinances, Streamlines with or without appraisals
  • Single-family & Multi-unit family – up to 4 units with owner occupancy
  • Approved Condos & Spot Condos
  • Double-Wide Manufactured Homes (Kentucky, New York, Puerto Rico and U.S. Virgin Islands excluded)
  • New Construction
  • PUDS
  • Disaster Victims Mortgage
  • FHASecure – Temporary Product
slide42

Credit Analysis

The purpose of underwriting is to determine the borrower’s ability and willingness to repay the mortgage debt to eliminate the risk of future default or foreclosure, and to examine the property to determine sufficient collateral.

borrower s credit
Borrower’s Credit
  • Past credit performance is the most useful guide in determining credit attitude
  • Timely payments on current & past obligations represent reduced risk
  • Credit history that shows continuous slow pays, judgments and/or collections increases the overall risk and requires strong compensating factors for approval
  • A pattern of derogatory credit history increases risk
  • Isolated occurrences of derogatory credit reduce risk
  • The Underwriter must determine if poor credit performance is based on a disregard for financial obligations or by factors beyond the borrowers control
  • Minor credit issues occurring 2 or more years in the past do not require explanation and are not considered high risk
  • Major credit issues including judgments, collections and recent credit problems require written explanation and increase the credit approval risk
borrower s credit cont d
Borrower’s Credit, Cont’d
  • Credit explanations must make sense and be consistent with other file data
  • High emphasis is placed on satisfactory histories for current housing and/or rent, utilities, secured installment debts and then revolving and unsecured debts
  • Payment history on the borrower’s housing obligation has significant importance in evaluating credit
  • Verification of current housing must be obtained directly from Mortgage company via VOM or included on credit report
borrower s credit cont d45
Borrower’s Credit, Cont’d
  • Verification of current rent must be obtained directly from an apartment complex or rental management agency. In some cases, cancelled checks, copies of money order receipts or bank statements will be required
  • Undisclosed debts must be explained – only funds from secured debts may be used for borrower’s down payment, closing costs and pre-paids – funds from revolving or other unsecured loans are not eligible as all or part of borrower’s investment
  • Credit inquiries in the most recent 90 days must be explained
  • Read all findings to determine specific requirements
judgments
Judgments
  • Court ordered judgments MUST be paid in full, regardless of Total Scorecard response
  • An exception may be granted if the judgment has been in repayment for at least 12 months with an acceptable payment arrangement letter, satisfactory history and debt included in ratio

Collections

  • FHA DOES NOT REQUIRE COLLECTIONS TO BE PAID OFF AS A CONDITION OF MORTGAGE APPROVAL, however, collections and judgments indicate the borrower’s regard for credit obligations and MUST be considered in the underwriter’s overall analysis
  • All collections & judgments, regardless of time frame must be explained

Mortgage Foreclosure

  • Unless an “Accept” or “Approve” response is received from Total Scorecard, borrowers with a previous foreclosure or deed-in-lieu of foreclosure will not be eligible for FHA financing if the foreclosure or deed-in-lieu of foreclosure occurred within the past three years
chapter 7 bankruptcy
Chapter 7 Bankruptcy
  • FHA insurable 2 years or more from BK-7 discharge date (application date not closing date)
  • Must document satisfactory history on any re-established trade lines
  • Underwriter may require 3 or more satisfactory non-traditional trade lines
  • Must provide statement from borrower who has chosen not to re-establish any trade lines after BK 7 or has no non-traditional trade line sources
  • Unless an “Accept” or “Approve” response is received from Total Scorecard, a borrower who has a BK-7 discharged less than 2 years will not be considered for approval
  • No BK 7 discharged less than 12 months from application date will be considered
  • Unless an “Accept” or “Approve” response is received from Total Scorecard, borrowers who have late payments after a BK7 has been discharged are limited to an 85% LTV on a cash-out refinance
chapter 13 bankruptcy
Chapter 13 Bankruptcy
  • Must document at least 1 year into the payout period plan has elapsed
  • Must document satisfactory payment history
  • Must obtain court permission to enter into new mortgage
  • Must include Chapter 13 payment in the debt ratio if the BK is not paid off
  • Borrowers currently in a Chapter 13 BK are limited to 85% LTV on cash-out refinances, regardless of Total Scorecard response

Consumer Credit Counseling

  • Must document that at least 1 year into the payout period plan has elapsed
  • Must document satisfactory payment performance and must document the debts/trade lines included in the payment plan
  • Must obtain Counseling Agency permission to enter into new mortgage
mortgagee letter 2008 11 non traditional credit borrower with no credit score
Mortgagee Letter 2008-11Non-Traditional Credit - Borrower With No Credit Score
  • 3 credit references required with at least 1 from Group I
    • Group I: Rental history, utility company including gas, electricity, water, land-line home telephone or cable TV
    • Group II: Insurance (medical, auto, life, renters insurance) if not payroll deducted; payment to child care providers-made to a business; school tuition; retail stores (department, furniture, appliance, specialty, rent to own, internet/cell phone); 12 month history of savings by regular deposits (quarterly/non-payroll); personal loan with repayment terms in writing along with cancelled checks
  • Non-traditional credit must be verified by a credit vendor on a NTMCR (non-traditional mortgage credit report)
  • If a NTMCR is not used, all credit references must be documented with the most recent 12 months cancelled checks
evaluating non traditional credit
Evaluating Non-Traditional Credit
  • No history of delinquency on rental history
  • No more than 1x30 on payments to other creditors
  • No collections accounts/court records (other than medical) filed within the past 12 months
evaluating non traditional credit51
Evaluating Non-Traditional Credit

No Credit References or only Group II References

  • 12 months verification
  • No more than 1x30 on credit source from Group II
  • No collection accounts/court records (other than medical) filed within the past 12 months
non traditional underwriting
Non-Traditional Underwriting
  • Qualifying ratios are to be computed using only those occupying the property
  • Housing ratio cannot exceed 31% - Debt ratio cannot exceed 43% - Compensating factors not allowed
  • Borrowers must have 2 months reserves from their own funds
slide53

Excessive Ratio Loans

(Compensating Factors for Loans exceeding ratios of 31/43.)

Compensating factors may be used to justify approval of a mortgage loan that exceeds guidelines and that receives a “refer” response. Underwriters must record the compensating factor(s) used to support loan approval in the "remarks" section of the Mortgage Credit Analysis Worksheet or 92900 – LT. Any compensating factor(s) used to justify mortgage approval must be supported by documentation

compensating factors
Compensating Factors
  • The borrower has successfully demonstrated the ability to pay a housing expense equal to or greater than the proposed monthly housing expense for the past 12-24 months
  • The borrower makes a large down payment (10% or more) toward the purchase of the property
  • The borrower has demonstrated the ability to accumulate savings and has a conservative attitude toward the use of credit
  • Previous credit history shows that the borrower has the ability to devote a greater portion of income to housing expenses & is a limited debt user
  • The borrower receives documented compensation or income not reflected in effective income but directly affecting the ability to pay the mortgage, including food stamps and similar public benefits
  • There is only a minimal increase in the borrower's housing expense
  • The borrower has substantial documented cash reserves (at least 3 months worth) after closing
compensating factors55
Compensating Factors
  • Funds borrowed against these accounts may be used for loan closing, but are not to be considered as cash reserves: “Assets” such as net equity in other properties; proceeds from a cash-out refinance; and funds from gifts, regardless of source
  • The borrower has substantial non-taxable income
  • The borrower has potential for increased earnings as indicated by job training or education in the borrower's profession
  • The home is being purchased as a result of relocation of the primary wage-earner, and the secondary wage-earner has an established history of employment, is expected to return to work, and reasonable prospects exist for securing employment in a similar occupation in the new area. The underwriter must document the availability of such possible employment
slide56

Income Sources and Documentation

The amount of income and the likelihood of its continuance must be established to determine a borrower's capacity to repay mortgage debt - Income may not be used in calculating the borrower's income ratios if it comes from any source that cannot be verified, is not stable, or will not continue

stability of income
Stability of Income
  • FHA does not impose a minimum length of time a borrower must have held a position of employment
  • The lender must verify the borrower's employment for the most recent two full years
  • Exceptions exist for borrowers who attended college or were in the military
    • The borrower must provide evidence supporting this claim, such as collegetranscripts, a college diploma or discharge papers
  • Borrowers who have recently returned to work after an absence from the workplace are eligible under the following criteria:
    • The borrower has been employed in the current job for six months or more
    • Must document 2 year work history prior to the gap of employment
  • Lenders must examine the borrower’s past employment record, qualifications for the position, previous training and education, and the employer's confirmation of continued employment
  • A borrower who changes jobs frequently within the same line of work, but continues to advance in income or benefits, should be considered favorably
  • Income stability takes precedence over job stability
salaries wages and other forms of effective income
Salaries, Wages, and Other Forms of Effective Income
  • Income of each borrower to be obligated for the mortgage debt must be analyzed to determine whether it can reasonably be expected to continue through at least the first three years of the mortgage loan
overtime and bonus income
Overtime and Bonus Income
  • Both overtime and bonus income may be used to qualify if the borrower has received such income for the past two years and it is likely to continue
  • The lender must develop an average of bonus or overtime income for the past two years, and the employment verification must not state that such income is unlikely to continue
  • Periods of less than two years may be acceptable provided the lender justifies and documents in writing the reason for using the income for qualifying purposes
  • If either type shows a continual decline, the lender must provide a sound rationalization in writing for including the income for borrower qualification
  • If bonus income varies significantly from year to year, a period of more than two years must be used in calculating the average income
part time second job income
Part Time / Second Job Income
  • Part-time/second job income, including employment in seasonal work, may be used for qualification if the lender documents that the borrower has worked the part-time job uninterrupted for the past two years and will continue to do so
  • Income from a part-time position that has been received for less than two years may be included as effective income, provided the lender justifies and documents that the income's continuance is likely
  • Income from part-time positions not meeting these requirements may be considered as a compensating factor only
  • Seasonal employment may be used for qualification if the lender documents that the borrower has worked the same type of job for the past two years and expects to be rehired during the next season
military income
Military Income
  • In addition to base pay, military personnel may be entitled to additional forms of pay
  • Income from variable housing allowances, clothing allowances, flight or hazard pay, rations, and proficiency pay is acceptable, provided its probability of continuance is verified in writing

Commission Income

  • Commission income must be averaged over the previous two years. The borrower must provide copies of signed tax returns for the last two years, along with the most recent pay stub. (Un-reimbursed business expenses must be subtracted from gross income)
  • Individuals whose commission income shows a decrease from one year to the next require significant compensating factors to allow for loan approval
  • Commissions earned for less than one year are not considered effective income. Exceptions may be made when the borrower's compensation was changed from salaried to commission as long as the borrower continues to work in the same or similar position with the same employer
  • A borrower may also qualify when the portion of earnings not attributed to commissions would be sufficient to qualify the borrower for the mortgage
retirement and social security income
Retirement and Social Security Income
  • Retirement and social security income require verification from the source (former employer, Social Security Administration) or federal tax returns. If any benefits expire within the first full three years, the income source may be considered only as a compensating factor

Alimony & Child Support

  • Must document receipt of either 3 or 12 months previous history
  • Must document 3 year continuance
interest and dividends
Interest and Dividends
  • Interest and dividend income may be used, provided that documentation (tax returns or account statements) supports a two-year history of receipt
  • This income must be averaged over the two years
  • Any funds derived from these sources and required for the cash investment must be subtracted before the projected interest or dividend income is calculated

Government Assistance Programs

  • Income received from government assistance programs is acceptable, subject to documentation from the paying agency, provided the income is expected to continue at least three years
  • Unemployment income must be documented for two years. Reasonable assurance of its continuance is also required. This requirement applies to seasonal employees, such as farm workers, resort employees, etc.
income from other sources
Income From Other Sources
  • Rent received for properties owned by the borrower is acceptable if the lender can document that the rental income is stable – This may include a current lease or schedule E from 1040s
  • If the borrower is renting out his or her current residence and purchasing a new primary residence, the borrower must provide a copy of the lease, document check for security deposit was deposited, and document borrower has 12 months reserves
  • Examples of stability may include a current lease, an agreement to lease, or a rental history over the previous 24 months
  • Income from roommates in a single-family property occupied as the borrower's primary residence is not acceptable
  • Rental income from boarders is acceptable if the boarders are related by blood, marriage, or law. The rental income may be considered effective income if shown on the borrower's tax returns
  • If a property was acquired since the last income tax filing and is not shown on Schedule E, a current signed lease or other rental agreement must be provided
  • The gross rental amount must be reduced for vacancies and maintenance by the following percentages:
    • Santa Ana HOC: 10%
    • Philadelphia HOC: 15%
    • Atlanta HOC: 15%
    • Denver HOC: 10% ( 20% for AR, OK & UT)
income from other sources cont d
Income From Other Sources, Cont’d

Projected Income:

  • Projected or hypothetical income is not acceptable for qualifying purposes. However, exceptions are permitted to this rule for income from cost-of-living adjustments, performance raises, bonuses, etc. that are both verified by the employer in writing and scheduled to begin within 60 days of loan closing
  • If a borrower is about to start a new job and has a guaranteed, non-revocable contract for employment that will begin within 60 days of loan closing, the income is acceptable for qualifying purposes
  • The lender must verify that the borrower will have sufficient income or cash reserves to support the mortgage payments and any other obligations during the interim between loan closing and the start of employment
income from other sources cont d66
Income From Other Sources, Cont’d

Employment By Family Owned Businesses:

  • Borrowers employed at businesses owned by their family member(s) are required to provide additional income documentation. These borrowers must provide the normal verification of employment, pay stubs, and evidence that they are not an owner of the business. This evidence may include copies of the borrower's signed personal tax returns or a signed copy of the corporate tax return showing ownership percentages
income from other sources cont d67
Income From Other Sources, Cont’d

Self Employed Borrowers:(Borrowers with 25 percent or greater ownership

interest in any business are considered self-employed)

  • Income from self-employment is considered stable and effective if the borrower has been self-employed for two or more years
  • An individual self-employed between one and two years must have at least two years of documented previous successful employment (or a combination of one year of employment and formal education or training) in the line of work in which the borrower is self-employed or in a related occupation
  • Income from a borrower self-employed less than one year may not be considered effective income
4506t
4506T
  • The 4506T is activated for borrowers who
    • Are self-employed
    • Receive commission income
    • Receive 1099 income
    • Work in a family-owned business
    • At underwriter’s discretion
asset verification
Asset Verification
  • When the earnest money deposit exceeds 2% of the sales price or appears excessive based on the borrowers savings pattern, lenders must document the source of funds
  • For savings and checking account statements, follow requirements on “findings” report
  • Source of large deposits must be documented not just explained
  • Large deposit designation depends on borrower’s monthly income vs. monthly cash outflow
common sources of borrower s funds for closing
Common Sources of Borrower’s Funds for Closing
  • Gift funds - Prior-to-close conditions and must contain the following documentation
    • Completion of the FHA gift letter
    • Document to support the transfer from donor to borrower
      • Copy of the donor’s cancelled check, executed withdrawal slip or copy of donor’s bank statement showing the withdrawal of the gift amount
      • Documention the borrower has deposited the gift funds in their own account (If borrower has no bank accounts, gift funds must be delivered to the title company and documented)
  • Eligible gift donors are the borrower’s relative, employer, labor union or a close friend with a clearly defined and documented interest in the borrower
  • Donors may borrow gift funds as long as the borrower is not obligated on the note
common sources of borrower s funds for closing71
Common Sources of Borrower’s Funds for Closing
  • Sale of personal property must be supported with ownership documentation, value of the item and evidence of sale
  • Approved Down Payment Assistance Programs
  • CASH SAVED AT HOME IS ALLOWED !!!!!!! Borrower must be able to demonstrate ability to save that amount of cash on hand based on length of time it took to save the cash vs. monthly debt cash out-flow. These funds must also be deposited to a bank account
  • Net proceeds from sale of currently owned property - HUD-1 Settlement Statement must be provided
  • Private savings clubs are also allowed. This is a non-traditional savings method. The borrower must document the amount of assets with the club, along with a copy of the account ledger, receipts from club, identification of the club and verification from the club treasurer
  • Loans secured against deposited funds (such as a Certificate of Deposit or Money Market Account) or withdrawals or loans from a 401(k)
debts liabilities
Debts & Liabilities
  • Liabilities include all installment loans, revolving charge accounts, real estate loans, alimony, child support and all other continuing obligations
  • Closed-ended installment debts having fewer than 10 months remaining may be excluded from the debt ratio as long as the debt does not affect the borrower’s ability to make the mortgage payment during the first 3-6 months after closing – All auto leases must be included in ratios, regardless of remaining term
  • Substantial reserves are a major compensating factor when excluding installment debts with fewer than 10 payments remaining
  • Debts excluded from ratios because fewer than 10 payments remain must have a timely payment history
  • Loans co-signed by borrowers do not have to be included in the debt ratio when the lender obtains proof that the primary borrower has been making timely payments for the most recent 12 months
debts liabilities cont d
Debts & Liabilities, Cont’d
  • Student loans that are deferred for at least 12 months from the closing date are not required to be included in the debt ratio. First payment due date is required
  • Loans secured by 401(k)s, union dues, payroll deducted savings deposits and/or childcare expenses should not be included in the debt ratio
debt to income ratios
Debt to Income Ratios
  • Mortgage PITI divided by effective income should not exceed 31% of gross effective income unless the Total Scorecard response is “Approve” or “Accept”
  • Total liabilities, including mortgage PITI, divided by effective income should not exceed 43% of gross effective income unless the Total Scorecard response is “Approve” or “Accept”
  • Compensating factors must be used to justify manual underwriting approval for a Total Scorecard “Refer” response with ratios that exceed 31% and 43%
  • Maximum allowable ratios for the 203(h) Disaster Victim’s Mortgage are 31/45%
borrowers co borrowers
Borrowers & Co-Borrowers
  • Borrowers and co-borrowers take title to the property
  • Non-occupant co-borrowers do not take title to the property
  • All borrowers are obligated on the note and security instrument
  • Co-borrower’s income, assets, liabilities and credit history must be considered during the underwriting process
citizenship and immigration status
Citizenship and Immigration Status
  • Citizenship of the United States is not required for FHA insurance
  • FHA will insure mortgages to Lawful Permanent Resident Aliens
  • Lender must document evidence of permanent residency within the Department of Homeland Security
  • FHA will insure mortgages to Non-permanent Resident Aliens as long as the subject property being purchased is the borrower’s principal residence
    • The borrower must have a valid Social Security Number
    • The borrower must be eligible to work in the U.S. evidenced by an Employment Authorization Document
    • If temporary residency status will expire within one year and a prior history of residency status renewals exists, the lender may assume continuation will be granted
  • Non-U.S. Citizens with no lawful residency in the U.S. are not eligible for FHA insured mortgages
non purchasing spouse
Non-Purchasing Spouse
  • When the borrower resides in a community property state or the property is located in a community property state, debts from the non-purchasing spouse must be included in the borrower’s ratio
  • The non-purchasing spouse’s CREDIT HISTORY will not be considered as a reason for credit denial
social security number evidence
Social Security Number Evidence
  • The lender is required to document a valid social security number for each borrower
  • All Individuals eligible for legal employment in the US must have a valid Social Security Number
  • Social Security cards are not always required. Lenders may use the borrower’s pay stub, passport, valid tax returns or service providers with direct access to the Social Security Administration
  • Lenders are responsible to resolve any inconsistencies or multiple social security number situations

Sales Contract

  • Legible sales contract and all addendums must be provided
multiple fha insured mortgages to one borrower exceptions
Multiple FHA Insured Mortgages To One Borrower - Exceptions

Relocations:

  • If the borrower is relocating and re-establishing residency in another area not within reasonable commuting distance from the current principal residence, the borrower may obtain another mortgage using FHA insured financing. The relocation does not have to employer mandated.

Increase in family size:

  • The borrower may be permitted to obtain another home with an FHA insured mortgage if the number of legal dependents increases to the point that the present house no longer meets the family’s needs. The borrower must provide evidence of the increase in dependents and the property’s failure to meet the family’s needs. In this case, the borrower must pay down the outstanding mortgage balance on the present property to 75% of the current appraised value.
multiple fha insured mortgages to one borrower exceptions cont d
Multiple FHA Insured Mortgages To One Borrower – Exceptions, Cont’d

Vacating a Jointly Owned Property:

  • If the borrower is vacating a residence that will remain occupied by a co-borrower, the borrower is permitted to obtain another FHA insured mortgage. Example: In a divorce, one of the spouses vacates the existing property and purchases a new home

Non-Occupying Co-Borrower:

  • A non-occupying co-borrower for a property being purchased as a primary residence by other family members may have a joint interest in that property as well as a principal residence of his or her own, and both loans may be FHA insured mortgages
lender selection
Lender Selection
  • Lenders must not discriminate by choosing appraisers based on race, color, religion, national origin, sex, age or disability
  • Lenders should use multiple FHA approved appraisers
  • The Lender is ultimately responsible for the assigned appraiser and the data indicated in the appraisal
  • The appraiser is to determine market value and insurability and not act as a Home Inspector
  • The lender is responsible for ensuring compliance with FHA’s minimum property standards based on the appraiser’s comments, noted defects and required inspections, if applicable
lender selection86
Lender Selection
  • Flagstar Bank requires that all appraisers be both FHA approved and on Flagstar Bank’s list of eligible appraisers
  • Appraisals for all manufactured homes, properties currently owned by an LLC, and FSBOs must be completed by one of Flagstar Bank’s approved national appraisal vendors. (Refer to Doc. #4903) (This does not include lenders with DE Delegated approval)
  • Appraisals for new construction properties that have LTVs within 10% of maximum financing must be ordered through a Flagstar Bank approved national vendor when the property is located in one of the following states:
    • Arizona
    • California
    • Florida
    • Georgia
    • Indiana
    • Michigan
    • Nevada
    • Ohio
    • Utah
mortgagee letter 2008 09 2 nd appraisal requirements
Mortgagee Letter 2008-092nd Appraisal Requirements
  • Loan amount, excluding MIP exceeds $417,000 and
  • LTV, excluding MIP, equals or exceeds 95% and
  • Property is located in a declining market
  • 2nd appraisal must be ordered through a Flagstar approved national appraisal vendor
  • Borrower can pay for 2nd appraisal
  • Lower value must be used if 2nd appraisal value is more than 5% lower than the original appraisal
  • Exterior only appraisal allowed for 2nd appraisal on a one-unit detached property
  • Condos, site condos, manufactured and 2-4 unit properties require 2nd appraisals on appropriate appraisal form
declining markets
Declining Markets

Property is considered in a “declining market” when the following is true:

  • Appraiser marked home values as “declining” in the “neighborhood” section of the appraisal or
  • Property is located in one of the counties identified as a declining market by Flagstar Bank (see document #6140 on our website)
  • If the appraiser has not indicated “declining” in the neighborhood section of the appraisal but the property is located in a Flagstar Bank defined declining market, the property will not be considered declining if one of the following are true:
    • Internal AVM indicates the property zip zone or sales market is stable or appreciating in most recent 12 months or
    • Appraisal is completed by a Flagstar Bank approved National Vendor, and there is an addendum stating that the appraiser researched the market and finds that home values have been stable or appreciating in the most recent six to 12 months

Refer to Flagstar Bank’s website for a list of counties that Flagstar Bank identifies as declining markets (Document #6140)

slide89

Mortgagee letter 2005-48

  • Appraisal Updates
  • No longer requires repair of minor cosmetic deficiencies
  • Allows for “AS-IS” appraisal for an existing property
  • No longer requires automaticrepair for:
    • Missing handrails
    • cracked or damaged exit doors
    • cracked window glass
    • minor plumbing leaks
    • defective floor finishes or coverings
    • evidence of previous (non-active) infestation damage when there is no evidence of structural damage
    • rotten or worn out counter tops
    • damaged plaster or sheetrock in homes constructed post 1978
    • poor workmanship
    • cracked sidewalks
    • removal of debris and trash in crawl space
slide90

Appraisal Updates

  • No longer requires automatic inspections on existing properties for:
    • Wood destroying insects (Only if evidence of active infestation exists)
    • Well & Septic reports
    • Sketch and distances between well and septic field and property line
    • Flat Roofs or unobservable roofs
    • Private road agreements – ingress and egress required
  • No longer requires:
    • The Homebuyers Summary report
    • Valuation Conditions Sheets ( VC Sheets)
    • Five day waiting period to close
    • Waivers for five day waiting period
slide91

Appraisal Updates

  • Property conditions that may represent a health or safety issue are a risk to borrowers and require inspection and/or repair:
  • Inadequate access/egress from bedrooms to exterior of home
  • Leaking or worn out roofs
  • Evidence of structural foundation problems
  • Defective paint surfaces in homes constructed pre-1978
  • Defective exterior paint surfaces in homes constructed pre-1978
the appraisal and minimum property standards
The Appraisal and Minimum Property Standards
  • Any operable or useful element in subject property must have at least 2 or more years of useful life or it must be replaced
  • The appraiser can require a separate inspection upon any “visible” defect or if he or she has knowledge of any existing problem
  • The property must be structurally sound
  • Each living unit must contain domestic hot water, sanitary facilities and a safe method of sewage disposal
  • If connection to public systems is available, connection is required unless connection costs exceed 3% of sales price
  • Heating systems must be adequate for healthy and comfortable living conditions
  • Electric and water heaters are acceptable if no visible defects exist
the appraisal and minimum property standards93
The Appraisal and Minimum Property Standards
  • Normally, all repairs must be completed prior to closing
  • Escrows for exterior repairs are allowed under certain weather-related circumstances
  • All required repairs must be inspected by the original appraiser and the lender must be provided with a Compliance Inspection Report indicating all repairs completed
  • Comparables used to determine value should be within a 1 mile radius and closed and sold less than 6 months prior the appraisal date (Some exceptions will apply)
the appraisal and minimum property standards94
The Appraisal and Minimum Property Standards
  • The appraiser must indicate all prior sales of subject property that occurred within 3 years of appraisal date
  • If subject property is re-sold less than 90 days after seller acquisition, the property is NOT eligible for FHA financing (some temporary exceptions apply. )
    • Both lender and property disposition firms they hire or with whom they are affiliated are now exempt from the 90 day lock-out period. Documentation proving the selling entity is exempt is required by underwriting. (individuals, companies or investors who purchase foreclosed properties and sell them are not eligible for this exemption)
  • If subject property is re-sold between one to 180 days of acquisition by current seller, a second appraisal may be required if the resale price is 100% or more over price paid by seller
  • If subject property is re-sold between one day to 12 months of seller acquisition, FHA may require additional documentation to support the resale value if the resale price is 5% or more than the lowest sales price within the previous year
slide95

THANK YOU FOR GIVING FLAGSTAR BANK THIS OPPORTUNITY. WE APPRECIATE YOUR BUSINESS AND LOYALTY!

CONTACT INFORMATION:

Your Local Account Executive

or

Fran Wagner

National Trainer

Direct Office Number: (248) 312-5801

Toll Free: (800) 945-7700 Ext. 5801

E-Mail Address: fran.wagner@flagstar.com