Underwriting Presentation

1
Indiana Housing and Community Development
Authority
Underwriting Presentation
U.S. Bank Home Mortgage MRBP Division Master
Servicer 2007
9/06
2
GOVERNMENT-ELIGIBLE LOAN PRODUCTS
FHA VA Rural Housing
3
FANNIE MAE - ELIGIBLE LOAN PRODUCTS

• Fannie Mae Conventional
  Products
• MyCommunityMortgage Suite of Products
• Community Solutions/HomeChoice
• MCM 97
• MCM 100
• Community Lending Suite of Products
• Fannie Mae Community Homebuyers
• Fannie 97
• Fannie 3/2
• Standard 80 LTV loan
• Standard 95 LTV loan
• Community Land Trust Mortgage Loans
• No Split Loan Products allowed.
• i.e. 80/20, 90/10, 80/15/5

4
FREDDIE MAC -ELIGIBLE LOAN PRODUCTS

• Freddie Mac Conventional Products
• Home Possible
• Home Possible 97
• Home Possible 100
• Home Possible Neighborhood Solutions 97
• Home Possible Neighborhood Solutions 100
• Standard Conventional 5/10/15/20 down - 30 year
  fixed rate
• No Split Loan Products allowed.
• i.e. 80/20, 90/10, 80/15/5

5
UNDERWRITING REFERENCES

• Fannie Mae References
• Fannie Mae Selling Guide, Chapter X Section 304
  Community Lending
• Fannie Mae Guide to Desktop Underwriting
• Fannie Mae website www.efanniemae.com
• FHA References
• Guide 4155.1 rev 5
• FHA website www.hud.gov
• Other References
• Allregs www.allregs.com
• VA www.homeloans.va.gov
• USDA-RD www.rurdev.usda.gov

6
UNDERWRITING REFERENCES

• Freddie Mac References
• Seller Servicer Guide, Chapter A34 (HP only)
• Learning Center www.FreddieMac.com/learn
• Website www.FreddieMac.com
• Seller Servicer Guide, Chapter 37
• Underwriting the Borrower

7
UNDERWRITING GUIDELINES

• Credit Underwriting is the responsibility of the
  originating lender.
• U.S. Bank Home Mortgage (Master Servicer)
  does not
• re-underwrite your loans.
• All loans are subject to internal and agency
  audits.
• Underwriters should make sound credit decisions,
  assure data integrity, and include all necessary
  documents in support of the underwriting decision.

8
UNDERWRITING GUIDELINES

• All loans should be underwritten in compliance
  with the most current underwriting guidelines for
  FHA, VA, Rural Housing, Fannie Mae. and Freddie
  Mac.
• The loan file must comply with the Bond program
  guidelines for income limits, sales price limits,
  property types, locations and program parameters.

9
AUTOMATED UNDERWRITING SYSTEMS

• The following automated systems are approved for
  use in the bond programs.
• Conventional Loan Types
• -Fannie Mae loans (DU)
• -Freddie Mac (LP)
• Government Loan Types
• -FHA VA loans (DU or LP)
• If manual underwriting is necessary, full
  documentation is required
• Other lender customized automated underwriting
  systems
• are not acceptable for loan approval

10
APPRAISALS- FANNIE MAE

• Full appraisal reports are required if a manual
  underwrite has been performed.
• Correspondent Lenders, sponsored by the Master
  Servicer, are required to submit full appraisals.
• Form 2055/2075 is permitted with a DU
  Approve/Eligible recommendation
• (Appraisals MUST have a Property Value listed
  on them)

11
APPRAISALS - FREDDIE MAC

• Full appraisal report required for Freddie Mac
  Home Possible loans evaluated by LP

12
MANUFACTURED HOUSING

• Government Loans
• Manufactured Homes are permitted in the program.
  The loan must follow FHA, VA, Rural Housing and
  Program Guidelines.
• Manufactured homes must meet specific size and
  structural requirements, remain permanently
  affixed to a foundation, and be taxed as real
  estate.
• Conventional Loans
• Manufactured homes are not currently eligible for
• Fannie Mae or Freddie Mac financing with the
• Bond program (due to LLPA)

13
SECONDARY FINANCING

• Down Payment Assistance Programs (DPA)
• The funding source for the DPA program must be
  stated in the source of funds section of the
  1003, and stated on the HUD-1
• DPA programs must meet FHA and Fannie Mae
  requirements
• Write the loan product, down payment source, and
  amount on the 1008 (loan transmittal), or
  mortgage credit analysis worksheet (MCAW)

14
UNDERWRITING GUIDELINES

• Condo Requirements
• Follow Fannie Mae, FHA and VA Condo Underwriting
  Guidelines
• US Bank Home Mortgage does not provide Condo
  Guidelines
• All Fannie Mae loans must follow the Condominium
  Project Acceptance guideline as outlined in the
  Fannie Mae Announcement 05-03 and 06-12 and
  Seller/Servicer guide
• Underwriters must indicate on the 1008 the
  Project Acceptance Review Type Codes
• Lenders having access to Fannie Maes Condo
  Project Manager (CPM), have the ability to verify
  if the Condo project is already Fannie Mae, FHA
  or VA approved
• Lenders having access to CPM have the ability to
  enter information on the Condo Project into CPM
  to see if it will get approved
• Lenders who do not have access to CPM can contact
  their Fannie Mae Representative to work at
  gaining access to this function

15
UNDERWRITING GUIDELINES

• Condo Requirements FREDDIE MAC
• Follow the most recent Freddie Mac Condo
  Underwriting Guidelines next slide
• Underwriters must indicate on the 1077 the
  Project Classification Codes
• Lenders may use Fannie Maes Condo Project
  Manager to assess Condo eligibility
• (Freddie Mac does not have a specific assessment
  tool)
• Reference Seller Servicer Guide Chapter

16
Freddie Mac Standard HP Products
www.freddiemac.com
17
CASH BACK

• Under Indiana Housings program, Cash Back is
  not permitted.
• However, reimbursement of payments such as
• prepaids and earnest monies are allowable to
  the
• extent the borrower has met any minimum
• contribution requirements and the
• reimbursement is acceptable to the
  Agency (FHA, VA, Fannie Mae, Freddie Mac).
• Files must be documented.

18
Updates andEnhancements
MyCommunityMortgage
19
MCM Special Program Features

• For one-unit properties
• 0 contribution needed from borrowers own funds!
  
• Qualifying Community Seconds on MCM loans in DU
  may be treated as a gift rather than a
  subordinate lien
• FannieNeighbors definition for MCM loans
  extended to many hurricane-impacted areas

20
MCM Eligibility Parameters
21
Community Seconds Treatment in DU

• Community Seconds on MCM loans in DU may be
  treated as a gift rather than a subordinate lien
• The Community Seconds must
• meet Fannie Mae eligibility per the Selling
  Guide, and
• provide for a deferred payment structure that
  extends for no less than five years (with no
  repayment required from the borrower)

22
Delivery Requirements
New Enhancements and DU

• Underwriters are required to reflect the CLTV on
  the Fannie Mae Transmittal Summary (1008)
  (cannot be more then 105)
• Enter Special Feature Code 118 at delivery
• (Does not show on DU but must be entered)
• MCM loan file must be documented with all
  information relating to the Community Seconds
  transaction

23
Cash-on-Hand

• Borrowers may use cash-on-hand for the down
  payment and closing costs, subject to specific
  criteria.
• Limited to one-unit, principal residences
• Cash-on-hand funds will not be used to calculate
  reserves (if reserves are required).
• DU will use the Cash-on-Hand amount to
  calculate the available funds to close.

24
Cash-on-Hand

• The lender must verify/document the following
• Borrower customarily uses cash for expenses
  usage is consistent with previous payment
  practices.
• Borrower's credit report indicates limited (or
  no) use of credit, and no depository
  relationship.
• Borrower must provide signed statement disclosing
  the source of funds (and that they were not
  borrowed).
• The borrower must deposit with a financial
  institution at the time of application, or no
  less than 30 days before closing, funds
  sufficient for the down payment and closing
  costs.

25
Fannie Mae Collections Policyfor MCM

• No payoff required for collection items of 5,000
  or less.
• Collections MUST be paid off only if the
  aggregate of the collections exceed 5,000
• Must be submitted through DU
• manually underwritten loans are ineligible

26
Using Desktop Underwriter

• MCM permitted for Approve-Eligible along with EA
  Levels I and II only
• Standard Loan Level Price Adjustments (LLPAs) for
  EA Levels I and II do not apply for MCM.

27
Using Desktop Underwriter

• Benefits of using DU with MCM
• Quicker approval,
• Standard limited waiver of reps and warrants
• Possible reduced documentation
• Greater flexibility in permitting higher
  qualifying ratios or lower credit scores with DU
  vs. manual underwriting
• Please Note Lenders should refer to the Guide
  to Underwriting with Desktop Underwriter and
  subsequent DU Release Notes for more details
  about
• submitting MCM loans through DU

28
Community Solutions

• Community Solutions is a borrower option for
  teachers and other educational employees, police
  officers, firefighters, and health care workers.
• Eligible borrowers include full-time employees in
  the following positions
• Employees of public or private schools, including
  
  kindergarten through post-secondary levels
• Employees of a state or local law enforcement
  agency, fire department, or other sworn law
  enforcement or firefighting function
• Certified, accredited, or licensed health care
  workers such as nurses, medical residents,
  pharmacists,
• technicians, or technologists

29
Community Solutions

• Extra flexibilities include
• Acceptance of part-time and overtime income with
• a 12 month history
• Higher qualifying ratios (for manual
  underwriting otherwise, determined by DU)
• 45 percent single qualifying ratio (one months
  reserves required)
• 50 percent with maximum 97 percent LTV,
  two months reserves (may be
  gifted), and strong compensating factors

30
Community HomeChoice
(continued)

• Extra flexibilities include
• Permits non-occupying co-borrowers
• Higher single qualifying ratios permitted
• 45 percent (one months reserves may be gifted)
• 43 percent with temporary interest rate buy down
• 50 percent with maximum 97 percent LTV,
  two months
  reserves (may be gifted), and budget-based
  worksheet (manual underwriting)

31
Entering MCM Loans into DU

• The next few slides will show you how to enter
  MCM information into Desktop Underwriter and how
  DU provides the loan recommendation.

32
1) Select correct county or MSA 2) Select
MyCommunity Mortgage 3) Answer Yes or No as
appropriate for FannieNeighbors and Community
Seconds 4) Select HUD Median Income or use Income
Adjustment Factor (115 for non-metropolitan
areas) 5) Submit Loan
Q How do I determine if a property is in a
FannieNeighbors area? A As noted earlier, use
the Property GeoCoder to determine if the
property is eligible for FannieNeighbors.
33
After submitting the case file information, an
underwriting recommendation is displayed.
34
MCM Mortgage Insurance Requirements

• Lower Mortgage Insurance Coverage

35
UNDERWRITING TIPS

• DU recommendations must be documented in the loan
  file
• Remember to follow the Bond Program guidelines
• Fannie Mae DU loans are evaluated through the
  Community Lending Modular (free submission)
• Always enter the appropriate Special Feature Code
  for Fannie Mae loans on the Fannie Mae
  Transmittal Summary - 1008 (processors and
  underwriters to verify) and on the USBHM Loan
  Submission Delivery checklist
• (closers /shippers to verify)

36
SPECIAL FEATURE CODES
Special Feature Codes must be listed on the
Fannie Mae 1008 and the USBHM Loan Submission
Delivery Checklist
37
SPECIAL FEATURE CODES
Special Feature Codes must be listed on the
Fannie Mae1008 and USBHM Loan Submission Delivery
Checklist
38
SECTION 8 LOANS

• Lenders may originate loans for borrowers who
  have obtained a Section 8 Homeownership Voucher.
• Please follow the most recent FHA and Fannie Mae
  guidelines as it relates to income credit for the
  subsidy.
• The Lender must show the Section 8 Voucher
  Assistance Program on the 1008 and the Mortgage
  Credit Analysis Worksheet.
• Contact Sheryl Krocek Production Coordinator
• [phone] sheryl.krocek_at_usbank.com

39
Fannie Mae-HOMEBUYER EDUCATION Requirements

• Homebuyer Counseling Certificate must be
  included in the file
• (Note Everyone who signs the note is
  required to attend counseling)
• Training must take place in the following forums
• Face-to-face home-buyer education
• Classroom or workshop sessions
• Telephone Education/Internet training
  currently not permitted per IHCDA
• Early Delinquency Counseling is provided by U S
  Bank Home Mortgage acknowledged
• by the borrowers in the Authorization for
  Counseling notice.
• Borrowers must Sign and lender must include in
  the Mortgage File
• the Fannie Maes Borrowers Authorization for
  Counseling
• form located in the Fannie Selling Guide or at
• efanniemae.com

40

• Home Possible Mortgages
• (HP)
• Product Training for
• Housing Finance Agency
• Lenders

41
Home Possible Product Features

• 0 contribution needed from the borrower!
• Loan Prospector first
• (all HP loans must be run through LP first)
• Area Median Income qualifications assessed
• automatically via Loan Prospector
• Already licensed LP users have immediate
• access to originate Home Possible loans!

42
Home Possible Headlines - Flexibilities

• Four simple products, available with no special
  contracts, designed to meet your borrowers needs
• Flexible credit terms, including expanded ratios
  and options for borrowers with less-than-perfect
  credit
• Secondary Financing including Affordable Seconds
• Low Mortgage Insurance coverage levels
• Maximum financing with up to 100 percent LTV and
  up to 105 TLTV

43
Home Possible Headlines - Flexibilities

• Can use HP on all risk classes
• Cash-on-Hand can be acceptable
• Qualify with rental income from a non-relative
• Co-borrower with no credit can now be submitted
  to LP

44
Teachers/Teachers Aides
Healthcare workers
0 borrower contribution for 1-unit properties
Professional and volunteer firefighters
Law enforcement officers
1 months reserves required may be a gift

• 1-unit properties for Neighborhood Solution 100
• 1- to 2-unit properties for Neighborhood Solution
  97

45
SPECIAL CHARACTERISTIC CODES (SCC's) - Freddie
Mac Loans
Other SCCs may apply as noted on LP Findings
46
Mortgage Insurance
LTVs 80.01 - 85 6 85.01 - 90 12 90.01 -
95 16 95.01 - 97 18 Greater than 97 20
47
Freddie Mac-HOMEBUYER EDUCATION-Requirements

• Homebuyer Counseling Certificate must be included
  in the file
• Freddie Mac
• Only one borrower required for Home Possible
• All borrowers preferred
• Training must take place in one of the following
  forums
• Face-to-face home-buyer education
• Classroom or workshop sessions
• Telephone education/counseling program by an
  approved mortgage
• insurer sponsored by the lender
• Internet training permitted by Fannie Mae and
  Freddie Mac through Recognized MI companies
• Freddie Mac also offers online homebuyer
  education at their website www.FreddieMac.com/hrc
  

48
Home Possible Details for Underwriters
http//www.freddiemac.com/singlefamily/pdf/pub579.
pdf
49
Questions!!! ASK

• For questions related to Underwriting
  Underwriters only contact
• Lynda Davis, Underwriter 216-475-8246
• Lynda.davis_at_usbank.com
• Judy Pudelski, Underwriter 216-475-8317
• Judith.pudelski_at_usbank.com
• Rita M. Connelly, Underwriting Manager
• Rita.connelly_at_usbank.com