June 11, 2014
Subordinate Financing Underwriting Requirement Expansion for Credit Unions
Great news! United Guaranty is expanding underwriting requirements for subordinate financing. Effective with MI applications received on or after June 16, 2014.
- New subordinate financing for purchase transactions will no longer be limited to Housing Finance Agency (HFA) loans.
- All Affordable Housing purchase transactions with new subordinate financing will be eligible for insurance, subject to the same requirements in effect today for HFA loans (listed below).
United Guaranty’s systems, Credit Union Underwriting Guide, and all other underwriting documents will reflect this expansion for new subordinate financing by the effective date of June 16, 2014.
Below are the requirements for new subordinate financing; these requirements will apply to all Affordable Housing loans originated by credit unions effective June 16, 2014. Because these requirements are expanding beyond HFA loans, they will be moved from the HFA section of the Credit Union Guide to the Subordinate Financing section.
Underwriting requirements for new subordinate financing:
Affordable Housing purchase transactions with simultaneous secondary financing are eligible for insurance when meeting all of the following requirements:
- LTV/Loan Amount/Credit Score/DTI Requirements:
Occupancy Transaction Type Property Type Maximum LTV Maximum CLTV Maximum Loan Amount Maximum Credit Score Maximum DTI Reserves Primary Residence (only) Purchase (only) 1-Unit, Detached, Attached, Condos, Co-ops 97% 100% $417,000 680 41% 2 months' PITIA 95% 100% $417,000 660
- Subordinate liens must meet the requirements of Fannie Mae’s Community Seconds® (Chapter B5-5 of the Selling Guide) or Freddie Mac’s Affordable Seconds® (Chapter 25.1 (g) of the Seller Guide). Subordinate financing (or grants with conditional repayment) provided under a Federal Home Loan Bank (FHLB) affordable housing program is eligible when all other Fannie Mae Community Seconds or Freddie Mac Affordable Seconds requirements are met.
- Funds that may require repayment—under any circumstance—are considered loans and must be included in the CLTV, including those that are forgivable or for which monthly payments are deferred.
- The minimum borrower contribution required is the lesser of $1,000 or 1% from the borrower’s own funds (gifts/grants cannot satisfy this requirement).
- All borrowers must occupy the property.
- Broker TPO loans require a full-file submission to United Guaranty.
- The loan must be identified as an Affordable Housing loan in the MI submission to United Guaranty.
- All other United Guaranty underwriting requirements apply.
- ARMs with an initial fixed-rate period of less than five years.
- Temporary interest-rate buydowns.
- Balloon mortgages.
- Construction-to-permanent loans.
- Renovation mortgages.
- Financed MI.
Please contact your United Guaranty Sales Team if you have any questions about this announcement.