October 2, 2015
CUA 2015-05: Fannie Mae Selling Guide Announcement SEL-2015-10 and United Guaranty Underwriting Requirement Changes
Effective December 7, 2015
In support of the Fannie Mae Selling Guide announcement SEL-2015-10 for HomeReady™ (formerly MyCommunityMortgage®), high-balance, and non-occupant borrower loans, United Guaranty has analyzed its underwriting requirements and will make the changes included in the general summary below for all loans effective December 7, 2015. A customer announcement will be issued closer to that date with a detailed list of changes to United Guaranty’s Credit Union Underwriting Requirements Guide (the Guide).
Also included below are the United Guaranty underwriting requirements that will remain the same; these already support the majority of Fannie Mae’s requirements announced in SEL-2015-10.
The Guide, all applicable systems, and all website materials will be updated shortly before the effective date of these changes.
|Topic||Fannie Mae's Position 1||United Guaranty’s Position|
|HomeReady (formerly MyCommunityMortgage):|
|Boarder Household Income||Boarder income will be allowed when it is documented that it has been received for 9 of the most recent 12 months. The total amount of boarder income received must be averaged over 12 months. (Previously, the income must have been received for the prior 12 months.)||Changing to align with Fannie Mae’s new requirements for boarder household income.|
|Rental Income for 2–4 unit Primary Residence||Aligning with its standard requirements for calculating rental income from 2–4 unit subject primary residence–Use 75% of the lesser of the actual or projected rents.||Changing to align with Fannie Mae’s new requirements for rental income for 2–4 unit primary residences.|
|Rental Income from Accessory Units||Allow rental income from an accessory unit to be considered in qualifying income under the standard rental income requirements.||Changing to align with Fannie Mae’s new requirements for rental income from accessory units.|
|Maximum LTV/CLTV for 2-unit Properties Utilizing Community Seconds||Fannie Mae will allow a 2-unit property to a maximum LTV/CLTV 85%/105% when the subordinate financing is a Community Second®.||Changing to allow a 2-unit property to a maximum LTV/CLTV 85%/100% when the subordinate financing is a Community Second.|
|HomeStyle Renovation Loans||Allow HomeStyle® Renovation loans under HomeReady in accordance with its standard requirements (except limited to primary residences).||Changing to allow the following for Renovation Mortgages:
•2-unit primary residences with a maximum 85%/100% LTV/CLTV when the secondary financing meets Fannie Mae’s Community Seconds requirements.
(formerly known as Non-Occupant Co-Borrower Loans)
|Allow non-occupant borrowers for all HomeReady:
• 1-unit primary residence to:
o A maximum 95% LTV with a DU underwrite; and
o A maximum 90% LTV with a manual underwrite.
• 2-unit primary residence to a maximum 85% LTV.
(Previously Fannie Mae did not allow non-occupant borrowers on MyCommunityMortgage.) See additional non-occupant borrower changes below.
|For 1-unit primary residence, no change.
United Guaranty will retain the current maximum LTV of 95% for transactions with non-occupant co-borrowers.
Changing to align with Fannie Mae and allow non-occupant borrowers for 2-unit primary residences up to 85% LTV.
|Coverage Requirement||Changed coverage requirements per LTV category.||United Guaranty will support the new coverage requirements. It will remain the lenders responsibility to ensure adequate coverage is ordered on each loan.|
|First-time Home Buyer||Will no longer require at least one borrower be a first-time home buyer for LTVs 95.01% to 97%.||No change. United Guaranty does not have a requirement for first-time home buyers for LTVs 95.01% to 97%.|
|Maximum LTV 2-unit Primary Residence||Reducing the LTV for 2-unit primary residences from 95% to 85% for fixed-rate mortgages and from 90% to 75% for ARMs.||No change. United Guaranty will retain current maximum LTV for 2-unit primary residences of 95% for both FRM and ARM.|
|Maximum LTV 3-4 unit Primary Residence||Reducing the LTV for 3–4 unit primary residences from 95% to 75% for fixed-rate mortgages.||No change. United Guaranty will retain the current maximum LTV for 3–4 unit primary residences of 90% for both FRM and ARM.|
|Borrower Income Limits||Adjusting its borrower income limits to align with current housing goals.||Not applicable. United Guaranty does not have borrower income limit requirements.|
|Temporary Interest-Rate Buydown||Allow a 3-2-1 buydown (previously only allowed a 2-1 buydown).||No change. United Guaranty’s current requirements allow 3-2-1 buydowns.|
|Non-Borrower Household Income||Allow the existence of non-borrower household income as a compensating factor in DU® to allow a DTI between 45% and 50% when certain requirements are met.
Note: this income will not be allowed as qualifying income and is not used in the borrower’s DTI calculation. It is used as a compensating factor only to allow the borrower’s DTI as high as 50%.
|No change. United Guaranty’s current requirements allow DTIs between
45% and 50%.
Note: United Guaranty will not allow this income as qualifying income, and it is not used in the borrower’s DTI calculation. It is not necessary to use as a compensating factor because United Guaranty guidelines allow DTIs between 45% and 50%.
|Manufactured Housing||Allow manufactured housing as an eligible property for HomeReady loans.||No change. Manufactured housing remains ineligible per United Guaranty’s Master Policy.|
|Homebuyer Education and Counseling||Pre-purchase homebuyer education will be required for all HomeReady loans via Framework Homeownership, LLC. Fannie Mae’s vendor must provide the education. MI companies will no longer be able to provide this training.||No change. United Guaranty does not require pre-purchase homebuyer education. This will affect
United Guaranty’s training offering, however, as United Guaranty will no longer be able to offer this service.
|High-Balance Loan Requirements|
|1-unit Investment Property||Allow 1-unit investment properties to 85% LTV. Maximum loan amount will vary per county.||Changing to allow maximum loan amount of $625,500 for 1-unit investment properties.|
|Secondary Financing – Community Seconds||Fannie Mae allows Community Seconds for 1-2 unit primary residence High Balance loans. (No change)||Changing to allow a maximum loan amount of $625,500 for 1-unit primary residence to a maximum 97%/100% LTV/CLTV when the secondary financing meets Fannie Mae Community Seconds requirements.
Changing to allow 2-unit properties with a maximum loan amount of $625,500 with a maximum 85%/100% LTV/CLTV when the secondary financing meets Fannie Mae Community Seconds requirements.
Changing to allow non-occupant borrowers and/or renovation mortgages.
|Maximum LTV for 1-unit Primary Residence||Increase maximum LTV from 90% to 95%. Maximum loan amount will vary per county.||No change. United Guaranty will retain current requirements allowing 95% LTV to $850,000 for 1-unit primary residence.|
|2-unit Primary Residence||Allow 2-unit properties to 85% LTV. Maximum loan amount will vary per county.||No change. United Guaranty will retain current maximum loan amount of $625,500 for 2-unit primary residences.|
|Second Home||Allow second homes to 90% LTV. Maximum loan amount will vary per county.||No change. United Guaranty will retain current requirements allowing 90% LTV to $625,500.|
|Minimum Borrower Contribution||5% minimum borrower contribution no longer applies for 1-unit primary residence.||No change. United Guaranty’s Gift/Grants requirements will continue to apply.
Note: United Guaranty will not change the Minimum Borrower Contribution–Unacceptable Sources requirements.
|Non-Occupant Borrower Requirements (applicable to all Fannie Mae loans).|
|Occupant Borrower(s) DTI||When underwritten in DU, remove the requirement that the occupant borrowers must qualify using only their income, assets, and debts. Non-occupant borrower’s income, assets, and debts will now be used to qualify. The qualifying DTI will be calculated using all borrowers’ income and debts.||Changing to eliminate DTI requirement for occupant borrower. Only qualifying DTI for all borrowers combined will apply.
Note: United Guaranty will remove the maximum DTI requirement of 50% for occupant borrower(s) effective Monday, October 5, 2015, at which time systems will be updated. This change will not be updated in the Underwriting Requirements Guide until Monday, December 7, 2015. No other non-occupant borrower changes are occurring at this time.
|2-unit Primary Residence||Fannie Mae will allow non-occupant borrowers for 2-unit primary residences to 85% LTV. (No change)||Changing to allow non-occupant borrowers for 2-unit primary residences to 85% LTV.|
1 The information included in the announcement is United Guaranty’s interpretation of Fannie Mae’s requirements and is not all-inclusive of the content in SEL-2015-10.
Please contact your United Guaranty Account Representative if you have questions concerning this announcement. For questions regarding underwriting requirements or submissions, contact our Underwriting Customer Service Team at 877.MI.CHOICE (877.642.4642) or email UGC:customerservice.
© United Guaranty Corporation 2015. All rights reserved. United Guaranty is a registered mark. United Guaranty is a marketing term for United Guaranty Residential Insurance Company and United Guaranty Mortgage Indemnity Company. Coverage is available through admitted company only. HomeReady, MyCommunityMortgage, Community Seconds, HomeStyle, and DU are marks of Fannie Mae.