FLORIDA JUMBO LENDERS

• Minimum Loan Amount: $150,000-$2M
• Allows **1 DAY** Out of Foreclosure or Short Sale
• Allows Minimum 1 Year out of BK
• BK13 Buyout – OK!
• 5% Minimum Contribution from Mortgage applicants Own Funds Required
• Allows 24M Business or Personal Bank Statements to be Used as Income Verification
• Available in Florida

Jumbo Florida Platinum Plus

• Minimum Loan Amount: $150,000
• 95%LTV to $1.5M FULL DOC / 90% to $2.5M ALTDOC (Bank Statements)
• 95%LTV CASHOUT – to $1.5M – 760 FICO/SFR/FULL DOC/OWNER OCC
• NO DOLLAR LIMIT on CASHOUT!
• Up to 80%LTV on IP CASHOUT (Including 2-4 Units!!)
• Will Consider Non Warrantable Condos!
• At 80%LTV, ENTIRE DP can be gift!!
• 30Y / 15Y / 5.1 ARM / 30 or 40Yw10YIO Available!
• 1YR TAX RETURN Feature as well!

Professional Investor Product

• Investment Properties Only
• Loan Amounts $100K – $2M
• Investment Properties Only
• No Income Required on 1003
• No DTI / DSCR Calculations
• No Reserve Requirement
• ‘Funds to Close’ Must Be Seasoned for 60 Days
• Open to Foreign Nationals
• LLCs, Limited/General Partnerships Considered
• No Limit to Number of Financed Properties
• Investment Properties Only

Florida Bad Credit Mortgage Lenders Lending Policy

Loan Manufacturing Philosophy

US Mortgage Lenders Bad Credit underwriters will evaluate many aspects of the loan but primarily relies on evaluation of the mortgage applicant’s ability to repay the loan to predict loan performance. Additional characteristics of the loan are also examined including credit history, asset position, and the property being used for collateral.

US Mortgage Lenders Bad Credit Guidelines establish the criteria under which a loan will be eligible for purchase or funding by Florida Bad Credit Mortgage Lenders. Florida Bad Credit Mortgage Lenders does not require originators or sellers to make any loan simply because it is eligible for funding by Florida Bad Credit Mortgage Lenders, nor does Florida Bad Credit Mortgage Lenders prohibit originators or sellers from originating a loan that is ineligible Florida Bad Credit Mortgage Lenders. Sellers should rely on their own underwriting guidelines to determine whether to extend credit to any applicant.

Bad Credit Mortgage Lender has a no-tolerance policy as it relates to fraud. Sellers should follow their own established fraud and identity procedures on every loan in an effort to prevent and detect fraud (including, but not limited to, Social Security number verification, verbal verifications of employment, processing of 4506-T, etc.) Loans containing fraudulent documentation or information  will immediately be declined and forwarded for further review. If there is any determination  of seller involvement, the seller will be made inactive and the appropriate agencies notified. Florida Bad Credit Mortgage Lenders will also pursue borrower fraud to the fullest extent of the law.

Bad Credit Mortgage Lenders Fair Lending Statement

Florida Bad Credit Mortgage Lenders operates in accordance with the provisions of the Fair Housing Act and Equal Credit Opportunity Act. The Fair Housing Act makes it unlawful to discriminate in housing-related activities against any person because of race, color, religion, national origin, sex, handicap, or familial status. The Equal Credit Opportunity Act prohibits discrimination with respect to any aspect of a credit transaction on the basis of sex, race, color, religion, national origin, marital status, age (provided the borrower has the capacity to enter into a binding contract), receipt of public assistance, or because the borrower has in good faith exercised any right under the Consumer Credit Protection Act. Florida Bad Credit Mortgage Lenders fully supports the letter and spirit of both of these laws and will not condone discrimination in any mortgage transaction.

Responsible Lending Statement

The primary focus of this lending program is the mortgage applicants ability to repay the mortgage obligation. Loans acquired by Florida Bad Credit Mortgage Lenders should be affordable to the borrower in his or her pursuit of homeownership.

Under the general Ability-to-Repay (ATR) standard, lenders must make a reasonable, good-faith determination that the consumer has a reasonable ability to repay the loan. Lenders must verify information using third-party records that provide reasonably reliable evidence of income or assets.

If a loan is subject to the ATR rules under the Federal Truth in Lending Act (“TILA”), lenders  must consider eight underwriting factors to be in compliance:

1. 1. Current or reasonably expected income or assets (other than the value of the property that secures the loan)that the consumer will rely on to repay the loan

2. 2. Current employment status (if you rely on employment income when assessing the consumer’s ability to repay)

3. 3. Monthly mortgage payment for this loan. You calculate this using the introductory or fully-indexed rate, whichever is higher, and monthly, fully-amortizing payments that are substantially equal

4. 4. Monthly payment on any simultaneous loans secured by the same property

5. 5. Monthly payments for property taxes and insurance that you require the consumer to buy, and certain other costs related to the property such as homeowners association fees or ground rent

6. 6. Debts, alimony, and child support obligations

7. 7. Monthly debt-to-income ratio or residual income, that you calculated using the total of all of the mortgage and non-mortgage obligations listed above, as a ratio of gross monthly income

8. 8. Credit history

Florida Bad Credit Mortgage Lenders will not fund nor purchase a loan subject to the ATR requirement  under TILA unless it meets the requirements of the rule. Certain loans may be exempt from TILA or otherwise exempt from the ATR rule. In those cases, though FloridaBad Credit Mortgage Lenders may choose to purchase a loan that does not adhere to the formal requirements of the ATR rule, FloridaBad Credit Mortgage Lenders  will only fund or purchase loans that the applicant appears able to afford based on application of prudent underwriting standards.

General Program Information

Programs

Florida Bad Credit Mortgage Lenders offers several Non-Agency loan programs. This Bad Credit Select Guideline focuses specifically on the Bad Credit  Select program. See the appropriate Loan Program Matrix for details.

Other Non-Agency Loan Programs offered by Florida Bad Credit Mortgage Lenders Include:

Bad Credit Select Program

The Bad Credit Program allows for multiple 30-day and 60-day mortgage lates in the past 12 months and unlimited consumer lates. This program also includes a Recent Housing Event option that allows for borrowers with a Housing Event in the most recent 24 months from date of closing.

Bad Credit Preferred

The Bad Credit Preferred Program allows expanded Loan – to – Values and increased loan amounts between

$150,000 and up to $2.5M with an adjustable or fixed rate option.

OFC Professional Florida Investor Program

The OFC Professional Investor Program allows for up to 20 financed properties and a foreclosure or short sale in the past 24 months.

OFC ALT-A Florida Loan Program

The ALT-A Program is offered for Prime Borrowers that have a unique situation.

Florida Mortgage Products

See applicable Product Matrix.

Florida Jumbo Mortgage Documentation

Documentation types include Full Documentation and the Bank Statement Income Program.

Maximum LTV/CLTV/HCLTV

See applicable Program Matrix.

Florida Minimum and Maximum Loan Amounts

The minimum loan amount for all Programs is $150,000.

See applicable Product Matrix for maximum  loan amounts.

Loan Age

(Correspondent Loans Only) The period between the note date and the purchaser’s funding date cannot exceed

45 days.

Points, Fees and Prepayment Penalties

Total points, fees, and APR may not exceed current state and federal high-cost thresholds.

Prepayment penalties on primary residence and second home transactions are prohibited.

For the OFC Professional Investor Program, a prepayment penalty is required (unless otherwise restricted by state law) with a 2-year duration and a payoff fee equal to six month’s interest on 80% of the unpaid principal balance at the time of payoff

Note: States may impose different definitions of points and fees, rate/APR, or prepayment penalties than apply under HOEPA. States may also use different triggers in each category for determining whether a loan will be a “high-cost mortgage” (or equivalent terms) under state law. As a matter of policy, Florida Bad Credit Mortgage Lenders does not purchase or fund loans defined as high-cost mortgages (or equivalent terms) under Federal or state law, regardless of the basis for the loan’s treatment as such.

Exceptions

Exceptions to published guidelines are considered on a case-by-case basis. Loans with exception requests

should exhibit strong compensating factors. Florida Bad Credit Mortgage Lenders’s decision to allow or deny any exception request relates only to whether Florida Bad Credit Mortgage Lenders will fund or purchase a loan. The decision does not bind a seller with respect to the underlying decision to extend credit.

Alternate Loan Program Analysis

All loan applications are to be reviewed for possible approval under a traditional conventional conforming or

FHA loan program offered by the seller. Originators  and Sellers are to complete the Alternate Program

Analysis Form (found online) to ensure borrowers are proceeding under the appropriate loan program.

Platinum Plus Program

Ability to Repay (ATR), Qualified Mortgage, And Net Tangible Benefit Requirements

The Consumer Financial Protection Bureau adopted a rule that implements the Ability to Repay (“ATR”) and Qualified Mortgage (“QM”) provisions of the Dodd-Frank  Act. Florida Bad Credit Mortgage Lenders will only purchase or fund loans in which the Mortgage applicants ability to repay has been established as laid out in the Truth In Lending Act. Investment properties used for business purposes (Borrower does not intend to occupy property more than 14 days per year), are exempt from ATR, but must still meet applicable points and fees threshold.

Clients are responsible for providing evidence of compliance with ATR/QM rules.

The Originator must verify the income and assets used to determine the Mortgage applicants ability to repay the loan. Refer to the Income  and Assets  sections of this Guide for additional information.

Benefit to the Florida Jumbo Mortgage Applicants

In keeping with the Commitment to responsible lending, all Loans must have a measurable benefit to the Borrower. When determining the benefit on a transaction, one of the following items must exist to support the benefit to the Borrower:

1. 1. Purchasing a home

2. 2. Lower principal and interest housing payment

3. 3. Lower total monthly payments

4. 4. Lower interest rate

5. 5. Conversion from an adjustable rate to a fixed rate

6. 6. Pay-off of a balloon payment

7. 7. Conversion from negative amortization to fullyamortization

8. 8. Reduction of loan term

 

9. 9 Reduction of total interest payments

 

10. 10. Consolidation of debt

11. 11. Resolution of loss mitigation actions

12. 12. Pay-off of a tax lien

13. 13. Proceeds (cash-out) to Borrower in excess of the costs and fees For Refinance

 

14. 14. Pay-off of a Construction Loan

 

15. 15. Pay-off of property taxes

 

16. 16. Title transfer/Court order

 

17. 17. Eliminating mortgage insurance

 

18. 18. Cash-out for medical needs

 

19. 19. Cash-out for education needs

 

20. 20. Pay-off of a privately held mortgage

 

21. 21. Other as defined by the Borrower

 

On a Loan where the only benefit is monthly savings, closing costs and fees must be taken into account and recouped within state-specified timeframes as applicable. Originators must adhere to any state-specific or federal benefit to Borrower compliance requirements.  Benefit to Borrower must be calculated based on the qualifying housing payment.

 

 

Borrower Eligibility

 

The guidelines below describe a person’s eligibility to be a Borrower on US Mortgage LendersPlatinum Plus Loan Program. We will purchase or fund loans made to individual, natural persons only. Loan applications from corporations, general partnerships, limited partnerships, and “Doing Business As” (DBAs) or religious/non-profit  organizations are ineligible on this program.

 

Immigration And Naturalization Service (Ins) Classifications

 

The U.S. Department  of Immigration  and Naturalization  Service (INS) has defined specific residency classifications. Platinum Plus is limited to individual persons who are citizens and/or legal permanent residents of the United States. For eligibility and restriction details, refer to the Platinum Plus Loan Program Matrices.

 

The following are some of the classifications defined by the

INS:

 

 

 

Program Guideline

 

 

United States citizens are eligible Borrowers for all of

US Mortgage LendersLoan Programs.

 

 

 

A permanent resident alien may be an eligible Borrower, if the Borrower is a holder of an alien registration card (green card). The Client is responsible to verify that the Borrower has a

   valid registration card.                                  

 

A non-permanent  resident alien may be eligible if they maintain a current G-1 to G-5, H-1, L-1, or E-1 Visa and they can provide a copy of the

Visa with underwriting documentation. Not eligible

 

INS   Classification            INS Definition   U.S. Citizen   A citizen of the United States is a native-born, foreign- born, or naturalized person who owes allegiance to the United States and who is entitled     to its protection.                                                                      Permanent Resident Alien A permanent resident alien is a person who is not a U.S. citizen but is legally able to maintain permanent residency in the United States. Non-Permanent Resident Alien A non-permanent  resident alien is a person who is not a U.S. citizen but resides in the United States under the terms of a Visa. Foreign Nationals A foreign national is a person who is not a U.S. citizen and who lives and works outside of the

    United States.                                                  

 

Persons with Diplomatic Immunity

A person with diplomatic immunity is allowed to live in the United States to carry out their official diplomatic duties. They are not U.S citizens, and are exempt from lawsuit or prosecution under the

h                ’  l

Not eligible

 

 

Evidence of Residency

 

Acceptable evidence of permanent residency for Borrowers who are not U.S. citizens must be provided. The Borrower must provide the INS evidence as follows:

 

• Alien Registration Receipt Card I-151 (referred to as a green card).

 

• Alien Registration Receipt Card I-551 (Resident Alien Card) that does not have an expiration date on the back (also known as a green card).

 

• Alien Registration Receipt Card I-551 (Conditional Resident Alien Card) that has an expiration date on the back, and is accompanied by a copy of the filed INS Form I-751 (petition to remove conditions).

 

• Non-expired foreign passport that contains a non-expired stamp (valid for a minimum of three years) reading “Processed for I-551 Temporary Evidence of Lawful Admission for Permanent Residence. Valid until [mm-dd-yy]. EmploymentAuthorized.”

 

• The U.S. Citizenship and Immigration Services Web site is:

https://egov.immigration.gov/cris/caseStatusSearchDisplay.do

 

 

Other forms of evidence of residency that are not listed may be acceptable, and will be reviewed on a case-by- case basis.

 

Borrower Types

 

The following are the types of Borrowers allowed on the Platinum Plus loan programs. FloridaBad Credit Mortgage Lenderslimits the number of Borrowers per Loan to four. For eligibility and restriction details, refer to the Platinum Plus Loan Program Matrices.

 

Primary Borrower

 

The Primary Borrower is the individual who earns the most income. Non-Occupant Co-Borrowers cannot be the Primary Borrower on the Mortgaged Property.

 

Co–Borrower

 

A Co-Borrower is an individual other than the Primary Borrower whose credit history, income, or assets are used for qualifying the loan. The Co-Borrower is the Mortgage applicants spouse, domestic partner, or any individual jointly responsible for repayment of the loan with the Borrower. All Co-Borrowers must be on title.

 

First-Time Homebuyers (FTHB)

 

Borrowers are considered First-Time Homebuyers (FTHB) when there is no evidence of owning residential property in the previous three years. First-Time Homebuyers  generally must fulfill specific requirements in addition to the conditions stipulated for experienced homebuyers. A Borrower(s) who has experience owning a home, but has not owned one in the past three years, will be considered a FTHB.

 

In the instance where one Borrower is a FTHB and the other Borrower(s) is not, we will treat the transaction as a non-FTHB transaction for grading and program eligibility.

 

For LTV/CLTV restrictions, reserve requirements and other guidelines specific to FTHBs, refer to the Platinum Plus Loan

Program Matrices.

 

Non-Borrowing Occupant

 

A Non-Borrowing Occupant is the Mortgage applicants legal spouse, domestic partner, or any person residing in the Mortgaged Property whose credit, income, and/or assets are not considered in the loan qualifying process. Non- Borrowing Occupants that appear on title will have to execute the documents required by law to create a valid lien on the property.

 

When a married Borrower purchases a property without involving a spouse, we requires the spouse to sign the security instrument, and any other applicable documentation under governing state law to confirm relinquishment of their rights to the property.

 

Non-Occupant Co–Borrower

 

A Non-Occupant Co-Borrower (co-signer) is an individual who will not be living in the Mortgaged Property, but whose income and/or assets have been used to qualify for the loan. The co-signer must sign the Note. Although the Non- Occupant Co-Borrower does not reside in the Mortgaged Property, he or she is jointly responsible

(with the Primary Borrower) for repaying the loan. If the Loan Program allows for a Non-Occupant Co- Borrower, the loan is subject to the following conditions:

 

• Mortgage Loan:

 

–     Owner occupied or second vacation home

 

–     Full Documentation only

 

–     The Primary (occupant)  Mortgage applicants credit profile will be used for grade determination, and the Primary

Borrower must have a DTI of no more than 60%

 

–    A minimum of 5% of the down payment must come from the Primary (occupant) Mortgage applicants own funds. A down payment of 100% gift funds is allowed at LTVs less than 80% or the program maximum, whichever requires the greater down payment. Secondary financing is not allowed on Non-Occupant Co-Borrower or Non-Owner Occupied transactions.  Closing costs may also be in the form of a gift.

 

• Non-Occupant Co-Borrower:

 

–    Individual cannot be the Primary Borrower, and must be a close family member such as a parent, child, grandparent, or sibling. Credit must meet the minimum credit standards for the grade assigned to the loan

 

–     Must provide income and asset documentation to be used for loanqualification

 

–    Must be vested on the Mortgaged Property for a minimum of six months for a Rate/Term Refinance and twelve months for a Cash-Out Refinance transaction

 

−     Up to two Non-Occupant Co-Borrowers allowed

 

Title Held  in a Trust or LLC on Behalf of the Borrower

 

The Borrower must be an individual with the exception of inter-vivos revocable trusts and limited-liability companies (LLCs) under certain circumstances. Inter vivos revocable trusts are created by individuals, while they are still living, as an estate planning tool.

 

Title must generally be in the Mortgage applicants name as an individual, trust, or LLC at time of application for refinance transactions and at the time of closing for all transactions.

 

Title in the name of an LLC at time of application is acceptable provided the Borrower is a member of the LLC

and the Loan will be in the Mortgage applicants name as an individual or acceptable trust at closing.

 

Non-individual legal entities such as corporations,  general partnerships,  limited partnerships,  real estate syndications or investment trust are not eligible.

 

The inter vivos revocable trust, also called a family trust, living trust, or revocable living trust, can be used as an alternative form of property ownership. An inter vivos revocable trust (“living trust”) is a trust defined

as follows:

 

Eligibility Requirements

 

• Created by an individual during his/her lifetime

 

• Becomes effective during its creator’s lifetime

 

• Can be changed or canceled by its creator at any time, for any reason, during his or her lifetime

 

• At least one individual establishing the trust must be on theLoan.

 

Trust Agreement Requirements

 

The Client must obtain copies of the entire trust document and include them in the loan file submitted for review. The copies must be certified by an attorney or the grantor/trustor/settlor. The title company must also be supplied with copies of the trust.

 

A review of the trust agreement is required to ensure the agreements meets all of the following requirements:

 

• The trust is established by one or more natural persons, solely or jointly. The person establishing the trust is known as the “Settlor”, “Trustor”, or “Grantor”, referred to below as “Settlor”.
• The trust is effective during the Settlor’s lifetime

 

• The Settlor is the primary beneficiary of the Trust. If there is more than one Settlor there can be more than one primary beneficiary.
• The Settlor is the trustee or one of the co-trustees

 

• The trustee has the power to mortgage the Subject Property for the purpose of securing a loan to the party (or parties) who are the borrowers on the Note.
• The trustee is not required to obtain written consent from the beneficiaries to mortgage the subject property if written consent has been provided.
• There is no unusual risk or impairment of lender’s rights, such as distributions required to be made in specified amounts other than net income
• The trust is valid under federal, state, and local law

 

• If the trust agreement requires more than one trustee to borrow money or purchase, construct, or encumber realty, the Client must confirm that the requisite number of trustees have signed the loan documents.

 

 

Certification of Trust

 

A certification of trust or a summary of trust is acceptable if required by state law. In states that require a Client to rely on an abstract, summary or certification of the trust agreement instead of the trust agreement, a copy of the

 

abstract, summary or certification is acceptable.

 

California (CA) Only Exception

 

California (CA) law provides for the use of a Certification of Trust that states the various facts about the trust in lieu of obtaining copies of the trust. Clients can rely upon this certification so long as it is signed by all of the trustees (Powers of Attorney are not allowed). Clients must review the certification to verify the above requirements are met.

 

Title

 

The title insurance policy must ensure full title protection, and must indicate that title to the subject property is vested in the name of the trustees. The policy may not list any exceptions with regard to the trust or the trustees.

 

Additional documentation:

 

• Inter Vivos Revocable Trust Rider to the Deed ofTrust/Mortgage

 

• Inter Vivos Trust as Borrower Acknowledgment

 

• Verbiage on this Acknowledgement may be incorporated into the Inter Vivos Revocable Trust Rider to the

Deed of Trust/Mortgage. If the verbiage is included in the Rider, then the Acknowledgement is not required

 

Maximum Loans to One Borrower

 

In order to reduce the level of risk and ensure lien security, FloridaBad Credit Mortgage Lenderslimits the potential Mortgage applicants open loans, total number of properties owned, and number of mortgaged properties owned in one area.

 

The occupancy of the property being financed will determine the limitations on how many other financed 1-4 family properties the Borrower may own and/or be obligated on. These limitations apply to each Borrower, individually and all Borrowers collectively that own and/or are obligated on a note secured by a mortgage. The Borrower(s) obligation on a mortgage is important when evaluating capacity. Therefore, even if the Borrower is not an owner of record, but is obligated on a note of a financed property, it must be included in the maximum number of financed properties.

 

The following are excluded from these limitations:

 

• Properties owned free and clear

 

• Joint or total ownership in property this is held in the name of a corporation, even if the Borrower is the owner of the corporation. However, if the Borrower is individually obligated on the note, it must be included

 

• Ownership in a multi-family property (5+ units)

 

• Ownership in commercial property

 

• Ownership in timeshares

 

• Ownership in unimproved land

 

For all loans, the Mortgage applicants primary residence, the subject property and any properties owned separately by a

Co- Borrower must be included in the total number of properties owned.

 

 

 

Maximum Dollar Amount Sold under Platinum Plus

 

The aggregate dollar amount of all loans made to one Borrower sold or funded under the Platinum Plus Program may not exceed $4M.

 

Maximum Loans to One Borrower Sold under Platinum Plus

 

There is no limit to the number of loans that can be submitted for the same Borrower to be sold or funded under the Platinum Plus program. Rather, the maximum number of loans to one Borrower is limited by the aggregate dollar amount of the total loans sold or funded under the Platinum Plus program. The aggregate dollar amount of all loans sold or funded under the Platinum Plus program may not exceed $4M.

 

 

Maximum Properties One Borrower May Own

 

A Borrower may finance or own multiple properties. Platinum Plus offers two options for Borrowers that own multiple properties. They include:

 

1)   If the Loan being sold or funded under Platinum Plus is secured by the Mortgage applicants principal residence, there are no limitations to the number of properties that the Borrower can own or are currently financing.

 

2)   If the Loan being sold or funded under Platinum Plus is secured by the Mortgage applicants second home or an investment property:

 

1. a. The Borrower may have up to ten financed properties (including their principal residence) OR

 

1. b. The Borrower may own or have financed an unlimited number of properties if the Loan being sold or funded

under Platinum Plus has a maximum LTV/CLTV that does not exceed the lesser of the program maximum or 70%.

 

More stringent lending practices should be implemented in cases where the Mortgage applicants loan documents exhibit escalation of late payments and multiple refinances. New investors that have made multiple real estate acquisitions (more than 50% of the properties purchased) in the past 12 months may require additional review, documentation, or be ineligible.

 

In all cases the Borrower must have sufficient assets to close and meet reserve requirements. For more information, refer to the Platinum

Plus Loan Program Matrices.

 

Maximum Loans in One Market Area Sold to Under Platinum Plus

 

The number of loans to one Borrower in any single market area is limited to two. The term “single market area” refers to the physical location of the property—meaning two or more homes owned by the same Borrower within a several block radius, defined neighborhood, or lending area.

 

Loan Application Analysis

 

The Loan File assists in determining the Mortgage applicants eligibility for the loan. During the completion and review of the application, the Client should analyze the application in the following manner:

 

• Verify and substantiate the quantity, quality, and durability of the Mortgage applicants income.

 

• Verify and analyze the Mortgage applicants assets to determine if adequate funds are available to meet the equity and reserve requirements of the transaction.

 

• Verify and substantiate the Mortgage applicants liabilities and credit history in relation to the Mortgage applicants assets and income.

 

• Evaluate the Mortgage applicants net worth in relation to his or her ability to manage financial affairs and accumulate assets/wealth.

 

• Verify that the declarations are consistent with programeligibility.

 

The Loan File must contain a complete, fully executed Loan application (1003). Both the initial and final 1003’s must be provided. The following applies:

 

• Must be signed and dated by the Borrower

 

• All HMDA data must be completed.

 

• Client is determined by auditing the interviewers section

 

• Client Contact information is included

 

 

Potential “Buy and Bail” Loan Scenarios

 

Loans that exhibit the following characteristics, sometimes referred to “Buy and Bail Characteristics”,  may be deemed ineligible for sale or funded under Platinum Plus:

 

• The borrower defaults on the original mortgage shortly after purchasing a second property

 

• The borrower will be a first time landlord (renting out the originalproperty)

 

• The borrower has minimal or no equity in the originalproperty

 

• Inability to validate lease terms with the purported tenant

 

• Purported tenant has a pre-existing relationship with thehomeowner

Credit

 

Credit is defined as the Mortgage applicants history of credit payments and financial obligations. An assessment of the Mortgage applicants capacity and willingness to pay financial obligations is a major factor used in determining a Mortgage applicants creditworthiness. A Borrower(s) who has consistently met financial obligations in the past may indicate reasonable justification that he or she is likely to continue to do so in the future. A Mortgage applicants credit history provides a strong measure of their intent to repay.

 

Credit history is measured on credit depth, number of obligations, delinquency  patterns, and demonstrated intent to repay. In a subjective evaluation of credit, many factors are considered when evaluating a Mortgage applicants credit history. The factors include:

 

• Credit repayment history

 

• Line utilization

 

• Proportion of balances versus limits on revolvingaccounts

 

• Patterns of debt pyramiding

 

• Recent inquiries and newly opened accounts

 

• Recent changes in the number of open accounts or overall amount of creditoutstanding

 

• The number of open accounts and length of credit history

 

• Public record information

 

For more information, refer to the Platinum Plus Loan Program Matrices.

 

Equal Credit Opportunity Act

 

The Federal Equal Credit Opportunity Act prohibits lenders from discriminating against credit Borrowers on the basis of race, color, religion, national or ethnic origin, sex, marital or familial status, age (provided the Borrower has the capacity to enter into a binding contract), disability, because all or part of the Mortgage applicants income is derived from a public assistance program or because the Borrower has, in good faith, exercised any rights under the Consumer Credit Protection Act. State laws may also prohibit discrimination on certain additional basis such as sexual orientation.

 

Number of Open Accounts

 

It is generally not one credit usage factor, but the combination of factors that establish whether or not the overall pattern of credit use is acceptable.

 

In general, the greater the number of credit accounts, the higher the credit risks. However, it is important to analyze the number of accounts within specific types of credit (i.e., retail, installment, revolving and mortgage). The higher risk group includes Borrowers with a large number of bank revolving accounts, and/or accounts with outstanding balances. On the other hand, if there is no bank revolving accounts, this could indicate an inability of the Borrower to obtain credit.

 

The lack of acceptable credit cannot be compensated for by either capacity or collateral strengths. When determining investment quality, the likelihood of timely repayment, as demonstrated by responsible credit, must always be

present. Once credit is established, however, collateral and capacity can be used to strengthen the loan’s overall investment quality.

 

Recent Inquiry Risk Factors and Undisclosed Liabilities

 

Recent inquiries indicate that the consumer has actively been seeking credit. A Borrower with minimal credit experience and a number of recent inquiries should be more closely scrutinized than a Borrower with the same number of inquiries and a very long and stable credit history.

 

Multiple inquiries within the most recent 12 months generally increase risk and, when combined with high balances- to-limits on revolving accounts may indicate that the Borrower is in danger of becoming overextended. In addition, several recent inquiries combined with a credit history of short duration may make even mild derogatory credit information significant.

 

The following factors should be considered:

 

• Mortgage applicants payment experience

 

• Type of credit being sought

 

• Total amount of credit outstanding

 

• Credit utilization reflected on the report

 

If the credit report indicated that a creditor has made multiple inquiries within the previous 90-day period, the underwriter must determine whether additional credit was granted as a result of the Mortgage applicants request. A review and evaluation of the inquiries section of the Mortgage applicants credit report is required to determine if the Borrower

has received additional credit that is not reflected in the credit report or disclosed in the Loan File. A detailed explanation letter that specifically addresses both the purpose and outcome of each inquiry is required from the Borrower(s). An overall generic credit explanation letter is not acceptable.

 

As a result of the credit inquiries, the loan may be subject to additional requirements. If additional credit was obtained, a verification of that debt must be provided and the Borrower must be qualified with the monthly payment. The verification can be achieved through a direct verification with the creditor or use of a credit supplement.

 

Clients are expected to proactively identify any and all undisclosed liabilities that may affect the loan approval in relation to underwriting guidelines, eligibility parameters, or pricing. It is the Client’s responsibility to develop and implement its own business processes to support compliance with Fannie Mae’s requirements  for undisclosed liabilities. Although Clients may already have such processes in place, some best practices that may be incorporated include:

 

• Refreshing a credit report prior to closing to uncover additional debt or credit inquiries

 

• Adopting new services from credit vendors that provide Borrower credit report monitoring services between the time of loan application and closing

 

• Investigating credit inquiries listed on the credit report to determine whether the Borrower did in fact, open additional debt resulting in repayment obligations. In some cases, it is possible to obtain a direct verification with the creditor associated with theinquiry

 

It is also highly recommended  that a Mortgage Electronic Registration System (MERS) report be run, prior to closing, to determine if the Borrower has undisclosed liens and/or if another mortgage is being originated. If new debt has been obtained, the Loan File must be re-evaluated to ensure compliance with debt-to-income and Borrower eligibility requirements.

 

Recently Opened Accounts

 

Like inquiries, several recently opened accounts may be a warning that the Borrower(s) may be getting overextended. In addition, a credit history with all accounts recently opened may signal that the Borrower(s) do not have sufficient experience managing financial obligations. The following factors should be considered:

 

• Mortgage applicants payment experience

 

• Utilization of revolving credit lines

 

• Total amount of credit outstanding

 

• Recent inquiries

 

• Whether the Borrower has sufficient experience in managing investmentproperty

 

Outstanding Debt/Line Utilization

 

Two very important  indicators of repayment ability are the number of accounts with sizable outstanding balances and high credit line utilization. The number of trade lines with balances reported in the last three years should be considered and reviewed in relationship to the number and activity in the last 12 months.

 

Analyze the current balance for each open account to the high credit limit to determine whether there is a pattern of accounts with balances at or near their limits. Generally, if a Borrower has credit balances that represent at or near 70% of their open and active credit limit, this may require additional review and/or compensating factors. The more accounts with high balances-to-limits and the higher the percentage used, the higher the risk.

 

High balances-to-limits may also indicate the Borrower is making minimum payments on revolving accounts

 

rather than reducing the debt and may be at or near payment capacity. Any derogatory information in a credit history within the most recent two years combined with several revolving accounts at or near their limits should be considered derogatory information when evaluating the credit profile of the Borrower. Generally, the higher the Mortgage applicants overall utilization of revolving credit, the higher the amount of risk. Compensating factors or additional documentation may be required to offset this risk.

 

Reason/Score Codes

 

Along with the credit scores, credit repositories return up to four reason codes with each credit score provided. These codes are sometimes referred to as score factor codes. These reason codes provide an explanation as to why the Borrower(s) did not receive a higher score. This is taken into consideration when evaluating mortgage applicants

credit.

 

HAWK Alerts

 

All three national credit repositories have developed automated messages to help messages to help identify possible fraudulent activity on a credit report. These alerts are commonly known as HAWK Alerts. All HAWK Alert messages shown on a credit report, especially those in the Fraud Verification Information section must be addressed and resolved.

 

Military Active Duty Alert

 

Military personnel are particularly susceptible to identity theft because many of their records, orders, and identification documents display their social security number. An active duty alert is a type of fraud alert established under the Fair and Accurate Credit Transactions Act (FACTA) that provides credit identity theft protection for U.S. military service personnel.

 

The Mortgagee must contact the Borrower directly to verify identity whenever an active duty alert appears on the Mortgage applicants credit report.

 

Customer Identification  and OFAC Alert Screening

 

The mortgagee must comply with Section 326 of the USA Patriot Act and OFAC, including:

 

• Provide each Borrower with a customer identification notice

 

• Obtain at least four items verifying the Mortgage applicants identity through documentary or non- documentary methods

 

• OFAC alert screening

 

• Determine if the Borrower is questionable orsuspicious

 

• Monitor questionable instance which may require internal and external reporting of suspected individuals

 

• Ensure Client’s employees are trained and informed of suspicious activities related to anti- money laundering or terrorist activities

 

Weighing Risk Factors

 

When evaluating Borrower(s) with adverse credit information, more weight should be given to derogatory credit information or late payments occurring within the past two years. The following factors should still be considered:

 

• The number, timing and extent of the delinquency

 

• Eventual repayment of delinquent obligations

 

• Any previous bankruptcy, mortgage foreclosures, or deed-in-lieu of foreclosure within the past seven years

 

• Whether other characteristics of the Mortgage applicants credit profile, such as age of credit, use of outstanding credit, and inquiries, make any significant difference in the derogatory credit

 

Delinquency and Derogatory Credit

 

There are a number of factors to consider in the analysis of delinquency or derogatory credit:

 

• The type of accounts on which the delinquency occurred

 

• The reason for delinquency

 

• The severity of the delinquency

 

• The frequency of delinquent accounts, AND

 

• How recently the delinquency occurred

 

More weight is placed on installment loan delinquency than on revolving debt delinquency. The most weight is placed on mortgage payment history. The most serious types of delinquency include foreclosures, bankruptcy, judgments, collection accounts and tax liens. Explanations and supporting documentation should be in the file to show these events were an isolated occurrence and are unlikely to happen again.

 

Accounts which are currently delinquent are closely scrutinized. All accounts past due must be brought current or otherwise resolved prior to closing according to the Platinum Plus program guidelines. Please refer to the Platinum Plus Matrix for details.

 

Credit Report Requirements

 

For each Borrower whose income or assets are required to qualify for the loan, the Loan File must contain one of the following:

 

• A full Residential Mortgage Credit Report(RMCR)

 

• An in-file merged credit report that accesses the three national credit repositories

 

• Joint merged credit reports are allowed without regard to marital status

 

General Requirements

 

The following outlines the general requirements for credit reports. The credit report must contain merged credit information provided by all three national repositories.

 

Residential Mortgage Credit Reports:

 

• Credit Report must not be dated more than 90 days from the Note Date. In the event that the Disbursement Date causes the Mortgage applicants credit report and/or credit file to be greater than 90 days old, we reserve the right to request updated credit, asset, and/or income documentation. Disbursement Date is the day on which the loan closes.

 

• Must contain all discovered credit and legal information  that is not considered obsolete under the Fair Credit

Reporting Act

 

• Be issued by an independent consumer reporting agency that obtains or verifies all information from sources other than the Borrower.

 

• Identify the full name, address, and phone number of the consumer reporting agency

 

• Identify the names of the national credit repositories from which the information was obtained. The consumer reporting agency must contact at least two national credit repositories for each area in which the Borrower has resided during the most recent two-yearperiod.

 

• Indicate the dates the accounts were last updated with creditors. Each account should have been updated within 90 days of the credit report.

 

 

• Include a certification stating that it meets the standards that Fannie Mae, Freddie Mac, the FHA, and VA prescribe for an RMCR. Separate credit repository inquiries are necessary when Co- Borrowers have maintained creditindividually.

 

• List all credit inquiries received within the previous 90days.

 

• Evidence the consumer reporting agency verified the Mortgage applicants current employment and, if obtainable, income.

The report must show the date of verification. Verification may be made by telephone. If there has been a change in employment in the past two years, the report must also describe the Mortgage applicants previous employment and income. In cases in which employment was not verified, the report must indicate why it was not.

 

• Show responsive statements concerning items on the report. For example, the consumer reporting agency must report unable to verify or employer refused to verify. The same responsive reporting applies to trade and credit history.

 

• Must contain specific information regarding legal items found in public records, including judgments, foreclosures, tax liens, bankruptcies,etc.

 

Tri-Merged Credit Reports:

 

• Must contain all the information from the three in-file creditreports.

 

• If the information is not exactly the same on each report, then the merged report must repeat the information as stated on each report or include the most derogatory of the duplicate information that pertains to the payment history and/or current paymentstatus.

 

• Identify the repositories that were used for the in-file creditreports.

 

• Must provide a credit bureau score, accompanied by reason codes, for each Borrower.

 

• The report must include all of the information verified by the threerepositories.

 

• Any social security number discrepancy must be disclosed by therepositories.

 

• Each individual trade line must identify the primary repository that provided the account information.

 

No Borrower in a transaction may have frozen credit. Frozen credit is where the Mortgage applicants credit has been involuntarily frozen by a court order, government entity or similar mandate. If a Borrower has frozen credit and unfreezes their credit after the original credit report was ordered, a new credit report must be obtained to reflect current updated information for evaluation.

 

Each credit report must contain a Fair Isaac credit score (“Empirica” on TransUnion, “Beacon” on Equifax, and “FICO” on Experian) for all Borrowers whose income and/or assets are used to qualify for the loan. The Client must provide at least two qualifying credit scores for each Borrower. These credit scores will be used as a component in determining the credit grade of the loan. A Co-Borrower with no valid credit score will be allowed in cases where income and/or assets are not required for qualification purposes. For grade determination, refer to the Platinum Plus Loan Program Matrices.

 

Selecting The Credit Score

 

FloridaBad Credit Mortgage Lenderswill select the Mortgage applicants credit score using one of the following methods:

 

• If all three scores are available, the middle score will beused.

 

• If only two scores are available, the lower score will be used. Once the score is selected for each Borrower, it is used for loan qualification as follows:
• For Full/Alternative Documentation Loans, the Primary Mortgage applicants selected score is used.

 

• For Reduced Documentation Loans, the lowest selected score among all Borrowers is used.

 

• If in the case where both Borrowers earn equal income, the Borrower with the lower score will be used for grade determination.

To ensure credit score validity, the Originator should review the scores, the score codes and the Mortgage applicants credit history, Score codes must be consistent with trade line information and use. Scores that do not appear to

represent an accurate assessment of the Mortgage applicants credit risk will not be considered usable and valid.

 

 

 

 

Limited, No Credit History Or Alternative Credit History

 

Borrowers with limited, no credit history, or that do not meet Platinum Plus program’s minimum credit requirements are not eligible. Each Borrower must have at least two valid and usable credit scores as defined by the guidelines. A Borrower not using income to qualify and showing $0 earned or is not employed does not need to meet the minimum trade line requirements.

 

Minimum Credit Requirements / Trade Lines

 

• A Borrower(s) without an established credit history is ineligible. A valid and usable score is one that is generated based upon credit history and credit patterns that accurately reflect the Mortgage applicants history. It should contain at least:

–     Three established open and active trade lines that reported for a minimum of 24months

 

–     At least one of the three established trade lines must have a minimum  $2,500 high credit limit

 

–     At least one open mortgage trade line in the last 36months

 

• If the Borrower is a First-Time Homebuyer, the Mortgage applicants rental housing payment history for the previous 12 months is required. Payments must be documented via an institutional VOR or cancelled checks/bank statements.
• For Borrowers that currently own or have owned a property free and clear, a copy of the title or credit report must document the free and clear status.
• If the Borrower is in college, is a recent college graduate or living with family members and is not paying rent, he or she must meet the minimum creditrequirements.

 

Mortgage applicants failing to meet the 3 trade lines criteria but have a minimum of 1 open trade line with 12 months or more reporting history can be considered without exception if the following requirements are met:

 

• 8 or more trade lines reported with at least one being a mortgage tradeline

 

• Minimum 7 years of established credit history

 

• If the mortgage history is not reported on the credit report, it may be verified through cancelled checks, or verification of mortgage (VOM).

 

OR

 

• 6 months additional reserves and meets one of the following requirements: DTI < 35%, LTV < 70, or the program maximum, whichever is less.

 

 

 

Unacceptable Tradelines

 

The following cannot be used to meet the minimum trade line requirement:

 

• Collections

 

• Charge-offs

 

• Public records and derogatory credit, included in or prior to abankruptcy

 

• Accounts currently over 90 days delinquent

 

• Student loans not currently in repayment

 

• “Authorized User” accounts

 

 

Adverse Credit

 

Collection accounts, charge-off accounts, judgments, liens, delinquent property taxes, repossessions, and garnishments are considered to be adverse credit. Adverse credit does not impact the grade determination, since these elements have already been included in the credit score; however, the allowance of adverse credit is restricted by grade and program.

 

All delinquent credit that will impact title must be paid off prior to or at closing. Title must insure FloridaBad Credit Mortgage Lenders

Funding’s lien position without exception.

 

However, Charge-Offs or collection accounts that do not impact title are not required to be paid off. For eligibility and restriction details, refer to the Platinum Plus Loan Program Matrices.

 

Derogatory Credit

 

Any derogatory information requires a full investigation including:

 

• A written explanation from the Borrower that outlines the cause of the major derogatory credit event and the likelihood of re-occurrence.

 

• Explanations must make sense and cannot conflict with other verified information or documentation in the Loan File. When a Borrower indicates unusual circumstances have contributed to serious delinquencies or derogatory credit, documentation to support those circumstances should be obtained to justify a decision to approve a loan with recent credit problems.

 

• Proper consideration must be given in evaluating the Mortgage applicantscreditworthiness

 

• Proof that the incident has been resolved and documentation supporting the resolution and conclusion of the matter. If a derogatory item is being paid through this transaction, the file should note it in the closing statement.

 

• A Borrower may provide medical information to explain a pattern of late payments. Medical information must never be specifically requested. However, explanation for a pattern of late payments or derogatory information on the credit report should be requested. The underwriting decision to grant credit should not be based on a Mortgage applicants physical, mental or behavioral health condition.

 

Divorce Debt

 

Delinquent credit which belongs to an ex-spouse may be excluded from the credit evaluation when all of the following apply:

 

• Loan File contains a copy of the filed/recorded divorce decree or recorded separation agreement which shows the derogatory accounts belong solely to theex-spouse;

 

• Late payments that have occurred after the date of the divorce or separation;and

 

• If debt in question is a mortgage, evidence of title transfer prior to any delinquent debt must be provided and evidence of “buyout” as part of courtproceedings.

 

Co-Signed Debt

 

Delinquent credit that belongs to a co-signer must be considered in determining the Mortgage applicants credit acceptance.

 

Bankruptcy

 

Bankruptcy is defined as court proceedings to relieve the debts of an individual or business unable to pay creditors. Bankruptcy may be declared under one of the Chapters of the Federal Bankruptcy Code.

 

• Chapter 7. Covers liquidation of individual or businessassets.

 

• Chapter 11. Covers reorganization of bankruptbusinesses.

 

• Chapter 13. Covers contractual repayment byindividuals.

 

 

Requirements and Guidelines

 

The following requirements and guidelines apply to bankruptcies:

 

• Loans to Borrowers with multiple bankruptcies are ineligible for purchase or funded under Platinum Plus. For example, a Borrower who filed for bankruptcy in 2009 and later in 2012 is ineligible under these guidelines regardless of whether the bankruptcy was discharged or dismissed. We do not consider the following

scenarios as multiple bankruptcies:

 

–     When a Chapter 13 rolls into a Chapter 7 bankruptcy

 

–     When individual Borrowers each have filed separate bankruptcies.

 

• Bankruptcy dismissal dates are treated the same as discharge dates.

 

• If a discharge/dismissal date cannot be established, documentation validating the dates must be provided.

 

If a Foreclosure is included in the Bankruptcy, each event is treated separately for grade determination. The Client must determine the seasoning for each event and grade the Loan accordingly.

 

Please refer to the Platinum Plus Loan Program Matrices for bankruptcy seasoning information,  and Loan Program restrictions. Credit depth requirements must be met post-bankruptcy. Credit prior to bankruptcy will not be considered for meeting the trade line requirements.

 

Chapter 7 Bankruptcy

 

Chapter 7, also called liquidation, is the most common type of bankruptcy. It provides for the absolute and complete elimination of most types of debt, thereby giving the debtor a fresh start. The goal of a Chapter 7

 

bankruptcy is to obtain a court order discharging one’s debts.

 

For all credit grades, the aging of the Chapter 7 bankruptcy is measured from the discharge date. For further details, refer to the Platinum

Plus Loan Program Matrices.

 

Chapter 11 Bankruptcy

 

Chapter 11 bankruptcies allow businesses the opportunity to reorganize business debt without having to liquidate all assets. The debtor presents a plan to creditors that allows the debtor to reorganize financial obligations in order to improve the financial stability of the business.

 

For all credit grades, the aging of the Chapter 11 bankruptcy is measured from the discharge date. For further details, refer to the Platinum

Plus Loan Program Matrices.

 

Chapter 13 Bankruptcy

 

Chapter 13 bankruptcies provide individuals who have a regular income, but are overcome with debt, the opportunity to repay within a reasonable period of time. Chapter 13 bankruptcies permit the debtor to file a plan to pay a certain percentage of future income to the bankruptcy court for payment to creditors. If the court approves the plan, the debtor will be under the court’s protection while repaying stated debts.

 

Depending on the Loan Program, the aging of a Chapter 13 bankruptcy is measured from the discharge date. For further details, refer to the Platinum Plus Loan Program Matrices. If Borrower enters into Bankruptcy and cancels, the seasoning is measured from the Cancellation Date

 

Consumer Credit Counseling Services (Cccs)

 

Consumer Credit Counseling Services (CCCS) assist Borrowers with financial management  of debts in an attempt to avoid further delinquencies or possible bankruptcy. Generally, creditors agree to a reduced repayment under a consumer credit counseling plan. In all cases, the CCCS plan must have been paid in full. A payment history is required in this situation and if delinquent in the most recent 12 months, the CCCS will be treated as an open Chapter 13 and is ineligible. The date the CCCS was paid off will be considered the discharge date. If Borrower enters into CCCS and subsequently cancels, the seasoning is measured from the cancellation date.

 

 

Foreclosures

 

A foreclosure is a proceeding that enables the creditor, in accordance with the terms of the security instrument, to take legal action that could ultimately result in the forced sale of the collateral property for full or partial satisfaction of the debt. Such action typically extinguishes the property owner’s rights, title, and interest. In the instance where a Borrower has been or is currently delinquent 120 days or longer and the lender has not initiated formal actions, the

120 day plus delinquency will be treated as a foreclosure for grading purposes. Documentation should be provided to show the individual Mortgage applicants circumstance.

 

Foreclosure is substantiated by real estate loans that are delinquent 120 days or longer, as mentioned above or the existence of any of the following:

 

• Breach

 

• Lis Pendens

 

• Notice of Sale

Requirements and Guidelines

 

• Service

 

• Sheriff’s Sale

 

• Short Payoff

 

• Bankruptcy Notice

 

The following requirements and guidelines apply to foreclosures:

 

• The length of time elapsed since the occurrence or completion of the foreclosure is considered in the grade determination.

 

• Applicants who have undergone foreclosure procedures must provide a mortgage/housing history in accordance with specific Program Guidelines.

 

• A Borrower with a history of more than one foreclosure is ineligible. For example, a Borrower who had a foreclosure in 2009 and then loses a home through bankruptcy in 2012 is ineligible.

 

• Any repossession or 120-day delinquency on a mobile home, manufactured home or timeshare, even if shown as an installment debt, will be considered aforeclosure.

 

If a Foreclosure is included in the Bankruptcy, each event is treated separately for grade determination. The Client must determine the seasoning for each event and grade the Loan accordingly.

 

Please refer to the Platinum Plus Loan Program Matrices for foreclosure seasoning information, and Loan Program restrictions.

 

Loss Mitigation History – Modifications, Forbearances, Rearrangements, Extensions, Or Workouts

 

Loss mitigation history includes the following:

 

• Deed-in-Lieu

 

• Short Sale

• NOD

 

• Short Refinance

• Pre-Foreclosure Sale

 

• Loan Extensions

 

• Loan Modification

 

For further details, refer to the Platinum Plus Loan Program Matrices.

 

An agreement to forbear, workout, extend, or rearrange the terms of the original loan does not change the fact that the loan was not paid in accordance with its original terms. This applies even if the extension or modification was initiated by the Borrower, and the debt was subsequently paid in accordance with the rearranged terms. Any forbearance on a mortgage including deed-in-lieu, NOD, pre-foreclosure sale, short sale, short refinance, modification or non-foreclosure action will be considered a loss mitigation action for grading purposes.

 

Please refer to the Platinum Plus Loan Program Matrices for loss mitigation action seasoning information, and Loan Program restrictions.

 

Lawsuits and Pending Litigation

 

If the application, title, or credit documents indicate that the Borrower is involved in a lawsuit or litigation additional documentation, such as an attorney’s explanation, copy of the complaint and answer, etc. is required. The title company closing the loan must provide a letter stating affirmative coverage of subject lien position.

 

 

Generally, lawsuit and pending litigation is not eligible under the Platinum Plus program. Situations in which the lawsuit or pending litigation does not have a meaningful impact on the mortgage applicants ability to repay the mortgage may be permitted.

Mortgage/Housing History

 

Each loan must include a mortgage/housing history for the Mortgage applicants primary residence and any other properties the Borrower owns. On non-owner occupied transactions, a mortgage/housing history is required on the Mortgaged Property as well as the primary residence. For specific program requirements refer to the Platinum

 

Plus Loan Program Matrices.

 

Requirements and Guidelines

 

The requirements and guidelines for mortgage/housing payments are:

 

• Mortgage/housing payment history on any property, regardless of the occupancy or lien status, is considered mortgage/housing history for grading purposes.

 

• If the Borrower does not own a property, a housing/rental payment history must be provided

 

• Any payments on a manufactured home or timeshare are considered to be mortgage debt, even if reported as an installment loan. They will be treated as installment debt rather than real estate owned.

 

• The existing mortgage on the Mortgaged Property can be no greater than the max delinquency contractually allowed by the program.

 

• Each contractual delinquency must be considered separately. (i.e. a first and second lien)

 

• Any delinquency must be explained and documented in a letter of explanation.

 

Mortgage / Housing History Requirements

 

• If the Borrower is a First-Time Homebuyer, the Mortgage applicants rental housing payment history is required.

Payments must be documented via an institutional VOR or cancelled checks/bank statements.

 

• If the Borrower is in college, is a recent college graduate, living with family members, is not paying rent, or is otherwise unable to verify housing history, he or she must meet the minimum credit requirements

 

• For Borrowers that currently own or have owned a property free and clear, this requirement will be waived for any period where there was free and clear ownership. A copy of the title or credit report must document the free and clear status.

 

Verification of Mortgage (VOM)

 

The following are acceptable for verifying mortgage payments:

 

• An institutional verification of mortgage (VOM)

 

• Copies of canceled checks (front and back)

 

• Bank statements

 

• A current credit bureau report

 

Third-party verification or copies of canceled checks (front and back) are always required for non-arm’s length verifications of mortgage (private mortgage, Land Contract/Contract-for-Deed, or Lease Option to purchase).

 

Verification of Rent (VOR)

 

Any of the following documents are acceptable for verifying rent payments:

 

• An institutional Verification of Rent form

 

• A letter and rating from a property management company

 

• Copies of canceled checks (front and back)

 

• A credit supplement for a rental rating

 

Third-party verification or copies of canceled checks (front and back) are always required for non-arm’s length or private party verifications of rent (related landlords, client landlords, employers or any interested party to the transaction).

 

To use rental history as a tradeline, the Borrower must verify rent using copies of canceled checks (front and back).

 

If the Borrower does not have a checking account, money orders may be accepted if they are valid and legible, are purchased from a legitimate vendor, and can be validated by conducting a telephone audit with the vendor.

 

Analyzing Delinquent Mortgage/Housing Payments

 

Mortgage/housing payment history is determined as follows:

 

• Rolling Lates. Consecutive, identical delinquencies. There is no limit to the number of rolling delinquencies that can occur to be counted as one event.

 

• Intermittent Lates A pattern of late payments that is not consecutive, but is broken into intervals.

 

• Progressive Lates Delinquencies that increase in severity. The most severe delinquency reached is considered one event.

 

When evaluating the mortgage/housing history, all delinquencies must be added. For example, if the Borrower has a First and Second Mortgage on his or her property and each one had one late payment (1×30) in the last 12 months, the Mortgage applicants mortgage/housing history is equal to two late payments (2×30).

 

Mortgage/housing delinquencies must be calculated as follows (with the mortgage history beginning in January and read from right to left):

 

Example 1:                                                                                                                                    

 

Dec Nov Oct Sep Aug Jul Jun May Apr Mar Feb   1   1   C   1   1   1   1   1   1   2   2   30   30   30   30   30   30   30   30   60   60

Jan

 

2

 

60

 

This account would be counted as 1×60 rolling and 2×30 rolling for determining the mortgage/housing component of the grade determination. The eight 30-day and the three 60-day delinquent payments are

counted as two 30-day rolling delinquencies and one 60-day rolling delinquency because there is no limit to the

number of rolling lates that are considered one event.

 

Example 2:                                                                                                                                     

 

Dec Nov Oct Sep Aug Jul Jun May Apr Mar Feb   C   C   C   C   1   1   1   1   1   3   2   30   30   30   30   30   90   60

Jan

 

2

 

60

 

This account would be counted as 1×90 non-rolling and 1×30 rolling for determining the mortgage/housing component of grade determination. The two 60-day and the one 90-day delinquency are considered a progressive delinquency and one event. The five 30-day delinquencies are rolling and considered one event because there is

no limit to the number of rolling lates that are considered one event.

 

Grade Determination

 

The Mortgage applicants grade is based on the following factors:

 

• Housing (mortgage/rental) payment history

 

• Credit score

 

• Bankruptcy history

 

• Foreclosure history

 

• Loss mitigation history, including non-foreclosure actions such as deed-in-lieu, NOD, pre- foreclosure sale, short sale, short refinance andmodification

 

• Required Program Reserves

 

The Mortgage applicants least favorable factor will determine the credit grade. For example, a negative rating on a mortgage will determine the credit grade if it is worse than the aging of the bankruptcy.

 

The debt-to-income (DTI) ratio, adverse credit, residual income, and reserve requirements must also be met. For details on determining grade, refer to the Platinum Plus Loan Program Matrices.

Qualifying Ratios

 

Qualifying ratios are ratios used to calculate the Mortgage applicants debt versus collateral and debt versus income in order to qualify the Borrower for a Loan Program. Note that all Loan Programs limit the ratios allowed when underwriting the loan. For specific details, refer to the Platinum Plus Loan Program Matrices.

 

Loan-To-Value (Ltv) And Combined Loan-To-Value (Cltv) Ratios

 

Calculating LTV Ratio

 

The loan-to-value (LTV) ratio is the loan amount divided by the value of the Mortgaged Property. The combined loan- to-value (CLTV) ratio is the sum of all liens on the Mortgaged Property divided by the value of the

property. Note that all Loan Programs offered limit the maximum LTV ratio allowed and may have seasoning

requirements when underwriting the loan. Value is determined as follows:

 

Determining the Value for LTV/CLTV

 

Purchase Transactions:

 

• Purchase Transactions. Loans must use the lesser of the purchase price or the Appraised Value as the value amount for calculating the LTV/CLTV ratios. The purchase price can be documented using the original, fully executed purchase agreement or the closing statement (HUD-1).

 

Refinance Transactions:

 

• Cash-Out Refinance. Loans on properties owned less than 12 months must use the lesser of the purchase price plus the added value of any documented improvements or the Appraised Value as the value amount for calculating the LTV/CLTV ratios. Cash-Out Refinance Loans on properties owned more than 12 months may use the Appraised Value as the value amount for calculating the LTV/CLTV ratios. The purchase price can be documented using the closing statement (HUD-1) from the original financing. The value of the improvements must be documented for each improvement.

 

• Rate/Term Refinance. The Appraised Value can be used as the value amount for calculating the LTV/CLTV ratios.

 

Lease Option to Purchase:

 

Lease Options must be treated as purchases for disclosure/documentation purposes. A rescission notice is not required.

 

• Less Than 12 Months’ Seasoning. A documented lease with a lease option-to-purchase will be treated as a purchase

 

transaction when there is less than 12 months of seasoning. The lesser of the Lease Option price or the Appraised

Value will be used to determine the LTV/CLTV.

 

• At Least 12 Months’ Seasoning. The Lease Option will be treated  as a refinance transaction if there is at least 12 months of seasoning. The Appraised Value will be used to determine the LTV/CLTV.

 

Construction-to-Permanent Refinances:

 

A Construction-to-Permanent  transaction may be closed as a purchase, limited Cash-Out Refinance or a Cash-Out Refinance. When a refinance is used, the Borrower must have held legal title to the lot before he applied for the construction financing and must be named as the Borrower for the Construction Loan.

 

 

• Cash Recapture. When the Borrower wishes to recapture monies paid out-of-pocket and to pay off an existing Construction Loan, the loan will be considered a purchase transaction. Evidence of the acquisition cost of the property will be required. The lower of the total acquisition cost (lot plus improvements) or the Appraised Value will be used to determine the LTV/CLTVratios:

 

−    Owned Less Than 12 Months. If the lot was purchased less than 12 months prior to the date of application, the value of the lot will be based on the lower of the purchase price or land value as indicated on the appraisal.

 

−    Owned at Least 12 Months. If the lot has been owned for more than 12 months, the value will be determined by the appraisal.

 

• Construction Loan Payoff. When the Borrower does not require cash recapture and the proceeds from the loan are being used to pay off the construction financing and closing costs, the loan will be considered a Rate/Term Refinance transaction. The Appraised Value will be used to determine the LTV/CLTV ratios.

 

• Equity Withdrawal. When the Borrower wishes to withdraw equity, the loan will be considered a Cash-Out Refinance transaction. Program guidelines for allowable cash-out limits must be met. The LTV/CLTV is determined by one of the following:

 

−    Owned Less Than 12 Months. If the lot was purchased less than 12 months prior to the date of application, the lesser of the Appraised Value or acquisition cost of the lot plus the documented cost of property improvements  will be used.

 

−    Owned at Least 12 Months. If the lot has been owned for more than 12 months, the LTV/CLTV will be determined by the current AppraisedValue.

 

• Borrower/Builder Transactions are considered non-arm’s length transactions and are ineligible.

 

Land Contracts, Installment Land Contract, Contract for Deed Refinance (applies to both recorded and unrecorded transactions):

 

Land Contracts must be treated as refinances for documentation purposes. The Borrower must be given the right to rescind the transaction.

 

• Executed Less Than 12 Months. If the Land Contract/Contract for Deed has been executed for less than 12 months, then the LTV will be based on the current Appraised Value or the purchase/contract price, whichever is less.

 

• Executed at Least 12 Months. If the Land Contract/Contract for Deed has been executed for at least 12 months, the LTV will be based on the current AppraisedValue.

 

Inherited Property:

 

If the subject property was inherited less than 12 months prior to application, the transaction is deemed a Special Purpose Cash-Out Refinance and is subject to the following:

 

• Proceeds are used to buy-out the documented equity interest of others. Equity owners must be paid through settlement

 

• The Mortgaged Property has cleared probate and property is vested in the Mortgage applicants name, AND

 

• Current Appraised Value is used for LTV/CLTVdetermination

 

Housing And Debt-To-Income Ratios

 

The debt-to-income (DTI) ratio is the sum of all the Mortgage applicants applicable monthly debt obligations divided by the Mortgage applicants gross monthly income. The Client must verify all of the Mortgage applicants outstanding liabilities. Note that all Loan Programs offered limit the maximum DTI ratio allowed when underwriting the loan – refer to the Platinum Plus Loan Program Matrices for details. The following debts must be included in the Mortgage applicants DTI ratio:

 

• Qualifying rate for monthly housing expensecalculation:

 

–     Fixed Rate Loans qualified using the fully amortized  payment calculated at the note rate

 

–    Adjustable Rate (ARM) Loans qualified using the higher of the fully indexed rate or the initial note rate plus the periodic adjustment (2%)

 

 

–    Interest Only Loans qualified at the note rate based on the fully amortizing Principal & Interest payment during the principal repayment period. Borrowers will not be qualified on the interest only payment amount.

 

• Monthly housing expense includes the following charges divided by the Mortgage applicants stable monthly income:

 

–     Monthly principal and interest payment (as per the qualifyingrate)

 

–     1/12th of the annual hazard insurance premium

 

–     1/12th of the annual real estate taxes and assessments

 

–     1/12th of the annual flood insurance premium, whenapplicable

 

–     1/12th of the annual private mortgage insurance premium (whenapplicable)

 

–     Monthly leasehold payments (when applicable)

 

–     Monthly HOA dues, condominium maintenance fees, monthly assessments (when applicable)

 

–     Monthly payment for other secured financing (whenapplicable).

 

• For equity lines of credit (as applicable), the monthly payment used for qualification should be based on the greater of:

 

–     The payment noted on the credit, OR

 

–     1% of the maximum current available draw

 

• The DTI ratio includes the monthly housing expenses plus the followingcharges:

 

–    Revolving charges (if no payment is showing on the credit report, use 5% of the outstanding balance)

 

–    Installment debt with 10 or more remaining payments if the inclusion of this installment debt would cause the Mortgage applicants DTI to be > 5% over the program allowance, up to a max DTI of 60%, additional compensating factors and/or documentation would be required to offset the risk

 

–     Real estate loans

 

–     Real estate net rental losses from all investment propertiesowned

 

–     Automobile loans

 

–     Automobile leases (must be included in the DTI even if fewer than 10 payments remain)

 

–     Net rental losses from real estate owned

 

–     Alimony, child support, or maintenance payments with 10 or more remainingpayments

 

–     Joint obligations, if applicable, for divorced or separated Borrowers

 

–     Student loans, whether deferred, in forbearance, or in repayment (notdeferred)

 

–    Monthly paid charge accounts, such as an Amex account, payment will not be included but outstanding balance amount will be netted out of availableassets

 

For maximum DTI ratio allowed when underwriting the loan, refer to the Platinum Plus Loan Program Matrices for details.

 

Payment Shock

 

Payment shock is the percentage that a Mortgage applicants mortgage/housing payment increases with the new loan. One of the strongest indicators of a Mortgage applicants ability to repay is his/her past record of handling housing payments. The percentage of payment shock, even when not limited expressly by the Loan Program will be analyzed to determine the likelihood of the Borrower to pay promptly. Generally, payment shock >150%, may require

further review and additional compensating factors and/or documentation may be required.

 

 

Second Trust Deeds, Junior Liens, And Secondary Financing

 

Second trust deeds, junior liens, and secondary financing (subordinate liens) are defined as mortgages having rights that are secondary to a First Mortgage. These are encumbrances on real estate (for example, a Second Mortgage, a tax lien or a mechanic’s lien), where the priority of the secondary financing is subordinate to that of another recorded interest in the same property.

 

This section outlines the requirements for junior liens or secondary financing that is not the subject Loan being sold or funded under the Platinum Plus Program.

 

Requirements and Guidelines

 

Client must investigate whether the Borrower has applied for any simultaneous loan or subordinate financing, including one that will occur after consummation of the FloridaBad Credit Mortgage LendersFirst Mortgage if the simultaneous loan will cover the closing costs of the First Mortgage. The following rights and restrictions apply to second trust deeds, junior liens, and secondary financing when the Platinum Plus program is being used to fund or purchase a First Mortgage with non-FloridaBad Credit Mortgage Lenderssecondary financing:

 

• The CLTV ratio of the first and secondary lien must not exceed the limit outlined in the applicable Platinum Plus Loan Program Matrices. Refer to the Platinum Plus Loan Program Matrices for details. The CLTV is calculated by adding the principal balance of the First Mortgage with the current principal balance of the subordinated closed-end second lien or the maximum available credit line of a subordinated open-end second lien and then dividing the sum by the Appraised Value of the property.

 

• A copy of the executed second lien note, recorded trust deed, and signed subordination agreement must be provided to confirm the loan amount, terms, andlien status.

 

• Terms of the subordinate lien must be less than or equal to the term of the First Mortgage.

 

• The subordinate lien must have a minimum remaining term of no less than five years, unless the financing

 

fully amortizes prior to that time.

 

• The financing must not permit the note holder to “call” the financing within the first five years following the loan closing.

 

• The note rate must be at market rates.

 

• The secondary financing must not have a negative amortizationfeature.

 

• The terms of the note must provide for regular monthly payments of at least the interest due with no provisions for future advances or wrap-around terms.

 

• Monthly payments on the secondary financing must be included in the Mortgage applicants debt-to- income ratio.

 

• Payments may be graduated or variable, as long as the annual payment adjustment of the secondary financing does not exceed a 2% interest rateincrease.

 

• The subordinate lien must be from an institutional lender.

 

Home Equity Lines of Credit

 

Secondary or subordinate financing that is a Home Equity Line of Credit (HELOC) is subject to the following:

 

• The calculation of the CLTV must include the total usable Home Equity Line ofCredit.

 

• For qualification purposes, in calculating the monthly housing payment, use the following:

 

–    For an existing subordinate lien, use the total usable line of credit and the interest rate in effect at the time of application. If there is no balance, then no payment will need to be used.

 

–    For a simultaneous Home Equity Line of Credit (originated with a new First Mortgage), use the amount to be drawn at funding. The ATR repayment calculation method for simultaneous loans must be used.

Second Trust Deeds, Junior Liens, and Secondary Financing Documentation Requirements

 

The following outlines the documentation requirements for secondary financing and junior liens. If the secondary financing is a simultaneous closing, then the following items are required:

• A copy of the loan approval from the institution providing the secondary financing prior to closing,

AND

 

• A copy of the executed note at closing

 

If the secondary financing is a subordinate, then the following items are required.

 

• The terms of the current Second Mortgage. If unable to discern from credit, the Client must obtain a copy of the terms from the lender

 

• An unsigned copy of the subordination agreement prior to closing, AND

 

• A copy of the executed subordination agreement at closing.

 

Sales And Financing Concessions

 

For purposes of determining the impact of costs paid by the Client or an interested third-party, distinctions are made between financing concessions and sales concessions.

 

Financing concessions are considered to be funds originating from an interested party to pay closing costs on a

 

purchase transaction. These are sometimes referred to as client-paid closing costs. Allowable financing concessions include:

 

• Payments in any form that are related to the financing; for example, discount points, Commitment fees, appraisal fees, and origination fees

 

• Contributions related to the mortgage financing charges which traditionally would be paid by the Borrower, including but not limited to the payment of discount points, loan fees, Commitment fees and/or origination fees, property taxes, and insuranceescrows

 

• Cost of other items traditionally paid by the Borrower such as application fees, appraisal fees, transfer taxes, tax stamps, attorney fees, surveys, non-recurring closing costs and title insurance, AND

 

• HOA dues are not allowed to be included in an interested partycontribution

 

Concessions not addressed above or in excess of the allowed percentage of the purchase price are considered to be a sales concession.

 

The Mortgaged Property sales price must be reduced to reflect the amount of any sales concession that exceeds the limits below. The LTV ratio is calculated using the lesser of the reduced purchase price or Appraised Value.

 

Financing concessions for primary residences and second homes are limited to the following percentages:

 

• 6% of the value for Loans with LTV/CLTV ratios less than or equal to90%

 

• 3% of the value for Loans with LTV/CLTV ratios greater than90%

 

The appraisal must reflect subsidies, contributions, or sales concessions that have an effect on the market value of the property.

 

 

Liabilities

 

The Mortgage applicants liabilities and debts include all installment loans, revolving charge accounts, contingent liabilities (co- signed debts), lines of credit, mortgage loans, alimony/child support, student loans, auto leases, and all other ongoing debts. Client must verify payments on all simultaneous loans, such as HELOCs. Auto lease payments are included in the debt-to-income (DTI) ratio regardless of the remaining months indicated on the credit report.

 

Debt To Income Calculations

 

In addition to the subject mortgage payment, the following debts should be included in the calculation of the debt-to- income ratio (DTI):

• Other mortgage payments including principal, interest, property tax, and property insurance. If the senior lien is an Adjustable Rate Mortgage (ARM), Borrowers must be qualified at the greater of the Note rate plus 2%* or the fully indexed rate using the fully amortizing principal and interest payment. Private mortgage insurance premiums and Homeowners’ Association dues or ground rents should be included, if applicable.

 

• Monthly payment reflected on credit report can be used to calculate the DTI. If no monthly payment is stated on the credit report or other form of verification, 5% of the outstanding balance on the account must be used.

 

• Outstanding installment debts with 10 months or less remaining and debts to be paid off at closing do not have to be calculated in the DTI.

 

• Auto leases must always be included in the DTI, regardless of the number of payments remaining.

 

Co-signed debts will not be included in the DTI if sufficient proof is provided that the primary debtor makes the payments. Sufficient proof consists of at least six months canceled checks from the primary debtor evidencing the proper payment amount and payable to the proper creditor.

 

Installment Debt

 

Installment debt is the monthly obligation on accounts with fixed payments and terms. Installment debts include car loans, student loans, etc. The monthly payment may be excluded from the DTI calculation if there are less than 10 monthly payments remaining to pay the debt in full and the payment is not substantial. If there are less than 10 payments remaining and the payment is substantial (exceeds 5% of the Mortgage applicants qualifying income), the debt must be included in the Mortgage applicants DTI calculation.

 

A payment is defined as substantial when it equals or exceeds 5% of the Mortgage applicants qualifying income. These payments must be included in the Mortgage applicants DTI calculation. Installment debts showing the term of the debt to be 10 months or less at closing will not be considered in the debt-to-income (DTI) ratio. Paying down of installment debts to 10 payments or less to qualify is not allowed. The installment debt must be paid off if the payment is excluded from the Mortgage applicants DTI calculation.

 

Installment debt that is paid in full prior to or at closing may be excluded from the DTI provided the HUD-1 reflects the payoff.

 

If an installment debt payment does not show on a credit report, a credit supplement or loan statement is required.

 

 

 

Revolving Debt

 

Revolving debt is open-ended debt of which the principal balance on an account may vary from month to month. The minimum required payment as stated on the credit report or current statement should be used in calculating the DTI unless as noted below. Revolving debt may not be paid down for qualification purposes but may be paid off and closed.

 

The following debts must be considered as a recurring monthly debt obligation:

 

• The credit report balances suggest that more than 10 payments remain to be paid regardless of whether the loan application indicates the debts will be paid off at or prior to closing

 

• The credit report does not show a required minimum payment amount and there is no supplemental documentation to support a payment of less than 5%. In this situation, an amount equal to a minimum of $10.00 or 5% of the outstanding balance must be used as the Mortgage applicants recurring monthly debt obligation.

 

• If a revolving or open account is to be paid off or paid down but not closed, a monthly payment on the current outstanding balance should be considered asa long-term debt.

 

Alimony/Child Support/Separate Maintenance Obligations

 

Monthly alimony, child support or separate maintenance  fees with 10 or more payments remaining must be included in the DTI.

Divorce Debt

 

Debts opened jointly with a former spouse will be considered an obligation of the Borrower unless a legal

 

separation agreement or divorce decree is provided to prove the former spouse is responsible for the debt, otherwise it will be counted as Adverse Credit.

 

Negative Cash Flow From Rental Property/Other Real Estate Owned

 

The tax and insurance expense for all properties owned by the Borrower must be documented and accounted for in Mortgage applicants Debt-to-Income ratio. For properties that are rented, the expense may be deducted from rental income. For properties that do not receive rental income, the tax and insurance expense must be part of the Mortgage applicants liabilities.

 

Real estate net rental losses from all investment properties owned must be included in the DTI.

 

Current Principal Residence – Pending Sale

 

If the Mortgage applicants current principal residence is pending sale, but the transaction will not close with title transfer to the new owner prior to the subject transaction, and the Borrower is purchasing a new primary residence, the current PITIA and the proposed PITIA must be used in qualifying the borrower for the new mortgage loan.

 

However, the Platinum Plus program does not require the current principal residence’s PITIA to be used in qualifying the Borrower as long as the following documentation  is provided:

 

• The executed sales contract for the current residence, and

 

• Confirmation that any financing contingencies have beencleared

 

Business Debts

 

Business debts for which the Borrower is personally liable must be included in the debt calculation. This includes business paid personal debt, unless proof of payment by the business is established. If the account is new, it must be included in the DTI calculations. These debts may be excluded if a minimum of 12 months of consecutive canceled checks from the business are provided.

 

Business debts for which the Borrower is not personally liable will not be considered in the Mortgage applicants total monthly debt if canceled checks drawn on the business account indicate they have been paid on a regular basis for a minimum of six months.

 

Un-Reimbursed Business Expenses

 

When evaluating the Mortgage applicants income, the Client must consider certain tax deductions (as applicable for income documentation program requirements) reported on IRS Form 2106 (Employee Business Expenses):

 

• Out-of-pocket, unreimbursed business expenses: These expenses must be deducted from the mortgage applicants income.

 

• Actual expenses for a leased automobile, rather than the standard mileage rate. The Client must analyze the “Actual Expenses” section of IRS Form 2106 to determine the amount of the lease payments, and make sure the lease expense is counted only once in its cash flow analysis, either as an expense on IRS Form 2106 or as a monthlyobligation.

 

 

Automobile Depreciation

 

If a borrower claims a “standard mileage” deduction, the business miles driven should be multiplied

by the depreciation factor for the appropriate year, and the calculated amount added to the mortgage applicants

 

cash flow.

 

If a borrower claims an “actual depreciation expense” deduction, the amount the borrower claimed should be added to the mortgage applicants cash flow.

 

Debt Payoff

 

If the Borrower indicates debt will be paid at the closing of the new mortgage, the Platinum Plus program does not include the payment in the DTI ratio. The paid statement(s), canceled check(s), or a settlement statement (HUD-1) evidencing payment must be submitted in the Loan File. Paying down of installment debts to less than

10 payments to qualify is not allowed.

 

Co-Signed Debt / Contingent Liabilities

 

If the Borrower is a co-signer or guarantor on any loans, those liabilities must be indicated on the application. Debts that have been co-signed by the Borrower may be excluded from the Mortgage applicants DTI under the following scenarios. In every situation, the debt must be paid current and as agreed for at least the previous 12 months.

 

• Satisfactory documentation is provided to prove that the primary debtor has been making the payments on a regular basis. At least 12 consecutive months of canceled checks from the primary debtor are required

 

• Property resultant from buyout of former co-owner (i.e., divorce). The Loan File must include evidence of transfer of ownership

 

• Mortgage assumed by third-party without a release of liability. A copy of the formal assumption agreement and evidence of transfer of ownership should be in the Loan File. Do not include payment history and assumption does not need to release the Borrower fromliability

 

• Court ordered debts – a copy of the court order assigning the debt to another party is required

 

• Co-signed accounts paid by a third-party, with 12 months of cancelled checks evidencing payment by the third-party

 

If these requirements cannot be satisfied, then the liability must be indicated on the application and considered as a monthly debt payment for mortgage eligibility purposes. Co-signed debts must be paid satisfactorily (0x30), or they will be counted as Adverse Credit.

 

Retirement / Savings Plan Loans

 

Repayment for loans against a financial asset such as retirement, savings plan, or insurance policy may be excluded from the DTI provided the Borrower can repay the debt by liquidating the asset. The value of the asset must be reduced by the amount of the debt when calculating total assets and/or reserves.

 

Student Loans

 

Deferred student loans are included in the DTI as a long-term obligation. Student loans can be counted in credit depth as long as they are in repayment and not being deferred. Student loans listed as delinquent must be brought current.

 

If no payment is shown on the credit report for a student loan payment, then proof of payment should be provided by student loan lender. If payment is unable to be determined,  use 1% of the original loan amount.

 

If a student loan is charged off or in collection, the following must be provided:

 

• A copy of repayment agreement and six months cancelledchecks

 

 

 

 

 

Income

OR

 

• If not in repayment evidence it won’t affect title

 

This section describes Borrower income. Income analysis is a key element of the underwriting process and is used to determine whether the Mortgage applicants ability to repay is reasonable.

 

Income documentation provided by the Borrower must be reviewed and adequately verified. Additionally, the income must be considered stable, likely to continue, and sufficient to enable the Borrower to repay the debt in a timely manner. Material inconsistencies must be investigated.

 

Income Verification Requirements

 

The Borrower must provide evidence of two years stable income derived from employment or other acceptable and verifiable sources. A complete 2 year history of employment and/or source of income must be stated on the

1003 application. There must also be a reasonable expectation that the income will continue in the foreseeable future and that such income must be sufficient for repaying the proposed monthly debts. Employment across different jobs in the same or related line of work is acceptable. Borrowers who have made job changes for advancement and maintained a stable earning capacity, as well as Borrowers with demonstrated job stability will receive favorable consideration.

 

• Employment gaps that extend beyond 30 days require an explanation letter from the Borrower.

 

• Paystubs and salary vouchers must be computer-generated or typed, not handwritten. In addition, the documents must clearly identify the employer, the Borrower as an employee, show the time period covered, and provide year-to-dateearnings.

 

• Income derived from a family-owned business must be documented by the Mortgage applicants federal tax returns for the prior two years, in addition to a verification ofemployment.

 

• A Borrower who finished school or military service and who does not meet the length of employment required must provide a copy of his/her diploma or discharge papers. The potential for future income based on job opportunities afforded such individuals, due to their extensive training, may be considered favorable for qualificationpurposes.

For loan amount and LTV/CLTV limitations, and for income type eligibility for documentation types, refer to the

Platinum Plus Loan Program Matrices.

 

Significant Increases/Decreases in Income (Trending)

 

If the Mortgage applicants monthly income is stable or increasing, the amount of income should be averaged based on the required number of years of documentation required for the program. A “significant“ increase or decrease is generally considered to be anything greater than 25%.

 

Increase in Income: When the Borrower has experienced a significant increase in income, the higher income may not be used to qualify the Borrower, unless there is sufficient documentation to determine that the increase is stable and likely to continue at the level used for qualifying (e.g., that the income is not a one-time incentive payment).

 

When the Mortgage applicants current income decreased from the prior year, the lower income amount should be used for qualifying purposes instead of the averaged income.

 

Decrease in Income: When the Borrower has experienced a significant decrease in income, the income cannot be

 

averaged using a previous higher level unless there is documentation of a one-time occurrence (e.g., injury) that prevented the Borrower from working or earning full income for a period of time and proof that the Borrower is back to the income amount that they previously earned.

 

Disposable/Residual Income

 

Borrowers must have residual income to maintain housing/living expenses. To calculate the Mortgage applicants residual income, subtract the total monthly expenses from the total monthly income. For residual income requirement, refer to the Platinum Plus Loan Program Matrices.

 

Verbal Verification of Employment (VVOE)

 

A Verbal Verification of Employment (VVOE) must be performed for each Loan submitted to FloridaBad Credit Mortgage Lendersfor purchase. FloridaBad Credit Mortgage Lenders will perform its own VVOE’s for loans it funds. Written evidence of phone contact with the Mortgage applicants employers, completed within 10 calendar days prior to the Note Date or prior to delivery to FloridaBad Credit Mortgage Lenders Funding, The verification must identify the name of the person who made the contact, identify the employer and the name and title of the person contacted, show the date of contact, the source of the phone number and confirm that no change in employment status has occurred, regardless of documentation and that the Borrower is currently employed.

 

Verbal Verification of Employment for Salaried, Hourly and Commission Income:

 

• A verbal verification must be performed within 10 business days prior to the Note Date or prior to delivery to

FloridaBad Credit Mortgage Lenders Funding.

 

• The phone number of the employer should be obtained independently and not taken from the application

 

• Employer should confirm the Mortgage applicants current employmentstatus and title.

 

• Third-party verification sources may be used

 

• The written VVOE Form should include:

 

–     Date of the verification

 

–     Source used to obtain the phone number (i.e. internet).

 

–     Name and title of the person at the employer’s office who confirmed theemployment

 

–     Name and title of the person who completed the VVOE

 

Verbal Verification of Employment for Self–Employed:

 

• Verbal Verification of Employment (VVOE) for Self-Employed Borrowers must verify the existence of the Mortgage applicants business within 30 calendar days prior to the Note Date or for escrow states, the Loan funding date, or prior to delivery to FloridaBad Credit Mortgage Lenders Funding.

 

• This verification can be made with a third party, such as a CPA, regulatory agency or applicable licensing bureau, or by verifying the phone listing and address for the business using the internet or directory assistance. It is also necessary to verify the phone listing and address for the business.

 

• The written VVOE Form should include:

 

–     Date of the verification

 

–     Source of the verification of the phone listing and the address of the business ( i.e. internet)

 

–     Name and title of the CPA or details of other source used to verify the business; and

 

 

 

Income Types

–     Name and title of the person who completed the VVOE

 

The Borrower must be employed as a salary/wage earner, be self-employed, or have a source of verifiable non- employment income. All income sources must be shown on the application and verified for each applicant.

 

Salary/Wage Earner Income

 

A salary/wage earner derives income through employment at a business where he or she has little or no ownership interest. A two-year employment history must be established for each Borrower. Compensation may be based on an hourly, weekly, bi-weekly, semi-monthly  or monthly basis.

 

Bonus, commission, overtime, and gratuity income is compensation in addition to the Mortgage applicants straight salary or hourly wage. FloridaBad Credit Mortgage Lenderswill accept stable bonus, commission, overtime, or gratuity income that has been received for two years and verified according to FloridaBad Credit Mortgage Lendersprogram guidelines. Borrowers must have a two year history of earning bonus, commission, overtime or gratuity income in order for the income to be included for qualification purposes.

 

Self-Employed Income

 

Self-Employed Borrowers must be carefully evaluated because their financial ability to repay debts is directly related to the success of the company and to the stable income and expenses of the business.

 

Self-Employed Borrowers are identified as follows:

 

• Borrowers who derive 25% or more of their primary income from a business in which they hold a controlling interest.

 

• Borrowers who do not own a business but who derive their primary income from commissions, consultation fees, interest, capital gains, gratuities, or real estaterents.

 

• Borrowers who rely on investments for income such as interest, dividends, capital gains, or real estate.

 

At least two consecutive years of self-employment and evidence of ongoing stable income are required. Business income must be reported as a sole proprietorship, partnership, or corporation.

Evidence of Self–Employment

 

Documentation to support the Mortgage applicants self-employment in a legitimate and active business covering the most recent two years must be obtained.

 

One of the following may be used for verification of the business:

 

• A copy of the business license covering the most recent two years.

 

• A copy of the business license for the current business year and a verbal verification through the issuing municipality confirming the business is current and active and has been in existence for two full years.

 

• Alternative documentation may be used only if a license is not required for the particular type of business. They include:

 

−     Dunn and Bradstreet report

 

−     Articles of incorporation

 

−     Fictitious business name filing

 

−     Title registration

 

−     Liability insurance or surety bond

 

−     Letter from a certified public accountant (CPA)

 

−     Letters of reference (acceptable for small businessesonly)

 

For Borrowers who operate a business from the Mortgaged Property (such as a home day-care facility, a bed and breakfast, or an auto repair shop), additional property type restrictions exist. For further details, refer to the Property Type  section in this Guide.

 

Self-Employed Income Calculation

 

Income documentation  should be reviewed for increasing or decreasing trends by comparing the current income and the income from the prior year. When calculating the Mortgage applicants self-employed income, use the Fannie Mae Self-Employed Income Analysis Form 1084A or 1084B.

 

Sole Proprietorship Income

 

Self-employed income will be determined  by averaging the income from the tax returns, including all schedules and attachments (Schedule C). Income from the year-to-date Profit and Loss Statement (P&L) may be included in the income calculation if consistent with earnings from previous years.

 

Deductible expenses for the business that are attributable to non-cash expenses are depreciation, depletion, amortization, or non-operating losses (NOL) that have been carried forward (loss taken in previous years that is taken as a deduction to taxes). These non-cash expenses may be added back to the net income/loss for qualifying purposes and are defined as follows:

 

• Depreciation is a deduction for the decline in value of an asset such as real or personal property and is not an out- of-pocket expense.

 

• Depletion is a deduction  for the useful life of a natural resource and is not an out-of-pocket expense.

 

• Amortization of an asset spreads the asset’s cost over the asset’s useful life. It may include start-up costs. Examples are a copyright or a patent. Amortization is not an out-of-pocket expense.
• Non-operating loss (NOL) is a business loss that occurred prior to the current tax year. The full loss is not recognized in the year it occurred, but is spread over future years and is not an out- of-pocket expense after the year it occurred.

 

A partnership is formed when two or more individuals form a business and share profits, losses, and responsibility for running the business. The partnership does not pay the taxes. The income/loss is passed through to the partners based on the percentage of capital ownership and is reported on a K-1.

Partnership cash flow is determined by analyzing the 1065 tax return and giving credit for ordinary income, depreciation, and depletion. Amortization or casualty loss deductions listed under other deductions may be added to the total. Discretionary losses will be excluded from the cash flow analysis if the business is a limited partnership and the Borrower provides a copy of the partnership agreement stating that all subsequent contributions are voluntary.

 

Corporate Income

 

A corporation is a state-chartered business that is owned by stockholders. Stockholders are not

 

personally liable for the debts of the corporation. Although legal control of the corporation rests with its stockholders, they are not responsible for the day-to-day operations of the business, as they delegate that responsibility to a board of directors and officers of the company.

 

Corporations  must file corporate tax returns (Form 1120) to report income and losses. Officers who are principals of the corporation generally report their income on a W-2. Income may be determined by using an average of the Mortgage applicants earnings for the past two years. Additionally, business tax returns must be analyzed to assess the likelihood of continued personal income to the Borrower.

 

Corporate Income Analysis

 

To calculate corporate income, total tax must be deducted from taxable income, and factors such as depreciation, depletion, or net operating loss (NOL) deductions listed on the return are added back. Other deductions, including amortization and casualty losses, may also be added back.

 

Retained earnings in the business are not recognized as cash flow to the Borrower or to the company.

 

Income from the corporation is recognized as income to the Borrower if he or she is the sole and full owner, and if the withdrawal of funds will have no effect on the corporation’s continued growth.

 

S–Corporation

 

An S-corporation operates like a standard corporation; however, any profit or loss from the company is passed to the owners through Schedule E of the 1040s. Stockholders are taxed at individual tax

rates for each proportionate share of ownership. Income for an owner that comes from wages is

declared on the individual’s tax return.

 

S-corporation  K-1 income is determined by giving credit for any guaranteed payments or salary and property distributions

(including cash) made to theBorrower.

 

When analyzing Form 1120S, only the Mortgage applicants share of income or loss adjustment should be used to calculate income. The Mortgage applicants share is based on his or her percentage of stock ownership as reported on the Schedule K-1. Depreciation, depletion, and amortization or casualty loss may be added back to income. Other non-recurring income/loss should be subtracted/added back.

 

Retained earnings in the business are not recognized as personal cash flow to the Borrower or to the company.

 

Allowable Age of Federal Income Tax Returns

 

The “most recent year’s” tax return is defined as the last return scheduled to have filed with the IRS.

 

 

 

If Today’s Date is:        February 15, 2016	Then the Most Recent Year’s Tax Return           would be:                                                   2014
April 15, 2016	2015

 

   December 15. 2016                           2015                                    

 

 

 

For business tax returns, if the Mortgage applicants business uses a fiscal year (a year ending on the last day of

 

any month except December), the Client may adjust the dates in the above chart to determine what year(s) of business tax returns are required.

 

 

In all cases, the tax returns for the current year are required as of June 30, rather than October 15th. If the Borrower has filed an extension and does not file by June 30th, the Loan is ineligible.

 

Under the Alt Doc- 12 Month Verification (Self-Employed only) program, the Borrower must submit the current year’s required tax returns. Extensions are not allowed.

 

 

Application Date	Disbursement Date	Documentation Required
October 15th (current year minus 1) to April 14th, current	October 15th (current year minus 1) to April 14th, current	The most recent year’s tax return is required. The use of Tax Extension (IRS Form 4868) is not permitted.
	April 15, current year to June 30, current year	The previous year’s tax return (the return date is April of the current year)   If the Borrower has files their tax return for the previous year, the Client must obtain copies of that return. If the Borrower has not filed their tax returns, the Client must obtain copies of the tax returns for the prior two years.   FloridaBad Credit Mortgage Lendersrequires tax transcripts on all Borrowers for the number of years required to verify income.
April 15, current year to June 30, current year	July 1 current year to December 31, current year	The Client must obtain:   •     The most recent year’s tax return,  OR all of the following:   •     A copy of IRS Form 4868 (Application for automatic Extension of Time to file U.S Individual Income Tax Return) filed with the IRS   •     The Client must review the total tax liability reported on IRS Form 4868 and compare it with the Mortgage applicants tax liability from the previous two years as a measure of income source stability and continuance.   •     An estimated tax liability that is inconsistent with previous years may make it necessary to require the current returns in order to proceed.   •    IRS Form 4506-T transcripts confirming “No Transcripts Available” for the applicable tax year, AND   •    Tax Returns for the prior two years.
	January 1, (current year plus 1) to April 14th, (current year plus 1)	The most recent year’s tax return is required. The use of a Tax Extension (IRS Form 4868) is not permitted.

 

Examples:

 

If the 2014 self-employed income has increased from 2013, is being used for qualifying purposes and the Borrower has filed an extension for the 2014 tax returns:

 

• The Client must obtain the 2013 and 2012 tax returns and a year-to-date Profit and Loss Statement

(audited)

 

If the 2014 self-employed income has decreased from 2013, is being used for qualifying purposes and the Borrower has filed an extension for the 2014 tax returns:

 

 

• The Client must obtain the 2013 and 2012 tax returns and a year-to-date Profit and Loss Statement

(Unaudited)

 

 

 

Borrowers Not Required to File Tax Returns with the IRS

 

There are some instances where a Borrower was not required to file a tax return for the prior year. Acceptable examples may include:

 

• Newly employed Borrower who was a full-time student the most recent taxyear

 

–  School transcripts are required for documentation

 

• Borrower whose income level was below the minimum reporting standards as required by the IRS

 

–   Examples include Borrowers who receive disability, Social Security, or pension income and indicate that they are not required to file tax returns

 

• Active duty military that meet all the requirements to be granted an extension by IRS in accordance with IRS Publication 3-Armed Forces’ Tax Guide.

 

In addition to the specific requirements noted above, the Loan must be satisfactorily documented to:

 

• Support the income used for qualifying

 

• Document the reason a tax transcript is not available

 

• Include a tax transcript indication “No Record Found” or IRS Verification of Non-Filing Form

 

Amended Tax Returns

 

Tax Returns that are amended and filed by the Borrower with the IRS are acceptable in the following circumstances:

 

• Tax Return Amendment filed prior to the Loan applicationdate

 

−    Tax returns filed prior to application are acceptable. The original filed return, the amended return and a letter of explanation from the Borrower (or Mortgage applicants accountant) are required.

 

−     If the file was amended 60 days or less prior to the application, evidence of payment must also be provided.

 

• Tax Return Amendment filed after the Loan applicationdate

 

−     A letter of explanation regarding the reason for the re-file

 

−     Evidence of filing

 

−     Evidence of payment or the evidence of the ability to pay thetax

 

−     Borrower does not require use of amended income (if increased) for qualification

 

Under no circumstances are amended returns acceptable if the Loan has already been reviewed and/or deemed ineligible for purchase by FloridaBad Credit Mortgage Lenders Funding.

 

Bank Statement Income

 

For qualifying information and eligibility for use of Bank Statement Income, please refer to the Loan Programs chapter of this guide.

 

Fixed Income

 

FloridaBad Credit Mortgage Lendersdefines fixed income as income derived from sources such as social security and supplemental (dependent’s) social security, temporary or permanent disability, VA disability, retirement/pension, or alimony/child support. If a type of fixed income is used to qualify the Borrower, proof of income and probability of continuance for at least three years must be provided. Some forms of fixed income can be non-taxable.

Verified non-taxable income will be given special consideration if it is determined that such income will continue for three years and that it will remain untaxed.

 

 

Acceptable forms of non-taxable income include:

 

• Certain military allowances

 

• Disability retirement payments

 

• Child support payments

 

• Social security distributions

 

• Non-taxable public assistance payments

 

• Worker’s compensation benefits

 

Non-taxable income that is not allowed to be grossed up includes:

 

• Foreign earned income

 

• Foster care income

 

• Housing allowance

 

Fixed Income Calculation

 

In order to evaluate a Borrower with non-taxable income in the same manner as a Borrower who has a higher taxable income, the non-taxable income may be adjusted or grossed-up by 125%, provided that:

 

• Only the net income will be used for determining disposable/residual  income; Medicare and insurance payments are to be omitted.

 

• The Borrower clearly benefits as a result of income being grossed-up toqualify.

 

• The Mortgage applicants net income (before gross-up) is sufficient to pay alldebts.

 

Rental Income

 

Rental income may be used in qualifying a Borrower for a loan. All owner occupied two-to-four unit properties and all investment properties require a rental income analysis to determine positive or negative cash flow. Rental income on a second home is not allowed. One of the following is required to support leases or rental income on the application:

 

• Rent Survey Form 1007 and Operating Income Statement (FNMA Form216)

 

• Personal 1040s with Schedule E

 

Rental Income Calculation

 

Income received from rental properties will be calculated using one of the following methods:

 

• Owned at Least One Year. For properties owned for one or more tax years, cash flow can be calculated in one of the following manners:

 

−     75% of actual rents, established by copies of signed leases,

 

OR

 

−     Net income from 1040 tax return Schedule E, plusdepreciation

 

• Owned Less Than One Year. For properties owned less than one tax year, cash flow must be based on 75% of the lesser of actual or market rents

 

Actual rents must be documented with copies of the signed leases. Net cash flow for properties, other than the subject property, will be calculated using Schedule E from the Mortgage applicants tax returns for the past two years.

 

A positive cash flow will be added to gross income; negative cash flow will be added to total liabilities and used to qualify the Borrower.

 

Room rents are an ineligible source of income. If any of the units in a property are receiving room rents than none of the rental income received for the property may be used as qualifying income.

 

Loans for investment properties that generate a negative cash flow will be closely scrutinized and must be appropriate for the Mortgage applicants circumstances.

Rental income received from a family member may not be used as income without copies of a minimum of six months’ cancelled rent checks provided by the tenant family member.

 

Rental Income from Departing Residence:

 

If the Mortgage applicants current principal residence is going to be rented, the following documentation  must be provided or the entire PITIA will be included in the Mortgage applicants qualifying ratios. The rental amount must be documented with either of the following:

 

• If a fully executed lease is not available:

 

–       Rent Survey from the appraiser

 

–       75% of the rental amount will be used

 

• If an executed lease is available:

 

–       Fully executed lease (must be non-arm’s length)

 

–       Copy of cancelled check for the first month’s rent

 

–       Copy of cancelled check for the security deposit

 

Interest and Dividend Income

 

Interest and dividend income may be used if verified through tax returns as stable for two years and if additional verification is obtained as proof that the funds are still on deposit in the financial institution or investment portfolio account.

 

Income must be proportionately reduced if funds are used to close in a purchase money transaction.

 

Capital Gain Income

 

Capital gain or loss that is a one-time transaction  will not be considered as a gain or loss in determining the income available to the Borrower. However, if the Mortgage applicants business has a constant turnover of assets that produce recurring gains or losses, the capital gain or loss may be considered in line with the following:

 

• An average of the gains or losses for the last two years as disclosed on the Mortgage applicants Form 1040 (Schedule

1. D) will to be used to calculate the incom

 

• When the income from this source represents a substantial portion of the Mortgage applicants income, the Mortgage applicants tax returns for the past two years must be reviewed (regardless of documentation type) to determine a more accurate estimate of average earnings. For example, an asset sold during the year might be an income-producing asset, which could result in a reduction in future income.

 

• Borrowers must document an asset base in order to use capital gain or loss on an on-going basis.

 

Farm Income

 

Net farm income reported on the Mortgage applicants income tax return (Schedule F) is eligible with the addition of depreciation, pension, amortization, and depletion.

 

Military Income

 

Income verified for clothing allowance, quarters allowance, hardship or hazard pay may be included as stable income if there is a likelihood of continuance. BAH and BAS allowances may be grossed up due to the nontaxable status.

Other allowances may be grossed up if documentation is provided evidencing it is nontaxable.

 

Employed by a Relative

 

Income derived from a family-owned business or from a relative must be Full or Alt documentation. Reduced income documentation types are not eligible.

 

Trust Income

 

Trust income may only be derived from an irrevocable trust or a revocable trust where a Borrower who is the beneficiary has also established the trust. In order to verify trust income, a copy must be provided of the original Trust Agreement showing the length of time and amount of income that will be received. The income must continue for at least three (3) years after closing. A Mortgage applicants trust income may be taxed at a lower rate or it may be part of a partnership that writes off losses resulting in no tax liability.

 

A complete copy of trust agreement or certification letter from bank trust administrator outlining total income paid to the Borrower, method of payment, duration of trust and any non-taxable portion is required. Additionally, personal tax returns with all schedules, K-1s, or 1041s or other documentation per program guidelines are required.

 

Lump sum distributions made before loan closing may be used for down payment or closing costs if they are verified by a copy of the check or the Trustee’s letter that shows the distribution amount. If a distribution was made that reduces the Trust income, the reduction must be taken into consideration in computing the income.

 

Annuity Income

 

Income from a retirement annuity may be used for qualification with proper documentation. A statement from the financial institution managing the annuity is required to verify the balance in the annuity, the monthly payments and the term of the payments to be distributed. Payments to the borrower must continue for a minimum of three years.

 

Note Income

 

Ongoing note income is eligible for loan qualification. A copy of the note outlining the amount and terms of repayment must be provided. The repayment period must extend at least three years from the date of the new loan.

 

The Client must document the regular receipt to the income for the most recent twelve months. Payments on a note executed within the past twelve months, regardless of the duration, may not be used as stable income.

 

Inherited and Guaranteed Income

 

Ongoing income received from inheritance, prize earnings, or lottery winnings are eligible for loan qualification. Documentation must verify that the income will continue for at least three years.

 

Other Income

 

The following income types will be considered provided that all of the specific stipulations outlined below are met, and the income is fully documented. Furthermore, probability of income continuance for at least three years must be verified.

 

• Second Job Income. Second job income will be considered if income is based on a two-year average.

 

• Seasonal Employment Income: Seasonal employment income, such as farm labor or construction labor, will be considered if it is properly documented and consistent for a minimum of two years. Seasonal employment income and unemployment income must be combined in order to calculate the average annual income.

 

• Unemployment Income: Unemployment Income may also be used if documentation shows that it has been received for a specified length of time (usually a six month period) during the previous two years.

 

• Housing Allowance: Housing allowance may be used as income for members of the military or clergy only, provided that the income will continue for a minimum of two years, and the Borrower has a history of receiving the income.

 

• Trailing or Relocating Co-Mortgage applicants Income: A trailing or relocating Co-Borrower is one who trails behind the primary Borrower during relocation. A trailing or relocating Co-Mortgage applicants income is the amount of income previously received by the trailing or relocating Co-Borrower from employment at the previous location. The use of a trailing or relocating

Co-Mortgage applicants income for loan qualification will be done on a case-by-case basis, and the followingapply:

 

–    The transaction must be a full documentation purchase that is secured by an owner occupied primary residence.

 

–     The Primary Borrower must be relocating with the same employer.

 

–     The trailing or relocating Co-Borrower must be a spouse, domestic partner, or future spouse of the Primary

Borrower.

 

–    The Primary Borrower and the trailing or relocating Co-Borrower must have verified cash reserves (or other verified assets that are easily converted to cash) equal to six months of payments for the mortgage and all other recurring debtobligations.

–    The trailing or relocating Co-Borrower must have been employed as a salaried employee in the same profession for the last two years and must providedocumentation.

 

–    As long as it can be determined and documented that a reasonable employment market exists for positions that are the same as, or similar to, the trailing or relocating Co-Mortgage applicants previous position, FloridaBad Credit Mortgage Lendersmay consider 70% of the trailing or relocating Co-Mortgage applicants documented income from his or her previous employment as “anticipated” income for future employment. This income may be used for loanqualification.

 

Ineligible Income

 

The following income types are ineligible:

 

• Foreign Income

 

• Contributions or support from family members (other than alimony/childsupport)

 

• Deferred income not presently available

 

• Educational benefits

 

• Illegal income

 

• One-time capital gains (continuing capital gains is an acceptable source of income)

 

• Projected income

 

• Refund of federal or state income tax

 

• Rental income on a second home or an ineligible second unit

 

• Reimbursable income

 

• Gambling winnings

 

• Automobile allowances – this is used to offset the auto paymentonly

 

• Per diem income

 

• Unverified sources

 

 

 

 

 

 

Full Documentation

 

FloridaBad Credit Mortgage Lenderswill accept these types of Full Documentation (Full Doc) with a verified two-year history of receipt.

 

Salary/Wage Earner Full Documentation Requirements

 

One of two methods must be used to provide full income documentation:

 

• Pay stubs for the most recent 30-day period showing year-to-date income and two years’ W-2 forms as follows:

 

–    If the Borrower has had different employers over the past two years, W-2 forms for the past two years are required.

 

–    If the bonus or commission income represents 25% or more of the Mortgage applicants income, two years of personal tax returns may be required

 

• Personal tax returns for the past two years, including allschedules.

 

• Signed and executed 4506-T

 

Verbal Verification of Employment:

 

• A verbal verification of employment is required within 5 days of the loan closing.

 

Self-Employed Full Documentation Requirements

 

Documentation includes the following:

 

• Two years of personal tax returns, with all schedules

 

• If the borrower has 25% or more ownership interest in a Partnership, S-Corp, or Corporation, business tax returns for the past two years including all schedules must be provided.

 

• For all self-employed borrowers, if more than 120 days has lapsed since filing the latest Schedule C or business tax return, a dated year-to-date profit and loss (P&L) statement is required.

 

• A Certified Public Accountant (CPA) letter

 

• A signed and executed 4506T

 

 

 

Verbal Verification of Employment:

 

• A verbal verification of employment is required within 5 days of the loan closing.

 

Alternative Documentation – Asset Qualifier Requirements:

 

Please refer to Loan Programs for specifics regarding this income documentation type and program requirements.

 

 

Alternative Documentation – Bank Statements (24-Month):

 

Please refer to Loan Programs for specifics regarding this income documentation type and program requirements.

 

 

Alternative Documentation – Salary/Wage Earner Requirements:

 

Alternative documentation may be used to document qualifying income for wage earners who have been with their current employer for the past two years. The following documentation is required:

• Pay stubs for the most recent 30-day period showing year-to-date income and one year’s W-2 forms

 

• If the Borrower earns over 25% of their income from self-employment, commission, bonus, or tip sources, two years of personal tax returns may be required (see Self-Employed Reduced Documentation Requirements section below)

 

• Signed and executed 4506-T

 

If the Borrower has been employed less than two years with the current employer, the Borrower is ineligible. W-2 form(s) from the prior year will also be required.

 

Reduced Documentation

 

FloridaBad Credit Mortgage Lenderswill accept these types of Reduced Documentation (Reduced Doc) with a verified, one-year history of receipt. Anything less than a 12-month history of receipt is not allowed. Verification of two years of employment history is required. The income must be reasonable for the profession and experience level of the Borrower.

 

Reduced – Bank Statements (12-Month):

 

Please refer to Chapter Six, Loan Programs for specifics regarding this income documentation type and program requirements.

 

Reduced Documentation – Self-Employed Only Requirements

 

• Personal tax returns for the past one year, including all schedules in addition to the following:

 

• One year business tax returns, with all schedules. If more than 120 days has lapsed since filing, a signed and dated year-to-date profit and loss (P&L) statement isrequired.

 

• If the Borrower has 25% or more ownership interest in an S-corp., business tax returns for the past one year including all schedules must be provided for theS-corp.

 

• Proof of the existence of the business for two years. Acceptable documentation includes a copy of the business license, business credit report, or a certified public accountant (CPA) letter.

 

Ineligible Income Documentation Types

 

No Ratio, NINA, Stated Income, and No Doc income documentation types are not allowed.

 

 

Assets

 

The Client must determine and provide evidence that the Borrower has sufficient cash to pay the down payment, prepaid items, financing cost, and closing costs, along with adequate cash reserves as the documentation type or program requires. When the Borrower will be paying off debts, adequate funds should be documented to complete the debt payoff, in addition to the funds required to close the transaction and any required cash reserves. For details on a specific program’s asset verification requirements, refer to Platinum Plus Loan Program Matrices.

 

The financial strength of the Borrower, including accumulation of verifiable assets, is a strong indication of creditworthiness. An established pattern of savings demonstrates skill in financial management. Evidence that the savings are liquid also strengthens the loan transaction as these funds are readily available to repay debt obligations, pay unexpected expenses and provide protection against short-term interruption of income.

 

FloridaBad Credit Mortgage Lendersencourages the Client to verify sources of liquid assets beyond the amount needed to meet the requirement of the transaction so that, if necessary, these assets may be considered as a compensating factor when the loan is reviewed.

 

 

 

Requirements and Guidelines

 

• Assets and reserves must be sourced and seasoned for at least 60days

 

• All assets need to be deposited in U.S. financialinstitutions

 

• If Borrower is not of retirement age, the Borrower must document that they have unrestricted  access to all retirement-based funds, including funds used for closing costs, down payments and reserves

 

• Large disparities between the current balance and the opening balances may require additional verification or documentation

 

• Large or irregular deposits must be explained and may require furtherdocumentation.

 

–    A large deposit is considered any amount that exceeds 50% of the Mortgage applicants gross monthly income.

 

–    A signed letter of explanation from the Borrower is required and must sufficiently explain and source the funds

 

–     Documentation supporting the source of the funds may be required

 

• Gift funds may not be used to meet the reserve requirements

 

• Proceeds from a Cash-out Refinance on the Mortgaged Property may not be used to meet reserve requirements.

 

Asset Documentation

 

The Loan File must disclose all sources of funds to close, unless it is not required by the income documentation program. Assets must be sourced and seasoned for 60 days and may be verified with the following documentation:

 

• Direct, written verification of deposit (VOD), completed by the depository. In cases where the Borrower has a joint account with someone other than the Co-Borrower(s), the VOD must clearly show the Borrower has authorized access to all the funds. The VOD must cover a minimum of 60 consecutive days.

 

• Two months’ current and consecutive account statements from each bank, brokerage, mutual fund account, or investment portfolio covering a minimum of 60 consecutive days.

 

• Account statements must include the followinginformation:

 

–     Borrower as the account holder

 

–     Account number

 

–     Time period covered

 

–     Current balance

 

–     Statement date

 

–     Name of the depository or investment institution

 

• The Borrower must explain any recent large deposits, newly opened accounts (within the last 90 days), or account balances that are considerably greater than the average balance over the previous few months. Any indications of borrowed funds must beinvestigated.

 

–    A written explanation of the source of funds from the Borrower must be obtained and the source of funds verified.

 

Minimum Down Payment

 

The Platinum Plus program requires the Borrower to make a minimum down payment of 5% from his or her

own funds. The balance must be paid from cash, other equity, gift funds, or secondary financing. At LTVs of 80% or less, the full down payment may come from a gift when no secondary financing exists. In this instance, closing costs may also be in the form of a gift. The Loan File should clearly state the source of funds for the down payment and closing costs.

 

Gift funds are not allowed on Non-Owner-Occupied (NOO) transactions.

 

Earnest Money Deposits

 

Earnest money deposits are considered part of the down payment. The source of the earnest money deposit(s)

must be verified using the following:

 

• Copy of the Mortgage applicants cancelled check and two months’ bank statements, up to and including the date the check cleared, to evidence a sufficient average balance to support the amount of the earnest money deposit.

 

• Any large deposit to the account must be addressed inwriting with supporting documentation.

 

• Verification that there are sufficient funds on deposit to cover the earnest money deposit and any other required funds to close.

 

• The canceled check or bank statement and the deposit receipt must agree with the Purchase Agreement.

 

• If additional earnest money deposits are made, an amendment to the original Purchase Agreement must be provided

 

Age of Asset Documentation

 

The verification of assets, including the source of funds, may not be greater than 90 days old at the time of closing. If the funds are required for closing, then the most recent account statement(s) at the time of the validation will be required. In the event that the Disbursement Date causes the Mortgage applicants verification of assets to be greater than

90 days old, FloridaBad Credit Mortgage Lenders reserves the right to request updated credit, asset, and/or income documentation. Disbursement Date is the day on which the loan closes.

 

Reserve Requirements

 

When reserves are required by a Platinum Plus program and documentation type, the number of months required will be indicated in the Platinum Plus Loan Program Matrices. To calculate the dollar amount of the required reserves, multiply the Mortgage applicants new PITIA payment by the number of months indicated. Reserves are defined as assets remaining, from down payment and closing costs, exclusive of cash-out received from the transaction.

Reserves must be verified, sourced, and seasoned for 60 days. PITIA is defined as:

• Principal and interest

 

• Hazard, flood, mortgage insurance premiums (asapplicable)

 

• Real estate taxes

 

• Ground rent

 

• Special assessments

 

• Association dues

 

• Any subordinate financing payments on mortgages secured by the MortgagedProperty

 

Ineligible Assets And Sources Of Funds

 

The following are ineligible assets and sources of funds:

 

• Stocks held by privately held corporations

 

• Stock options

 

• Non-vested restricted stock

 

• Windfall assets (i.e., inherited funds, proceeds from a lawsuit, lottery winnings)

 

• Cash-Out Refinance proceeds

 

• Non-financial assets (collectibles, stamps, coins, artwork, etc.) unless liquidated

 

• Assets titled in an irrevocable trust

 

• Custodial accounts

 

• Escrow accounts

 

• 529 Accounts

 

• Accounts pledged as collateral on another loan

 

• Below investment  grade corporate and municipal bonds

 

• Cash value of life insurance

 

• Foreign assets.

 

Acceptable Assets And Sources Of Funds

 

Checking/Savings/Deposit Accounts

 

Funds held in checking, savings, certificates of deposit, money market and other deposit accounts are acceptable sources of funds provided verification of deposit (VOD) or acceptable alternative documentation is used to verify these accounts.

 

The source of funds for a recently opened account or for a large increase must be explained and verified. Copies of the Mortgage applicants bank statements must reliably document that the funds were not recently borrowed. The statements should show that the funds were accumulated prior to funding.

 

Business Funds

 

The use of business funds for down payment, closing costs and reserves is allowed for sole proprietors, partnerships and corporations, including S-corporations. When using these funds, each transaction must be analyzed in order to determine the Mortgage applicants percentage of ownership in the business, validate the Mortgage applicants ability to access business funds without any detrimental effect to the business and to ensure there is strength and stability within the business.

 

Ownership Verification:

 

Mortgage applicants ownership or interest in the business must be confirmed by documentation  such as a business license or corporate or partnership tax returns.

 

Verification of the Availability of Funds:

 

• Sole Proprietor: Verification that the Borrower has 100% ownership of the business, for example using the tax returns provided or a copy of the businesslicense.

 

• Partnership: Borrower must be a general partner and verification of the percent of ownership is required.

Verification of the ability to withdraw funds to the extent of the percentage of ownership and approval of the other general partners is required. The percentage of ownership can be validated using the U.S. Partnership Return of Income (IRS Form 1065) and the Partner’s Share of Income, Credits, Deductions, etc. (IRS Schedule K-1) for filing income tax returns for the partnership.

 

• Corporation: Verification that the Borrower is 100% owner of the corporation or if the Borrower is not a 100% stockholder verification of the percent of ownership. In addition, verification of the ability to withdraw funds to the extent of the percentage of ownership is required, along with approval of the stockholders with a corporate resolution. The Mortgage applicants percentage of ownership can usually be determined from the Compensation of Officers section of the corporate tax return.

 

Self-Employed Borrowers

 

The following requirements are applicable for Self-Employed Borrowers using business funds:

 

• All funds must be seasoned with the source of funds for any large deposits fully documented  and explained.

 

• Business assets must be verified using standard documentationrequirements.

 

• A cash flow analysis on the business is required. The cash flow analysis can be performed by the accountant  or CPA.

The file must contain evidence the Borrower has full use of business funds and there is no required repayment.

 

• The Loan File must contain evidence that the funds are not advancement against future earnings or future cash distributions. The Loan File documentation must include a review of any potential tax implications on funds received.

Credit Card Financing

 

Certain loan costs may be paid outside of closing by the Mortgage applicants use of a credit card. The following costs can be financed:

 

• Appraisal

 

• Lock-in fees

 

• Credit report

 

The aggregate total may not exceed $1,000. Sufficient funds to pay off the charged amounts must be verified. The Borrower does not need to pay off the charged amounts. The minimum monthly payment will be added to the debt ratios.

 

Retirement Accounts

 

Vested funds from individual retirement accounts (IRA/Keogh accounts) and tax-favored retirement savings accounts (401(k) are acceptable sources of funds for down payment, closing costs and reserves.

 

Client must verify the ownership of the accounts and the Mortgage applicants actual receipt of the funds from the liquidation of the assets, if needed to complete the transaction.

 

When funds from retirement accounts are used for reserves, it is not necessary to withdraw the funds from the account. It is necessary, however, to exercise caution when considering retirement accounts as reserves since these accounts often feature significant penalties for early withdrawal or have limited access and have vesting requirements.

 

 

 

 

 

 

 

When using the funds as reserves, the Client may use the following percentage of the vested amount:

 

 

 

Retirement  Accounts (401 (K) IRA, SEP, KEOUGH):

 

•     If the Borrower is < 59.5 years old)                      55%    

 

• If the Borrower is > 59.5 years old)                     65%

 

If the retirement account only allows withdrawals in connection with Mortgage applicants termination of employment, retirement or death, the Client may not consider the vested funds for reserves.

 

Stocks, Bonds, and Other Securities

 

If the source of funds to close is proceeds from the sale of stocks, bonds, or other securities, then the Loan File must document their value and must contain proof that the Borrower owned such commodities. Acceptable evidence of ownership and value include:

 

• A statement from the brokerage company indicating ownership of the securities and verifying the sale.

 

• Verification from the bank where the securities were sold or redeemed.

 

• Copies of sale documents.

 

A copy of the bond redemption tables (for value verification), and proof of liquidation, is required for government bond proceeds.

 

Other Accounts

 

Accounts such as annuities, trust funds and hedge funds may be utilized. Documentation must be provided to show that the funds are available to the Borrower and under what conditions the funds may be withdrawn. If being used for reserves, annuities are treated the same as retirement accounts.

 

Borrowed Funds Secured by Assets

 

Proceeds from a loan that was fully secured by the Mortgage applicants assets qualify as a source of funds to close, subject to the following requirements and guidelines:

• The loan must be secured by an asset owned by the Borrower, such as a certificate of deposit, stock, bond, real estate (other than the Mortgaged Property), life insurance policy, savings account, or a bridge loan.

 

• The loan must be from an institutional lender.

 

• The DTI ratio calculation must show that the Borrower is qualified to pay the additional debt.

 

• A copy of the executed note reflecting the terms and proof of the receipt of the funds must be provided.

 

Sale of Real Property

 

If the source of funds to close is proceeds from the sale of real estate owned by the Borrower, the amount of net proceeds must be documented with a copy of the final HUD-1 along with the receipt of the proceeds by the borrower.

 

Gift Funds

 

A Borrower purchasing may receive a gift to be used towards the down payment, prepaid items, closing cost and financing cost. For details on a specific program’s gift of equity or gift fund requirements, refer to the Platinum Plus Loan Program Matrices.

 

Gift of equity is defined as equity in a property given by the owner to the Borrower when the Borrower purchases a home from an immediate family member, defined as parents, grandparents, siblings, spouse, children, aunts, and uncles. . Gift of equity is acceptable from immediate family members and no repayment is expected. Property must be owner occupied. Verification of a gift of equity must be reflected on the purchase agreement or HUD-1. Gift of equity transactions must also comply with Interfamily Transfer requirements in

 

this chapter.

 

A down payment of 100% from gift funds is allowed for LTVs of less than or equal to 80% or the program max when no secondary financing exists. In this instance, closing costs and reserves may also be in the form of a gift. Reserve requirements must be met by the Mortgage applicants own funds. Gift funds are not allowed on Non-Owner- Occupied (NOO) transactions.

 

 

• Gift funds must be verified by the following:

 

• Signed gift letter

 

–    Must indicate the donor’s relationship to theBorrower

 

–    Donor’s address and phone number

 

–    Subject property address

 

–    Dollar amount of the gift

 

–    Certification that it is a gift with no repayment required

 

• Receipt of funds*

 

• Proof of the donor’s ability to provide the funds

 

–    Must be sourced and seasoned for 60 days

 

Examples of acceptable proof of receipt of funds are a bank statement showing the deposit or a copy of the cashier’s check.

 

If the Borrower received a gift from a relative or domestic partner who has lived with the Borrower for the last

12 months, or from a fiancée, the gift is considered the Mortgage applicants own funds and may be used to satisfy the minimum Borrower contribution requirement if all individuals occupy the property.

 

Gift funds are not permitted from any donor that is a party to the transaction (except gifts of equity from the

Client) or is a real estate builder, developer, or in the business of owning, financing, or selling real estate.

 

Gifts of Equity

 

Gift of equity is defined as equity in a property given by the owner to the Borrower when the Borrower purchases a home from an immediate family member, defined as parents, grandparents, siblings, spouse, children, aunts, and uncles. Gift of equity is acceptable from immediate family members and no repayment is expected. Property must be

 

owner occupied. Verification of a gift of equity must be reflected on the purchase agreement or HUD-1. Gift of equity transactions must also comply with Interfamily Transfer requirements in this chapter. Gift of equity transactions should be supported by an appraisal at fair market value. Generally, sales prices less than or greater than 10% of fair market value established by the appraisal are subject to further review and documentation.

Transaction Types

 

This section describes the types of transactions  for which FloridaBad Credit Mortgage Lenderswill purchase or fund loans.

 

Purchase

 

A Purchase transaction involves the purchase of a real property, as defined by a Sale and Purchase Agreement executed by the Borrower and home Client that represents a First or Second Mortgage on the property.

 

Non-Arm’s Length

 

A non-arm’s length transaction is a transaction between family members, co-workers, friends or anyone associated with the transaction such as the listing agent, mortgage lender or broker.

 

Non-Arms’ length transactions are not eligible for purchase except for Gift of Equity (GOE) or inherited properties.

Examples of non-arm’s length transactions include but are not limited to:

 

 

 

• Relatives: Relatives are defined as individuals related by blood, marriage, adoption, or legal guardianship.

Transactions between an individual and their spouse, parent, sibling, grandparent, aunt, uncle, cousin, stepparent or stepchild, regardless of whether the relationship is by blood, adoption, marriage, or legal guardianship are considered non-arm’s length. The definition also includes domestic partners and fiancées.

 

–   A purchase and sale transaction between relatives, including the estate of a deceased family member unless the transaction is a probate sale.

 

–   A financing transaction between relatives, such as the processing or origination of a Loan for a relative by an employee of the Client.

 

–   Parents purchasing and financing a property for a child who then wants to refinance to pay- off the parents

 

• Employer/Employee

 

–   A purchase and sale transaction between an employer and anemployee.

 

–   A financing transaction between an employer and an employee, including a Loan originated by the

Client for the Client’s employee, contractor, orprincipal.

 

• Landlord/Tenant

 

–   A purchase and sale transactions between a landlord and tenant, including lease option purchase options.

 

–   A financing transaction between a landlord and tenant, such as the processing or origination of a Loan for a tenant when the landlord is an employee of theClient.

 

• Home Builders

 

–   Purchase transactions where the Borrower is the owner of, or is employed by the homebuilder who has constructed the subject property.

 

–   Transactions where the principals of construction companies are involved in the sale and financing of the subject property, with the exception of qualifying builder owned lending operation transactions.

 

• Real Estate Brokers/Agents: A transaction where the Borrower or a relative of the Borrower, is a licensed real estate broker or agent employed in the real estate industry and is involved in the financing or sale of

the subject property, regardless of whether he/she receives a sales commission.  This includes a Borrower or

a relative of theBorrower.

 

–     Acting as the property client’s agent under a listing agreement with the client of the property;

 

–     Acting as his/her selling agent for a real estate broker;

 

–     Acting as both the listing agent and as the client agent (dual representation); and

 

–     Employed by the FloridaBad Credit Mortgage LendersClient acting as the Loan interviewer.

 

–    A transaction where the Borrower acts as his/her own real estate agent (buyer’s agent) in the purchase of a property will be considered arm’slength.

 

• Third Party Service Vendors: A transaction where the Borrower is also a principal of a third party vendor, such as a settlement agent, escrow company, title company, appraisal company, or credit reporting company providing such service for the subjectLoan.

 

• Client Employees

 

–     A Borrower who is employed by the Client of the Loan (i.e. no employeeloans)

 

• Client Financed

 

–     The payoff of a loan currently financed by the Client

 

Interfamily Transfer

 

• The HUD-1 must reflect the gift of equity as part of the transaction or the purchaseprice.

 

• The property must be owner occupied (non-owner occupied interfamily transfers will be reviewed by FloridaBad Credit Mortgage Lenderson a case-by-case basis).

 

Interfamily transfers are considered Purchase transactions. For an interfamily transfer to be eligible for purchase by FloridaBad Credit Mortgage Lenders Funding, the appraisal must support the value, AND:

 

• Existing liens on the property must be current.

 

• Full Documentation loans only.

 

• The HUD-1 must reflect the gift of equity as part of the transaction or the purchaseprice.

 

• For owner occupied properties, the maximum LTV/CLTV is 80% or the program maximum, whichever is lower.

 

• For non-owner occupied properties, the maximum LTV/CLTV is 70% or the program maximum, whichever is lower.

 

Family members are defined as parents, grandparents, siblings, spouses, children, aunts and uncles

 

Renting Back the Current Residence

 

Is not permitted.

 

Rate/Term Refinance

 

A Rate/Term Refinance represents a First Mortgage that is used to pay off an existing mortgage(s) or lien(s) with a new loan. This loan secures the Mortgaged Property in order to acquire a different interest rate or loan term. Cash removal or debt consolidation other than incidental cash (the lower of 1% of the loan amount or $2,000), is not permitted.

 

A Rate/Term Refinance is when the Mortgage Loan proceeds are used for:

 

• Reasonable and customary loan closing costs/fees.

 

• Payoff of the First Mortgage.

 

• Payoff of closed end subordinate mortgage(s) that:

 

–     Are at least 12 months seasoned

 

–     Were used to purchase the Mortgaged Property

 

–     Were used for documented home improvements

 

• Payoff of Home Equity Lines of Credit where:

 

–     A cash draw greater than $2,000 has not been taken in the last 12months.

 

OR

 

–     Proceeds have been used for documented home improvements.

 

Refinance Resulting from Divorce

 

A refinance transaction resulting from a divorce settlement wherein either the Borrower or the Co-Borrower is required to buy out the interest of the other spouse in the Mortgaged Property may be considered a Rate/Term Refinance transaction if:

 

• The Borrower who will be acquiring sole ownership of the property receives no cash-out from the proceeds of the transaction.

 

• The Borrower provides a copy of the divorce decree or the property settlement agreement reflecting the required buy-out.

 

Other divorce-related property right dissolution shall be treated as a Cash-Out Refinance transaction.

 

Cash-Out Refinance

 

A Cash-Out Refinance is a loan whose proceeds are distributed for:

 

• Debt consolidation

 

• Cash-in-hand

 

• Payoff of non-seasoned,  closed-end subordinatemortgage(s)

 

• Payoff of Home Equity Lines of Credit where cash has been drawn in the last 12 months and/or is greater than $2,000

 

• Payoff of property tax liens

 

• Payoff of federal and state tax liens

 

Here is an example of a Cash-Out Refinance:

 

Loan amount	$175,000
Mortgage payoffs	– $131,400
Consumer debt payoffs	– $ 25,000 (cash-out)
Payoff property tax liens	–  $   5,000 (cash-out)
Closing costs	–  $   7,000
Cash to Borrower	= $   6,600 (cash-in-hand)
Total cash-out	= $ 36,600 (cash-in-hand  + cash-out)

 

 

 

Debt Consolidation

 

A debt consolidation refinance transaction involves the repayment of an existing loan from the proceeds of a new mortgage. If payment of credit cards or installment loans is a condition of loan qualification, the payoff must be indicated on the HUD-1 or otherwise documented.

 

In all cases, a 6-month property seasoning is required for cash-out/cash-in-hand transactions.

 

Property Owned Free and Clear

 

A Borrower who obtains a mortgage on a property that does not already have a mortgage lien against it is also defined as a Cash-Out Refinance transaction.

 

1031 Tax Exchange

 

 

These transactions are not eligible.

 

 

Consolidation, Extension, And Modification Agreements (Cema)

 

These transactions are not eligible.

 

 

Continuity of Obligation

 

For Refinance Transactions, there must be a continuity of obligation if there is currently an outstanding lien that will be satisfied through the refinance transaction. Continuity of obligation is met when any one of the following exists:

 

• At least one (1) borrower is obligated on the new loan who was also a borrower obligated on the existing loan being refinanced;

 

• The borrower has been on title and residing in the property for at least twelve (12) months or can demonstrate a relationship (relative, domestic partner, etc.) with the current obligor;

 

• The loan being refinanced and the title to the property are in the name of a natural person or a limited liability company (LLC), as long as the borrower was a member of the LLC prior to transfer. Transfer of ownership from a corporation to an individual does not meet the continuity of obligation requirements.

 

• The borrower has recently inherited, or was legally awarded, the property (divorce, separation  or dissolution of a domestic partnership).

 

Loans with an acceptable continuity of obligation may be considered either a Cash Out or Limited Cash

 

Out as described in this Chapter.

 

If the borrower is currently on title but is unable to demonstrate an acceptable continuity of obligation, or if there is no outstanding lien against the property, the loan is still acceptable as a Cash Out Refinance, as detailed below:

 

• If the purchase date is within six (6) to twelve (12) months prior to application date and there is no lien, the LTV

must be based on the lesser of the original sales price or the current appraised value

• If the purchase date is more than twelve (12) months and there is no lien, the LTV may be based on the current appraised value
• If there is a lien and the borrower has been on title for at least six (6) months, the LTV is limited to 50%, or the program maximum, whichever is less based on the appraisedvalue

 

 

Delayed Financing

 

Borrowers who purchased the subject property less than six months prior to application are ineligible for a cash-out refinance. This includes transactions where the Borrower purchased the Subject Property for cash and is looking to obtain delayed financing.

 

 

Construction-To-Permanent Refinance

 

A Construction-to-Permanent  Refinance is a loan obtained to pay off an interim (short-term) loan used to finance the construction of the subject property. The transaction may be treated as a Purchase, Rate/Term Refinance, or Cash- Out Refinance. For information regarding the treatment of the Construction-to- Permanent financing, refer to the Loan- to-Value Ratio section in this chapter.

 

Land Contract Refinance

 

A Land Contract is an installment contract for the sale of land and improved structures. The home client has legal title until the installment is paid and the buyer has equitable title during the term of the contract. Land Contracts are treated as refinance transactions. Land Contract transactions are acceptable on owner occupied properties only.

 

Land Contract/Contract for Deed (Recorded or Unrecorded)

 

A Land Contract/Contract  for Deed is subject to the following:

 

• The home client must be the current owner of the property as reflected on the Preliminary Title

Report/Commitment.

 

• A copy of the Land Contract/Contract for Deed is required.

 

• Canceled checks (front and back) or bank statements are required to evidence the down payment.

 

• Copies of canceled checks (front and back) to evidence the monthly payments covering all months of residency for the past 12 months are required.

 

The Borrower might be eligible for a cash-out transaction depending on when the Land Contract/Contract for Deed was executed:

 

• Executed Less Than 12 Months. If the Land Contract/Contract for Deed has been executed for less than 12 months, then the transaction must be Rate/Term Refinance and it will be based on the Appraised Value or

 

contract price, whichever is less;OR

 

• Executed at Least 12 Months. If the Land Contract/Contract for Deed has been executed for at least 12 months, the Borrower may be eligible for a Cash-Out Refinance, and the transaction may be based on the Appraised Value.

 

Note: Some states do not recognize the Borrower as having an equitable position in the property until they have made their last payment under the Contract for Deed. In this case, the state would consider the transaction to be a Purchase. However, pursuant to these underwriting guidelines, all loans that pay off a Contract for Deed will be considered as a refinance.

 

Since the tax rate will be reassessed for the new transaction, the newly established tax rate will be used for qualifying the borrower.

 

Multiple Transactions Executed by One Client

 

Multiple applications for Land Contract/Contract  for Deed transactions that are executed by the same

Client, company, and/or individual are unacceptable.

 

A Land Contract/Contract  for Deed executed by a company or property owner whose primary business is investments in real estate or rehabilitation of deferred maintenance properties are not be eligible.

 

Lease Option-To-Purchase

 

A Lease Option-to-Purchase is an agreement to lease a property for a specified period of time at an agreed- upon monthly rent payment. Under this option, a portion of the payments in excess of the market rents will be applied toward the down payment. Once the potential buyer has satisfied the terms of the down

payment, he or she may execute the Option-to-Purchase the property at the sale price agreed upon in the Lease Option-to-Purchase agreement. Lease Option-to-Purchase transactions are eligible on owner occupied properties only. Loan proceeds can only be used to pay off the contract.

 

Rent Credit

 

Rent credit towards down payment will be accepted only for the portion of rent paid over and above established market rents per the appraiser by a market rent analysis. The appraiser must determine the fair market rent on Form 1007 Single-Family Residence or Form 216 Multi-Family Residence. Any rents in excess of “fair market rent” may be applied to the down payment.

Refund of Excess Deposit

 

If the Borrower earned a large amount of rental credit during the term of the Lease Option-to-Purchase, the

Borrower may receive a refund of excess deposits at close. For example:

 

 

 

Purchase price	$100,000
Option credit earned	–  $36,000
Subtotal	$64,000
Loan amount (85% LTV)	$85,000

 

Balance due on lease                               –  $64,000       

 

Excess deposit                                      = $21,000      (Refund of excess deposit)

 

 

 

Requirements and Guidelines

 

The following requirements and guidelines apply to Lease Option-to-Purchase transactions:

 

• A copy of the executed Lease Option-to-Purchase agreement isrequired.

 

• Proof of the Mortgage applicants earnest money deposit, in the form of copies of canceled checks (front and back)

must be provided.

 

• Copies of canceled checks (front and back) to evidence the monthly payments covering all months of residency for the past 12 months.

 

A documented lease with a Lease Option-to-Purchase and less than 12 months of seasoning will be treated as a Purchase transaction. The lesser of the purchase price or the Appraised Value will be used to determine the LTV/CLTV.

 

A Lease Option-to-Purchase with at least 12 months of seasoning will be treated as a refinance transaction. The Appraised Value will be used to determine the LTV/CLTV. Lease Option-to-Purchase transactions are eligible for Rate/Term Refinances only to pay off the contract. They are ineligible for Cash-Out Refinance transactions.

 

Lease Option-to-Purchase transactions that do not involve an earnest money deposit and/or monthly rent in excess of proven market rents will not be considered a Lease Option-to-Purchase transaction and must comply with standard  Purchase guidelines.

 

Inherited Properties

 

If a Mortgaged Property was inherited within the past 12 months, the following limitations apply:

 

• The Borrower must have clear title.

 

• If the Borrower is paying only existing mortgages and heirs with cash-out, the maximum LTV/ CLTV is

80%, or the maximum allowed for the grade and program, whichever is less. This will be treated as a Rate- Term Refinance.

 

• The maximum LTV/CLTV on Cash-Out Refinances where the proceeds for debt consolidation or cash-in- hand is 70% or the maximum allowed for the program, whichever isless.

 

• Rate/Term Refinances only for non-owner occupiedproperties.

 

Buying out additional heirs identified in the related will is allowed. A copy of the will must be provided, along with the buyout agreement signed by all of the beneficiaries identified in the will.

 

For inherited properties, there is no restriction for occupancy.

 

If the property was inherited more than 12 months ago, standard refinance guidelines apply.

 

Ineligible Transaction Types

 

A Lease Back Purchase Transaction, where the lease-back period is greater than 30 days is an ineligible

 

Loan Programs

 

 

Asset Qualifier Program

 

This program is designed for high net worth Borrowers. Borrowers are qualified on documented and verified liquid assets. In all cases, the Borrower must have the demonstrated ability to repay the Loan. This program offers the opportunity to utilize a qualifying calculation based on the verification of assets and accumulated wealth as an alternative method to income verification to document the Mortgage applicants ability to repay.

 

Program Eligibility

 

The Asset Qualifier Loan program is eligible for Prime A+ and A credit grades only.

 

Loan amounts and LTV Limitations

 

Primary Residence – Purchase and Rate & Term Refinance

 

Property Type	Credit Score	LTV/CLTV	Maximum Loan Amount
Single-family, PUDS, Condos , and 2-4 Units	680	70%/70%	$1,500,000
	680	65%/65%	$2,000,000
	720	60%/60%	$2,500,000

 

 

 

Primary Residence – Cash-out Refinance

 

Property Type	Credit Score	LTV/CLTV	Maximum Loan Amount	Maximum Cash–out Amount
Single-family, PUDS, Condos, and 2-4 Units	680	65%/65%	$1,500,000	$300,000
	680	60%/60%	$2,000,000	$500,000
	720	55%/55%	$2,500,000	$500,000

 

Second Home – Purchase and Rate &Term Refinance

 

Property Type	Credit Score	LTV/CLTV	Maximum Loan Amount
Single-family, PUDS, and Condos	680	65%/65%	$1,500,000
	680	60%/60%	$2,000,000
	720	55%/55%	$2,500,000

 

Second Home – Cash-out Refinance

 

Property Type	Credit Score	LTV/CLTV	Maximum Loan Amount	Maximum Cash–out Amount
Single-family, PUDS, and Condos	680	60%/60%	$1,500,000	$300,000
	680	55%/55%	$2,000,000	$500,000
	720	55%/55%	$2,500,000	$500,000

 

 

 

Prior Housing History

 

Borrowers with no history of mortgage or paying rent in the last two (2) years are not eligible. Borrowers who own property free and clear are considered to have a mortgage history.

Eligible Borrowers:

 

• U.S. Citizens

 

• Permanent Resident Aliens

 

• First-time Home Buyer

 

–     A two (2) year rental history must be provided

 

–     Maximum Loan amount of $1,500,000

 

–     Maximum 60% LTV/CLTV or program maximum, whichever is less

 

–     Non-occupant co-borrowers are not allowed

 

• Inter Vivos Revocable Trust

 

–     Must meet FloridaBad Credit Mortgage Lendersguidelines

 

• Non-Permanent Resident Alien

 

Ineligible Borrowers

 

• Non-occupant Co-Borrowers

 

• Foreign Nationals

 

Income Verification

 

This program utilizes a qualifying calculation based on the verification of assets as an alternative method to income verification to document a Mortgage applicants ability to repay. As such, tax returns are neither requested nor required and must not be submitted with the Loan file. A 4506T is not required.

 

Employment and income must not be disclosed on the 1003. “Not applicable to this Loan” must be inserted into the employment section. The income section is to remain blank. Business phone number, if applicable and contact information must be reflected on the 1003. This will be used for contact and verification purposes only. A Debt-to- Income (DTI) is not calculated.

 

If employment or income information is provided on the 1003, the Loan is not eligible for this Loan program.

 

Asset Documentation

 

Full asset documentation  is required for both funds to close and reserves. Assets can be cash, stocks, bonds, IRAs,

401Ks, mutual funds or retirement accounts. For most asset types, this would include all pages of the most recent twelve (12) months. Asset levels in the verified accounts are expected to be consistent and sustained over the twelve

(12) month period. Assets must be in liquid or semi-liquidform.

 

Assets must be verified sufficient to cover the Loan amount requested with sufficient additional reserves to

 

cover all revolving, installment, alimony/child support, and other monthly debt for a period of no less than five

(5) years, plus the separate program reserve requirement based on the Loan amount.

 

Twelve (12) months of consecutive statements are required for each asset account. Any large increases or decreases must be adequately sourced. Increases or decreases greater than 15% over the twelve (12) month period must be explained by the Borrower. Additional supporting documentation may be required.

 

Asset statements reflecting other individuals who are not applicants for the Loan are not eligible. However, if the Mortgage applicants spouse is on the account and not on the Loan, the funds may be considered  if a 100% access letter is provided.

 

Asset statements reflecting the occurrence (one time or isolated incident) of NSF checks, wire transfers, overdraft protection transfers, negative ending balances and transfers from other accounts must be satisfactorily explained and documented. Asset statements reflecting multiple NSF checks, overdraft protection transfers, negative ending balances, or lack a satisfactory explanation indicate cash flow problems and are not eligible.

Eligible Assets

 

Eligible assets must be comprised of the following asset types, be available to the Borrower, and are limited as follows:

 

 

 

Asset Type                                                                                    Qualifying Amount

 

   Checking, Savings, and Money Market Accounts                             100%                        

 

   Publicly traded Stocks and Bonds                                                    70%                         

 

   Mutual Funds                                                                                 70%                        

 

   Retirement Accounts (401 (K) IRA, SEP, KEOUGH):                                                        

 

                   –       If the Borrower is < 59.5 years old                            55%                          

 

                   –       If the Borrower is > 59.5 years old                            65%                          

 

The above amounts shown for retirement accounts can only be used if a distribution has not already been set up. If a distribution has begun, the asset is not eligible for this program.

 

For eligible asset types, any debt tied to that asset must be netted out. For example, if stocks were purchased on margin or a 401(K) Loan was taken against the 401(K) account.

 

Ineligible Assets

 

• Business funds

 

• Stock options

 

• Privately held stock

 

• Deferred compensation

 

• Non-regulated financial companies

 

• Non-liquid assets (automobiles, artwork, business net worth,etc.)

 

Business Funds

 

Business funds are not eligible to be included in the total available asset calculation or qualifying calculation.

 

Payment Shock

 

Payment shock should not exceed 100% if the Borrower is currently renting or 250% if the Borrower has a

 

mortgage history in the past twenty-four months. The payment shock requirement will be waived if the LTV is

less than 65%.

 

Payment shock is calculated by dividing the difference between the new and existing housing payments by the existing housing payment. For example:

 

 

 

New Payment (PITIA)	$1,500
Subtract Existing Payment (Rent or PITIA)	$1,000
Equals difference	$500
Divided by the Existing Payment	$1,000
Equals Payment Shock %	50%

 

 

 

Reserve Requirements

 

Reserve requirements are in addition to the residual assets needed to cover debts for the initial sixty (60)

month period.

 

 

 

Loan Amount                                                         Reserves Required

 

   <= $1,000,000                                                           9 months                           

 

   >$1,000,000 up to $2,000,000                                    18 months                          

 

   >$2,000,000 up to $2,500,000                                    24 months                          

 

 

 

Borrowers with other investment properties must also meet the following reserve requirement:

 

• Additional two (2) months PITIA reserves for each NOO property regardless of financing up to a maximum of thirty-six

(36) months. The reserve calculation is based off the subject property PITIA.

 

Qualifying Examples

 

Example #1 – Qualifying Income:

 

Loan     amount:     $300,000

 

PITIA  for   subject:   $2000

 

Verified Assets:

 

•	$200,000 Checking and Savings (100%usable)	= $200,000
	$300,000 Stocks and Bonds ( 70% usable)	= $210,000
   	$400,000  401K (65% usable)   $300,000 Mutual Funds (70% usable)	= $260,000   = $210,000

Total Allowable Assets                                           = $880,000

 

$880,000 (allowable assets) minus $300,000 (Loan amount) = $580,000 residual assets

 

Total of monthly debt (revolving, installment, alimony/child support, hazard insurance, property tax on the subject property, etc.) excluding subject P&I = $2500

 

$2500 X 60 months  = $150,000

 

Required reserves for $300,000 Loan amount = 9

 

2,000 (PITIA) = $18,000

 

Since the residual assets are more than the required funds to cover all other debt for 60 months plus required reserves, the Loan qualifies for the Loan program.

 

Example #2 – Qualifying Income: Loan amount:                     $300,000 PITIA for subject:  $2000

Verified Assets:

 

•	$10,000 Checking and Savings (100%usable)	= $10,000
   	$20,000 Stocks and Bonds ( 70% usable)   $300,000 Mutual Funds (70% usable)	= $140,000   = $ 210,000

Total Allowable Assets                                           = $360,000

 

$360,000 (allowable assets) minus $300,000 (Loan amount) = $60,000 residual assets

 

Total of monthly debt (revolving, installment, alimony/child support, hazard insurance, property tax on the subject property, etc.) excluding subject P&I = $800

 

$700 X 60 months = $48,000

 

Required reserves for $300,000 Loan amount = 9 months X $2,000 (PITIA) = $18,000

 

Since the residual assets are less than the required funds to cover all other debt for 60 months plus

required reserves, the Loan does not qualify for the Loan program.

 

Limitations on Other Real Estate Owned

 

Ownership of investment properties by the Borrower requires additional reserves and Debt Coverage Ratio (DCR) requirement. Any investment properties owned by the Borrower must show a debt coverage ratio of at least 1.20. This may be cumulative if multiple properties are owned. Lease agreements must be provided for all investment properties. If the DSC for the Mortgage applicants other investment  properties  falls short of the 1.20 requirement, additional reserves will be required.

 

Debt Service Coverage (DSC)

 

• The debt service coverage ratio is calculated by taking 75% of the gross rents divided by the PITIA of the respective property

 

• Rents are derived from the rental/lease agreement

 

• DCR requirement is 1.20. Net rents must be > 1.2 times PITIA. This calculation may be cumulative for all rents and all PITIAs.

 

Debt Service Coverage Example:

 

Gross Rent = $1,200

 

Vacancy/Expense Factor = 25% = $300

 

Net Rent = $900

 

DCR Requirement = 1.20

 

$900 divided by 1.20 = $750

 

PITIA may not exceed $750 per month

 

Debt Service Coverage Additional Reserve Requirement Example:

 

Program DCS Requirement = 1.2

 

Actual DCR for investment properties =

 

.93 DCR Shortage = 1.20-.93 = .27

 

Additional monthly liability for reserve calculation = $1400 X .27 =

 

$378 Additional reserves = 60 X $378 = $22,680

 

 

Gift Funds and Gifts of Equity

 

Gift funds and gifts of equity are not allowed.

 

Requirement

 

Not required.

 

Borrower Affirmation Regarding Ability to Repay

 

Each Loan submitted under the Platinum Plus program must contain a signed acknowledgement from the Borrower regarding their ability to repay the Loan under this program. The client may utilize their own form, if the language contained is similar and inclusive of the language on the FloridaBad Credit Mortgage LendersForm.

 

 

Bank Statement Program (24-Month And 12-Month Verification Options) FloridaBad Credit Mortgage Lenderspermits the use of personal or business bank statements to support a self-employed Mortgage applicants income for qualification purposes. The documentation provided needs to document that the income is stable,

likely to continue and sufficient to enable the Borrower to repay the debt. The income presented must be

reasonable for the profession. In addition, when using business bank statements to support the Mortgage applicants income, the nature and structure of the business must be evaluated to determine if the applied expense assumptions per Platinum Plus’s guidelines are reasonable. FloridaBad Credit Mortgage Lendersreserves the right to require additional documentation, up to and including full documentation  (i.e. tax returns) to determine the Mortgage applicants qualifying income.

 

For Loan amount and LTV/CLTV limitations, and for income documentation type and eligibility, refer to the Platinum Plus Loan

Program Matrices.

 

Eligible Borrowers

 

To be eligible for this program, the Borrower must be self-employed or earn over 25% of their income from self- employment, rental income, commission, bonus, or tip sources. Self-employed borrowers are:

 

• Borrowers who derive 25% or more of their primary income from a business in which they hold a controlling interest

 

• Borrower who derive their primary income from commissions, consultation fees, interest, , gratuities, or real estate rents

 

• Borrowers who rely on investments for income such as interest, dividends, capital gains, or real estate rents.

 

If one of the Borrowers meets this eligibility requirement  and the other does not, the Borrower that is not eligible must fully document their income. The net deposits used from the bank statements for the self-employed borrower must not reflect the income that is fully documented  for the other applicant (i.e. deduct Social Security payments, W-2 wages, etc.).

 

• The Mortgage applicants business may be a sole proprietorship, a partnership (general or limited), or a corporation.

They may also receive income documented by Form1099, or filed on a Schedule C.

 

• The Borrower must have been in the same line of work or own the same business entity for two years. Self- employed Borrowers must be able to document by a neutral third-party that the business has been in operation for the last two years and that they have had ownership for that period of time. Third-party verification includes:

 

–    A letter from a certified public accountant (CPA)

 

–    A letter from a regulatory agency or professionalorganization

 

–    Copy of business license

 

Non-arm’s length transactions or Borrowers that receive foreign income are ineligible.

 

Income Documentation Requirements

 

The Mortgage applicants application must include all sources and amounts of income. The bank statements must support the income listed on the application. Deposits from income sources that are not reflected on the 1003 or those not needed to qualify will not be included in the qualifying income calculation. Income sources separate from

self- employment must be verified. Examples of verification include social security letter, employment verification, or divorce decree. If tax returns or VOE are provided for the Borrower using bank statements to support their income, the Loan must be fully documented.

 

Given the difficulty tracking and validating that cash flows are not moving between business entities, Borrowers that own multiple businesses must use personal bank statements to support their income. Their personal bank statements should demonstrate the distributions they receive from their business interests to satisfy their personal obligations.

Also, business bank statements may not be used when the Mortgage applicants business has a number of employees, significant overhead or operating expenses. These would suggest that the expense assumption used in this program would not be applicable. This program is designed for the use of business bank statements when the Mortgage applicants business is small in scope and has limited expenses.

 

Non-taxable income, such as child support payments, disability retirement plans, and worker’s compensation

may be adjusted by 25% to determine the qualifying income. Verification must be made that the particular source of income is nontaxable and that both the income and its nontaxable status are likely to continue.

 

Bank statements reflecting the occurrence (one time or isolated incident) of NSF checks, wire transfers overdraft protection transfers, negative ending balances and transfers from other accounts must be satisfactorily explained and documented.  Bank statements reflecting multiple NSF checks, overdraft protection transfers, negative ending balances, or lack a satisfactory explanation indicate cash flow problems and are not eligible.

 

Bank Statement Requirements

 

Income may be documented by either personal or business bank statements. The co-mingling of personal and business or multiple business accounts is not allowed. If one account is used to show income and another account used for reserves, documentation  must be provided to show evidence that the funds are separate and distinct.

 

Please note: Only one set (twelve or twenty-four months) of bank statements will be used to determine qualifying income. If another account is used for reserves, only two month’s statements to establish seasoning are required,

 

If additional bank statements are provided by the Client they will be reviewed and become part of the overall review of the Loan. Given the difficulty to reconcile funds between accounts, it may cause the Loan to become ineligible or require the Loan to be fully documented.

 

Borrowers who own multiple business entities must use personal bank statements to support their income. The most recent twenty-four (24) or twelve (12) months bank statements must be provided depending on the selected Loan program.

 

For Loan amount and LTV/CLTV limitations, and for income documentation type and eligibility, refer to the Platinum Plus Loan

Program Matrices.

 

Ineligible Bank Accounts

 

The following outlines the types of bank statements that are ineligible for the Platinum Plus bank statement programs.

 

• Co-mingling of accounts whether personal and business or multiple business accounts is not allowed.

 

• Bank statements reflecting other individuals who are not applicants for the Loan are not eligible. However, if the Mortgage applicants spouse is on the personal bank account and not on the Loan, only 50% of the total deposits may be used for qualifying.

 

• Borrowers with multiple businesses may not use business bank statements to support their income. Personal accounts are acceptable.

 

• Business bank statements may not be used when the Mortgage applicants business exhibits a number of employees, overhead, and operating expenses. In this case, personal bank statements may be used.

 

• Bank statements which exhibit recurring NSF, wire transfers, overdraft protection transfers, and negative ending balances are unacceptable.

 

• A current twenty-four (24) or twelve (12) month history or the same bank account is required. Changing of accounts is not acceptable.

Eligible Bank Accounts

 

The following types of bank statements are eligible for the Platinum Plus bank statement programs:

 

• Personal or business account such as a checking or savingsaccount.

 

• Deposits must be consistent and typical whether personal or business accounts are used.

 

• Deposits that are larger than typical for the account may be included with a satisfactory explanation.

Supporting documentation may be required. Atypical deposits are defined as more than 50% of the gross monthly determined income.

• If the Mortgage applicants spouse is on the personal bank account and not on the Loan, only 50% of the total deposits may be used towards qualifying income. Business accounts may only be used when the following applies:

 

–    Borrower (s) owns 100% of the business.

 

–    The business must be small in nature and have minimal overhead and operating expenses.

 

• Low beginning and /or ending balances may require additional documentation up to and including full tax returns (1040’s, 1065’s 1120’s,etc.).

 

 

Determining Cash Flow from Bank Statements

 

FloridaBad Credit Mortgage Lenders takes a common sense approach to underwriting a Mortgage applicants creditworthiness to determine the willingness and ability to repay the Loan. This program provides for income calculation based on bank statements as an alternative method to tax returns to document the self-employed Mortgage applicants ability to repay. Each Borrower has a different situation and each Loan needs to be weighed on its own merit. If the Borrower is self-employed or

in a unique business, a narrative must be provided by the Borrower that clearly outlines the nature of the business and the cash flows. The expense assumptions  must be reasonable for the type of self-employment. Decreasing income trends must be explained and additional documentation may be required.

 

Any irregularity in the Borrower profile or the documentation provided may be cause for the Loan to become ineligible for purchase.

 

Calculating Income from the Bank Statements:

 

The following outlines how to calculate the income using the Mortgage applicants bank statements. The lesser of the income stated on the application or the calculated income using the cash flow from the bank statements will be used to qualify the Borrower. The allowances below may be used to establish qualifying income:

 

• 100% of the deposits from the Mortgage applicants personalaccounts

 

• 70% of the deposits from the Mortgage applicants business accounts

 

If the business expenses appear to be greater than 30%, the use of business bank statements to support the Mortgage applicants income will not be accepted. Personal bank statements will need to be provided. Examples of businesses that would typically have expenses that exceed 30% include a construction company, restaurant, or retail firm.

 

The average deposits will be used to determine the Mortgage applicants income for qualification purposes. Deposits must be typical and consistent for the Mortgage applicants line of work. Transfers from a Mortgage applicants business account to a personal account are acceptable if they are consistent, i.e. the Borrower is paying himself regular distributions.

 

Atypical deposits may not be included unless supporting documentation is provided to show that the monies would be typical for the Mortgage applicants type of business or line of work. Credit back from returns and cash advances

 

from credit cards are not acceptable to be included in the qualifying income.

 

For assistance with the calculation of income from bank statements, please refer to the FloridaBad Credit Mortgage LendersBank Statement Calculator. This tool is for reference and is not required at the time of submission to FloridaBad Credit Mortgage Lendersfor review.

 

Bank Statements with Rental Income

 

Rental income may be used in qualifying a Borrower under the Bank Statement Program. All the rental income must be shown in the Mortgage applicants bank statements to be considered in qualifying income. The rental income shown on the bank statements must support the rental lease amounts.

 

Room rents are an ineligible source of income. If any of the units in a property are receiving room rents than none of the rental income received for the property may be used as qualifying income. If the Borrower is receiving room rents on any of their properties, the Loan must be fully documented and is not eligible for the Platinum Plus bank statement programs.

 

All owner- occupied two-to-four unit properties and all investment properties require a rental income analysis to determine positive or negative cash flow. Rental income on a second home is not allowed. The following is required to support the rental income shown on the application:

 

• Rent Survey Form 1007 and Operating Income Statement (FNMA Form 216) – Subject property only

 

• Complete Schedule of Real Estate Owned (1003)

 

• Complete Rent Schedule outlining the property address, length of ownership, rent received, and payment details

(PITIA).

 

• Copies of the fully executed lease agreements

 

If the rental income is not shown on the bank account used to determine the Mortgage applicants qualifying income, one additional account may be used to support the rental income. The following applies:

 

• Documentation must be provided to show the account is separate and distinct from the bank account being used to determine the Mortgage applicants qualifyingincome

 

• The account must have been set up for the management of the rental income only. If other funds are co- mingled with the rental income the account isineligible.

 

• The bank statements must support the receipt of the income as outlined on the lease(s).

 

• Six months’ bank statements will be required to showevidence of rental income receipt

 

Actual rents must be documented with copies of the signed leases. Room rents are an ineligible source of income. If any of the units in a property are receiving room rents than none of the rental income received for the property may be used as qualifying income. Rental income received from a family member may not be used as income without copies of a minimum of six months’ cancelled rent checks provided by the tenant family member.

 

If multiple accounts have to be used to support the receipt of the rental income, the Loan must be fully documented. If the bank statements presented do not support the rent schedule and the leases presented, the Loan must be fully documented.

 

Rental Income Calculation

 

Income received from rental properties will be calculated as follows:

 

• 75% of actual rents, as established by the fully executed lease(s)

 

• If the lease is incomplete, expired, or not yet in effect, the entire payment will be included in qualifying ratios

 

A positive cash flow will be added to gross income; negative cash flow will be added to total liabilities and used to qualify the Borrower.

 

A Loan for the refinance of an investment property generating a negative cash flow will be ineligible.

 

Verbal Verification of Employment

 

A verbal verification of employment within 10 days of the Loan closing must be performed.

 

4506T Requirement

 

A 4506T transcript is not required for the bank statement programs.

 

Borrower Affirmation Regarding Ability to Repay

 

Each Loan submitted under the Platinum Plus loan program must contain a signed acknowledgement from the Borrower regarding their ability to repay the Loan under this program. The client may utilize their own form, if the language contained is similar and inclusive of the language on the FloridaBad Credit Mortgage LendersForm.

 

 

 

 

 

 

 

 

 

 

 

Home Equity Loan Programs

 

The following sections summarize the Platinum Plus Home Equity Programs. Please refer to the Platinum Plus

Loan Program Matrices and the appropriate guideline sections for additional information.

 

Simultaneous and Stand-Alone Second Liens – Qualified Mortgages Only.

 

All second liens must meet Qualified Mortgage (QM) guidelines. Income documentation must meet Appendix

1. Q. Non-Qualified Mortgages are not eligible for the second lien progr

 

Simultaneous Second Lien Program Restrictions

 

The following restrictions apply to the Platinum Plus Simultaneous Second Lien Program. For additional details, please refer to the Platinum Plus Loan Program Matrices for additional information.

 

• Platinum Plus 1st lien Loan requirements apply to simultaneous secondliens.

 

• Simultaneous Second Lien allowable behind Agency (FNMA and FHLMC) and Platinum Plus 1st Liens only

 

Stand-Alone Second Lien Program Restrictions

 

The following restrictions apply to the Platinum Plus Stand-Alone Second Lien Program. For additional details, please refer to the Platinum Plus Program Matrices for additional information.

 

Allowable First Lien Mortgages (Stand-Alone second lien)

 

Eligible:

 

• Jumbo loan

 

• Conventional (Agency) loan

 

• FHA or VA loan

 

• Balloon payment loans with remaining term greater than five years from the new FloridaBad Credit Mortgage Lenders loan closing date

 

• First mortgage that allows interest only payments with remaining term greater than five years from the new FloridaBad Credit Mortgage Lenders loan closing date

 

Ineligible:

 

• First mortgage with a negative amortization feature

 

• Amortization term greater than 40 years

 

• A contract for deed, contract for purchase, or land contract

 

• Privately held 1st liens

 

• Loans with provisions prohibiting  the placement of additional liens on the mortgaged property

 

• Loans with provisions for future advances

 

Borrower Eligibility

 

Eligible:

 

• U.S citizens

 

• Permanent Resident Aliens.

 

Ineligible:

 

• Non-permanent Resident Aliens

 

• Non-occupant Co-Borrowers

 

• Foreign Nationals

 

Occupancy Standards

 

Eligible:

 

• Primary (1-4 Units) Residences

 

• Second Homes

 

• Investment Properties

 

 

Property Types

 

Eligible:

 

• Single-family (detached, semi-detached, and attached)

 

• PUD (Attached and Detached)

 

• Condominiums (Must be warrantable, Low and High-Riseacceptable)

 

• 2-4 Units

 

Ineligible:

 

• Non-Warrantable Condominiums

 

Down Payment

 

Not applicable for stand-alone seconds

 

Reserve Requirements

 

The reserve requirements must meet the reserve requirements for the Platinum Plus first lien mortgage programs.

 

Loan Balance Restrictions

 

• Minimum Loan Amount – $50,000

 

• Maximum Loan Amount – $500,000

 

Financing Closing Costs

 

The Platinum Plus program does not limit the amount of closing costs that may be financed as part of the

Home Equity Loan, except for any limitations that are imposed by applicable State laws.

 

Eligible States

 

The client may deliver under the Platinum Plus home equity loans secured by properties located in the states indicated on the rate sheet. The Client should be aware that certain states may have restrictions regarding loan size, maximum CLTV or other issues. The Client is responsible for ensuring compliance with all such restrictions.

 

Ownership Interests

 

Land Ownership

 

• Fee Simple

 

• Leasehold

 

Title Vesting

 

• Individual

 

• Joint Tenants

 

• Tenants in Common

 

• Trust

 

Mortgage Insurance Requirements Mortgage insurance is not required. Hazard Insurance Requirements

 

Hazard insurance is required for all home equity loans. Proof of insurance includes a policy or certificate of coverage, declarations page, a copy of the master policy from the homeowners association (if applicable), insurance binder, property insurance form or payment receipt.

 

 

The subordinate lender must be added to the hazard insurance policy as second mortgagee. This information should appear after the first mortgage holder.

 

 

The appropriate amount of hazard insurance is determined as the lesser of:

 

 

• 100% of the insurable value of the improvements with replacement cost coverage, as established by the property insurer, or the unpaid principal balance of the mortgage (sufficient coverage for the new combined loans), OR
• The combined unpaid principal balance of the first and any secondary financing, as long as it equals the minimum amount required to compensate for any damage or loss on a replacement cost basis, typically 80% of the insured value of the improvements. If it does not, then coverage that does provide the minimum required amount must be obtained.

 

Individual hazard insurance policies for second lien loan transaction must comply with the following:

 

 

• The coverage must be adequate and in place at time ofclosing.
• If the policy is expiring within 45 days of closing, obtain the paid receipt and updated documentation from the Borrower prior to

closing.

 

 

Escrows

 

An escrow of funds for the payment of property taxes or hazard insurance premiums should not be set up for the home equity loan, but the Client may require such escrows on the first mortgage in conformance with its policies

 

and procedures, or those of an underlying first mortgage investor.

 

Rescission Period

 

The Client must grant to the Borrower the right to rescind the home equity loan and notify the Borrower of that right in each case to the full extent required under any applicable laws.

 

Appraisal Requirements

 

An original signed appraisal or a copy of the appraisal with legible copies of the original photographs or computerized copies of the mortgage premises and comparables are required. All appraisals must be completed for the client.

Appraisals may not be assigned/transferred to the Client or FloridaBad Credit Mortgage Lenders. Please refer to the Platinum Plus Appraisal Valuation Summary for additional information.

 

Additional Property Considerations

 

• Maximum of ten acres allowed for the Home EquityProgram

 

• Properties listed for sale within the last 12 months are noteligible

 

• Rural Properties as classified by the Appraiser

 

• All our other ineligible property types per the Ineligible Property Type section of this Guide

Non-Warrantable Condominiums

 

Non-warrantable condos are acceptable under the following circumstances. Projects with multiple non- warrantable characteristics are ineligible due to risk

layering.

 

 

 

Category                                            Non-Warrantable Allowances

 

 

Litigation                                         Projects involved in litigation are ineligible.

 

 

HOA Reserves

HOA Budget must include a dedicated line item allocation to replacement reserves of at least 8% of the budget.

 

 

 

Completion Status

 

 

 

Investor Concentration

The project, or the subject’s legal phase along with all prior phases, must be substantially complete (up to buyer preference items). All Common  elements in the project or legal phase must be 100% completed. At least 50% must be sold or under

bona-fide contract.

Maximum investor concentration of 60% for new construction  projects, recent conversions, or investment subject properties. Calculation based on total units in

     current and previous legal phases.                                                                    

 

No single entity (an individual, investor group, partnership or corporation) may own more than

 

   Single Entity Ownership                20% of the total units in the project.                                                            

 

 

HOA in Builder’s Name

The developer may be in control of the condominium association provided the Master Agreement provides for the homeowners to take control upon either a predetermined percentage of unit sales or within a defined time period.

 

No more than 20% of total units in a project may be 60 days or more past due on the payment of

   Delinquent HOA Dues                  condominium / association fees.                                                               

 

Low-, mid- and high-rise condos are eligible. Complexes over four stories must be common  to the

 

Property Type

area. Projects less than 10 units must be typical and common for the

     market area.                                                                                                  

 

Commercial Space                          Maximum 30% of the total space is used for non-residential purposes.

 

Note: projects with a rental desk on site are not allowed.

 

 

 

Eligible Loan Programs

 

Non-Warrantable  Condominiums  are allowed under the Prime Jumbo and Near Prime Loan programs. Refer to Platinum Plus Loan Program Matrices for additional information.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateral

 

 

Eligible Property Types

 

The property types eligible for purchase or funding under the Platinum Plus programs are listed below. For property type eligibility, refer to the Platinum Plus Loan Program Matrices.

Single-Family Residence

 

A site-built dwelling designed for single-family use only. The dwelling may share one wall with a residence owned by another. The units may be either detached or attached in groupings of two (“twin home”).

 

Row Home

 

A site built attached housing unit that is designed for the use of one family and is built on land owned by the Borrower. A row home is not classified as a Planned Unit Development (PUD) or condo, does not share any common areas, does not pay Homeowners’ Association fees or have covenants, conditions, and restrictions like other attached dwellings. These homes are usually two or more stories with a front and rear entrance only. Row homes are typically located in communities of row homes with similar construction type and appearance and typically fill an entire block.

 

Townhouse

 

A site built attached dwelling unit generally having two or more floors, and attached to other similar units via party walls. Townhomes  are often used in Planned Unit Developments and condominium developments, which provide for clustered or attached housing and common open space.

 

May be considered single-family, or a PUD depending on the above descriptions.

 

Multi–Family

 

Multi-family homes are a type of residential structure with more than one dwelling unit. Properties with more than four units are ineligible.

 

• Two-family. A site built dwelling designed for 2 families owned by the sameparty(s)

 

• Three-family. A site built dwelling designed for 3 families owned by the sameparty(s)

 

• Four-family. A site built dwelling designed for 4 families owned by the sameparty(s)

 

Additional scrutiny will be used in situations where a Borrower currently owns a residence and plans to rent it out while purchasing a 3-4 unit property as an owner-occupied property.

 

The appraiser must provide three rental and three sale comps with legible photos. The income approach must be completed.

 

Modular Homes (Panelized, Pre-Cut Homes)

 

Modular homes are factory-built homes constructed to the state, local, or regional building codes where the home will be located. Modular homes are multi-sectioned units that are transported to the site and installed. Modular homes are treated the same as single-family residences. One comparable must be a modular/prefabricated home. Manufactured homes are not acceptable as comparables.

 

Planned Unit Development (Puds) Project Requirements for PUDs

The Client must ensure that all PUD properties comply with the requirements and warranties described in this section. A PUD must comply with PUD warranties. FloridaBad Credit Mortgage Lendersreserves the right to:

 

• Determine whether a particular Mortgaged Property is a PUD.

 

• Require the Client to submit, at the Client’s expense, an opinion of legal counsel, in form and substance, satisfactory to FloridaBad Credit Mortgage Lenders Funding, and all supporting data that supports the Client’s PUD warranties.

 

Fulfillment of these project requirements does not release the Client from the responsibility of ensuring that the project complies with additional requirements set forth in this Guide.

Planned Unit Development (PUD)

 

A Planned Unit Development (PUD) is a development that has all of the following characteristics:

 

• The individual unit owners own a parcel of land improved with a dwelling. This ownership is not in common with other unit owners.

 

• The development is administered by a Homeowners’ Association (HOA) that owns and is obligated to maintain property and improvements within the development for the common use and benefit of the unit owners.

 

• The unit owners have an automatic, non-severable interest in the HOA and pay mandatory assessments.

 

Classifications of a PUD are not based on its zoning. While there are many styles of homes that can be within a PUD (townhouse, single-family, detached, quads, etc.), this is not the basis of determination. The development must meet the above definitions, and the Client must make all warranties required for this type of ownership.

 

Planned Unit Development (PUD) Classifications

 

There are two classifications for PUD projects; 1) Type E are established PUD projects and 2) Type F are new

PUD projects. If the Mortgaged Property is a detached PUD, no additional analysis is required. If the subject is an attached PUD, the following review is required:

Type E Warranty:

 

• Type E warranty applies to established PUD projects in which the HOA has been turned over to the unit purchasers.

 

• This is the sole eligibility criterion for qualifying as a Type Eproject.

 

• Manufactured homes are not allowed.

 

Type F Warranty:

 

• Type F warranty applies to new PUD projects that are still under control of the developer. The project must meet the following eligibilitycriteria:

 

• The project cannot have been created by the conversion of existing buildings into a PUD.

 

• The project may not include any multi-dwelling units that represent the security for a single mortgage.

 

• A sufficient number of the total units in the project (or legal phase) must have been conveyed or be under contract to be sold to the purchasers in order for the lender to determine whether the presales will support the responsibilities of the HOA for at least twoyears.

 

• The units must be owned in fee simple or leasehold and the unit purchasers must the sole ownership interest in, and right to the use or, the projects’ facilities once control of the owners’ association has been turned over to them.

 

• Manufactured homes are not allowed.

 

The HOA should complete a Limited Project Review Questionnaire  (see Forms chapter) for a determination that the Type F warranty requirements have been met. The Full Project Review Questionnaire (see Forms chapter) will be required for all New Associations (less than 1 year) and all Non Fannie/Freddie Approved Projects.

 

FloridaBad Credit Mortgage Lendersreserves the right to limit the number and/or aggregate dollar amount of loans purchased in any one subdivision or PUD project or to declare loans in any project ineligible for purchase.

 

PUD Warranties

 

The Client must make the following warranties for each mortgage secured by a PUD unit:

 

• The property meets the definition of a PUD as describedabove.

 

• All property insurance requirements,  as outlined in this Guide, have beenmet.

 

• One entity does not own more than 10% of the subject project (applies to attached PUDs only).

 

Eligible PUD Project Types

 

If the Mortgaged Property is a detached PUD, additional restrictions are not required. Attached PUD projects with the following characteristics are eligible:

• At least 90% of the total units in the project have been conveyed to the unit purchasers

 

• The project is 100% complete, including all units and commonelements

 

• The project is not subject to additional phasing orannexation

 

Ineligible PUD Project Types

 

Attached PUD projects with any of the following characteristics are ineligible:

 

• Properties less than 400 square feet. In all cases, the property must be typical and common for the market area and supported by two comparables.

 

• Projects in current or threatened litigation are typically ineligible. Litigation may be acceptable if it is determined to be minor and immaterial. Any project for which the developer, project sponsor, or HOA is named as a party to litigation or pending litigation that relates to the safety, structural soundness, habitability, or functional use.

 

–    If the master liability policy does not cover a lawsuit or judgment, or special assessments need to be imposed to cover the lawsuit or judgment

 

• Projects managed and operated as a hotel/motel or contain the word hotel/motel in the name. They may have the following characteristics, however, this list is not inclusive:

 

–     Daily, monthly or seasonal rentals

 

–     Centralized phone and/or key systems

 

–     Food or beverage service (room service) is available to the individualunits

 

–     Lack of a full kitchen within the unit

 

–     Housekeeping services on a daily or weekly basis

 

–     Advertising of rental rates

 

–     Registration service (check-in desk, off-site desk)

 

–     Restrictions on interior decorating or furnishings, or the units are sold fully furnished

 

–     Franchise agreements

 

–     Low owner occupancy density with limited or noowner-occupants

 

–     Affiliation with and/or managed by an entity such as a hotel or hospitalitychain

 

–     Impose black-out dates or do not have year-round access

 

–    Shares facilities, common elements or amenities with a hotel or resort that is owned and managed by the developer or another third-partyentity

 

• Projects with mandatory rental pooling agreements that require unit owners to either rent their units or give a management firm control over unitoccupancy

 

• Project management and marketing practices such as:

 

–     The developer or a third-party entity expects to retain ownership or control of the project

 

–     The developer or a third-party entity retains ownership or control of any common elements or amenities

 

–     Unit owners have no control over any third-party entity that succeeds the developer

 

–     Commercial space over which the unit owners have no control

 

• The PUD documents and any amendments are silent on the presence of common elements and/or amenities, their use and/or ownership, or they state that common elements and/or amenities may be added to, expanded, or deleted as determined by the developer or another third-party entity without the consent of the unit owners or theHOA.

 

• Manufactured housing projects

 

• Projects with revenue sharing by either the HOA or unit owner

 

• Projects with non-incidental business operations (such as restaurants, health club, spa, etc.) owned and operated by the HOA.

 

• Time-share or segmented ownership projects

 

• Common interest apartments

 

• The developer, third-party entity, or the HOA operates commercial  facilities within the project or master association, such as retail stores, restaurants,  golf course, common areas, recreational  facilities, and amenities usually associated with luxury hotels andresorts.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condominiums

• Assisted living or senior care facilities that have a minimum age requirement and/or provide meal or healthcare services

 

• Continuing care retirement community (CCRC) or life-care facilities. These are residential projects that are designed to meet the health and housing needs of seniors as their needs change over time.

 

• Multi-unit PUDs that permit an owner to hold title to more than one unit, with ownership of all of the owned unites evidenced by a single deed and financed by a singlemortgage

 

• Any project owned by several owners as tenants-in-common or by a HOA in which the individuals have an undivided interest in a residential apartment building and land, and have the right of exclusive occupancy of a specific unit in thebuilding.

 

• Live-work type PUDs such as artist’s studio, workshops, factories and galleries.

 

• Own your own property situations where the legal description gives the Borrower the right to occupy a given unit rather than the actual ownership of theunit.

 

• Projects with commercial space used for non-residential purposes that exceeds 20% of the total space

 

• Projects in which a single entity (individual, investor group, partnership, or corporation) other than the developer, owns more than 10% of the units.

 

• New projects in which the property client offers sales/financing structures in excess of the maximum allowable contributions for individual loans.

 

• Any project that represents a legal, but non-conforming uses of the land, if zoning regulations prohibit re- building improvement to current density in the event of their full or partial destruction

 

• Projects with mandatory club memberships or leasedamenities.

 

 

A condominium  unit is a single-family dwelling located in a Condominium Project. Each unit owner has title to a single unit in the building plus an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas. A condominium  is real estate that is generally defined as separate ownership in a residential unit with an undivided interest in the real estate designated for common ownership solely by unit owners. Building types may be low-rise (less than four stories), mid-rise (five to eight stories) or high-rise (greater than eight stories), attached, detached, and/or site condominiums.

 

Condominiums create additional risk because the Homeowners’ Association (HOA) has legal rights that could adversely impact the mortgagee’s rights. Depending on the financial management of the HOA, the value of the project (unit) can be adversely affected.

The Platinum Plus program will allow for the purchase or funding loans secured by units in Condominium Projects, relying primarily on the Client’s warranties. The sustainability, marketability, and financial stability of the project must be supported by the appraisal, market information, and county records. The project must be located in an area where condominium ownership is common and acceptable.

 

A Warrantable Condominium  is a Condominium Project that meets Agency-eligibility standards and insurance requirements.

 

Condominium Project Review

 

A project review is required for all Condominium  Projects. If the project has not been approved by Fannie Mae, the Originator must initiate the appropriate review, secure the approval, and deliver the approval documentation

 

to FloridaBad Credit Mortgage Lendersas part of our project review. For projects that are already Fannie Mae-approved, approval- related documentation must be included in the Loan File submitted for project review.

 

The following documentation must be supplied for project reviews:

 

• The Client’s Loan Approval (Fannie Mae Form 1008) with the type/class indicated on the form

 

• Individual Condominium Unit Appraisal Report (Fannie Mae Form 1073/465 or Form 1075/466). Site condominiums can be completed on either the Individual Condominium Unit Appraisal Report or Single Family Residential Appraisal Report. Common areas and amenities must be inspected by the appraiser and documented.

 

• A completed copy of the Warranty of Condominium Project Legal Documents  (Fannie Mae Form 1054).

Clients may use their own form provided that it includes all the required information.

 

• HOA certification

 

• Insurance declaration page

 

• Flood determination certificate

 

• Current project budget – at least 10% of the budget provides funding for replacement reserves for capital expenditures and deferred maintenance

 

• CPM/PERS project approval documentation (CPM project acceptance certificate). The expiration date must not be prior to the Closing Date.

 

• Attorney opinion letter, if applicable

 

• An environmental hazard assessment is required for Condominium Projects if an environmental problem is identified by the Client or FloridaBad Credit Mortgage Lendersthrough performance of its project underwriting or Due Diligence. The solution to the problem must be deemed acceptable by FloridaBad Credit Mortgage Lenders Funding.

 

The following Fannie Mae project types are acceptable:

 

• S-CPM Expedited Review or Lender Full Review – establishedprojects

 

• Fannie Mae Full Review – Projects that received a final projectapproval (PERS)

 

Clients must provide all documentation  referenced above that supports the warranty of the project. Loans may be suspended for purchase pending receipt of this information. While the Client may need to obtain additional documents  as CC&Rs and bylaws, articles of incorporation,  project legal documents, etc. to determine project eligibility, it is not necessary to provide them in the Loan File. Condominium projects are divided into the following categories:

 

New projects: A project in which:

 

• Project or legal phase is not fully complete or subject to additional phasing or annexation, proposed construction, or new construction, or

 

• Less than 90% of the total units in the project have been conveyed (sold) to unit purchasers, or

 

• The control of the HOA has not been turned over to the individual unitowners.

 

Established projects: A project which:

 

• The project is 100% complete, and is not subject to additional phasing or annexation

 

• 90% or more of the total units have been conveyed (sold) to the unit purchasers (other than the developer), and

 

• The control of the HOA has been turned over to the individual unitowners.

 

Site (Detached) Condominium: A detached dwelling unit located in a Condominium Project comprised entirely of site (detached) condominiums that are not manufactured housing.

 

Two- to Four-Unit Projects: A project that is comprised of at least two but no more than four one-unit dwellings that are each separately owned with separate legal descriptions.

 

Project Concentration Limits

 

The Platinum Plus program limits each Client and Borrower to no more than the greater of five units or 10% of the total units in a specific project within a 12-month period. This restriction applies across all product lines. No single entity other than the developer may own more than one unit in a two-to-four unit project.

 

FloridaBad Credit Mortgage Lendersreserves the right to limit the number and/or aggregate dollar amount of loans purchased in any one subdivision or Condominium Project, or declare loans in any project ineligible for purchase.

 

Eligible Project Types

 

Condominium projects with the following characteristics are eligible:

 

• At least 90% of the total units in the project have been conveyed to the unitpurchasers.

 

• The project is 100% complete, including all units and commonelements

 

• The project is not subject to additional phasing or annexationand;

 

• Control of the HOA has been turned over to the unit owners

 

Note: Non-Warrantable Condominiums are eligible with restrictions. Please refer to the Non–Warrantable Condominium

section for program and guideline criteria

 

Ineligible Project Types

 

Condominium  projects with any of the following characteristics are ineligible:

 

• Condominium conversions

 

• Properties less than 400 square feet. In all cases, the property must be typical and common for the market area and supported by two comparable sales.

 

• Projects in current or threatened litigation are typically ineligible. Litigation may be acceptable if it is determined to be minor and immaterial. Details of the litigation must be submitted to FloridaBad Credit Mortgage Lendersto determine acceptability.

 

–    Any project for which the developer, project sponsor, or HOA is named as a party to litigation or pending litigation that relates to the safety, structural soundness, habitability, or functional use.

 

–    If the master liability policy does not cover a lawsuit or judgment, or special assessments need to be imposed to cover the lawsuit or judgment

 

• Projects managed and operated as a hotel/motel or contain the word hotel/motel in the name. They may have the following characteristics, however, this list is not inclusive:

 

–     Daily, monthly or seasonal rentals

 

–     Centralized phone and/or key systems

 

–     Food or beverage service (room service) is available to the individualunits

 

–     Lack of a full kitchen within the unit

 

–     Housekeeping services on a daily or weekly basis

 

–     Advertising of rental rates

 

–     Registration service (check-in desk, off-site desk)

 

–     Restrictions on interior decorating or furnishings, or the units are sold fully furnished

 

–     Franchise agreements

 

–     Low owner occupancy density with limited or noowner-occupants

 

–     Affiliation with and/or managed by an entity such as a hotel or hospitalitychain

 

–     Impose black-out dates or do not have year-round access

 

–    Shares facilities, common elements or amenities with a hotel or resort that is owned and managed by the developer or another third-partyentity

 

• Projects with mandatory rental pooling agreements that require unit owners to either rent their units or give a management firm control over unitoccupancy

 

• Project management and marketing practices suchas:

 

–     The developer or a third-party entity expects to retain ownership or control of the project

 

–     The developer or a third-party entity retains ownership or control of any common elements or amenities

 

–     Unit owners have no control over any third-party entity that succeeds the developer

 

–     Commercial space over which the unit owners have nocontrol

 

• The condominium documents and any amendments are silent on the presence of common elements and/or amenities, their use and/or ownership, or they state that common elements and/or amenities may be added to, expanded, or deleted as determined by the developer or another third-party entity without the consent of the unit owners or theHOA.

 

• Manufactured housing projects

 

• Projects with revenue sharing by either the HOA or unitowner

 

• Projects with non-incidental business operations (such as restaurants, health club, spa, etc.) owned and operated by the HOA.

 

• Time-share or segmented ownership projects

 

• Common interest apartments

 

• The developer, third-party entity, or the HOA operates commercial  facilities within the project or master association, such as retail stores, restaurants,  golf course, common areas, recreational  facilities, and amenities usually associated with luxury hotels andresorts.

 

• Assisted living or senior care facilities that have a minimum age requirement and provide meal or healthcare services

 

• Continuing care retirement community (CCRC) or life-care facilities. These are residential projects that are designed to meet the health and housing needs of seniors as their needs change over time.

 

• Multi-unit condominiums that permit an owner to hold title to more than one unit, with ownership of all of the owned unites evidenced by a single deed and financed by a single mortgage

 

• Any project owned by several owners as tenants-in-common or by a HOA in which the individuals have an undivided interest in a residential apartment building and land, and have the right of exclusive occupancy of a specific unit in thebuilding.

 

• Live-work type condominiums  such as artist’s studio, workshops, factories andgalleries.

 

• Own your own property situations where the legal description gives the Borrower the right to occupy a given unit rather than the actual ownership of theunit.
• Projects with commercial space used for non-residential purposes that exceeds 20% of the total space

 

• Projects in which a single entity (individual, investor group, partnership, or corporation) other than the developer, owns more than 10% of the units.

 

• New projects in which the property client offers sales/financing structures in excess of the maximum allowable contributions for individual loans.

 

• Any project that represents a legal, but non-conforming uses of the land, if zoning regulations prohibit re- building improvement to current density in the event of their full or partial destruction

 

• Projects with mandatory club memberships or leased amenities.

 

• Multiple property types within the project (e.g., townhomes and condominium units within the same HOA)

 

Site Condominiums

 

Condominium  projects composed of detached, one-unit dwellings that meet the following conditions will be treated the same as single-family residences:

 

• The Condominium Project consists solely of detached one-unit dwellings. (Manufactured homes are not permitted.)

 

• The Mortgage Property is owner occupied.

 

• These transactions must comply with all general condominium requirements outlined in this section.

 

Warranties for Site Condominiums

 

If the Mortgaged Property is a site condominium unit, the Client warrants the following to FloridaBad Credit Mortgage Lendersas of the Purchase Date:

 

• The mortgage on the subject property is covered by a title insurance policy that includes ALTA Form A, Condominium endorsement.

 

• The property is covered by hazard, flood, liability, and fidelity insurances as required under the

Insurance Requirements  section of this chapter.

 

Insurance Requirements

 

The Client must confirm the HOA has a legal obligation to maintain adequate insurance and the budget is sufficient to cover insurance expenses.

 

• Hazard Insurance. Blanket all risk policy with 100% of insurable replacement cost, the deductible may not to exceed 5% of policy face amount per building. A hazard declaration page must be included with the Loan File as evidence of insurance. The declaration page must also contain a reference to the subject property. The policy should include a “severability of interest” clause or a specific endorsement to preclude the Insurer’s denial of a unit owner’s claim because of negligent acts of the HOA or other unit owners. The policy should also provide for

10 days’ notice of cancellation.

 

• Flood Insurance. The policy must be less of 100% of insurable value or the maximum coverage allowed per NFIP.

Coverage of each unit should be the lesser of $250,000 or the amount of its replacement cost. Deductible may not exceed $25,000 per building located in the flood zone.

 

• Liability Insurance. General liability of $1,000,000 per occurrence is required for all condominiums.

 

 

 

 

 

 

 

 

 

 

Legal Review

 

−     Type T

 

−     Type U

• Fidelity Bond. Insurance equal to the greater of 1) three months of assessments/maintenance fees of all units in the project, or 2) the maximum funds that will be in the custody of the HOA or its agent at any time while the policy is in force is required or the following reviews:

 

−     Type R with 21 units or more in the project

 

−     Type S with 21 units or more in the project

 

 

−    HO6- (Walls-In) Coverage: that is no less than 20% of the condo unit’s Appraised Value (5% deductible limit).

 

 

 

• Compliance with Laws. The Condominium Project must be created and exist in full compliance with state law requirements of the jurisdiction where the project is located an all other applicable laws and regulations.

 

• Right of First Refusal. Any right of first refusal in the Condominium Project documents will not adversely impact the rights of a mortgagee or its assigneeto:

 

–     Foreclose or take title to a condominium unit pursuant to the remedies in the mortgage.

 

–     Sell or lease a unit acquired by the mortgagee or itsassignee.

 

• Amendments to Documents. The project documents must provide that amendments of a material adverse nature to mortgagees by agreed to by mortgagees that represent at least 51% of the votes of unit estates that are subject to mortgages. The project documents must provide for any action to terminate the legal status of the project after substantial destruction or condemnation occurs or for other reasons to be agreed to by mortgagees that represent at least 51% of the votes of the units that are subject to mortgages. Finally the project documents may provide for implied approval to be assumed when a mortgagee fails to submit a response to any written proposal for an amendment within 60 days after it received proper notice of the proposal, provided the notice was delivered by certified or registered mail with a return receipt requested.

 

• Unpaid Dues. Any

 

• Accept a deed or assignment in lieu of foreclosure in the event of default by a Borrower

 

• First mortgagee who obtains title to a condominium unit pursuant to the remedies in the mortgage or through foreclosure will not be liable for more than six months of the unit’s unpaid regularly budgeted dues or charges accrued before acquisition of the title to the unit by the mortgagee.

 

• Rights of Condominium Mortgagees and Guarantors. The project documents must give the mortgagee and guarantor of the mortgage on any unit of a project the right to timely written notice of:

 

–     Any condemnation or casualty loss that affects either a material portion of the project or the unit securing the mortgage.

 

–     Any 60-day delinquency in the payment of assessments or charges owed by the owner of any unit on which it holds the mortgage.

 

–     A lapse, cancellation, or materials modification of any insurance policy maintained by the HOA

 

–     Any proposed action that required consent of a specified percentage of mortgagees

 

• First Mortgagee’s Rights Confirmed. No provision of the Condominium Project documents gives a condominium unit owner or any other party priority over any rights of the first mortgagee of the condominium unit pursuant to its mortgage in the case of payment to the unit owner of insurance proceeds or condemnation awards for losses to or a taking of condominium units and/or common elements.

 

Non-Warrantable Condominiums

 

Non-warrantable condos are acceptable under the following circumstances. Projects with multiple non- warrantable characteristics are ineligible due to risk

layering.

 

 

 

Category                                            Non-Warrantable Allowances

 

 

Litigation                                         Projects involved in litigation are ineligible.

 

 

HOA Reserves

HOA Budget must include a dedicated line item allocation to replacement reserves of at least 8% of

 

                                                       the budget.                                                                                          

 

The project, or the subject’s legal phase along with all prior phases, must be substantially complete

(up to buyer preference items). All Common  elements in the project or legal phase must be 100%

 

Completion Status

 

 

 

Investor Concentration

 

 

   Single Entity Ownership  

completed. At least 50% must be sold or under bona-fide contract.

Maximum investor concentration of 60% for new construction  projects, recent conversions, or

investment subject properties. Calculation based on total units in

     current and previous legal phases.                                                                      No single entity (an individual, investor group, partnership or corporation) may own more than

20% of the total units in the project.

 

 

HOA in Builder’s Name

The developer may be in control of the condominium association provided the Master Agreement provides for the homeowners to take control upon either a predetermined percentage of unit sales or

 

                                                       within a defined time period.

 

No more than 20% of total units in a project may be 60 days or more past due on the payment of

   Delinquent HOA Dues                  condominium / association fees.                                                               

 

Low-, mid- and high-rise condos are eligible. Complexes over four stories must be common to the

 

Property Type

area. Projects less than 10 units must be typical and common for the

     market area.                                                                                                  

 

 

Commercial Space                          Maximum 30% of the total space is used for non-residential purposes.

 

Note: projects with a rental desk on site are not allowed.

 

 

 

 

Eligible Loan Programs

Non-Warrantable  Condominiums  are allowed under the Platinum Plus loan programs. Refer to Platinum Plus

Loan Program Matrices for additional information.

 

 

Rural Properties

 

In addition to one of the above property types, a property may be classified as a rural property if any of the following conditions exits:

 

• The property is classified as rural by the appraiser.

 

• The property is located on a gravel road.

 

• Two of the three comparable properties used by the appraiser are more than five miles from the Mortgaged

Property.

 

• Less than 25% of the surrounding market area is developed.

 

In order to be eligible for any of the Platinum Plus Loan Programs, a rural property must be an owner occupied single–family residence.

Ineligible Property Types

 

The following property types are not acceptable for any Platinum Plus Loan Program:

 

• Mixed Use properties

 

• Time share units/projects

 

• Unimproved land

 

• Mobile homes

 

• Condo-hotels

 

• Cooperatives

 

• Log homes

 

• Condominiums and PUDs with pending structurallitigation

 

• Properties located in a retirement or senior community with limited agerestrictions.

 

• Manufactured homes

 

• Property that does not have full utilities installed to meet all local health and safety standards including:

 

–     A continuing supply of potable water

 

–     A public sewer or certified septic system

 

–     Public electricity

 

–     Natural or LP gas

 

• Properties zoned commercial, industrial, or business (where highest and best use is commercial, industrial, or business)

 

• Condominium conversions

 

• Vacant land

 

• “Subject to” values without a Completion Certificate (Fannie Mae Form1004D)

 

• Properties with square footage of less than 700 square feet (these may be acceptable if acceptable comparables are within 100 square feet of the size of the Mortgaged Property)

 

• Earth-sheltered or dome home

 

• Any property in below average condition

 

• Working farms, ranches, or orchards

 

• Properties that have been modified to accommodate home businesses, such as catering service, in-home day care, animal boarding facilities, or auto repair businesses

 

• Properties currently listed for sale, or that have been listed for sale in the past six months are ineligible for a refinance transaction

 

• Multi-family properties greater than 4 units

 

• Motel conversions

 

• Group homes

 

• Properties located in declining markets

 

 

Occupancy

 

The following sections outline the occupancy categories and the requirements and guidelines associated with them. Occupancy types are:

 

• Owner occupied primary residences

 

• Second/vacation homes

 

• Non-owner occupied investment properties

 

Owner Occupied Primary Residence

 

An owner occupied primary residence is a 1-4 unit dwelling that is occupied by the Borrower as his or her principal residence. A property will not be considered a primary residence unless at least one of the Borrowers occupies all or part of the Mortgaged Property as a primary residence within 30 days of the note date. The following define primary residency:

 

• The Borrower occupies the property for a major part of the year.

 

• The property location is convenient to the Mortgage applicants place ofemployment.

 

• The property must possess the physical characteristics to accommodate the Mortgage applicants immediate dependent family. Physical characteristics are considered those typical to both the owner and the neighborhood.

 

• The property’s address is on record for federal income tax reporting, voter registration, driver’s license, and occupational licensing.

 

• In the case of a purchase money transaction, the Borrower must state his or her intention to occupy the

Mortgaged Property as his or her principalresidence.

 

Second Home or Vacation Homes

 

A second home or vacation home is a one-unit dwelling owned and occupied by the Borrower for his or her exclusive use and enjoyment. The property should be located at a sufficient distance and time of travel from the primary residence. The following define a second/vacation home:

 

• The property is suitable for year-round occupancy.

 

• The property is not subject to timesharing, rental agreement ownership, rental pools, or agreements that stipulate the rental of the property.

 

• A management firm must not control occupancy.

 

• The property may not be remote or inaccessible and may be used only for residentialpurposes.

 

• Income from a second/vacation home is not acceptable.

 

The Platinum Plus loan program limits the number of loans a Borrower may have for second/vacation homes to one. Two to four unit properties are ineligible as second/vacation homes. Second homes are listed in the Owner

 

Occupied section of the Platinum Plus Loan Program Matrices.

 

Non-Owner Occupied Investment Properties

 

An investment property is a 1-4 unit residential property that is neither the Mortgage applicants primary residence nor his or her second/vacation home. Investment property is defined as property owned for the purpose of generating  a positive net cash flow.

 

A loan for investment property that generates a negative cash flow may be eligible for purchase or funding under Platinum Plus as long as the Mortgage applicants credit and debt ratios strictly adhere to the Loan Program requirements. The overall transaction  will be closely scrutinized and must make sense for the Mortgage applicants circumstance.

 

 

Property Underwriting

 

The property used as collateral for the loan must provide sufficient value to recover the investment should the loan default. The appraisal provides the basis for evaluating the value of the collateral. The appraiser must present a concise picture of the neighborhood, the site, and the improvements to support an indicated value

that adequately supports the estimate of market value. The Client must perform an audit of the appraisal for the following:

 

• Consistency, logic, and accuracy of the appraisal

 

• Reasonable support for the value of the property

 

• Current and future marketability of the property

 

• Appraiser qualifications

 

• Timeliness and applicability of the data used to determinemarketability

 

• Completeness and accuracy of the appraisal forms and exhibits

 

FloridaBad Credit Mortgage Lendersmay elect to require additional appraisal diligence based on the improvements and condition of the property or data within the appraisal report. This increased diligence may include additional comparables, an AVM, a field review, or a second full appraisal on a property.

 

 

 

Client Considerations:

 

The Client should consider the following when reviewing collateral for the loan transaction:

 

• The accuracy and completeness of the appraisal and its assessment of the marketability of the property;

 

• Underwriting the completed appraisal report to determine whether the Mortgaged Property presents adequate collateral for the mortgage;

 

• Continually evaluating the quality of the appraiser’s work through normal underwriting review of all appraisal reports and spot-check field review of appraisals as part of its quality control program;

 

• Ensuring that the appraiser uses sound reasoning and provides evidence to support the methodology used for developing the value opinion;

 

• Ensuring that the appraiser provides an accurate opinion, an adequately supported value, and an accurate description of the property;

 

• Ensuring that the appraiser provides his or her license or certification on the appraisal report;

 

• Complying with the appraiser independence requirements outlined in Section 1026.42 of Regulation Z

under the Truth in Lending Act;

 

• Disclosing to the appraiser any information about the Mortgaged Property of which it is aware of that could impact the marketability of the property;

 

• Providing the appraiser with the ratified sales contract and other financing or sales concessions that are associated with the transaction;

 

• Ordering and receiving the appraisal report for each mortgage transaction;and

 

• Ensuring the appraiser does not use unsupported assumptions or use race, color, religion, sex, handicap, familial status or national origin for any party in the transaction as the basis for market value.

 

Appraiser Qualifications

 

The Client should ensure that each appraiser meets the following qualifications:

 

• Has a certified residential appraiser license or a certified general appraiser license in good standing. All licenses must be issued in the state where the Mortgaged Property is located.

 

• Meets the independent appraiser requirements  for staff appraisers or, as appropriate, fee appraisers specified by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the FDIC, and the Office of Thrift Supervision with their respective real estate appraisal regulations adopted in accordance with Title XI of the Financial Institutions  Reform, Recovery, and Enforcement Act of 1989 (regardless of whether the Client is subject to those regulations).

 

• Is actively engaged in appraisal work and experienced in the appraisal of properties similar to the Mortgaged

Property.

 

FloridaBad Credit Mortgage Lendersmay at any time notify the Client that FloridaBad Credit Mortgage Lenderswill no longer approve loans secured by a Mortgaged Property that was appraised by a particular appraiser.

 

Appraisal Requirements

 

The mortgage underwriting and approval process depends upon the real estate appraisal report. All appraisals must be in writing. The appraisal report must include sufficient and accurate information to assist in the review of the proposed loans. An appraisal that meets all of the FloridaBad Credit Mortgage Lendersguideline requirements is required for all Loan Programs. Each appraisal must satisfy the requirements  of Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (regardless of whether the Client is subject to those regulations).

 

• All appraisers must be state licensed and a copy of the license must be submitted with the appraisal

 

• Appraisals must be dated within 120 days of the Note date. In the event that the Disbursement Date causes the Mortgage applicants credit report and/or credit file to be greater than 120 days old, FloridaBad Credit Mortgage Lenders reserves the right to request updated credit, asset, and/or income documentation. Disbursement Date is the day on which the loan closes.

 

• All appraisals obtained during the loan origination and underwriting processes must be included in the Loan File

 

• Recertification of value is not allowed

 

Each Loan must include a third-party valuation review product. Please refer to the Platinum Plus Appraisal Valuation Summary

for complete requirements.

 

A complete original summary appraisal report is required on each property. The appraisal report must support the appraiser’s estimate of the Mortgaged Property market value. It must present a good visual representation of the neighborhood, site, and improvements. The appraiser should use the comments section of the report to

 

achieve this goal and attach any additional documentation if needed.

 

The Client must ensure that all appraisals are performed in strict accordance with all applicable local, state, and federal laws, regulations, and orders.

 

All appraisals must conform to the Uniform Standards of Professional Appraisal Practice (USPAP) guidelines adopted by the Appraisal Standards Board of Appraisal Foundation.

 

The appraisal report must include the following:

 

• The correct loan transaction type

 

• Occupancy status of the property

 

• Information about property taxes and any special assessments

 

• Property rights appraised

 

• The identity of the Borrower and the identity of the currentowner

 

• Address and legal description of the property

 

• Tax Assessor’s Parcel Number (APN) for the Mortgaged Property

 

• Any sales concessions and/or loan charges to be paid by the Client, or any other party that has a financial interest in the financing or sale of the MortgagedProperty

 

• Identity and address of the appraiser

 

Required Appraisal Forms

 

All appraisals must be in writing. The appraisal report must be submitted on the current version of the appropriate appraisal forms listed below.

 

Single-Family Properties and Detached PUD Units

 

• Uniform Residential AppraisalReport (Fannie Mae Form 1004/Freddie Mac Form 70)

 

• Statement of Limiting Conditions and Appraiser’s Certification (Fannie Mae Form

1004B/Freddie Mac Form 439)

 

For single-family investment properties, if the income is necessary for qualifying, the following forms are required:

 

• Single-Family Comparable Rent Schedule (Fannie Mae Form1007)

 

• Operating Income Statement (Fannie Mae Form 216)

 

Condominium Units

 

• Individual Condominium or PUD Unit (Fannie Mae Form 1073/Freddie Mac Form 465) with Statement of

Limiting Conditions

 

• Appraiser’s Certification (Fannie Mae Form 1004B/Freddie Mac Form439)

 

Two-to-Four Unit Properties

 

• Small Residential Income Property Appraisal Reports (Fannie Mae Form1025)

 

• Statement of Limiting Conditions

 

• Appraiser’s Certification (Fannie Mae Form 1004B/Freddie Mac Form430)

 

• Operating Income Statement (Fannie Mae Form 216)

 

Field Reviews

 

FloridaBad Credit Mortgage Lendersmay, at its discretion, require a field review appraisal to be performed. The Residential Appraisal Field Review Report (Fannie Mae Form 2000/Freddie Mac Form 1032) must be used for all field review appraisals. When a field review is requested, the lower value of the original appraisal or field review will be used to determine LTV/CLTV.

 

Properties with “Subject to” Repairs or Completion

 

All properties where the value is defined as “subject to repairs, alterations, or conditions” or “subject to completion per plans and specifications,” require the original Satisfactory Completion Certificate (Freddie Mac Form 442) along with a photo of the completed property. Escrows for items to be completed or repaired are not acceptable.

 

Required Appraisal Attachments

 

The following attachments must accompany each appraisal:

 

• A location map showing the Mortgaged Property and comparables.

 

• Three clear descriptive photographs (front, rear, and street scene) of the Mortgaged Property.

 

• One original photograph (may be electronic) of each comparable in the Residential Appraisal Report. The appraisal must also include photographs of the comparable listings and comparable rentals in multi-family reports.
• A diagram of the Mortgaged Property floor plan, detailing room layout, location of all rooms, and exterior doors.

 

• The appraiser’s cover letter explaining unusual items not adequately addressed in the appraisal.

 

Disasters Areas

 

If the Mortgaged Property is located in an area that is declared a federal disaster area, the Client must ensure that the property meets all FloridaBad Credit Mortgage Lenderspre- or post-disaster collateral requirements. The list of disaster areas

can be found on FEMA’s website at: http://www.fema.gov/disasters.

 

Property Appraised Prior to Disaster

 

For loans secured by properties appraised before the presidential/state disaster declaration, an interior and exterior inspection of the Mortgaged Property is required and the following pre-disaster guidelines apply:

 

• The original appraiser should perform the inspection and provide a certificate stating:

 

−     Mortgaged Property is free from damaged and is in the same condition as previously apprised

 

−     Marketability and value remain the same

 

• If the original appraiser is not available:

 

−     The inspection maybe be completed by any of the following:

 

o  Property / building inspection company

 

o  Licensed general contractor

 

o  Building or safety inspector for localmunicipality

 

o  Licensed structural engineer

 

−     The inspector must be given a copy of the original appraisalreport

 

−     The inspector must provide certification, on their letterhead,stating:

 

o  Original appraisal has been reviewed

 

o  Interior inspection has been completed

 

o  To their best of their knowledge

 

    Subject is free from significant damage

 

    All repairs, if needed, have been completed

 

Property Appraised After Disaster

 

For loans secured by properties appraised after the presidential/state disaster declaration, an interior and exterior inspection of the Mortgaged Property is required and the following post-disaster guidelines apply:

 

• Appraiser must note any damage and its affect on marketability andvalue

 

• Electronic evaluations are not acceptable

 

• FloridaBad Credit Mortgage Lendersmay at its sole discretion require an interior and exterior inspection of the property by the original appraiser.

 

Appraisal Evaluation

 

The appraisal is an opinion of the value that is objective, unbiased, and supported by research and data. The following sections are used to evaluate the adequacy of the appraisal:

 

Neighborhood Analysis

 

The neighborhood in which a property is located is a critical determinant of its marketability and value. All factors presented in the neighborhood analysis section of the appraisal report must be analyzed. This section must provide

an accurate description of the neighborhood along with any favorable or unfavorable factors and any changes that influence the market value and marketability of the properties in the neighborhood. The neighborhood analysis should take into consideration all elements of the property’s neighborhood including:

 

Neighborhood Property Values

 

The appraisal must indicate whether property values in the subject neighborhood are increasing, stable, or declining. The appraiser must substantiate this by showing comparable sales within six months of the appraisal date. Property values should be stable or increasing. Declining values are a concern due to the potential for equity erosion. If the neighborhood property values are declining, the appraiser must explain the reasons for the decline and its effect on the value of the Mortgaged Property.

 

Neighborhood Composition

 

The degree to which a neighborhood is built up and its location within a metropolitan area or rural area is used to assess the reasonableness of the comparable sales. An “urban” location generally relates to a city, a “suburban” location relates to the areas adjacent to a city, and “rural” location relates to those areas beyond the urban and suburban areas.

 

Rural Properties

 

Rural properties are generally more difficult to assess. Marketing times may be affected by their remote location. There is greater emphasis placed on the proximity of the comparable sales in determining the rural property’s marketability.

 

If any one of the following criteria exists, the property may be classified as rural:

 

• The property is classified as rural by the appraiser.

 

• The property is located on a gravel road.

 

• Two of the three comparable properties used by the appraiser are more than 5 miles from the Mortgaged

Property.

 

• Less than 25% of the surrounding market area is developed.

 

Marketing Time

 

Properties in the subject’s neighborhood should have a marketing time of less than six months.

 

Present Land Use of the Neighborhood

 

A likely change in the neighborhood’s land use would be of concern if the change negatively affects the property’s future value.

 

Predominant Value and Price Range

 

A comparison of the predominant value for the neighborhood should favorably reflect the Mortgaged Property’s value. If the Mortgaged Property sets the top value for the neighborhood, it may be an indication that the property represents an over-improvement. Likewise, a property at the low end of the market’s value may also be a concern. The Client should consider whether the property in its current form is likely to continue to be its highest and best use.

 

Site Analysis

 

It is important that the site of the Mortgaged Property is of a size, shape, and topography that is generally acceptable in its market area in order to have a strong market appeal. The site should have street improvements, utilities, and other amenities normally expected in the area.

 

Maximum Acceptable Acreage

 

The maximum acreage allowance under the Platinum Plus program is 10 acres. Generally, value should only be given to 5 acres unless it can be shown with comparable sales that 5 to 10 acres is typical for the area. Acreage exceeding 10 acres will be reviewed on a case-by-case basis. Comparable market activity of like-sized parcels must align with the acreage of the Mortgaged Property. Ranches, working farms, orchards, and/or commercial operations of any type are not permitted.

Land Values

 

Land value and the land-to-value ratio must be reviewed. For areas that are built up at more than 25%, the Mortgaged Property’s land-to-value ratio should be consistent with other properties in the area. For areas that are less than 25% built up, the property’s land-to-value ratio should not be more than 40% and must be consistent with other properties in the area.

 

Lots with More Than One Contiguous Lot

 

Only the value for the lot upon which the Mortgaged Property is located will be recognized.

 

Zoning

 

The zoning of the Mortgaged Property should be residential in nature.

 

• Recent or pending zone changes that would have a negative impact on residential market values are not acceptable.

 

• Agriculturally zoned properties may be acceptable when their use is primarily residential. Value given to outbuildings will not be allowed unless supported by comparables with similar amenities.

 

• For legal non-conforming property, if the appraisal indicates that the property is of a legal non- conforming use, then one of the following must be occur:

 

• The appraiser must address the issue within the body of the appraisal or present a Letter of Addendum that states the property can be rebuilt “as is” in the event of a loss. The source of the information must also be indicated; OR

 

• A letter from the county stating the property may be rebuilt “as-is” in the event of a loss must be obtained.

 

Flood Zones

 

Properties that are uninsurable because they are located in a flood hazard area that is ineligible for the National Flood Insurance Program are not acceptable.

 

Highest and Best Use

 

Properties should represent the “highest and best use” for the site. If the current improvements do not represent the “highest and best use” for the Mortgaged Property, the property is not acceptable.

 

Subject Property Analysis

 

The Mortgaged Property should conform to the neighborhood in terms of age, design, and materials used for construction. The appraiser should describe any unacceptable or unusual items that affect marketability. Where appropriate, adjustments should be made for these items in the estimate of market value.

 

Acceptable marketability is supported by at least average ratings for quality, construction, condition, and appeal of the property. Poor or fair ratings should be rare. If there are exceptions, the appraiser must provide sufficient explanation.

 

Living Area

 

Living areas of the Mortgaged Property should be typical of the marketing area. The appraisal should use comparables of similar size to demonstrate the marketability of the property.

 

FloridaBad Credit Mortgage Lenderswill critically analyze condominiums or attached properties with less than 700 square feet and detached dwellings with less than 800 square feet of living area to determine if their size is typical and readily marketable in the subject area. Properties with less than 700 square feet may be accepted for purchase or funding by FloridaBad Credit Mortgage Lendersat US Mortgage Lenderssole discretion on a case- by-case basis.

 

Design

 

The appraiser should assess the design and overall appeal of the Mortgaged Property and evaluate whether similarly designed properties exist and are readily marketable in the subject area.

Outbuildings

 

Small outbuildings such as barns, stables, workshops, or guesthouses must be described on the appraisal report. Outbuildings must be typical for the subject area and be supported by comparable sales of properties with similar outbuildings.

 

Building Permits for Additions and Alterations

 

Building permits are generally not required if the conversion or addition to the living area was completed in a workman-like manner, confirmed by the appraiser, and supported by photographs of the addition. The addition or improvements must be of good quality and any possible health or safety violations must be noted by the appraiser. Room additions or additional units must be permitted to ensure the dwelling was built to code.

 

Properties on Stilts, Posts or Piers

 

Post and pier foundations are acceptable if it can be shown they are common to the area and the property meets FEMA standards (FEMA Technical bulletin 9-99).

 

Condition of Property

 

All properties are expected to have an “average” or “good” rating. The Client must consider all factors negatively affecting the property’s condition when assessing the overall risk of the loan. These factors may include:

 

• Deferred Maintenance. Appraisals on properties showing evidence of deferred maintenance or “subject to” items must be described in detail. The appraiser must determine the nature of the repairs and include the cost to cure. Deferred maintenance that exceeds 2.5% of the property value or that affects its basic habitability will require a Satisfactory Completion Certificate (Form 442).

 

• Debris, Graffiti, or Trash. Properties showing an excessive amount of debris, graffiti, or trash may require cleanup. If necessary, a Satisfactory Completion Certificate (Freddie Mac Form

442) and photos will be required.

 

• Infestation. If there is any indication of termites or any other infestation, the Client ensures that the infestation issue has been investigated, treated, andremedied.

 

• Roof Damage. The Client must address properties with visible evidence of roof leaks and/or interior water damage (ceiling stains) even if the appraisal does not list them. If any of these conditions exist, the Client must obtain a roof certification, indicating a remaining useful and physical life of at least three years.

 

• Other Unacceptable Property Conditions:

 

−     Boarded-up properties

 

−     Properties that pose an imminent threat to the health and safety of the occupant

 

−     Inadequate foundations that do not meet current code requirements for the local municipality

 

−     Inadequate heating (must be permanently affixed legal heatingsystems)

 

−     Properties that lack city or county maintenance services

 

−     Properties without water or public electricity

 

−     Cantilevered properties on stilts, posts, or piers

 

−     Shared services for well, septic or utilities that are privateagreements

 

−     Cantilevered properties on stilts, posts, or piers

 

−     Properties showing evidence of mold

 

• Environmental hazards or nuisances

 

Any nuisances or environmental hazards the Client knows or suspects may exist that could adversely affect the value of the Mortgaged Property must be disclosed. The appraiser must note these in the appraisal and document any other nuisances or environmental hazards.

 

If FloridaBad Credit Mortgage Lenderssuspects a nuisance or environmental hazard, it may require an environmental study be completed prior to considering the loan for purchase. In this case, the Client must hire a nationally recognized and reputable environmental engineering firm to provide a written report. The report must include an analysis and a detailed list of cleanup costs.

 

FloridaBad Credit Mortgage Lendersmust be convinced that any known or suspected hazards will not have an adverse effect upon the Appraised Value of the Mortgaged Property.

 

Cost Approach

 

The cost approach is used to determine a property’s market value based on the current cost of constructing a home from materials that are as similar as possible to those used for the property being appraised. The cost approach is important when appraising newer or substantially rehabilitated properties as a check for the market data approach. If the appraiser believes that the cost approach is not applicable (turn-of-the-century  homes) and if sufficient sales of comparable properties are available in the market, the cost approach may be omitted with comments explaining this belief.

 

Whether or not the cost approach is used, the Client must show an estimated land value. The Client should base this figure on the value of the land as though it were developed to its highest and best use consistent with its present zoning classification.

 

External Obsolescence

 

External obsolescence is a devaluation of property value due to an undesirable or unnecessary condition outside the property. The appraiser should address the impact on marketability that external obsolescence has upon the Mortgaged Property. In addition, the appraiser must provide evidence of comparable market sales that are similarly affected.

 

Functional Obsolescence

 

Functional obsolescence is defined as features of a property that has become unfashionable or unnecessary in the eyes of potential purchasers. The appraiser should describe the functional obsolescence, and provide similar comparables to demonstrate its marketability or provide the cost to cure, if applicable.

 

Market Data Approach

 

The greatest weight and reliance is placed on the market data approach. The value indicated by this approach must be supported by an analysis of at least three recently closed comparables located near the Mortgaged Property.

 

FloridaBad Credit Mortgage Lendersconsiders the following key items in its review and analysis of the market data approach:

 

Proximity of Comparables to the Mortgaged Property

 

Comparable properties should be located in the same neighborhood and/or school district.

Comparable sales should be located within one mile of the Mortgaged Property in urban and suburban areas. If two of three comparable properties used by the appraiser exceed a distance of five miles from the Mortgaged Property, the property will be considered rural. The appraiser must explain the

necessity of using any comparable property located outside the neighborhood.

 

Comparables Inside and Outside New Projects

 

The appraiser must demonstrate the marketability of homes built within new subdivisions or Condominium Projects through the use of at least one comparable from inside the subdivision or project and one comparable from a competing subdivision or project.

 

Age of Comparable Sales

 

Comparables must have a recent date of sale, preferably within six months of Mortgaged Property’s sale date. If any of the comparables are over six months old, the appraiser should comment on the market conditions. If it is necessary to use older comparables, the appraiser should supplement them with pending sales and/or current listings in the neighborhood.

Similarity of Comparables to Subject

 

The comparables used by the appraiser must represent the best market data available to support the property’s estimated value. Comparable sales should be as similar as possible to the Mortgaged Property in physical attributes, rights of ownership, zoning, and other amenities.

 

Adjustments to Comparables

 

The following are acceptable adjustments to comparables:

 

Number of Adjustments

 

The need for numerous adjustments indicates that the comparable is not similar to the Mortgaged

Property.

 

Dollar Amount of Adjustments

 

The dollar amount of adjustments should reflect the market reaction to the difference between the Mortgaged Property and the comparables, not the cost of a particular difference. The amount should be realistic and consistent among the comparables.

 

Adjusted Property Characteristics

 

Adjustments to certain items such as quality and age are more difficult to justify with direct market evidence than other items such as garages and finished basements. If a comparable contains a significant number of adjustments for difficult items, its accuracy as a value indicator decreases.

 

Time Adjustments

 

The appraiser should keep to a minimum those adjustments made due to the difference in time at which the comparable sold compared to the Mortgaged Property. If used, these comparables should be supported by documents showing that they are warranted.

 

Square Footage Adjustments

 

Adjustments for differences in square footage should be realistic for the marketplace.

Total Net Adjustments

Total net adjustments should be minimal if the comparable is truly similar. As a guideline, net adjustments should not exceed 15% of the sales price of the comparable.

Bracketing

The appraiser should use a bracketing technique during the selection of comparables. This involves choosing one comparable that is superior to the subject, one that is inferior and one that is most similar. Through the adjustment process, the superior comparable adjusts downward to the subject, the inferior one adjusts upward, and the most similar comparable requires few, if any, adjustments.

Descriptive Language

The appraiser should describe property characteristics using specific, factual, and detailed language. The appraiser should use numerals whenever applicable (for lot size, age of improvements, etc.). Clear descriptions (such as, good, average, fair, or poor) should be used to provide consistency between the property and the comparables.

Florida Sales or Financing Concessions

The subject and all comparables must show the form of financing (financing addenda are helpful). Adjustments should be considered for different types of financing or special marketing concessions, such as buy downs, apportionment  of rent payments toward down payments, or decorating and other miscellaneous credits.

The Client should carefully review the appraisal to determine if the appraiser has adequately demonstrated the effects of such financing or sales concessions on the property’s value.

Sales History

Florida Bad Credit Mortgage Lenders will review the sales history of the subject and comparables to determine if any substantial appreciation or property churning has occurred. Large increases in value must be supported by market data or documented improvements to the property.

Income Approach

The value indicated by the income approach, if considered applicable by the appraiser, must be derived by the gross rent multiplier technique using economic market rent. The income approach is required for all two-to–four unit properties and non-owner occupied, single-family properties. In general, due to the value dependence on rental income for investment on two-to-four unit properties, FloridaBad Credit Mortgage Lenders may require additional substantiation  if the value for such properties exceeds a reasonable multiple gross annual economic market rent.

Reconciliation of  Valuation Analysis

The value indicated by each of the applicable approaches, together with the final reconciliation, must support the appraiser’s estimate of market value. This reconciliation is not an averaging technique; rather, it is a process by which the appraiser explains the reasonableness of each approach and its applicability to the final estimate of value.

Additional Review Considerations

Attached housing and multiple units add another level of complexity when analyzing the collateral security of the loan. In addition to the neighborhood, site, and market analysis already discussed above, the Client should note these additional components when appraising two-to-four unit properties, condominiums, and PUDs.

Two-to-Four Unit Properties

Two-to-four unit properties present an additional level of property risk. Their marketability is tied to the level of rent commanded by the property and its compatibility with the neighborhood.

 

• Neighborhood. The extent to which other small residential income properties are located in the area will influence the marketability of the property. Market rents should be stable or increasing. The appraiser’s statement of market rents will be assessed by the comparable rental properties used for comparison.

 

• Comparable Rental Data. Market rent is an estimate of the property’s potential to generate income from its units.

Rental data should be supplied from other small, income-producing properties that are similar in number of units, room count, and living area. Rental comparables should be readily available and in close proximity to the subject. Going out of the immediate neighborhood to obtain rental comparables might suggest a lack of rental activity and therefore, lack of marketability.

 

• Comparable Market Data. FloridaBad Credit Mortgage Lenders will analyze the adequacy of the comparable sales by the date of sale, proximity to the subject, and number and amount of adjustments. As in the rental comparables, the appraiser should assess the similarity of the sales comparables to the subject in terms of gross building area, unit count, and room count.

Condominiums

• Neighborhood. The presence of other Condominium Projects in the property’s market area indicates the appeal and marketability of the condominium under review. Marketability of a single Condominium Project will be difficult to demonstrate if the neighborhood lacks competing projects.

• Project Improvements. Condominium units are affected by the improvements and amenities of the overall project. As amenities increase, required maintenance and related association fees increase.

• Number of Stories. The selection of comparable sales should be from projects that are similar in height to the subject’s building.

• Condominium Conversions. Projects that were not originally built for use as a condominium are considered conversions (a project originally built for use as an apartment or hotel). As a result, their market appeal may be impaired. Condominium conversions will be reviewed on a case-by-case basis.

• Age of the Project. A project’s age, construction status, and amount of time the Homeowners’ Association has been in control will determine the warranties that the Client makes when selling the loan under the Platinum Plus program, or by Florida Bad Credit Mortgage Lenders’s underwriters.
• Stage of Completion. The Client should consider whether the amenities are complete. Under- funded budgets may affect the developer’s ability to complete all expected improvements, which may in turn affect the project’s future marketability.

• Number of Units Sold or Rented. The appraiser should provide information on the number of units sold and rented. The Client should analyze the percentage of units sold and rented to determine whether the project meets the warranties published in thisGuide.

Florida Project Analysis

A review of the appraisal’s project analysis section will indicate the adequacy of the project’s budget and of the management practices of the Homeowners’ Association.

Florida Sales Comparison

Florida Bad Credit Mortgage Lenders will analyze the market sales information in a similar manner to a single-family dwelling. Recent sales comparables, similarity of living area, and number of adjustments are all considered in analyzing the appropriateness of the comparables.

The Client must provide comparables from competing projects that have similar amenities, association fees, and number of stories. For high-rise condos, the appraiser should select sales comparables with a similar floor location. For existing projects, re-sales from within the project are desirable along with at least one competing project. When older sales indicate a higher price than more recent sales, project devaluation may be taking place.

Leasehold Properties

In addition to meeting leasehold loan eligibility requirements,  at least one comparable must be leasehold.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Party Appraisal Review

 

• Prior to submitting a loan for US Mortgage LendersCredit & Compliance review, Sellers are required to submit the appraisal to Clear Capital for their CDA (Collateral Desk Appraisal).
• The Vendor Appraisal Review final opinion of value must be within 10% (i.e. above or below) the origination appraisal(s).
• See below for escalation process

 

> If the CDA returns a value that is < 5% of the Appraised Value4, the Appraised Value4 can be used to establish the LTV/CLTV.

>   If CDA returns a value that is > 5% but ≤10% of the Appraised Value4, three options are available:

1)    The CDA value can be used to establish the LTV/CLTV, however the LTV/CLTV maximum is the lower of the program maximum or 70%, whichever is less.

2)    A Clear Capital Broker Price Opinion (BPO) and Clear Capital Value Reconciliation of Three Reports may be ordered. In the case where two Appraisals were required, the two Appraisals and the CDA can be used to the Value Reconciliation of Three Reports. The reconciled value determined by Clear Capital will be used to determine LTV/CLTV.

3)    A Clear Capital Field Review may be ordered. The lowest value between the Original Full Appraisal, Clear Capital CDA, and Clear Capital Field Review will be used to determine LTV/CLTV.

>  If the CDA returns a value that is “Indeterminate” or > 10% of the Appraised Value, a Clear Capital Broker Price Opinion (BPO) and Clear Capital Value Reconciliation of Three Reports must be ordered. The reconciled value determined by Clear Capital will be used to determine LTV/CLTV.

>   If the Clear Capital CDA returns a value is greater than the Appraised Value4, the Appraised Value4 will be used to determine LTV/CLTV.

1.      “Full Appraisal” refers to a Uniform Residential Appraisal Report (URAR). This includes a FNMA 1004 and FHLMC 70

2.      The Collateral Desktop Analysis (CDA) must include the MLS data

3.      The CDA will be completed on lower of the two appraisals.

4.    The “Appraised Value” is the value determined from the original appraisal(s) obtained by the Seller.

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