• JUMBO PRIME 5H (JP-5H)
• ALT-A 5H (AA-6H)
• SUPER JUMBO 1H (SJ-1H)
• MULTI-FAMILY 1H (MF-1H)
Eligibility Guidelines | July 8, 2019
Exclusive Property of ALTLOAN. Not for Use by or Distribution to the General Public. Guidelines are for use by mortgage professionals only and subject to change without notice.
Thank you for participating in ALTLOAN’s wholesale loan program. This is A Sales Guide ALTLOAN.
This Sales Guide contains the following two volumes:
(I) Underwriting Guidelines; and (II) Policies and Procedures.
The Underwriting Guidelines include the following sections: 1. General Requirements
2. Loan Programs
3. Mortgage Products
4. Borrower Eligibility; Borrowers, Guarantors and Non-Borrower
Mortgagors 5. Credit Scores and History
6. Calculating, Verifying and Documenting Income, Verifying and
Documenting Employment History, and Completing the Final
Application 7. Determining and Documenting Borrower Assets
8. Determining and Borrower Occupancy
9. Determining Loan Purpose
10. Qualifying Calculations - Loan to Value Ratio, Amount of Cash-out,
Income Ratios, Assets, Funds to Close Reserves and Payment Shock
11. Compliance
12. Property and Property Appraisal Requirements
13. Insurance Requirements
14. Mortgage Document Requirements
15. Exhibits
The policies and procedures include the following sections: 1. Contacting ALTLOAN
2. Interest Rate Locks
3. ALTLOAN Fee Schedule
4. Submitting Loans to ALTLOAN for a Guideline Review prior to close
5. Submitting Closed Loans to ALTLOAN for funding
6. Receiving Borrower Payments Post ALTLOAN funding.
7. Final Documents
8. Changes to Policies and Procedures
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Underwriting Guidelines
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Table of Contents
1. General Requirements ........................................................................................ Page 9
1.1 Conformance with the Underwriting Guidelines and
Policies and Procedures Required .......................................................... Page 9
1.2 Net Tangible Benefit to the Borrowers Required ............................. Page 10
1.3 ALTLOAN’s Must Offer Applicants the Lowest Cost
Loan Available ................................................................................................ Page 10
1.4 Compliance with ECOA Required ............................................................ Page 11
1.5 ALTLOANs Must Make Their Own Credit Decisions and
Use Independent Funding to Close Loans ............................................ Page 11
1.6 ALTLOANs Must Document a Loan’s Compliance with the
Requirements of These Underwriting Guidelines by
Compiling a Mortgage File ......................................................................... Page 11
1.7 Non-qualified Subordinate Financing, Tax Liens and Judgements
Prohibited ......................................................................................................... Page 11 1.8 Prepayment Penalties on Consumer Loans Prohibited .................. Page 11
1.9 Definitions ...................................................................................................... Page 11 1.10 Underwriting Guidelines Amendable at ALTLOAN’s Option ..... Page 12
2. Loan Programs ....................................................................................................... Page 14
2.1 Loan Program Eligibility Matrices .......................................................... Page 14
2.2 AA-6H Full Doc ............................................................................................. Page 16
2.3 AA-6H Bank Statements ............................................................................ Page 23
2.4 NA-A3 Residual Income ............................................................................ Page 29 2.5 AA-6H Asset Depletion .............................................................................. Page 34 2.6 NA-M3 Moderate Credit, Full Doc ......................................................... Page 41 2.7 NA-M4 Moderate Credit, Bank Statement .......................................... Page 46 2.8 NA-I5 Investor DSC ..................................................................................... Page 50 2.9 NA-I3 Investor No Ratio ............................................................................ Page 54 2.10 MF-1H Multi-Family ................................................................................... Page 57 2.11 SJ-1H Full Doc ............................................................................................... Page 61 2.12 SJ-1H Bank Statements ............................................................................. Page 63 2.13 JP-5H Full Doc .............................................................................................. Page 65 2.14 JP-5H Bank Statements ............................................................................. Page 68
3. Mortgage Products ............................................................................................... Page 71
3.1 5/1 Hybrid ARM Product............................................................................ Page 71
3.2 7/1 Hybrid ARM Product............................................................................ Page 71
3.3 30 Year Fixed Product ................................................................................. Page 72
3.4 15 Year Fixed Product ................................................................................. page 72
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4. Borrower Eligibility; Occupying Borrowers, Non-occupying
Co-borrowers, Investment Borrowers, Guarantors and Non-Borrower Mortgagors ............................................................................... Page 73
4.1 Borrowers, Guarantors and Non-Borrower Mortgagors Defined ...................................................................................... Page 73
4.2 Subject Property Owners Must Be Borrowers, or Non-Borrower Mortgagors ...................................................................................................... Page 74
4.3 Non-borrower Mortgagor Requirements ............................................. Page 74
4.4 Borrower Requirements for Owner Occupied Properties ............. Page 74
4.5 Borrower Requirements for Investor Occupied Properties .......... Page 75
4.6 General Borrower Requirements ............................................................ Page 76
4.7 Citizens / US Persons and Foreigners ................................................... Page 76
4.8 Country Restrictions .................................................................................... Page 77
4.9 OFAC ................................................................................................................... Page 77
4.10 Diplomatic Immunity ................................................................................ Page 78
4.11 Limitation on Mortgages for which Borrowers are Obligated... Page 78
5. Credit Scores and History and Fraud Prevention Engine
Requirement ........................................................................................................... Page 79
5.1 Consumer Credit Report Required ....................................................... Page 79
5.2 Age of Credit Report ................................................................................... Page 79
5.3 Credit Score Requirements ...................................................................... Page 79
5.4 Trade Line Requirements ......................................................................... Page 80 5.5 Delinquency and Derogatory Credit..................................................... Page 81 5.5.1 Foreclosures, bankruptcies, short sales. forbearances and
deed in lieu of foreclosure for all loan programs except NA M3 - Moderate Credit Full Doc NA M4 - Moderate Credit Bank Statement SJ-1H Full Doc SJ-1H Bank Statements JP-5H Full Doc and JP-5H Bank Statements ........................................................................... Page 81
5.5.2 Liens, Judgements and Other Attachments for all loan programs except NA-M3 - Moderate Credit Full Doc NA-M4 - Moderate Credit Bank Statement SJ-1H Full Doc , SJ-1H Bank Statements, JP-5H Full Doc and JP-5H Bank Statements .......................................................................... Page 81
5.5.3 Liens, Judgements and Other Attachments ...................................... Page 81 5.5.4 Collection and Charge-off Accounts .................................................... Page 82
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5.6 Required Mortgage and Housing Payment History ........................ Page 82 5.7 Written Explanations of Derogatory Credit ...................................... Page 83 5.8 Verification of Obligations Not Appearing on
Consumer Credit Report ........................................................................... Page 83 5.9 Explanations Regarding Lawsuits and Pending Litigation .......... Page 83 5.10 Credit Report Identified Inquiries ........................................................ Page 83 5.11 Use of Fraud Prevention Engine Required ........................................ Page 84
6. Determining and Documenting Income and Employment History ... Page 85
6.1. Loan Program AA-6H Full Doc, NA-A3 Residual Income, NA-M3 Moderate Credit Full Doc, SJ-1H Full Doc and JP-5H Full Doc
6.2.1 Loan Program AA-6H Bank Statements, SJ-1H Bank Statements… Page 88
& JP-5H Bank Statements
6.2.2 Loan Program NA-M4 – Moderate Credit Bank Statement ........ Page 95
6.3 Loan Program AA-6H Asset Depletion ...................................................... Page 99
6.4 Loan Program NA-I5 – Investor Debt Service Coverage and
Loan Program MF-1H Multi-Family .......................................................... Page 101
6.5 Income determination and validation not needed
for programs NA-I3 Investor No Ratio .................................................. Page 104
7. Calculating and Verifying Borrowers Assets for Closing and
Reserves ................................................................................................................... Page 105
7.1 Calculating and Documenting Assets for Down Payment,
Closing Costs and Reserves for all loan programs except AA-6H Asset Depletion ................................................................................ Page 105
7.2 Calculating and Documenting Assets for Down Payment, Closing Costs and Reserves for loan program
AA-6H Asset Depletion ................................................................................ Page 109
7.3 Depletable Assets for Loan Program AA-6H Asset Depletion ...... Page 114
7.4 Permitted Foreign Banks ............................................................................ Page 116
8. Determining and Borrower Occupancy ....................................................... Page 118
8.1 Primary Residences ...................................................................................... Page 118
8.2 Second Homes ................................................................................................. Page 119
8.3 Business Purpose/ Investor Properties ................................................ Page 120
9. Determining Loan Purpose, Requirements related to Purchase,
Refinances and Cash- out Refinances ............................................................ Page 121
9.1 Purchase Transactions ................................................................................ Page 121
9.2 Rate & Term Refinance Transactions .................................................... Page 122
9.3 Cash-out Refinance Transactions ............................................................ Page 123
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10. Qualifying Calculations - Loan to Value Ratio,
Amount of Cash-out, Income Ratios, Assets, Funds to Close
Reserves and Payment Shock........................................................................... Page 124 10.1 Loan to Value Ratio and Cumulative Loan to Value Ratio ........... Page 124 10.2 Calculating Mortgage Payments, Housing Expense and Other
Obligations .................................................................................................... Page 125 10.3 Income Tests ................................................................................................. Page 128 10.4 Testing the Sufficiency of Down Payment and Closing Fund,
and of Borrower Reserves ...................................................................... Page 129 10.5 Use of Cash-out Proceeds ......................................................................... Page 130
11. Compliance .............................................................................................................. Page 131
11.1 Compliance Requirements ...................................................................... Page 131 11.2 High Cost Loans Ineligible ....................................................................... Page 131 11.3 Use of Compliance Engine Required .................................................... Page 131 11.4 Texas Cash-out Refinances ...................................................................... Page 132 11.5 Rescission Hardships Not Permitted ................................................... Page 132 11.6 TRID ................................................................................................................. Page 132 11.7 Business Purpose/ Investment Loans ................................................ Page 132
12. Property and Property Appraisal Requirements ..................................... Page 133
12.1 Eligible Properties ...................................................................................... Page 133 12.2 Ineligible Properties .................................................................................. Page 133 12.3 Property Requirements ............................................................................ Page 134 12.4 As is Condition ............................................................................................. Page 135 12.5 Properties Listed for Sale......................................................................... Page 135 12.6 Property Acquired Vacant ....................................................................... Page 135 12.7 Condominium Project Requirements .................................................. Page 136 12.8 Property Appraisal Requirements ....................................................... Page 138 12.9 Additional Appraisal Requirements .................................................... Page 141 12.10 Clear Capital CDA or Pro Teck ARR required ................................ Page 142 12.11 Appraised Value ........................................................................................ Page 142 12.12 Appraisal Quality Control Report ....................................................... Page 143 12.13 Special Property Requirements for Loan
Program I6 - Mixed Use ........................................................................ Page 143 12.13.1 Limitation on Property Stories ........................................................ Page 143 12.13.2 Limitation on Commercial Usage ................................................... Page 143 12.13.3 Limitation on Units .............................................................................. Page 143 12.13.4 Reserved................................................................................................... Page 143 12.13.5 Property Condition; Zoning and Certificates of Occupancy .Page 143 12.13.6 Cash Rents ............................................................................................... Page 144 12.13.7 Vacant Units ............................................................................................ Page 144 12.13.8 Prohibited Uses ..................................................................................... Page 144
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12.14 Project Requirements for Condotels ................................................. Page 145
13. Insurance Requirements .................................................................................... Page 148
13.1 Title Insurance ............................................................................................. Page 148 13.2 Hazard Insurance ........................................................................................ Page 151 13.3 Flood Insurance ........................................................................................... Page 152
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1. General Requirements
1.1 Conformance with these Underwriting Guidelines and Policies and Procedures Required
These underwriting guidelines (the “Underwriting Guidelines”) describe the underwriting requirements of ALTLOAN. For a mortgage loan (a “Loan”) to be eligible for funding at ALTLOAN, the Loan must conform, without exception, to the requirements set forth in these Underwriting Guidelines. In addition, for a Loan to be eligible for funding at ALTLOAN, the Loan must, without exception, be originated, interest rate locked and delivered in accordance with ALTLOAN’s policies and procedures (the “Policies and Procedures”). These Underwriting Guidelines and the Policies and Procedures together constitute ALTLOAN’s sales guide (the “Sales Guide”).
These Underwriting Guidelines constitute the “Underwriting Guidelines” to which ALTLOANs represent and warrant compliance, in the Mortgage Loan Agreements under which loans are funded by ALTLOAN. If a Loan is pby ALTLOAN that does not conform to the requirements of these Underwriting Guidelines, the Loan is subject to repurchase in accordance with the ALTLOAN Mortgage Loan Purchase Agreement.
These Underwriting Guidelines reference requirements in the Fannie Mae Selling Guide. Whenever these Underwriting Guidelines reference the “Fannie Mae Selling Guide”, the “Fannie Guide,” “Fannie Mae requirements,” “Fannie Mae’s requirements,” or Fannie Mae, the applicable portions of the Fannie Mae Selling Guide required by the context of these Underwriting Guidelines is incorporated herein, and the requirements set forth in such portions of the Fannie Mae Selling Guide become requirements for the purposes of these Underwriting Guidelines.
Ability to Repay Required
Borrowers obligated on a Loan (the “Borrowers”) must have the ability to repay the Loan, and must, prior to the Loan’s closing, attest to their ability to repay the Loan on a ALTLOAN designated form, a specimen of which is shown at Exhibit 15.1 of these Underwriting Guidelines. Moreover, for a Loan to be eligible for funding at ALTLOAN, the ALTLOAN must, prior to the Loan’s closing, evaluate the Borrowers’ ability to repay the Loan, and must make a good faith determination that the Borrowers do have the ability to repay the loan in conformance with the regulations promulgated by the Consumer Finance Protection Bureau. In making such an evaluation, the ALTLOAN must consider the borrowers’:
1. Current or reasonably expected income or assets
2. Current employment status
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3. Monthly Mortgage payment for the loan in question
4. Monthly payments on other loans secured by the same
property
5. Monthly payments for property taxes, insurance and
home association fees
6. Debts, alimony or child support obligations
7. Monthly debt to income ratio or residual income that was
calculated using the total of all the mortgage and non-
mortgage obligations as a ratio of gross monthly income
8. Credit history
A ALTLOAN that sells a Loan to ALTLOAN must attest that the ALTLOAN evaluated the ability of the Borrowers to repay the Loan, and its conclusion that the Borrowers do have the ability to repay the Loan. The ALTLOAN must represent and warrant that the origination of the Loan complied with all applicable laws and regulations related to the Borrowers’ ability to repay the Loan, including the regulations of the Consumer Finance Protection Bureau. In addition, a ALTLOAN must confirm its representation and warranty regarding compliance with laws and regulations related to the Borrowers’ ability to repay the Loan, at the time the ALTLOAN executes a purchase advice setting forth the terms under which the Loan is being funded by ALTLOAN.
Notwithstanding the foregoing, if a loan is originated solely for business purposes, and is secured by an investment property, then the ALTLOAN is not required to evaluate the Borrowers’ ability to repay, and an attestation regarding the Borrowers’ ability to repay is not required from the ALTLOAN or the Borrowers.
1.2 Net Tangible Benefit to the Borrowers Required
For a Loan to be eligible for funding at ALTLOAN, the Loan must provide a net tangible benefit to the Borrowers. A tangible benefit may include: financing the acquisition of a property, reducing the cash expenditure required to service an existing mortgage, lowering the interest rate of an existing mortgage, extending the period during which the interest rate on an existing mortgage is fixed, extending the term of an existing mortgage, and obtaining additional cash proceeds through a cash-out refinance. For a Loan to be eligible for funding at ALTLOAN, the tangible benefit provided to the borrowers by the Loan must exceed the borrowers’ cost to acquire the Loan.
1.3 ALTLOAN’s must Offer Applicants the Lowest Cost Loan Available
ALTLOAN requires that, prior to originating a Loan for funding at ALTLOAN, the ALTLOAN first consider all the alternative loan programs the ALTLOAN has
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available, and then
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offer loan applicants the lowest cost loan program that (i) meets the applicants’ requirements and preferences, and (ii) for which the applicants qualify.
1.4 Compliance with ECOA Required
ALTLOAN requires that ALTLOANs selling Loans to ALTLOAN comply in all respects with the Equal Credit Opportunity Act.
1.5 ALTLOANs Must Make Their Own Credit Decisions and Use
Independent Funding to Close Loans
For a loan to be eligible for funding at ALTLOAN (i) the ALTLOAN must make its own determination as to whether to approve and consummate the Loan, (ii) ensure that none of ALTLOAN’s directors, officers, employees, agents, contractors or affiliates influenced or interfered with the ALTLOAN’s decision to approve or consummate a Loan, and (iii) the ALTLOAN must consummate the Loan by advancing its own funds (and may not “table fund” the Loan or broker the Loan).
1.6 ALTLOANs Must Document each Loan’s Compliance with the
Requirements of These Underwriting Guidelines by Compiling a Mortgage File
For a Loan to be eligible for funding at ALTLOAN, the Loan must be documented in a mortgage file (the “Mortgage File”) that demonstrates the Loan complies, in all respects, with the requirements set forth in these Underwriting Guidelines.
1.7 Non-qualified Subordinate Financing, Tax Liens and Judgements Prohibited
For a Loan to be eligible for funding at ALTLOAN, the property securing the
Loan (the “Subject Property”) may only be encumbered by the mortgage securing the Loan and by “Acceptable Subordinate Financing” as defined in the Fannie Guide. If the Subject Property is encumbered by any other lien then the Loan is ineligible for funding at ALTLOAN.
1.8 Prepayment Penalties on Consumer Loans Prohibited
ALTLOAN does not require or permit prepayment penalties on Loans to consumers. Any Loan that is subject to the Truth in Lending Act shall be classified as a consumer loan for the purpose of this Section 1.8. ALTLOAN does not require, but does, where lawful, permit prepayment penalties on business purpose loans secured by investment properties (provided that any Loan which is subject to the Truth and Lending may not be deemed a business purpose loan).
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1.9 Definitions
For the purposes of these Underwriting Guidelines:
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The term (“Applicable Loan Program”) shall mean, for a given Loan, the ALTLOAN selected ALTLOAN Loan Program under which the Loan is offered for funding by ALTLOAN, as more fully described in Section 2.1 of these Underwriting Guidelines;
The term (“Date of the Loan”) shall mean the date the note and Mortgage evidencing the loan were executed by the Borrowers (if different Borrowers executed the note and Mortgage on different dates, the “Date of the Loan” shall be the first date on which any Borrower signed the note and Mortgage);
The term (“Final Application”) shall mean the loan application that contains, in all respects, accurate, verified and documented information, which is signed by the Borrowers on the Date of the Loan;
The term (“Initial Application”) shall mean the first application for a Loan submitted by the Borrowers to the ALTLOAN; for all Loans except business purpose / investment loans, the Initial Application must be made on Fannie Mae form 1003.
The term (“ALTLOAN”) shall mean for any given Loan, the mortgagee set forth in the Mortgage (or in the case of a Loan for which MERS is the mortgagee, the entity identified on the Mortgage as the entity for which MERS is nominee;
The term (“Liquid Financial Reserves”) shall have the meaning described in the portion of the Fannie Guide under the heading “What are Liquid Financial Reserves?”
The term (“Mortgage”) shall mean the customary and appropriate legal instrument that provides for a first lien security interest on the Subject Property and includes mortgages, deeds of trust and other similar security instruments;
The term (“PITIA”) shall mean the first regular monthly payment due on the Loan for principal, interest, tax escrows and impounds, insurance escrows and impounds. homeowner association fee escrows and impounds and ground rent escrows and impounds;
The term (“Seasoned Funds”) shall mean funds that have continuously been on deposit since the date that is sixty days prior to the date of the Initial Application, in an account that belongs to a Borrower at either a domestic depository or domestic stock broker or investment advisor (each an “Eligible Account”); Seasoned Funds may have been transferred between Eligible Accounts;
The term (“Seasoning Period”) shall mean the period beginning 60 days prior to the date of the Initial Application, and ending on the earlier of (i) the date the relevant asset (or if the asset is liquidated, the proceeds therefrom) are transferred to an Eligible Account or (ii) the Date of the Loan.
1.10 Underwriting Guidelines Amendable at ALTLOAN’s Option
These Underwriting Guidelines may be amended by ALTLOAN at any time and from time-to-time without prior notice. In the event that ALTLOAN amends these Underwriting Guidelines, updated Underwriting Guidelines will be posted at www.ALTLOANmortgage.com A Loan that was interest rate locked prior to the date and time of an amendment will be subject to these Underwriting Guidelines as they were effective prior to the amendment, unless the lock-in
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period for such
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Loan expires. Any Loan locked after the date and time of an amendment to these Underwriting Guidelines must conform with all the requirements of such amendment. In addition, any Loan which was interest rate locked prior to the date and time of an amendment to these Underwriting Guidelines, but which is not funded by ALTLOAN prior to the expiration of such interest rate lock, must conform with all of the requirements of such amendment.
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2. Loan Programs
ALTLOAN funds Loans that fully conform to the eligibility requirements of one of its nine loan programs. The nine programs are:
Program
AA-6H Full Doc AA-6H Bank Statements *NA-A3 Residual Income AA-6H Asset Depletion *NA-M3 Moderate Credit Full Doc *NA-M4 Moderate Credit Bank Statement *NA-I5 Investor DSC NA-I3 Investor No Ratio MF-1H Multi-Family SJ-1H Full Doc SJ-1H Bank Statements JP-5H Full Doc JP-5H Bank Statements
*NA – Not Available at this time
2.1 Loan Program Eligibility Matrices
For each Loan a ALTLOAN offers for funding at ALTLOAN, the ALTLOAN must specify a ALTLOAN Loan Program (the “Loan Program”) under which the Loan is to be funded, and the Loan must conform to all of the requirements of the specified Loan Program. Many of the requirements for the ALTLOAN Loan Programs are set forth on the loan program matrices in this Section 2 of these Underwriting Guidelines, including requirements for loan to value ratio, debt to income ratio, loan amount, credit score, occupancy, property type, transaction type, and numerous other loan characteristics. For a Loan to be eligible for funding at ALTLOAN, the Loan must conform, in all respects, with the requirements set forth on the matrix for the Loan Program under which the Loan is offered for funding at ALTLOAN.
ALTLOAN makes exceptions to its loan matrices and other credit policies on a loan level basis when ALTLOAN determines that an exception is warranted. For an exception to be valid it must be documented on a ALTLOAN exception form that is signed by an authorized ALTLOAN officer. A copy of dully signed ALTLOAN exception forms must be included in the loan file pertaining to the applicable Loan. While exceptions are most commonly made prior to the funding of a Loan, an exception may also be made post-funding.
ALTLOAN may make an exception to any part of its underwriting guidelines or credit policies. Some examples of the types of exceptions that ALTLOAN may
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make include:
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Loan to value ratio exceptions;
Debt to income ratio exceptions; Loan amount exceptions; Credit score variance exceptions; Exceptions regarding the number of months since a borrower incurred a significant credit event; Amount of Borrower reserves exceptions; Exceptions regarding the source of assets used for closing and reserves; Exceptions regarding the length a borrowers’ employment (including self- employment); Methods used to document Borrowers’ income, assets and credit history; The length of time since a property has been listed or over which a Borrower has owned a property; ALTLOAN’s policies regarding the use of gifts for funds to close or reserves; ALTLOAN’s policies regarding subordinate financing, and ALTLOAN’s policies regarding the number and type of valuation reports including appraisals.
The loan matrices for the ALTLOAN loan programs are as follows:
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2.2 Program Matrix for Loan Program AA-6H Full Doc
Program Number AA-6H Program Description Alt-A Full Doc
Available Products, Adjustment Caps, Margins and Interest Rate Floors
5/1 ARM- Caps 2% initial, 2% each year and 5% lifetime 7/1 ARM -Caps 2% initial, 2% each year and 5% lifetime 30 year fixed 15 year fixed Margins: owner occupied 3.25%, investor occupied 5.25% Index: 1 Year LIBOR (per CFPB rules, index must be set not earlier than 45 days prior to the Date of the Loan) Floor (lifetime minimum rate): Initial note rate
Interest Only and Amortization Options:
5/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 7/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 30 Year Fixed: 30 Year Self-amortizing (interest only not available). 15 Year Fixed: 15 Year Self-amortizing (interest only not available).
Self-amortizing loans are for 30 year terms, except 15 year fixed which is for a 15 year term. Interest only loans are for 40 year terms (after the 10 year Interest Only period the loan must amortize over the remaining 30 years). Interest only not available in Illinois.
Citizenship / Visa requirements
Citizens / US persons and foreigners permitted, foreigners only permitted for 2nd home and investor occupancy with a maximum LTV of 70%.
Allowable Loan to Value (LTV), Maximum Loan Amounts
Primary Residence – 1 - 4 Unit and Condo
Loans with one or more foreign borrowers are ineligible for primary residences
2 unit properties limited to 85% LTV, Non warrantable condos limited to 85% LTV, 3 & 4 unit properties limited to 80% LTV, Condotels limited to 70% LTV
Interest only loan limited to 85% LTV
Purchase and Rate & Term Refinance:
720 minimum Credit Score 95% LTV to $1,500,000 - 95% LTV limited to
Purchases of detached 1 family (SFD) properties, for borrowers with a max DTI of 35%, and requires a minimum loan size of $500,000
90% LTV to $1,500,000, 85% LTV to $2,500,000 80% LTV to $3,000,000 70% LTV to $4,000,000 65% LTV to $5,000,000 60% LTV to $6,000,000
700 minimum Credit Score:
90% LTV to $1,500,000 85% LTV to $2,500,000 75% LTV to $3,000,000 70% LTV to $3,500,000
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65% LTV to $5,000,000 60% LTV to $6,000,000
680 minimum Credit Score
90% LTV to $1,500,000 85% LTV to $2,500,000 75% LTV to $3,000,000 70% LTV to $3,500,000 65% LTV to $5,000,000 55% LTV to $6,000,000
660 minimum Credit Score:
90% LTV to $1,500,000 80% LTV to $2,500,000 70% LTV to $3,000,000 55% LTV to $3,500,000
640 minimum Credit Score:
85% LTV to $1,500,000 80% LTV to $2,000,000
620 minimum Credit Score
70% LTV to $1,000,000 60% LTV to $1,500,000
Cash Out Refinance
720 minimum Credit Score 85% LTV to $1,500,000 80% LTV to $2,500,000 70% LTV to $3,000,000 60% LTV to $4,000,000 55% LTV to $5,000,000 50% LTV to $6,000,000
700 minimum Credit Score
85% LTV to $1,500,000 75% LTV to $2,500,000 70% LTV to $3,000,000 60% LTV to $4,000,000 55% LTV to $5,000,000 50% LTV to $6,000,000
680 minimum Credit Score
85% LTV to $1,500,000 75% LTV to $2,500,000 65% LTV to $3,000,000 60% LTV to $4,000,000 55% LTV to $5,000,000 50% LTV to $6,000,000
660 minimum Credit Score
80% LTV to $1,500,000 75% LTV to $2,500,000
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65% LTV to $3,000,000
640 minimum Credit Score 80% LTV to $1,000,000 75% LTV to $2,000,000
620 minimum Credit Score 65% LTV to $1,000,000 60% LTV to $1,500,000
Second Homes – 1 - 2 unit and condo
Loans with one or more foreign borrowers are limited to the LTVs and loan amounts indicated below
Condotel loans limited to 70% LTV
Purchase and Rate & Term Refinance:
720 minimum Credit Score: 85% LTV to $750,000 80% LTV to $3,000,000 70% LTV to $4,000,000 65% LTV to $5,000,000 55% LTV to $6,000,000
700 minimum Credit Score:
80% LTV to $2,500,000 75% LTV to $3,000,000 65% LTV to $5,000,000 55% LTV to $6,000,000
680 minimum Credit Score:
80% LTV to $2,500,000 70% LTV to $3,000,000 65% LTV to $4,000,000 55% LTV to $6,000,000
660 minimum Credit Score:
80% LTV to $2,500,000 70% LTV to $3,000,000 55% LTV to $3,500,000
640 minimum Credit Score:
80% LTV to $2,000,000
620 minimum Credit Score: 65% LTV to $1,000,000 60% LTV to $1,500,000
Loans with one or more foreign borrowers:
70% LTV to $2,000,000 65% LTV to $3,000,000 60% LTV to $4,000,000
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55% LTV to $5,000,000
Cash Out Refinance
720 minimum Credit Score 80% LTV to $2,500,000 70% LTV to $3,000,000 60% LTV to $4,000,000 55% LTV to $5,000,000 50% LTV to $6,000,000
700 minimum Credit Score
80% LTV to $1,500,000 75% LTV to $2,500,000 70% LTV to $3,000,000 60% LTV to $4,000,000 55% LTV to $5,000,000 50% LTV to $6,000,000
680 minimum Credit Score
80% LTV to $1,500,000 75% LTV to $2,500,000 65% LTV to $3,000,000 60% LTV to $4,000,000 55% LTV to $5,000,000 50% LTV to $6,000,000
640 minimum Credit Score
80% LTV to $1,000,000 75% LTV to $2,000,000
620 minimum Credit Score
60% LTV to $1,000,000 55% LTV to $1,500,000
Loans with one or more foreign borrowers:
65% LTV to $1,000,000 60% LTV to $2,000,000 55% LTV to $3,000,000 50% LTV to $5,000,000
Investment/Business Purpose–1-4 unit & condo
Loans with one or more foreign borrowers are limited to the LTVs and loan amounts indicated below
Condotel loans limited to 65% LTV
Purchase and Rate & Term Refinance:
720 minimum Credit Score: 80% LTV to $1,500,000
24 July 8, 2019
70% LTV to $3,000,000 65% LTV to $5,000,000 50% LTV to $6,000,000
700 minimum Credit Score:
80% LTV to $1,000,000 75% LTV to $1,500,000 70% LTV to $3,000,000 65% LTV to $5,000,000 50% LTV to $6,000,000
680 minimum Credit Score: 80% LTV to $1,000,000 75% LTV to $1,500,000 70% LTV to $3,000,000 55% LTV to $5,000,000
640 minimum Credit Score:
80% LTV to $1,000,000 65% LTV to $1,500,000 55% LTV to $2,000,000
620 minimum Credit Score
65% LTV to $1,000,000
Loans with one or more foreign borrowers: 70% LTV to $1,500,000 65% LTV to $3,000,000 60% LTV to $4,000,000 55% LTV to $5,000,000
Cash Out Refinance
700 minimum Credit Score 75% LTV to $1,500,000 70% LTV to $2,000,000 65% LTV to $3,000,000 60% LTV to $4,000,000 55% LTV to $5,000,000
680 minimum Credit Score
75% LTV to $1,000,000 70% LTV to $1,500,000 65% LTV to $3,000,000 55% LTV to $3,500,000 50% LTV to $5,000,000
640 minimum Credit Score
70% LTV to $1,000,000 60% LTV to $1,500,000 50% LTV to $2,000,000
25 July 8, 2019
620 minimum Credit Score 60% LTV to $1,000,000
Loans with one or more foreign borrowers:
70% LTV to $750,000 65% LTV to $1,500,000 60% LTV to $2,000,000 55% LTV to $3,000,000 50% LTV to $5,000,000
Minimum Loan Amount Owner occupied and second homes: $100K, Investor: $75K
Minimum Credit Score 620
Maximum Debt to Income Ratio
50% DTI for LTVs to 85%, 43% DTI for LTVs to 90%, and 35% DTI for LTVs to 95%
Eligible Property Types
1-4 Units, warrantable condo and non-warrantable condo - non-warrantable condos require a rate add-on, and condotels – condotels are limited to 70% LTV and require a rate add-on
Permissible Occupancy Primary residences, second homes and investment
Required Reserves
* If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is a primary residence or second home, then required reserves must be increased by one month of the PITIA for the Subject Property for each investment property owned by any of the Borrowers. If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is an investment property, then required reserves must be increased by two months of the PITIA for the Subject Property for each investment property owned by any of the Borrowers.
Reserve requirements may be waived based on mortgage rating, please see Section 10.4 for specific requirements.
For cash-out refinances, loan proceeds disbursed to Borrower may be used to meet reserve requirements.
Acceptable States All 50 States and DC (territories not permitted)
Gifts
Gifts permitted provided gifts must conform to all Fannie Mae gift requirements (except that Fannie requirements are modified to permit gifts for investor occupancy); For gifts of equity, LTV must be reduced by 5%
Income Documentation Please refer to Section 6.
Loan Amount Reserves
up to $1,000,000 3 months PITIA*
$1,000,001 to $2,000,000
6 months PITIA*
more than
$2,000,000
12 Months PITIA*
26 July 8, 2019
Credit History
No Foreclosure, bankruptcy, deed in lieu or short sale over past 48 months at standard LTVs and reserves
No foreclosure, bankruptcy, deed in lieu or short sale permitted over past 24 months available at a maximum LTV is 75% and with reserves increased by 6 months
Mortgage and Rental History Maximum permitted delinquency is 1x30x12
Subordinate Financing
Subordinate financing permitted provided (1) CLTV does not exceed the applicable LTV limits, (2) that the debt service on subordinate financing is included in the DTI calculation, and (3) that the terms of the subordinate financing conform to Fannie Mae requirements.
Appraisal Requirements 1 Full Appraisal + CDA or ARR. Loan amounts over $1,500,000 require 2 appraisals + CDA or ARR
Escrows Required AUS Not applicable; manual underwrite Calculator
Pre-Payment Penalty
3 YR prepayment penalty required for investor occupancy / business purpose loans where permitted by law (PPP buyouts may be available)
ACH draft required for mortgage payments
If one or more Borrowers is a foreigner, then ACH draft required.
27 July 8, 2019
2.3 Program Matrix for Loan Program AA-6H Bank Statements
Program Number AA-6H Program Description Alt-A Bank Statemens
Available Products, Adjustment Caps, Margins and Interest Rate Floors
5/1 ARM- Caps 2% initial, 2% each year and 5% lifetime 7/1 ARM -Caps 2% initial, 2% each year and 5% lifetime 30 year fixed 15 year fixed Margins: owner occupied 3.25%, investor occupied 5.25% Index: 1 Year LIBOR (per CFPB rules, index must be set not earlier than 45 days prior to the Date of the Loan) Floor (lifetime minimum rate): Initial note rate
Interest Only and Amortization Options
5/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 7/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 30 Year Fixed: 30 Year Self-amortizing (interest only not available). 15 Year Fixed: 15 Year Self-amortizing (interest only not available).
Self-amortizing loans are for 30 year terms, except 15 year fixed which is for a 15 year term. Interest only loans are for 40 year terms (after the 10 year Interest Only period the loan must amortize over the remaining 30 years). Interest only not available in Illinois.
Self-employment requirement At least one borrower must have been continually self- employed for two years
Citizenship / Visa requirements Citizens / US persons permitted, foreigners NOT permitted
Allowable Loan to Values (LTV), Maximum Loan Amounts Primary Residence – 1 - 4 Unit and Condo
FOR CREDIT SCORES OF LESS THAN 650, the minimum loan is $150,000
2 unit properties limited to 85% LTV, Non warrantable condos limited to 85% LTV, 3 & 4 unit properties limited to 80% LTV, Condotels limited to 70 % LTV
Interest only loan limited to 85% LTV
Purchase and Rate & Term Refinance:
720 minimum Credit Score:
90% LTV to $1,500,000 85% LTV to $2,500,000 70% LTV to $3,500,000 65% LTV to $5,000,000 60% LTV to $6,000,000
700 minimum Credit Score:
90% LTV to $1,500,000 85% LTV to $2,500,000 70% LTV to $3,000,000 65% LTV to $5,000,000 55% LTV to $6,000,000
680 minimum Credit Score
90% LTV to $1,500,000
28 July 8, 2019
80% LTV to $2,500,000 70% LTV to $3,000,000 65% LTV to $5,000,000 55% LTV to $6,000,000
660 minimum Credit Score:
85% LTV to $1,500,000 80% LTV to $2,500,000 70% LTV to $3,000,000 50% LTV to $5,000,000
640 minimum Credit Score:
85% LTV to $1,500,000 80% LTV to $2,000,000
620 minimum Credit Score:
65% LTV to $1,000,000 60% LTV to $1,500,000
Cash Out Refinance
720 minimum Credit Score
85% LTV to $1,500,000 75% LTV to $2,500,000 65% LTV to $3,000,000 60% LTV to $4,000,000 55% LTV to $5,000,000 50% LTV to $6,000,000
700 minimum Credit Score
85% LTV to $1,500,000 75% LTV to $2,500,000 60% LTV to $4,000,000 55% LTV to $5,000,000 50% LTV to $6,000,000
660 minimum Credit Score
80% LTV to $1,000,000 75% LTV to $2,000,000 70% LTV to $2,500,000 60% LTV to $3,000,000 50% LTV to $4,000,000
640 minimum Credit Score
75% LTV to $1,000,000 70% LTV to $1,500,000 65% LTV to $2,000,000
620 minimum Credit Score
65% LTV to $1,000,000 60% LTV to $1,500,000
29 July 8, 2019
Second Homes – 1 - 2 unit and condo Loans with foreign borrowers are ineligible.
FOR CREDIT SCORES OF LESS THAN 650, the minimum loan is $150,000
Condotel loans limited to 70% LTV
Purchase and Rate & Term Refinance:
720 minimum Credit Score:
80% LTV to $2,500,000 70% LTV to $3,500,000 65% LTV to $5,000,000 60% LTV to $6,000,000
680 minimum Credit Score:
80% LTV to $2,500,000 70% LTV to $3,000,000 65% LTV to $5,000,000 55% LTV to $6,000,000
660 minimum Credit Score:
80% LTV to $2,000,000 70% LTV to $3,000,000 55% LTV to $3,500,000
640 minimum Credit Score:
75% LTV to $1,500,000 70% LTV to $2,000,000
620 minimum Credit Score
65% LTV to $1,000,000 60% LTV to $1,500,000
Cash Out Refinance
680 minimum Credit Score 80% LTV to $1,000,000 75% LTV to $1,500,000 70% LTV to $2,000,000 65% LTV to $2,500,000 60% LTV to $4,000,000 55% LTV to $4,500,000
660 minimum Credit Score
75% LTV to $1,000,000 70% LTV to $1,500,000 65% LTV to $2,000,000 60% LTV to $3,000,000
30 July 8, 2019
640 minimum Credit Score 70% LTV to $1,500,000 65% LTV to $2,000,000
620 minimum Credit Score
65% LTV to $1,000,000 60% LTV to $1,500,000
FOR CREDIT SCORES OF LESS THAN 650, the minimum loan is $150,000
Investment / Business Purpose – 1 - 4 unit and condo Loans with foreign borrowers are ineligible.
Condotel loans limited to 65% LTV
Purchase and Rate & Term Refinance:
700 minimum Credit Score: 80% LTV to $1,000,000 75% LTV to $1,500,000 70% LTV to $3,000,000 65% LTV to $5,000,000
680 minimum Credit Score:
75% LTV to $1,000,000 70% LTV to $1,500,000 65% LTV to $3,000,000
660 minimum Credit Score:
75% LTV to $1,000,000 70% LTV to $1,500,000 65% LTV to $2,000,000 50% LTV to $3,000,000
640 minimum Credit Score:
70% LTV to $1,000,000 65% LTV to $1,500,000 60% LTV to $2,000,000
620 minimum Credit Score:
55% LTV to $1,000,000
Cash Out Refinance
720 minimum Credit Score 75% LTV to $1,000,000 70% LTV to $1,500,000 65% LTV to $3,000,000
31 July 8, 2019
60% LTV to $4,000,000 55% LTV to $5,000,000
680 minimum Credit Score
75% LTV to $1,000,000 70% LTV to $1,500,000 65% LTV to $3,000,000 60% LTV to $3,500,000 55% LTV to $5,000,000
660 minimum Credit Score
70% LTV to $1,000,000 65% LTV to $1,500,000 60% LTV to $2,000,000 50% LTV to $3,000,000
640 minimum Credit Score
65% LTV to $1,500,000 60% LTV to $2,000,000
620 minimum Credit Score:
50% LTV to $1,000,000
Minimum Loan Amount Owner occupied and second homes: $100,000 Investor occupied / business purpose: $75,000 for SFR and $100,000 for condos, duplex, triplex and 4 unit. IF THE CREDIT SCORE IS LESS THAN 650 THEN THE MINIMUM LOAN AMOUNT IS $150,000.
Minimum Credit Score 620
Maximum Debt to Income Ratio 50% DTI for LTVs to 85%, and 43% DTI for LTVs to 90%
Eligible Property Types 1-4 Units, warrantable condo and non-warrantable condo - non-warrantable condos require a rate add-on, and condotels – condotels limited to 70% LTV and require a rate add-on
Permissible Occupancy Primary residences, second homes and investment
Required Reserves
* If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is a primary residence or second home, then required reserves must be increased by one month of the PITIA for the Subject Property for each investment property owned by any of the Borrowers. If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is an investment property, then required reserves must be increased by two
Loan Amount Reserves
up to $1,000,000 3 months PITIA*
$1,000,001 to $2,000,000
6 months PITIA*
more than
$2,000,000
12 Months PITIA*
32 July 8, 2019
months of the PITIA for the Subject Property for each investment property owned by any of the Borrowers.
Reserve requirements may be waived based on mortgage rating, please see Section 10.4 for specific requirements.
For cash-out refinances, loan proceeds disbursed to Borrower may be used to meet reserve requirements
Acceptable States All 50 States and DC (territories not permitted)
Gifts Gifts permitted provided gifts must conform to all Fannie Mae gift requirements (except that Fannie requirements are modified to permit gifts for investor occupancy); For gifts of equity, LTV must be reduced by 5%.
Income Documentation Please refer to Section 6.
Credit History No Foreclosure, bankruptcy, deed in lieu or short sale over past 48 months at standard LTVs and reserves
No foreclosure, bankruptcy, deed in lieu or short sale permitted over past 24 months available at a maximum LTV is 75% and with reserves increased by 6 months
Mortgage and Rental History Maximum permitted delinquency is 1x30x12
Subordinate Financing Subordinate financing permitted provided (1) CLTV does not exceed the applicable LTV limits, (2) that the debt service on subordinate financing is included in the DTI calculation, and (3) that the terms of the subordinate financing conform to Fannie Mae requirements.
Appraisal Requirements 1 Full Appraisal + CDA or ARR. Loan amounts over $1,500,000 require 2 appraisals + CDA or ARR
Escrows Required AUS Not applicable; manual underwrite Calculator
Pre-Payment Penalty 3 YR prepayment penalty required for investor occupancy loans where permitted by law (PPP buyouts may be available)
ACH draft required for mortgage payments
ACH not required (Foreign Borrowers are not eligible for loan program)
33 July 8, 2019
2.4 Program Matrix for Loan Program NA A3 – Residual Income
Program Number NA A3 Program Description Residual Income
Available Products, Adjustment Caps, Margins and Interest Rate Floors
5/1 ARM- Caps 2% initial, 2% each year and 5% lifetime 7/1 ARM -Caps 2% initial, 2% each year and 5% lifetime 30 year fixed 15 year fixed Margins: owner occupied 3.25%, investor occupied 5.25% Index: 1 Year LIBOR (per CFPB rules, index must be set not earlier than 45 days prior to the Date of the Loan) Floor (lifetime minimum rate): Initial note rate
Interest Only and Amortization Options:
5/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 7/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 30 Year Fixed: 30 Year Self-amortizing (interest only not available). 15 Year Fixed: 15 Year Self-amortizing (interest only not available).
Self-amortizing loans are for 30 year terms, except 15 year fixed which is for a 15 year term. Interest only loans are for 40 year terms (after the 10 year Interest Only period the loan must amortize over the remaining 30 years). Interest only not available in Illinois.
Citizenship / Visa requirements Citizens / US persons only, foreigners not permitted
Allowable Loan to Value (LTV), Maximum Loan Amounts
Primary Residence – 1 - 4 Unit and Condo
3 & 4 unit properties limited to 80% LTV
Purchase and Rate & Term Refinance:
700 minimum Credit Score: 85% LTV to $1,500,000 80% LTV to $2,000,000 75% LTV to $2,500,000 70% LTV to $3,000,000
680 minimum Credit Score
85% LTV to $1,000,000 80% LTV to $1,500,000 75% LTV to $2,000,000 70% LTV to $3,000,000
660 minimum Credit Score:
80% LTV to $750,000 75% LTV to $1,250,000 70% LTV to $1,500,000 65% LTV to $2,000,000 60% LTV to $3,000,000
640 minimum Credit Score:
75% LTV to $750,000 70% LTV to $1,000,000 65% LTV to $1,500,000 60% LTV to $2,000,000
620 minimum Credit Score:
34 July 8, 2019
70% LTV to $750,000 65% LTV to $1,000,000 60% LTV to $1,500,000
Cash Out Refinance
720 minimum Credit Score
80% LTV to $1,500,000 75% LTV to $2,000,000 70% LTV to $2,500,000 65% LTV to $3,000,000
680 minimum Credit Score
80% LTV to $1,000,000 75% LTV to $1,500,000 70% LTV to $2,000,000 65% LTV to $2,500,000 60% LTV to $3,000,000
660 minimum Credit Score
75% LTV to $1,000,000 70% LTV to $1,500,000 65% LTV to $2,000,000 60% LTV to $2,500,000 55% LTV to $3,000,000
640 minimum Credit Score
70% LTV to $750,000 65% LTV to $1,000,000 60% LTV to $1,500,000 55% LTV to $2,000,000
620 minimum Credit Score
65% LTV to $1,000,000 55% LTV to $1,500,000
Second Homes – 1 - 2 unit and condo
Purchase and Rate & Term Refinance:
720 minimum Credit Score:
80% LTV to $1,000,000 75% LTV to $1,500,000 70% LTV to $2,000,000 65% LTV to $3,000,000
680 minimum Credit Score:
80% LTV to $1,000,000 70% LTV to $1.500,000 65% LTV to $2,000,000 60% LTV to $3,000,000
35 July 8, 2019
640 minimum Credit Score:
70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $1,500,000
620 minimum Credit Score
60% LTV to $1,000,000
Cash Out Refinance
720 minimum Credit Score 75% LTV to $750,000 70% LTV to $1,500,000 65% LTV to $3,000,000
700 minimum Credit Score
70% LTV to $1,250,000 65% LTV to $2,500,000 60% LTV to $3,000,000
680 minimum Credit Score
70% LTV to $1,000,000 65% LTV to $2,000,000 55% LTV to $3,000,000
640 minimum Credit Score
65% LTV to $750,000 55% LTV to $1,000,000 50% LTV to $1,500,000
Investment / Business Purpose – 1 - 4 unit and condo
Purchase and Rate & Term Refinance:
720 minimum Credit Score:
80% LTV to $1,000,000 75% LTV to $1,500,000 70% LTV to $2,000,000 65% LTV to $3,000,000
680 minimum Credit Score:
80% LTV to $750,000 75% LTV to $1,250,000 70% LTV to $2,000,000 65% LTV to $3,000,000
660 minimum Credit Score
75% LTV to $750,000
36 July 8, 2019
70% LTV to $1,000,000 65% LTV to $1,500,000 55% LTV to $2,000,000
640 minimum Credit Score:
70% LTV to $1,000,000 65% LTV to $1,500,000 55% LTV to $2,000,000
620 minimum Credit Score
60% LTV to $1,000,000
Cash Out Refinance
720 minimum Credit Score 75% LTV to $1,000,000 70% LTV to $2,000,000 65% LTV to $2,500,000 60% LTV to $3,000,000
680 minimum Credit Score
70% LTV to $1,000,000 65% LTV to $2,500,000 55% LTV to $3,000,000
640 minimum Credit Score
70% LTV to $750,000 65% LTV to $1,000,000 60% LTV to $1,500,000 50% LTV to $2,000,000
Minimum Loan Amount Owner occupied and second homes: $100K, Investor: $100K
Minimum Credit Score 620
Maximum Debt to Income Ratio & Minimum VA Residual Income Multiple
Borrowers must have three times (300%) of the minimum permitted residual income on the residual income requirement chart published by the Veterans Administration; Maximum permitted DTI is 59%
Eligible Property Types 1-4 Units, warrantable condo and non-warrantable condo - non-warrantable condos require a rate add-on.
Permissible Occupancy Primary residences, second homes and investment
Required Reserves
* If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is a primary residence or second home, then
Loan Amount Reserves
up to $1,000,000 3 months PITIA*
$1,000,001 to $2,000,000
6 months PITIA*
more than $2,000,000
12 Months PITIA*
37 July 8, 2019
required reserves must be increased by one month of the PITIA for the Subject Property for each investment property owned by any of the Borrowers. If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is an investment property, then required reserves must be increased by two months of the PITIA for the Subject Property for each investment property owned by any of the Borrowers.
Reserve requirements may be waived based on mortgage rating, please see Section 10.4 for specific requirements.
For cash-out refinances, loan proceeds disbursed to Borrower may be used to meet reserve requirements.
Acceptable States All 50 States and DC (territories not permitted)
Gifts
Gifts permitted provided gifts must conform to all Fannie Mae gift requirements (except that Fannie requirements are modified to permit gifts for investor occupancy); For gifts of equity, LTV must be reduced by 5%
Income Documentation Please refer to Section 6.
Credit History
No Foreclosure, bankruptcy, deed in lieu or short sale over past 48 months at standard LTVs and reserves
No foreclosure, bankruptcy, deed in lieu or short sale permitted over past 24 months available at a maximum LTV is 75% and with reserves increased by 6 months
Mortgage and Rental History Maximum permitted delinquency is 1x30x12
Subordinate Financing
Subordinate financing permitted provided (1) CLTV does not exceed the applicable LTV limits, (2) that the debt service on subordinate financing is included in the DTI calculation, and (3) that the terms of the subordinate financing conform to Fannie Mae requirements.
Appraisal Requirements 1 Full Appraisal + CDA or ARR. Loan amounts over $1,500,000 require 2 appraisals + CDA or ARR
Escrows Required AUS Not applicable; manual underwrite Calculator
Pre-Payment Penalty
3 YR prepayment penalty required for investor occupancy loans where permitted by law (PPP buyouts may be available)
ACH draft required for mortgage payments
ACH not required (Foreign Borrowers are not eligible for loan program)
38 July 8, 2019
2.5 Program Matrix for Loan Program AA-6H Asset Depletion
Program Number AA-6H Program Description Alt-A Asset Depletion
Available Products, Adjustment Caps, Margins and Interest Rate Floors
5/1 ARM- Caps 2% initial, 2% each year and 5% lifetime 7/1 ARM -Caps 2% initial, 2% each year and 5% lifetime 30 year fixed 15 year fixed Margins: owner occupied 3.25%, investor occupied 5.25% Index: 1 Year LIBOR (per CFPB rules, index must be set not earlier than 45 days prior to the Date of the Loan) Floor (lifetime minimum rate): Initial note rate
Interest Only and Amortization Options:
5/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 7/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 30 Year Fixed: 30 Year Self-amortizing (interest only not available). 15 Year Fixed: 15 Year Self-amortizing (interest only not available).
Self-amortizing loans are for 30 year terms, except 15 year fixed which is for a 15 year term. Interest only loans are for 40 year terms (after the 10 year Interest Only period the loan must amortize over the remaining 30 years). Interest only not available in Illinois.
Citizenship / Visa requirements
Citizens / US persons and foreigners permitted, foreigners only permitted for 2nd home and investor occupancy with a maximum LTV of 70%.
Allowable Loan to Values (LTV), Maximum Loan Amounts
Primary Residence – 1 - 4 Unit and Condo
FOR CREDIT SCORES OF LESS THAN 650, the minimum loan is $150,000
2 unit properties limited to 85% LTV, 3 & 4 unit properties limited to 80% LTV, Condotels limited to 70% LTV
Loans where one or more borrowers is a foreigner must be second home or investor occupied and are ineligible for primary residences
Purchase and Rate & Term Refinance:
700 minimum Credit Score:
85% LTV to $1,500,000 80% LTV to $2,000,000 75% LTV to $2,500,000 70% LTV to $3,000,000 65% LTV to $4,000,000 60% LTV to $5,000,000 55% LTV to $6,000,000
680 minimum Credit Score
85% LTV to $1,000,000 80% LTV to $1,500,000
39 July 8, 2019
75% LTV to $2,000,000 70% LTV to $3,000,000 65% LTV to $4,000,000 60% LTV to $5,000,000 55% LTV to $6,000,000
660 minimum Credit Score:
80% LTV to $750,000 75% LTV to $1,250,000 70% LTV to $1,500,000 65% LTV to $2,000,000 60% LTV to $3,000,000 50% LTV to $4,000,000
640 minimum Credit Score:
75% LTV to $750,000 70% LTV to $1,000,000 65% LTV to $1,500,000 60% LTV to $2,000,000
620 minimum Credit Score:
70% LTV to $750,000 65% LTV to $1,000,000 60% LTV to $1,500,000
Cash Out Refinance
720 minimum Credit Score
80% LTV to $1,500,000 75% LTV to $2,000,000 70% LTV to $2,500,000 65% LTV to $3,000,000 60% LTV to $3,500,000 55% LTV to $4,500,000 50% LTV to $6,000,000
680 minimum Credit Score
80% LTV to $1,000,000 75% LTV to $1,500,000 70% LTV to $2,000,000 65% LTV to $2,500,000 60% LTV to $3,500,000 55% LTV to $4,500,000 50% LTV to $6,000,000
660 minimum Credit Score
75% LTV to $1,000,000 70% LTV to $1,500,000 65% LTV to $2,000,000 60% LTV to $2,500,000 55% LTV to $3,000,000 50% LTV to $3,500,000
640 minimum Credit Score
40 July 8, 2019
70% LTV to $750,000 65% LTV to $1,000,000 60% LTV to $1,500,000 55% LTV to $2,000,000
620 minimum Credit Score
65% LTV to $1,000,000 55% LTV to $1,500,000
Second Homes – 1 - 2 unit and condo
Loans with one or more foreign borrowers are limited to the LTVs and loan amounts indicated below
Condotel loans limited to 70% LTV
Purchase and Rate & Term Refinance:
720 minimum Credit Score:
75% LTV to $1,500,000 70% LTV to $2,000,000 65% LTV to $3,000,000 60% LTV to $4,000,000 55% LTV to $4,500,000 50% LTV to $6,000,000
680 minimum Credit Score:
80% LTV to $1,000,000 70% LTV to $1.500,000 65% LTV to $2,000,000 60% LTV to $3,000,000 55% LTV to $4,500,000 50% LTV to $6,000,000
640 minimum Credit Score:
70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $1,500,000
620 minimum Credit Score
60% LTV to $1,000,000
Loans with one or more foreign borrowers: 70% LTV to $2,000,000 65% LTV to $3,000,000 60% LTV to $4,000,000 55% LTV to $4,500,000
Cash Out Refinance
41 July 8, 2019
720 minimum Credit Score 75% LTV to $750,000 70% LTV to $1,500,000 65% LTV to $3,000,000 60% LTV to $3,500,000 55% LTV to $4,000,000 50% LTV to $5,000,000
700 minimum Credit Score
70% LTV to $1,250,000 65% LTV to $2,500,000 60% LTV to $3,000,000 55% LTV to $4,000,000 50% LTV to $5,000,000
680 minimum Credit Score
70% LTV to $1,000,000 65% LTV to $2,000,000 55% LTV to $3,000,000 50% LTV to $5,000,000
640 minimum Credit Score
65% LTV to $750,000 55% LTV to $1,000,000 50% LTV to $1,500,000
Loans with one or more foreign borrowers:
65% LTV to $1,000,000 60% LTV to $2,000,000 55% LTV to $3,000,000 50% LTV to $5,000,000
Investment / Business Purpose – 1 - 4 unit and condo
FOR CREDIT SCORES OF LESS THAN 650, the minimum loan is $150,000
Loans with one or more foreign borrowers are limited to the LTVs and loan amounts indicated below
Condotel loans limited to 65% LTV
Purchase and Rate & Term Refinance:
720 minimum Credit Score:
80% LTV to $1,000,000 75% LTV to $1,500,000 70% LTV to $2,000,000 65% LTV to $3,000,000 60% LTV to $3,500,000 55% LTV to $4,000,000
42 July 8, 2019
50% LTV to $5,000,000
680 minimum Credit Score: 80% LTV to $750,000 75% LTV to $1,250,000 70% LTV to $2,000,000 65% LTV to $3,000,000 60% LTV to $3,500,000 55% LTV to $4,000,000 50% LTV to $5,000,000
660 minimum Credit Score
75% LTV to $750,000 70% LTV to $1,000,000 65% LTV to $1,500,000 55% LTV to $2,000,000
640 minimum Credit Score: 70% LTV to $1,000,000 65% LTV to $1,500,000 55% LTV to $2,000,000
620 minimum Credit Score
60% LTV to $1,000,000
Loans with one or more foreign borrowers: 70% LTV to $1,500,000 65% LTV to $3,000,000 60% LTV to $3,500,000 55% LTV to $5,000,000
Cash Out Refinance
720 minimum Credit Score 75% LTV to $1,000,000 70% LTV to $2,000,000 65% LTV to $2,500,000 60% LTV to $3,000,000 55% LTV to $4,000,000 50% LTV to $5,000,000
680 minimum Credit Score
70% LTV to $1,000,000 65% LTV to $2,500,000 60% LTV to $3,000,000 55% LTV to $3,500,000 50% LTV to $5,000,000
640 minimum Credit Score
70% LTV to $750,000 65% LTV to $1,000,000 60% LTV to $1,500,000
43 July 8, 2019
50% LTV to $2,000,000
Loans with one or more foreign borrowers: 70% LTV to $750,000 65% LTV to $1,500,000 60% LTV to $2,000,000 55% LTV to $3,000,000 50% LTV to $5,000,000
Minimum Loan Amount Owner occupied and second homes: $150,000 Investor occupied / business purpose: $100,000
Minimum Credit Score 620 Maximum Debt to Income Ratio 50% DTI (after including asset depletion income)
Eligible Property Types
1-4 Units, warrantable condo and non-warrantable condo - non-warrantable condos require a rate add- on, and condotels – condotels limited to 70% LTV and require a rate add-on
Permissible Occupancy Primary residences, second homes and investment
Required Reserves
* If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is a primary residence or second home, then required reserves must be increased by one month of the PITIA for the Subject Property for each investment property owned by any of the Borrowers. If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is an investment property, then required reserves must be increased by two months of the PITIA for the Subject Property for each investment property owned by any of the Borrowers.
Acceptable States All 50 States and DC (territories not permitted)
Gifts
Gifts other than gifts of equity are not permitted (except that Fannie requirements are modified to permit gifts for investor occupancy). Gifts of equity require 5% reduction in Loan to Value
Income Documentation Please refer to Section 6
Credit History
No Foreclosure, bankruptcy, deed in lieu or short sale over past 48 months at standard LTVs and reserves
Loan Amount Reserves
up to $1,000,000
110% of the Loan + 3 months PITIA*
$1,000,001 to $2,000,000
110% of the loan amount + 6 months PITIA*
more than $2,000,000
110% of the loan
amount + 12 Months PITIA*
44 July 8, 2019
No foreclosure, bankruptcy, deed in lieu or short sale permitted over past 24 months available at a maximum LTV is 75% and with reserves increased by 6 months
Mortgage and Rental History Maximum permitted delinquency is 1x30x12
Subordinate Financing
Subordinate financing permitted provided (1) CLTV does not exceed the applicable LTV limits, (2) that the debt service on subordinate financing is included in the DTI calculation, and (3) that the terms of the subordinate financing conform to Fannie Mae requirements.
Appraisal Requirements 1 Full Appraisal + CDA or ARR. Loan amounts over 1,500,000 require 2 appraisals + CDA or ARR
Escrows Required AUS Not applicable; manual underwrite Calculator
Pre-Payment Penalty 3 YR prepayment penalty required for investor occupancy loans where permitted by law (PPP buyout may be available)
ACH draft required for mortgage payments
If one or more Borrowers is a foreigner
45 July 8, 2019
2.6 Program Matrix for Loan Program NA-M3 – Moderate Credit, Full Doc
Program Number NA-M3 Program Description Moderate Credit, Full Doc
Available Products, Adjustment Caps, Margins and Interest Rate Floors
5/1 ARM- Caps 2% initial, 2% each year and 5% lifetime 7/1 ARM -Caps 2% initial, 2% each year and 5% lifetime 30 year fixed 15 year fixed Margins: owner occupied 4.50%, investor occupied 5.75% Index: 1 Year LIBOR (per CFPB rules, index must be set not earlier than 45 days prior to the Date of the Loan) Floor (lifetime minimum rate): Initial note rate
Interest Only and Amortization Options:
5/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 7/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 30 Year Fixed: 30 Year Self-amortizing (interest only not available). 15 Year Fixed: 15 Year Self-amortizing (interest only not available).
Self-amortizing loans are for 30 year terms, except 15 year fixed which is for a 15 year term. Interest only loans are for 40 year terms (after the 10 year Interest Only period the loan must amortize over the remaining 30 years). Interest only not available in Illinois. the remaining term; interest only not available in Illinois)
Citizenship / Visa requirements Citizens / US persons only, Foreigners not permitted.
Allowable Loan to Value (LTV), Maximum Loan Amounts
CREDIT EVENT LIMITATIONS FOR OWNER OCCUPIED PROPERTIES:
1. MORE THAN ONE 30 DAY LATE OVER PAST 12
MONTHS, NO SIXTY DAY LATES
Max loan amount = $1,500,000
2. ONE OR MORE 60 DAY LATES OVER PAST 12
MONTHS, NO NINETY DAY LATES
Max loan amount = $1,000,000
Max LTV for cash-out refinances = 75%
3. UP TO ONE 120 DAY (NINETY DAY LATES
PERMITTED), NO 150 DAY LATES AND NOT MORE
THAN ONE 120 DAY LATE OVER PAST 12
MONTHS
Max loan amount = $1,000,000
Max LTV for purchases and R&T refis = 70%
Max LTV for cash-out refinances = 65%
Second homes prohibited
4. FORECLOSURE, BANKRUPTCY EXCLUDING
CHAPTER 13, SHORT SALE OR DEED IN LIEU LESS
THAN 2 YEARS PRIOR TO THE DATE OF THE
LOAN (date of signing)
Max loan amount = $1,000,000
Max LTV for cash-out refinances = 75%
5. FORECLOSURE, BANKRUPTCY EXCLUDING
CHAPTER 13, SHORT SALE OR DEED IN LIEU LESS
THAN 12 MONTHS PRIOR TO THE DATE OF THE
LOAN – credit event must be completed /
discharged at least one day prior to the Date of
the Loan (date of signing)
46 July 8, 2019
Max loan amount = $1,000,000
Max LTV for purchases and R&T refis = 70%
Max LTV for cash-out refinances = 65%
Second homes prohibited
6. CHAPTER 13 DISCHARGED WITHIN 1 YEAR OF
THE DATE OF THE LOAN (date of signing)
Max loan amount = $1,500,000
7. MORE THAN ONE 120 DAY LATE OVER PAST 12
MONTHS
Loan is ineligible for funding at ALTLOAN
Primary Residence – 1 - 4 Unit and Condo
3 & 4 unit properties limited to 80% LTV Non warrantable condos limited to 80% LTV
Loans in New York State must exceed the Fannie Mae loan limit (including, where applicable, the maximum loan limit for high cost areas)
Purchase and Rate & Term Refinance:
660 minimum Credit Score 85% LTV to $2,000,000
640 minimum Credit Score
85% LTV to $1,500,000 80% LTV to $2,000,000
620 minimum Credit Score:
85% LTV to $1,000,000 80% LTV to $1,500,000
600 minimum Credit Score
75% LTV to $1,500,000
580 minimum Credit Score 75% LTV to $1,000,000 70% LTV to $1,500,000
Cash Out Refinance
680 minimum Credit Score
80% LTV to $1,500,000
620 minimum Credit Score 80% LTV to $1,000,000 75% LTV to $1,500,000
600 minimum Credit Score
75% LTV to $1,500,000
47 July 8, 2019
Second Homes – 1 - 2 unit and condo
Loans in New York State must exceed the Fannie Mae loan limit (including, where applicable, the maximum loan limit for high cost areas)
Purchase and Rate & Term Refinance:
640 minimum Credit Score: 80% LTV to $2,000,000
620 minimum Credit Score:
80% LTV to $1,500,000
600 minimum Credit Score 75% LTV to $1,500,000
580 minimum Credit Score
75% LTV to $1,000,000 70% LTV to $1,500,000
Cash Out Refinance
680 minimum Credit Score
80% LTV to $1,500,000
620 minimum Credit Score 80% LTV to $1,000,000 75% LTV to $1,500,000
600 minimum Credit Score
75% LTV to $1,500,000
CREDIT EVENT LIMITATIONS FOR INVESTOR OCCUPIED / BUSINESS PURPOSE PROPERTIES:
8. ONE OR MORE 60 DAY LATES OVER PAST 12
MONTHS, NO NINETY DAY LATES
Max loan amount = $1,000,000
Max LTV for purchase and R&T refis = 70%
Max LTV for cash-out refinances = 65%
9. FORECLOSURE, BANKRUPTCY EXCLUDING
CHAPTER 13, SHORT SALE OR DEED IN LIEU LESS
THAN 2 YEARS PRIOR TO THE DATE OF THE
LOAN (date of signing)
Max loan amount = $1,000,000
Max LTV for purchase and R&T refis = 70%
Max LTV for cash-out refinances = 65%
48 July 8, 2019
10. CHAPTER 13 DISCHARGED WITHIN 1 YEAR OF
THE DATE OF THE LOAN (date of signing)
Max loan amount = $1,500,000
11. ONE OR MORE 90 DAY LATES OVER PAST 12
MONTHS
Loan is not eligible for funding at ALTLOAN
12. FORECLOSURES, BANKRUPTCIES EXCLUDING
CHAPTER 13, SHORT SALE OR DEED IN LIEU
WITHIN 1 YEAR OF THE DATE OF THE LOAN (date
of signing)
Loan is not eligible for funding at ALTLOAN
Investment / Business Purpose – 1 - 4 unit and condo
Purchase and Rate & Term Refinance: 660 minimum Credit Score:
75% LTV to $1,500,000
580 minimum Credit Score: 75% LTV to $1,000,000
Cash Out Refinance
680 minimum Credit Score
70% LTV to $1,500,000
660 minimum Credit Score 70% LTV to $1,000,000 65% LTV to $1,500,000
600 minimum Credit Score
70% LTV to $1,000,000
Minimum Loan Amount Owner occupied and second homes: $100K, Investor: $75K
Minimum Credit Score 580 Maximum Debt to Income Ratio 50% DTI
Eligible Property Types
1-4 Units, warrantable condo and non-warrantable condo -
non-warrantable condos require a rate add-on, condotels not permitted
Permissible Occupancy Primary residences, second homes and investment
Required Reserves
Loan Amount Reserves
up to $1,000,000 3 months PITIA*
$1,000,001 to $2,000,000
6 months PITIA*
more than
$2,000,000
12 Months PITIA*
49 July 8, 2019
* If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is a primary residence or second home, then required reserves must be increased by one month of the PITIA for the Subject Property for each investment property owned by any of the Borrowers. If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is an investment property, then required reserves must be increased by two months of the PITIA for the Subject Property for each investment property owned by any of the Borrowers.
Reserve requirements may be waived based on mortgage rating, please see Section 10.4 for specific requirements.
For cash-out refinances, loan proceeds disbursed to Borrower may be used to meet reserve requirements.
Acceptable States
All 50 States and DC (territories not permitted). Loans in New York State which are secured by owner-occupied properties must exceed the Fannie Mae loan limit (including where applicable, the maximum loan limit for high cost areas).
Gifts
Gifts permitted provided gifts must conform to all Fannie Mae gift requirements (except that Fannie requirements are modified to permit gifts for investor occupancy); For gifts of equity, LTV must be reduced by 5%
Income Documentation Please refer to Section 6.
Credit History
Please refer to LTV table in this Section 2.6 for restrictions on loan amount and LTV due to prior Borrower foreclosures, bankruptcies, short sales and deeds in lieu of foreclosure.
Mortgage and Rental History 0 X 1 X 120, please refer to LTV table in this Section 2.6 for LTV and loan amount restrictions based on housing history.
Subordinate Financing
Subordinate financing permitted provided (1) CLTV does not exceed the applicable LTV limits, (2) that the debt service on subordinate financing is included in the DTI calculation, and (3) that the terms of the subordinate financing conform to Fannie Mae requirements.
Appraisal Requirements 1 Full Appraisal + CDA or ARR. Loan amounts over $1,000,000 require 2 appraisals + CDA or ARR
Escrows Required AUS Not applicable; manual underwrite Calculator
Pre-Payment Penalty
3 YR prepayment penalty required for investor occupancy loans where permitted by law (PPP buyouts may be available)
ACH draft required for mortgage payments
ACH not required (Foreign Borrowers are not eligible for loan program M3)
50 July 8, 2019
2.7 Program Matrix for Loan Program NA-M4 – Moderate Credit, Bank Statement
Program Number NA-M4 Program Description Moderate Credit, Bank Statement
Available Products, Adjustment Caps, Margins and Interest Rate Floors
5/1 ARM- Caps 2% initial, 2% each year and 5% lifetime 7/1 ARM -Caps 2% initial, 2% each year and 5% lifetime 30 year fixed 15 year fixed Margins: owner occupied 4.50%, investor occupied 5.75% Index: 1 Year LIBOR (per CFPB rules, index must be set not earlier than 45 days prior to the Date of the Loan) Floor (lifetime minimum rate): Initial note rate
Interest Only and Amortization Options:
5/1 ARM: 30 Year Self-amortizing. 7/1 ARM: 30 Year Self-amortizing. 30 Year Fixed: 30 Year Self-amortizing (interest only not available). 15 Year Fixed: 15 Year Self-amortizing (interest only not available).
Self-amortizing loans are for 30 year terms, except 15 year fixed which is for a 15 year term. .
Self-employment requirement At least one borrower must have been continually self- employed for two years
Citizenship / Visa requirements Citizens / US persons only, foreigners not permitted.
Allowable Loan to Value (LTV), Maximum Loan Amounts
CREDIT EVENT LIMITATIONS FOR OWNER OCCUPIED PROPERTIES:
1. MORE THAN ONE 30 DAY LATE OVER PAST 12
MONTHS, NO SIXTY DAY LATES
Max loan amount = $1,500,000
2. ONE OR MORE 60 DAY LATES OVER PAST 12
MONTHS, NO NINETY DAY LATES
Max loan amount = $1,000,000
Max LTV for cash-out refinances = 75%
3. FORECLOSURE, BANKRUPTCY EXCLUDING
CHAPTER 13, SHORT SALE OR DEED IN LIEU LESS
THAN 2 YEARS PRIOR TO THE DATE OF THE
LOAN (date of signing)
Max loan amount = $1,000,000
Max LTV for cash-out refinances = 75%
4. CHAPTER 13 DISCHARGED WITHIN 1 YEAR OF
THE DATE OF THE LOAN (date of signing)
Max loan amount = $1,500,000
5. ONE OR MORE 90 DAY LATES OVER PAST 12
MONTHS
Loan is ineligible for funding at ALTLOAN
6. FORECLOSURE, BANKRUPTCY EXCLUDING
CHAPTER 13, SHORT SALE OR DEED IN LIEU LESS
THAN 12 MONTHS PRIOR TO THE DATE OF THE
LOAN (date of signing)
Loan is ineligible for funding at ALTLOAN
Primary Residence – 1 - 2 Unit and Condo
51 July 8, 2019
2 unit properties limited to 80% LTV Non warrantable condos limited to 80% LTV
Loans in New York State must exceed the Fannie Mae loan limit (including, where applicable, the maximum loan limit for high cost areas)
Purchase and Rate & Term Refinance:
640 minimum Credit Score
85% LTV to $1,500,000
620 minimum Credit Score: 85% LTV to $1,000,000 80% LTV to $1,500,000
Cash Out Refinance
620 minimum Credit Score
80% LTV to $1,000,000 75% LTV to $1,500,000
Second Homes – 1 - 2 unit and condo
Loans in New York State must exceed the Fannie Mae loan limit (including, where applicable, the maximum loan limit for high cost areas)
Purchase and Rate & Term Refinance:
620 minimum Credit Score:
80% LTV to $1,500,000
Cash Out Refinance
620 minimum Credit Score 80% LTV to $1,000,000 75% LTV to $1,500,000
CREDIT EVENT LIMITATIONS FOR INVESTOR OCCUPIED / BUSINESS PURPOSE PROPERTIES:
1. ONE OR MORE 60 DAY LATES OVER PAST 12
MONTHS
Loan is ineligible for funding at ALTLOAN.
2. FORECLOSURE, BANKRUPTCY EXCLUDING
CHAPTER 13, SHORT SALE OR DEED IN LIEU LESS
THAN 2 YEARS PRIOR TO THE DATE OF THE
LOAN (date of signing)
Loan is ineligible for funding at ALTLOAN
3. CHAPTER 13 DISCHARGED WITHIN 1 YEAR OF
THE DATE OF THE LOAN (date of signing)
52 July 8, 2019
Loan is ineligible for funding at ALTLOAN
Investment / Business Purpose – 1 - 2 unit and condo
Purchase and Rate & Term Refinance:
660 minimum Credit Score: 75% LTV to $1,000,000 70% LTV to $1,500,000 65% LTV to $2,000,000
640 minimum Credit Score:
75% LTV to $1,000,000
Cash Out Refinance
660 minimum Credit Score 70% LTV to $1,000,000 65% LTV to $1,500,000 60% LTV to $2,000,000
640 minimum Credit Score
70% LTV to $1,000,000
Minimum Loan Amount Owner occupied and second homes: $100K, Investor: $100K
Minimum Credit Score 620 Maximum Debt to Income Ratio 50% DTI
Eligible Property Types
1-2 Units, warrantable condo and non-warrantable condo - non-warrantable condos require a rate add-on. Condotels not permitted.
Permissible Occupancy Primary residences, second homes and investment
Required Reserves
* If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is a primary residence or second home, then required reserves must be increased by one month of the PITIA for the Subject Property for each investment property owned by any of the Borrowers. If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is an investment property, then required reserves must be increased by two
Loan Amount Reserves
up to $1,000,000 3 months PITIA*
$1,000,001 to $2,000,000
6 months PITIA*
more than $2,000,000
12 Months PITIA*
53 July 8, 2019
months of the PITIA for the Subject Property for each investment property owned by any of the Borrowers.
Reserve requirements may be waived based on mortgage rating, please see Section 10.4 for specific requirements.
For cash-out refinances, loan proceeds disbursed to Borrower may be used to meet reserve requirements.
Acceptable States
All 50 States and DC (territories not permitted). Loans in New York State which are secured by owner-occupied properties must exceed the Fannie Mae loan limit (including, where applicable, the maximum loan limit for high cost areas)
Gifts
Gifts permitted provided gifts must conform to all Fannie Mae gift requirements (except that Fannie requirements are modified to permit gifts for investor occupancy); For gifts of equity, LTV must be reduced by 5%
Income Documentation Please refer to Section 6.
Credit History
Please refer to LTV table in this Section 2.7 for restrictions on loan amount and LTV due to prior Borrower foreclosures, bankruptcies, short sales and deeds in lieu of foreclosure.
Mortgage and Rental History Rolling 60 permitted (12 X 60 X 12), no 90 day lates permitted, please refer to LTV table in this Section 2.7 for LTV and loan amount restrictions based on housing history.
Subordinate Financing
Subordinate financing permitted provided (1) CLTV does not exceed the applicable LTV limits, (2) that the debt service on subordinate financing is included in the DTI calculation, and (3) that the terms of the subordinate financing conform to Fannie Mae requirements.
Appraisal Requirements 1 Full Appraisal + CDA or ARR. Loan amounts over $1,000,000 require 2 appraisals + CDA or ARR
Escrows Required AUS Not applicable; manual underwrite Calculator
Pre-Payment Penalty
3 YR prepayment penalty required for investor occupancy loans where permitted by law (PPP buyouts may be available)
ACH draft required for mortgage payments
ACH not required (Foreign Borrowers are not eligible for loan program M4)
54 July 8, 2019
2.8 Program Matrix for Loan Program NA-I5 – Investor DSC (Debt Service Coverage)
Program Number NA-I5 Program Description Investor DSC
Eligible Product
5/1 ARM- Caps 2% initial, 2% each year and 5% lifetime 7/1 ARM -Caps 2% initial, 2% each year and 5% lifetime 30 year fixed 15 year fixed Margins: owner occupied 3.25%, investor occupied 5.25% Index: 1 Year LIBOR (index must be set not earlier than 45 days prior to the Date of the Loan) Floor (lifetime minimum rate): Initial note rate
Interest Only and Amortization Options:
5/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 7/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 30 Year Fixed: 30 Year Self-amortizing (interest only not available). 15 Year Fixed: 15 Year Self-amortizing (interest only not available). Self-amortizing loans are for 30 year terms, except 15 year fixed which is for a 15 year term. Interest only loans are for 40 year terms (after the 10 year Interest Only period the loan must amortize over the remaining 30 years). Interest only not available in Illinois.
Citizenship / Visa requirements
Borrowers who are natural persons may be Citizens / US persons or foreigners Borrowers who are eligible legal persons (LLCs and corporations) must be organized in one of the fifty states or the District of Columbia. If one or more Borrowers is a foreigner LTV is capped at 70% and 12 months of reserves are required.
Investment / Business Purpose – 1 - 4 unit and condo
Loans with one or more foreign borrowers are limited to the LTVs and loan amounts indicated below
Purchase and Rate & Term Refinance:
Allowable Loan to Values (LTV), Maximum Loan Amounts
720 minimum Credit Score: 80% LTV to $1,000,000 75% LTV to $1,500,000 70% LTV to $2,000,000 65% LTV to $3,000,000 60% LTV to $4,000,000 55% LTV to $5,000,000
680 minimum Credit Score:
80% LTV to $750,000
55 July 8, 2019
75% LTV to $1,500,000 70% LTV to $2,000,000 65% LTV to $3,000,000 60% LTV to $3,500,000 50% LTV to $5,000,000
640 minimum Credit Score:
75% LTV to $1,000,000 65% LTV to $2,000,000 55% LTV to $2,500,000 50% LTV to $3,000,000
620 minimum Credit Score:
60% LTV to $1,000,000 Loans with one or more foreign borrowers:
70% LTV to $1,500,000 65% LTV to $2,500,000 60% LTV to $3,000,000 55% LTV to $3,500,000
Cash Out Refinance 720 minimum Credit Score
80% LTV to $750,000 70% LTV to $1,500,000 65% LTV to $2,500,000 60% LTV to $3,000,000 55% LTV to $3,500,000 50% LTV to $5,000,000
680 minimum Credit Score
70% LTV to $1,000,000 65% LTV to $2,000,000 60% LTV to $3,000,000 55% LTV to $3,500,000 50% LTV to $5,000,000
640 minimum Credit Score
65% LTV to $1,500,000 60% LTV to $2,000,000 50% LTV to $3,000,000
620 minimum Credit Score
60% LTV to $500,000 Loans with one or more foreign borrowers:
65% LTV to $1,500,000 60% LTV to $2,000,000 55% LTV to $3,000,000
Minimum Loan Amount $75,000; FOR CONDOS WITH LOAN AMOUNTS OF LESS THAN $100,000 THE MAXIMUM LTV IS 75%
56 July 8, 2019
FOR PURCHASE AND RATE & TERM, AND 70% FOR CASH-OUT REFINANCE
Minimum Credit Score 620 Minimum Debt Service Coverage 1.0 times PITIA
Eligible Property Types 1-4 Units, warrantable condo and non-warrantable condo (non-warrantable condo requires rate add- on). Condotels not permitted.
Permissible Occupancy
Investor / business purpose properties only (borrowers must sign a business use affidavit (no primary or second home occupancies)
Required Reserves
Loan Amount Reserves
up to $1,000,000 3 months PITIA*
$1,000,001 to $2,000,000
6 months PITIA*
more than $2,000,000
12 Months PITIA*
* If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is a primary residence or second home, then required reserves must be increased by one month of the PITIA for the Subject Property for each investment property owned by any of the Borrowers. If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is an investment property, then required reserves must be increased by two months of the PITIA for the Subject Property for each investment property owned by any of the Borrowers. Reserve requirements may be waived based on mortgage rating, please see Section 10.4 for specific requirements. For cash-out refinances, loan proceeds disbursed to Borrower may be used to meet reserve requirements.
Acceptable States All 50 States and DC (territories not permitted)
Gifts
Gifts, other than gifts of equity are permitted provided gifts must conform to all Fannie Mae gift requirements with the following modifications:
Gifts on investment occupancy permitted
For LTVs greater than 75%, 5% of purchase purchase price must be sourced to a borrower or guarantor (and may not be from a gift)
57 July 8, 2019
Income Documentation Please refer to Section 6.
Credit History
No Foreclosure, bankruptcy, deed in lieu or short sale over past 48 months at standard LTVs and reserves No foreclosure, bankruptcy, deed in lieu or short sale permitted over past 24 months available at a maximum LTV is 75% and with reserves increased by 6 months
Mortgage and Rental History Maximum permitted delinquency is 1x30x12
Subordinate Financing
Subordinate financing permitted provided (1) CLTV does not exceed the applicable LTV limits, (2) that the debt service on subordinate financing is included in the DTI calculation, and (3) that the terms of the subordinate financing conform to Fannie Mae requirements.
Appraisal Requirements 1 Full Appraisal + CDA or ARR. Loan amounts over
1,500,000 require 2 appraisals + CDA or ARR
Escrows Required
Pre-Payment Penalty 3 YR prepayment penalty required where permitted by law (PPP buyout may be available)
AUS
Calculator
ACH draft required for mortgage payments If one or more Borrowers is a foreigner an ACH is required.
58 July 8, 2019
2.9 Program Matrix for Loan Program NA-I3 – Investor No Ratio
Program Number NA-I3 Program Description Investor No Ratio
Eligible Product
5/1 ARM- Caps 2% initial, 2% each year and 5% lifetime 7/1 ARM -Caps 2% initial, 2% each year and 5% lifetime 30 year fixed 15 year fixed Margins: owner occupied 3.25%, investor occupied 5.25% Index: 1 Year LIBOR (index must be set not earlier than 45 days prior to the Date of the Loan) Floor (lifetime minimum rate): Initial note rate
Interest Only and Amortization Options:
5/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 7/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 30 Year Fixed: 30 Year Self-amortizing (interest only not available). 15 Year Fixed: 15 Year Self-amortizing (interest only not available). Self-amortizing loans are for 30 year terms, except 15 year fixed which is for a 15 year term. Interest only loans are for 40 year terms (after the 10 year Interest Only period the loan must amortize over the remaining 30 years). Interest only not available in Illinois.
Citizenship / Visa requirements
Borrowers who are natural persons may be Citizens / US persons or foreigners Borrowers who are eligible legal persons (LLCs and corporations) must be organized in one of the fifty states or the District of Columbia. If one or more Borrowers is a foreigner LTV is capped at 65% and 12 months of reserves are required.
Investment / Business Purpose – 1 - 4 unit and condo
Loans with one or more foreign borrowers are limited to the LTVs and loan amounts indicated below
Non warrantable condos limited to 65% LTV
Allowable Loan to Values (LTV), Maximum Loan Amounts
Purchase and Rate & Term Refinance:
700 minimum Credit Score: 75% LTV to $1,000,000 70% LTV to $2,000,000 65% LTV to $3,000,000 60% LTV to $5,000,000
640 minimum Credit Score:
75% LTV to $1,000,000 65% LTV to $2,000,000
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60% LTV to $3,000,000 Loans with one or more foreign borrowers:
65% LTV to $1,500,000 60% LTV to $2,000,000 55% LTV to $3,000,000 50% LTV to $4,000,000
Cash Out Refinance 700 minimum Credit Score
70% LTV to $1,000,000 65% LTV to $2,000,000 55% LTV to $3,000,000 50% LTV to $5,000,000
640 minimum Credit Score
65% LTV to $1,500,000 60% LTV to $2,000,000 50% LTV to $3,000,000
Loans with one or more foreign borrowers:
65% LTV to $1,000,000 60% LTV to $1,500,000 55% LTV to $2,000,000 50% LTV to $4,000,000
Minimum Loan Amount
$75,000; FOR CONDOS WITH LOAN AMOUNTS OF LESS THAN $100,000 THE MAXIMUM LTV IS 75% FOR PURCHASE AND RATE & TERM, AND 70% FOR CASH-OUT REFINANCE
Minimum Credit Score 640 Minimum Debt Service Coverage Not applicable
Eligible Property Types 1-4 Units, warrantable condo and non-warrantable condo (non-warrantable condo requires rate add-on)
Permissible Occupancy
Investor / business purpose properties only (borrowers must sign a business use affidavit (no primary or second home occupancies)
Required Reserves
Loan Amount Reserves
up to $1,000,000 3 months PITIA*
$1,000,001 to $2,000,000
6 months PITIA*
more than $2,000,000
12 Months PITIA*
* If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is a primary residence or second home, then required reserves must be increased by one month of the PITIA for the Subject Property for each investment property owned by any
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of the Borrowers. If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is an investment property, then required reserves must be increased by two months of the PITIA for the Subject Property for each investment property owned by any of the Borrowers. Reserve requirements may be waived based on mortgage rating, please see Section 10.4 for specific requirements. For cash-out refinances, loan proceeds disbursed to Borrower may be used to meet reserve requirements.
Acceptable States All 50 States and DC (territories not permitted)
Gifts
Gifts, other than gifts of equity are permitted provided gifts must conform to all Fannie Mae gift requirements with the following modifications:
Gifts on investment occupancy permitted
5% of purchase price must be sourced to a borrower or guarantor (and may not be from a gift)
Income Documentation Please refer to Section 6.
Credit History
No Foreclosure, bankruptcy, deed in lieu or short sale over past 48 months at standard LTVs and reserves No foreclosure, bankruptcy, deed in lieu or short sale permitted over past 24 months available at a maximum LTV is 75% and with reserves increased by 6 months
Mortgage and Rental History Maximum permitted delinquency is 1x30x12
Subordinate Financing
Subordinate financing permitted provided (1) CLTV does not exceed the applicable LTV limits, (2) that the debt service on subordinate financing is included in the DTI calculation, and (3) that the terms of the subordinate financing conform to Fannie Mae requirements.
Appraisal Requirements 1 Full Appraisal + CDA or ARR. Loan amounts over
1,000,000 require 2 appraisals + CDA or ARR
Escrows Required
Pre-Payment Penalty 3 YR prepayment penalty required where permitted by law (PPP buyout may be available)
AUS
Calculator
ACH draft required for mortgage payments If one or more Borrowers is a foreigner an ACH is required.
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2.10 Program Matrix for Loan Program MF-1H – Mixed Use
Program Number MF-1H Program Description Multi-Family
Eligible Product
5/1 ARM- Caps 2% initial, 2% each year and 5% lifetime 7/1 ARM -Caps 2% initial, 2% each year and 5% lifetime 30 year fixed 15 year fixed Margins: owner occupied 3.25%, investor occupied 5.25% Index: 1 Year LIBOR (index must be set not earlier than 45 days prior to the Date of the Loan) Floor (lifetime minimum rate): Initial note rate
Interest Only and Amortization Options:
5/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 7/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 30 Year Fixed: 30 Year Self-amortizing (interest only not available). 15 Year Fixed: 15 Year Self-amortizing (interest only not available). Self-amortizing loans are for 30 year terms, except 15 year fixed which is for a 15 year term. Interest only loans are for 40 year terms (after the 10 year Interest Only period the loan must amortize over the remaining 30 years). Interest only not available in Illinois.
Citizenship / Visa requirements
Borrowers who are natural persons may be Citizens / US persons or foreigners Borrowers who are eligible legal persons (LLCs and corporations) must be organized in one of the fifty states or the District of Columbia. If one or more Borrowers is a foreigner LTV is capped at 60% and 12 months of reserves are required.
Investment / Business Purpose – 2 to 9 units
Loans with one or more foreign borrowers are limited to the LTVs and loan amounts indicated below
Purchase and Rate & Term Refinance:
Allowable Loan to Values (LTV), Maximum Loan Amounts
740 minimum Credit Score: 80% LTV to $1,000,000 75% LTV to $1,500,000 70% LTV to $2,000,000 65% LTV to $2,500,000 60% LTV to $3,000,000 55% LTV to $4,000,000
700 minimum Credit Score:
75% LTV to $1,000,000
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70% LTV to $1,500,000 65% LTV to $2,500,000 60% LTV to $3,000,000 55% LTV to $4,000,000
680 minimum Credit Score:
70% LTV to $1,500,000 65% LTV to $2,500,000 60% LTV to $3,000,000 55% LTV to $4,000,000
640 minimum Credit Score:
65% LTV to $1,000,000 60% LTV to $1,500,000 50% LTV to $2,000,000
620 minimum Credit Score:
60% LTV to $1,000,000 55% LTV to $1,500,000
Loans with one or more foreign borrowers:
60% LTV to $2,000,000 55% LTV to $3,000,000 50% LTV to $4,000,000
Cash Out Refinance 740 minimum Credit Score:
75% LTV to $1,000,000 70% LTV to $1,500,000 65% LTV to $2,000,000 55% LTV to $3,000,000 50% LTV to $4,000,000
700 minimum Credit Score: 70% LTV to $1,000,000 65% LTV to $2,000,000 55% LTV to $3,000,000 50% LTV to $4,000,000
680 minimum Credit Score: 65% LTV to $1,500,000 60% LTV to $2,500,000 55% LTV to $3,000,000 50% LTV to $4,000,000
640 minimum Credit Score:
60% LTV to $1,000,000 55% LTV to $1,500,000 50% LTV to $2,000,000
Loans with one or more foreign borrowers:
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60% LTV to $1,500,000 55% LTV to $2,000,000 50% LTV to $3,500,000
Minimum Loan Amount $200,000 Minimum Credit Score 620 Minimum Debt Service Coverage 1.1 times PITIA (110% debt service coverage)
Eligible Property Types
Properties consisting of 2 to 9 units, if the property is less than 5 units, at least 1 unit must be commercial (store, restaurant, etc.) and properties with more than 2 commercial occupancy units are not permitted. PLEASE SEE SECTION 12.13 OF THESE GUIDELINES FOR IMPORTANT ADDITIONAL PROPERTY REQUIREMENTS
Permissible Occupancy
Investor / business purpose properties only (borrowers must sign a business use affidavit (no primary or second home occupancies)
Required Reserves
Loan Amount Reserves
up to $2,000,000 6 months PITIA*
more than $2,000,000
12 Months PITIA*
* If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is a primary residence or second home, then required reserves must be increased by one month of the PITIA for the Subject Property for each investment property owned by any of the Borrowers. If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is an investment property, then required reserves must be increased by two months of the PITIA for the Subject Property for each investment property owned by any of the Borrowers. For cash-out refinances, loan proceeds disbursed to Borrower may be used to meet reserve requirements.
Acceptable States All 50 States and DC (territories not permitted)
Gifts Gifts are not permitted. Income Documentation Please refer to Section 6.
Credit History
No Foreclosure, bankruptcy, deed in lieu or short sale over past 48 months at standard LTVs and reserves No foreclosure, bankruptcy, deed in lieu or short sale permitted over past 24 months available at a
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maximum LTV is 75% and with reserves increased by 6 months
Mortgage and Rental History Maximum permitted delinquency is 1x30x12
Subordinate Financing
Subordinate financing permitted provided (1) CLTV does not exceed the applicable LTV limits, (2) that the debt service on subordinate financing is included in the DTI calculation, and (3) that the terms of the subordinate financing conform to Fannie Mae requirements.
Appraisal Requirements
1 Full Appraisal Loan amounts over
1,500,000 require 2 appraisals (Appraisals may be on either Fannie form 1025, Freddie form 71A or Freddie form 71B)
Escrows Required
Pre-Payment Penalty 3 YR prepayment penalty required where permitted by law (PPP buyout may be available)
AUS Not applicable; manual underwrite
Calculator http://ALTLOANmortgage.com/calculators/
ACH draft required for mortgage payments If one or more Borrowers is a foreigner an ACH is required.
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2.11 Program Matrix for Loan Program SJ-1H Full Doc
Program Number SJ-1H Program Description Super Jumbo Full Doc
Available Products, Adjustment Caps, Margins and Interest Rate Floors
5/1 ARM- Caps 2% initial, 2% each year and 5% lifetime 7/1 ARM -Caps 2% initial, 2% each year and 5% lifetime Margins: owner occupied 3.25% Index: 1 Year LIBOR Floor (lifetime minimum rate): Initial note rate
Interest Only and Amortization Options:
5/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 7/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing (with price add-on).
(Interest Only products are for a 40-year term. After the Interest Only period the loan must amortize over the remaining term; interest only not available in Illinois)
Citizenship / Visa requirements Citizens / US persons only. Foreigners not permitted.
Allowable Loan to Value (LTV), Maximum Loan Amounts
Primary Residence & Second Homes – 1 Unit and Condo
Purchase and Rate & Term Refinance:
700 minimum Credit Score 65% LTV to $10,000,000
Cash Out Refinance
700 minimum Credit Score 60% LTV to $10,000,000 (65% possible as an exception)
Minimum Loan Amount Owner occupied and second homes: $500,000 Minimum Credit Score 700 Maximum Debt to Income Ratio 50% DTI Eligible Property Types 1 unit, warrantable and non-warrantable condo. Permissible Occupancy Primary residences and second homes.
Required Reserves
* If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is a primary residence or second home, then required reserves must be increased by one month of the PITIA for the Subject Property for each investment property owned by any of the Borrowers. If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is an investment property, then required reserves must be increased by two months of the PITIA for the Subject Property for each investment property owned by any of the Borrowers.
Loan Amount Reserves
Up to $10,000,000 10 months PITIA*
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For cash-out refinances, loan proceeds disbursed to Borrower may be used to meet reserve requirements.
Acceptable States All 50 States and DC (territories not permitted) Gifts Gifts are not permitted. Income Documentation Please refer to Section 6.
Credit History No Foreclosure, bankruptcy, deed in lieu or short sale over past 48 months at standard LTVs and reserves.
Mortgage and Rental History Maximum permitted delinquency is 0x30x12.
Subordinate Financing
Subordinate financing permitted provided (1) CLTV does not exceed the applicable LTV limits, (2) that the debt service on subordinate financing is included in the DTI calculation, and (3) that the terms of the subordinate financing conform to Fannie Mae requirements.
Appraisal Requirements 1 Full Appraisal + CDA or ARR. Loan amounts over $1,500,000 require 2 appraisals + CDA or ARR
Escrows Required AUS Not applicable; manual underwrite Calculator
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2.12 Program Matrix for Loan Program SJ-1H Bank Statements
Program Number SJ-1H Program Description Super Jumbo Bank Statements
Available Products, Adjustment Caps, Margins and Interest Rate Floors
5/1 ARM- Caps 2% initial, 2% each year and 5% lifetime 7/1 ARM -Caps 2% initial, 2% each year and 5% lifetime Margins: owner occupied 3.25% Index: 1 Year LIBOR Floor (lifetime minimum rate): Initial note rate
Interest Only and Amortization Options:
5/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 7/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing (with price add-on).
(Interest Only products are for a 40-year term. After the Interest Only period the loan must amortize over the remaining term; interest only not available in Illinois)
Self-employment requirement At least one borrower must have been continually self- employed for two years
Citizenship / Visa requirements Citizens / US persons only. Foreigners not permitted.
Allowable Loan to Value (LTV), Maximum Loan Amounts
Primary Residence & Second Homes – 1 Unit and Condo
Purchase and Rate & Term Refinance:
700 minimum Credit Score 65% LTV to $10,000,000
Cash Out Refinance
700 minimum Credit Score 60% LTV to $10,000,000 (65% possible as an exception)
Minimum Loan Amount Owner occupied and second homes: $500,000. Minimum Credit Score 700 Maximum Debt to Income Ratio 50% DTI Eligible Property Types 1 unit, warrantable and non-warrantable condo. Permissible Occupancy Primary residences and second homes.
Required Reserves
* If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is a primary residence or second home, then required reserves must be increased by one month of the PITIA for the Subject Property for each investment property owned by any of the Borrowers. If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is an investment property, then required reserves must be increased by two
Loan Amount Reserves
Up to $10,000,000 10 months PITIA*
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months of the PITIA for the Subject Property for each investment property owned by any of the Borrowers.
For cash-out refinances, loan proceeds disbursed to Borrower may be used to meet reserve requirements.
Acceptable States All 50 States and DC (territories not permitted) Gifts Gifts are not permitted. Income Documentation Please refer to Section 6.
Credit History No Foreclosure, bankruptcy, deed in lieu or short sale over past 48 months at standard LTVs and reserves.
Mortgage and Rental History Maximum permitted delinquency is 0x30x12.
Subordinate Financing
Subordinate financing permitted provided (1) CLTV does not exceed the applicable LTV limits, (2) that the debt service on subordinate financing is included in the DTI calculation, and (3) that the terms of the subordinate financing conform to Fannie Mae requirements.
Appraisal Requirements 1 Full Appraisal + CDA or ARR. Loan amounts over $1,500,000 require 2 appraisals + CDA or ARR
Escrows Required AUS Not applicable; manual underwrite Calculator
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2.13 Program Matrix for Loan Program JP-5H Full Doc Program Number JP-5H
Program Description Jumbo Prime Full Doc
Available Products, Adjustment Caps, Margins and Interest Rate Floors
5/1 ARM- Caps 2% initial, 2% each year and 5% lifetime 7/1 ARM -Caps 2% initial, 2% each year and 5% lifetime 30 year fixed
15 year fixed
Margins: owner occupied 3.25%
Index: 1 Year LIBOR (per CFPB rules, index must be set not earlier than 45 days prior to the Date of the Loan) Floor (lifetime minimum rate): Initial note rate
Interest Only and Amortization Options:
5/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing.
7/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing.
30 Year Fixed: 30 Year Self-amortizing (interest only not available).
15 Year Fixed: 15 Year Self-amortizing (interest only not available).
Self-amortizing loans are for 30 year terms, except 15 year fixed
which is for a 15 year term. Interest only loans are for 40 year
terms (after the 10 year Interest Only period the loan must amortize over the remaining 30 years). Interest only not available in Illinois.
Citizenship / Visa requirements Citizens and US persons only, Foreigners Are Not Permitted
Allowable Loan to Value (LTV),
Maximum Loan Amounts
Primary Residence – 1 & 2 Unit and Condo
Purchase and Rate & Term Refinance:
720 minimum Credit Score
80% LTV to $3,000,000 70% LTV to $4,000,000
65% LTV to $5,000,000
60% LTV to $6,000,000
700 minimum Credit Score:
80% LTV to $2,500,000
75% LTV to $3,000,000
70% LTV to $3,500,000
65% LTV to $5,000,000
60% LTV to $6,000,000
680 minimum Credit Score
80% LTV to $2,000,000
75% LTV to $3,000,000
70% LTV to $3,500,000
65% LTV to $5,000,000
55% LTV to $6,000,000
Cash Out Refinance
720 minimum Credit Score
75% LTV to $2,500,000 70% LTV to $3,000,000
50%
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60% LTV to $4,000,000
55% LTV to $5,000,000
50% LTV to $6,000,000
700 minimum Credit Score
75% LTV to $2,000,000
70% LTV to $3,000,000
60% LTV to $4,000,000
55% LTV to $5,000,000
50% LTV to $6,000,000
680 minimum Credit Score
70% LTV to $2,000,000
65% LTV to $3,000,000
60% LTV to $4,000,000
55% LTV to $5,000,000
50% LTV to $6,000,000
Second Homes – 1 - 2 unit and condo
Purchase and Rate & Term Refinance:
720 minimum Credit Score:
75% LTV to $3,000,000
70% LTV to $4,000,000
65% LTV to $5,000,000
55% LTV to $6,000,000
700 minimum Credit Score:
75% LTV to $2,000,000
70% LTV to $3,000,000
65% LTV to $5,000,000
55% LTV to $6,000,000
Cash Out Refinance
700 minimum Credit Score
60% LTV to $2,500,000
55% LTV to $5,000,000
50% LTV to $6,000,000
Minimum Loan Amount Owner occupied and second homes: $200K
Minimum Credit Score 680
Maximum Debt to Income Ratio 50% DTI
Eligible Property Types
1-2 Units, warrantable condo and non-warrantable condo -
non-warrantable condos require a rate add-on. 3 & 4 unit
and Condotel not permitted
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Permissible Occupancy Primary residences and second homes (investment not permitted)
Required Reserves
* If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is a primary residence or second home, then required reserves must be increased by one month of the PITIA for the Subject Property for each investment property owned by any of the Borrowers. If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is an investment property, then required reserves must be increased by two months of the PITIA for the Subject Property for each investment property owned by any of the Borrowers.
Reserve requirements may be waived based on mortgage rating, please see Section 10.4 for specific requirements.
For cash-out refinances, loan proceeds disbursed to Borrower
may be used to meet reserve requirements.
Acceptable States All 50 States and DC (territories not permitted)
Gifts Gifts are not permitted
Income Documentation Please refer to Section 6.
Credit History No Foreclosure, bankruptcy, deed in lieu or short sale over past 48 months.
Mortgage and Rental History All mortgages must be 0 X 30 X 12
Subordinate Financing
Subordinate financing permitted provided (1) CLTV does not
exceed the applicable LTV limits, (2) that the debt service on
subordinate financing is included in the DTI calculation, and (3) that the terms of the subordinate financing conform to Fannie Mae requirements.
Appraisal Requirements 1 Full Appraisal + CDA or ARR. Loan amounts over $1,500,000 require 2 appraisals + CDA or ARR
Escrows Required
AUS Not applicable; manual underwrite
Calculator
Pre-Payment Penalty Not permitted
ACH draft required for mortgage payments
Not required
Loan Amount Reserves
up to $1,000,000 6 months PITIA*
More than $1,000,000
12 months PITIA*
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2.14 Program Matrix for Loan Program JP-5H Bank Statements
Program Number JP-5H Program Description Jumbo Prime Bank Statements
Available Products, Adjustment Caps, Margins and Interest Rate Floors
5/1 ARM- Caps 2% initial, 2% each year and 5% lifetime 7/1 ARM -Caps 2% initial, 2% each year and 5% lifetime 30 year fixed 15 year fixed Margins: owner occupied 3.25% Index: 1 Year LIBOR (per CFPB rules, index must be set not earlier than 45 days prior to the Date of the Loan) Floor (lifetime minimum rate): Initial note rate
Interest Only and Amortization Options
5/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 7/1 ARM: 10 Year Interest Only or 30 Year Self-amortizing. 30 Year Fixed: 30 Year Self-amortizing (interest only not available). 15 Year Fixed: 15 Year Self-amortizing (interest only not available).
Self-amortizing loans are for 30 year terms, except 15 year fixed which is for a 15 year term. Interest only loans are for 40 year terms (after the 10 year Interest Only period the loan must amortize over the remaining 30 years). Interest only not available in Illinois.
Self-employment requirement At least one borrower must have been continually self- employed for three years
Citizenship / Visa requirements Citizens / US persons permitted, foreigners NOT permitted
Allowable Loan to Values (LTV), Maximum Loan Amounts Primary Residence – 1 & 2 Unit and Condo
Purchase and Rate & Term Refinance:
720 minimum Credit Score 80% LTV to $2,500,000 70% LTV to $3,500,000 65% LTV to $5,000,000 60% LTV to $6,000,000
700 minimum Credit Score:
80% LTV to $2,500,000 70% LTV to $3,000,000 65% LTV to $5,000,000 55% LTV to $6,000,000
680 minimum Credit Score
80% LTV to $2,000,000 75% LTV to $2,500,000 70% LTV to $3,000,000 65% LTV to $5,000,000 55% LTV to $6,000,000
Cash Out Refinance
720 minimum Credit Score 75% LTV to $2,500,000 65% LTV to $3,000,000 60% LTV to $4,000,000
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55% LTV to $5,000,000 50% LTV to $6,000,000
700 minimum Credit Score
75% LTV to $2,000,000 70% LTV to $2,500,000 60% LTV to $4,000,000 55% LTV to $5,000,000 50% LTV to $6,000,000
680 minimum Credit Score
70% LTV to $2,000,000 65% LTV to $2,500,000 60% LTV to $3,000,000 50% LTV to $4,000,000
Second Homes – 1 - 2 unit and condo
Purchase and Rate & Term Refinance:
720 minimum Credit Score: 75% LTV to $2,500,000 70% LTV to $3,500,000 65% LTV to $5,000,000 55% LTV to $6,000,000
700 minimum Credit Score:
75% LTV to $2,000,000 70% LTV to $3,000,000 65% LTV to $5,000,000 55% LTV to $6,000,000
Cash Out Refinance
700 minimum Credit Score 60% LTV to $2,500,000 55% LTV to $4,500,000
Minimum Loan Amount Owner occupied and second homes: $200,000 Minimum Credit Score 680 Maximum Debt to Income Ratio 50% DTI
Eligible Property Types 1-2 Units, warrantable condo and non-warrantable condo - non-warrantable condos require a rate add-on. 3 & 4 unit and Condotel not permitted
Permissible Occupancy Primary residences and second homes (investment not permitted)
Required Reserves
Loan Amount Reserves
up to $1,000,000 6 months PITIA*
More than $1,000,000
12 months PITIA*
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* If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is a primary residence or second home, then required reserves must be increased by one month of the PITIA for the Subject Property for each investment property owned by any of the Borrowers. If (i) the Borrowers own one or more investment properties which are not the Subject Property, and (ii) the Subject Property is an investment property, then required reserves must be increased by two months of the PITIA for the Subject Property for each investment property owned by any of the Borrowers.
Reserve requirements may be waived based on mortgage rating, please see Section 10.4 for specific requirements.
For cash-out refinances, loan proceeds disbursed to Borrower may be used to meet reserve requirements.
Acceptable States All 50 States and DC (territories not permitted) Gifts Gifts are not permitted Income Documentation Please refer to Section 6.
Credit History No Foreclosure, bankruptcy, deed in lieu or short sale over past 48 months.
Mortgage and Rental History All mortgages 0 X 30 X 12
Subordinate Financing Subordinate financing permitted provided (1) CLTV does not exceed the applicable LTV limits, (2) that the debt service on subordinate financing is included in the DTI calculation, and (3) that the terms of the subordinate financing conform to Fannie Mae requirements.
Appraisal Requirements 1 Full Appraisal + CDA or ARR. Loan amounts over $1,500,000 require 2 appraisals + CDA or ARR
Escrows Required AUS Not applicable; manual underwrite Calculator Pre-Payment Penalty Not permitted
ACH draft required for mortgage payments
Not required
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3. Mortgage Products and Subordinate Financing Requirements
Mortgage Products
For a Loan to be eligible for funding at ALTLOAN, the Loan must conform to the
ALTLOAN mortgage product requirements set forth in this Section 3. ALTLOAN
funds four types of loan products: 5/1 hybrid adjustable rate mortgage, 7/1
hybrid adjustable rate mortgage (“ARM”), 30-year fixed rate mortgage and 15-
year fixed rate mortgage. Temporary buy-downs are not permitted.
3.1 5/1 Hybrid ARM Product
The required loan terms of the 5/1 hybrid ARM product are as follows:
Term: 360 months for self-amortizing loan and 480 months for interest only loans.
Initial interest rate: fixed for 60 months, followed by an initial adjustment,
and then followed by additional adjustments every 12 months.
Index: 1 year LIBOR (the index value must be established not earlier than 45 Days prior to the Date of the Loan).
Margin: owner occupied - 3.25%, investor occupied – 5.25%.
Caps: Initial - 2%, Annual - 2%, Lifetime – 5%.
Floor (minimum interest rate): initial note rate.
Amortization: either (a) self-amortizing over 360 months or (b) interest only
for 120 months and then self-amortizing over the remaining term (over the
remaining 360 months).
3.2 7/1 Hybrid ARM Product
The required loan terms of the 7/1 hybrid ARM product are as follows:
Term: 360 months for self-amortizing loan and 480 months for interest only
loans.
Initial interest rate: fixed for 84 months, followed by an initial adjustment, and then followed by additional adjustments every 12 months.
Index: 1 year LIBOR (the index value must be established not earlier than 45
Days prior to the Date of the Loan).
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Margin: owner occupied - 3.25%, investor occupied – 5.25%. Caps: Initial - 2%, Annual - 2%, Lifetime – 5%.
Floor (minimum interest rate): initial note rate.
Amortization: either (a) self-amortizing over 360 months or (b) interest only
for 120 months and then self-amortizing over the remaining term (over the
remaining 360 months).
3.3 30 Year Fixed Product
The required loan terms of the 30-year fixed product are as follows:
Term: 360 months
Interest rate: note rate fixed throughout the life of the Loan Amortization: self-amortizing over 360 months.
3.4 15 Year Fixed Product
The required loan terms of the 15-year fixed product are as follows:
Term: 180 months
Interest rate: note rate fixed throughout the life of the Loan Amortization: self-amortizing over 180 months.
Subordinate Financing Requirements
ALTLOAN funds first lien mortgage loans. ALTLOAN permits a Subject Property collateralizing a to be encumbered by a subordinate mortgage if each of the following are true:
1) The terms of the subordinate mortgage comply, in all respects, with
Fannie Mae’s requirements for Acceptable Subordinate Financing;
2) There is only one subordinate mortgage encumbering the Subject
Property (if the Subject Property is encumbered by multiple subordinate
mortgages the Loan is ineligible for funding at ALTLOAN);
3) The mortgage payment for the subordinate mortgage is including in the
debt to income ratio used to qualify the Loan;
4) The cumulative loan to value ratio for the Loan does not exceed the
permitted loan to value ratio for the loan.
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4. Borrower Eligibility; Occupying Borrowers, Non-occupying Co-borrowers, Investment Borrowers, Guarantors and Non-Borrower Mortgagors
4.1 Borrowers, Guarantors and Non-Borrower Mortgagors Defined
For the purposes of these Underwriting Guidelines, for any given Loan:
Borrowers are defined as all Occupying borrowers, Non-occupying co- borrowers, Trust Borrowers, Investment Borrowers and Guarantors;
(a) Occupying borrowers are defined as natural persons who (i)
occupy, or will, upon a Loan’s closing, occupy the Subject Property,
(ii) become obligated for the Loan and sign the note and Mortgage
evidencing the Loan, (iii) either (a) own an interest in the Subject
Property or (b) are the settler of a revocable inter vivos trust that
conforms to Fannie Mae’s requirements for inter vivos trusts, and (iv) whose credit qualifications are used to determine whether the Loan will be granted;
(b) Non-occupying co-borrowers are defined as natural persons who
(i) are obligated for a Loan where the Loan occupancy is primary
residence or second home, and sign the note and Mortgage
evidencing the Loan, (ii) are owners of the Subject Property, (iii)
do not and will not occupy the Subject Property, (iv) whose credit
qualifications are used to determine whether the Loan will be
granted;
(c) Trust borrowers are defined as inter vivos trusts that own an
interest in the Subject Property;
(d) Investment borrowers are defined as natural persons or legal
persons who (i) are obligated for a Loan where the Loan
occupancy is business purpose / investor occupied, and sign the
note and Mortgage evidencing the Loan, (ii) are owners of the
Subject Property, (iii) do not and will not occupy the Subject
Property, and (iv) whose credit qualifications are used to
determine whether the Loan will be granted; Investment
borrowers may only be natural persons, LLCs or corporations, and
may not be any other type of entity;
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(e) Guarantors are defined as natural persons who (i) own an interest
in the legal person which owns the Subject Property, (ii) are
obligated for a Loan where the Loan occupancy type is investor
occupied / business, and sign the note and Mortgage evidencing
the Loan, (iii) do not and will not occupy the Subject Property, and (iv) whose credit qualifications are used to determine whether the Loan will be granted Loan.
Non-borrower mortgagors are not included in the definition of Borrowers, and are defined as natural persons who are not obligated for a Loan, but who own or otherwise have an interest in the Subject Property, and mortgage such interest so that the Subject Property can collateralize the Loan.
4.2 Subject Property Owners Must Be Borrowers, or Non-Borrower Mortgagors
For a Loan to be eligible for funding at ALTLOAN, at least one owner of the Subject Property must be a Borrower, and each owner of the Subject Property must be a Borrower or a Non-Borrower Mortgagor.
4.3 Non-borrower Mortgagor Requirements
If one or more Non-borrower mortgagors owns an interest in the Subject Property, then each Non-borrower mortgagor must conform with each of the following requirements:
(a) The Non-Borrower Mortgagor is the Spouse of a Borrower;
(b) The Non-Borrower Mortgagor executes the mortgage securing the
Loan, thereby mortgaging his or her interest in the Subject Property in
a manner that provides the ALTLOAN with an enforceable first lien on
the Subject Property (Non-Borrower Mortgagors are not permitted if
the title insurer that insures the ALTLOAN’s first lien security interest
in the Subject Property makes any exception or change to its
insurance coverage as a result of a Non-Borrower Mortgagor);
(c) The Non-Borrower Mortgagor is not an applicant for the Loan, does not file a loan application, and is not evaluated in determining whether the Loan will be granted.
4.4 Borrower Requirements for Owner Occupied Properties
If the Subject Property is owner occupied then the Loan must conform with each of the following requirements:
(a) at least one Borrower must be an Occupying borrower;
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(b) Each Non-occupying co-borrower meets the following
requirements:
(i) has one of the following family relationships with one of the Occupying borrowers; mother, father, sister, brother, son, daughter, uncle, aunt, niece or nephew, in each case, either by blood or marriage;
(ii) for purchase transactions, not less than 5% of the purchase price of the Subject Property may be derived from the Occupying borrower(s)’ funds;
(iii) The credit score that is the basis for qualification of the Loan may not be improved by a non-occupying Borrower; (if the credit score for a Loan, as calculated in accordance with Section 5 hereof is higher due to the inclusion of a Non- occupying co-borrower, then the credit score of the non- occupying co-borrower must be excluded in determining the representative credit score for the Loan, however if the credit score of a Non-occupying co-borrower diminishes the credit score for the Loan, then the credit score of the Non-occupying co-borrower must be included in determining the representative credit score for the Loan;
(iv)Non-occupying co-borrowers must live in the United States.
(c) If a Borrower is a Trust Borrower, then (1) the settler of the Trust
Borrower must occupy the Subject Property, and (2) the Trust
Borrower must conform to all of Fannie Mae’s requirements
regarding inter vivos trusts.
4.5 Borrower Requirements for Investor Occupied Properties
If the Subject Property occupancy is business purpose / investor (non-owner occupied) then the Loan must conform with each of the following requirements:
(a) No Borrower and no owner of the Subject Property may occupy
the Subject Property, either now, or at any time the Loan is
outstanding;
(b) No person who is related by blood or marriage to a Borrower may
occupy the Subject Property, either now, or at any time the Loan is
outstanding (for the purposes hereof, related shall include spouse,
domestic partner, mother, father, mother-in-law, father-in-law,
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sister, brother, sister-in-law, brother-in-law, son, daughter, son-in-
law, daughter-in-law, uncle, great uncle, aunt, great aunt, niece,
nephew or first cousin, all either by blood or marriage);
(c) If the Borrower is a legal person (non-natural person), then all
owners of the Borrower must be natural persons (the Borrower
may not be owned by one or more legal persons).
(d) If the Borrower is a legal person, each person who owns 20% or
more of the Borrower must be a Guarantor (if no natural person
owns 20% of the Borrower, then the Loan is ineligible for funding
at ALTLOAN).
4.6 General Borrower Requirements
Each Borrower must (i) file a loan application, (ii) become obligated on the Loan by signing the note and Mortgage evidencing the Loan, and (iii) complying with the requirements set forth in Sections 4.7 Citizens / US Persons and Foreigners; 4.8 Country Restrictions, 4.9 OFAC, 4.10 Diplomatic Immunity, 4.11 Limitation on Mortgages for which Borrowers are Obligated, and Section 5 Credit Scores and Credit History.
4.7 Citizens / US Persons and Foreigners
Each Borrower who is a natural person must be classified as either:
(i) A citizen / US person, which for the purposes hereof shall include all
US citizens, all holders of immigration document I551 (green card), all
persons who have been approved for I551 (green card) status and
who can document such approval (typically through immigration
form I797) and all persons holding visas allowing residency in the
United States that are acceptable to Fannie Mae, provided that in no event will a person holding an “A” class (diplomatic visa) or “G” class
(international organization visa) be eligible for financing;
(ii) A foreigner;
Foreigners are subject to reduced loan to value limits and other special qualification requirements, and a pricing overlay. Documentation evidencing the visa status of non-citizens, including copies of non-citizens’ passports must be included in the Mortgage File.
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Each Borrower who is a legal person (LLC, corporation or inter vivos trust) must be organized under the laws of one of the fifty states or the District of Columbia, and the documents evidencing the formation of such Borrower must be included in the Mortgage File.
4.8 Country Restrictions
Notwithstanding any other provision of this Underwriting Guide, a Loan is ineligible for funding at ALTLOAN if one or more Borrowers obligated on the Loan (i) is (a) not a United States Citizen and (ii) does not hold a form I551 (green card), and (iii) is a citizen of any of the following countries:
Afghanistan Balkans Belarus Burma Central African Republic Cote d’Ivoire
Cuba Democratic Republic of Congo Iran Iraq Liberia Libya Kenya Myanmar
Nigeria North Korea Somalia Sudan
Syria Yemen Zimbabwe
4.9 OFAC
No Borrower may be listed on the United States Treasury’s OFAC website.
ALTLOANs must determine if a Borrower is listed on the OFAC website, and must
include in the
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Mortgage File documentation showing the Borrower is not listed on the
OFAC website.
4.10 Diplomatic Immunity
No Borrower or non-borrower mortgagor may have diplomatic immunity, and no Borrower may hold an “A” class visa, or a “G” class visa.
4.11 Limitation on Mortgages for Which Borrowers and Guarantors are Obligated
No Borrower may be obligated for more than 10 loans that have been funded by
ALTLOAN. If a person is already obligated for 10 loans that have been funded by
ALTLOAN, then additional Loans for which such person is a Borrower are ineligible
for funding at ALTLOAN.
No Borrower may be obligated for loans funded by ALTLOAN with an aggregate
principal amount that exceeds $6 million. If a person is already obligated for loans
that have been funded by ALTLOAN with an aggregate principal amount of $6
million or more, then additional Loans on which such person is a Borrower are
ineligible for funding at ALTLOAN. Notwithstanding the preceding sentence, if (i) if
none of the Borrowers obligated on a Loan are obligated on a loan that was
previously funded by ALTLOAN, and (ii) such Loan would be eligible for funding at
ALTLOAN if not for this paragraph, then such Loan is eligible for funding at
ALTLOAN.
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5. Credit Scores, Credit History and Fraud Prevention Engine Requirements
5.1 Consumer Credit Report Required
An industry standard, tri-merge credit report (a “Credit Report”) is required for each Borrower who is both (i) a citizen / US person, and (ii) a natural person.
All Credit Reports must provide merged credit information from Experian, Trans Union and Equifax.
Special Requirement for foreigner Borrowers
For Borrowers classified as foreigners (in accordance with section 4.7 of these Underwriting Guidelines), the ALTLOAN must attempt to obtain a Credit Report. If a Credit Report is unavailable, the Loan is still eligible for funding at ALTLOAN, however if a Credit Report with credit scores is available, it must be used to evaluate whether the Loan conforms to the credit cores and credit history requirements of the applicable Loan Program. ALTLOANs must include in the Mortgage File, documentation demonstrating that the ALTLOAN attempted to obtain a Credit Report for each foreign Borrower.
5.2 Age of Credit Report
Credit reports may not be greater than 90 days old on the Date of the Loan.
5.3 Credit Score Requirements
As set forth in the loan program matrices in Section 2 of these Underwriting Guidelines, each loan program has a required minimum credit score. To determine if a Loan meets the minimum credit score requirement for its Loan Program, ALTLOANs must determine the Loan’s Representative Score. If the Representative Score for a Loan, is less than the required score, then the Loan is ineligible for funding at ALTLOAN. In addition, the Representative Score must be used to determine if a Loan complies with other Loan Program requirements which are dependent on credit score, such as maximum loan amount for a given loan to value ratio.
For loan program AA-6H Full Doc , AA-6H Asset Depletion , NA-M3 – Moderate Credit Full Doc, SJ-1H Full Doc or JP-5H Full Doc, the Representative Score is the Applicable Score of the Occupying Borrower with the greatest income among all Occupying Borrowers. For the purposes hereof, the Applicable Score for an Occupying Borrower is (i) the middle score for Occupying Borrowers with 3 Valid Credit Scores, and (ii) the lower score for Occupying Borrowers with 2 two valid6 Credit Scores.
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For loan programs AA-6H Bank Statements, NA-M4 Moderate Credit Bank Statement, SJ-1H Bank Statements and JP-5H Bank Statements , the Representative Score is the lowest Applicable Score among all Borrowers who are natural persons. For the purposes hereof, the Applicable Score for a Borrower is (i) the middle score for Borrowers with 3 Valid Credit Scores, and (ii) the lower score for Borrowers with 2 valid Credit Scores.
For loan program NA-I5 Investor DSC, NA-I3 Investor No Ratio and MF-1H Multi-Family , the Representative Score is, at the ALTLOAN’s option, either (i) the average Applicable Score among all Borrowers who are natural persons or (ii) the lowest Applicable Score among all Borrowers who are natural persons. For the purposes hereof, the Applicable Score for a Borrower is (i) the middle score for Borrowers with 3 Valid Credit Scores, and (ii) the lower score for Borrowers with 2 two valid Credit Scores.
A (“Valid Credit Score”) is a credit score from Experian (FICO), Trans Union (Empirica), and Equifax (Beacon). Only scores from these reporting agencies are Valid Credit Scores.
For a Loan to be eligible for funding at ALTLOAN, all Borrowers who are citizens of, or reside in, the United States must have a Valid Credit Score. Foreigners are not required to have a Valid Credit Score, however for a Loan to be eligible for funding at ALTLOAN, the ALTLOAN originating the Loan must have attempted to run credit on each foreign borrower. If a Valid Credit Score is not available for a foreign borrower, the Loan is still eligible for funding at ALTLOAN. If a Valid Credit Score is available for a foreign borrower, the Valid Credit Score must be used in determining the Representative Credit Score for the Loan, and whether the Loan meets the credit score requirement of the Loan Program.
5.4 Trade Line Requirements
If one or more of the Borrowers on a Loan is a citizen or US person, then ALTLOAN requires that the Borrowers jointly have a minimum of 3 trade lines of established credit in the United States. For a trade line to be included in the count of trade lines toward the required minimum it must have been reported by Experian, Trans Union or Equifax with a history of at least twelve months prior to the date of the credit report, or it must be verified through a mortgage verification, rent verification or installment debt verification as having been established not less than twelve months prior to the date of such verification (each tradeline included in the count of tradelines must have been opened for not less than twelve months).
In addition, if one or more of the Borrowers on a Loan is a Citizen / US person, then ALTLOAN requires that Borrowers jointly have two trade lines that have (i) been active within the twelve months prior to the date of the Borrower’s consumer credit report, and (ii) have been established for twelve months or longer. For the purposes
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hereof, trade lines may include mortgage debt, installment debt, revolving debt and real property rental payments. Trade lines of any Borrower may be counted toward the total number of trade lines required, but trade lines for which more than one Borrower is obligated may only be counted as one trade line.
5.5 Delinquency and Derogatory Credit
5.5.1 – Foreclosures, bankruptcies, short sales and deed in lieu of foreclosure for all loan programs except NA-M3 Moderate Credit Full Doc, NA-M4 Moderate Credit Bank Statement, SJ-1H Full Doc , SJ-1H Bank Statements, JP-5H Full Doc and JP-5H Bank Statements
For a Loan to be eligible for funding at ALTLOAN at standard LTV ratios and reserves, during the four-year period preceding the date of the Loan: no Borrower may have (i) owned a property, located in the United States, that was or is in foreclosure, (ii) been in bankruptcy under the jurisdiction of the United States, (iii) given a deed in lieu of foreclosure on a property located in the United States, (iv) sold a property located in the United States in a short sale, or (v) settled a mortgage debt secured by a property in the United States for less than the debt’s full principal due.
Notwithstanding the preceding paragraph, a Loan is eligible for funding at ALTLOAN if each of the following are true: (a) during the two-year period preceding the date of the Loan: (i) no Borrower has owned a property located in the United States that was or is in foreclosure, (ii) been in bankruptcy under the jurisdiction of the United States, (iii) given a deed in lieu of foreclosure on a property located in the United States, (iv) sold a property located in the United States in a short sale, or (v) settled a mortgage debt secured by a property located in the United States for less than the debt’s full principal, (b) the Loan’s LTV does not exceed75%, and (c) the Borrower’s reserves are at least six months greater than standard (six months greater than what would have been ALTLOAN’s required reserves, if not for this paragraph).
5.5.2 - Foreclosures, bankruptcies, short sales and deed in lieu of foreclosure for loan programs NA-M3 Moderate Credit Full Doc, NA-M4 Moderate Credit Bank Statement, SJ-1H Full Doc , SJ-1H Bank Statements, JP-5H Full Doc and JP-5H Bank Statements
For a Loan to be eligible for funding at ALTLOAN, the Loan must conform to the foreclosure, bankruptcy, short sale and deed in lieu of foreclosure restrictions set forth on the applicable loan program matrix in Section 2 of these Underwriting Guidelines.
5.5.3 Liens, Judgements and Other Attachments
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For a loan to be eligible for funding at ALTLOAN, the Borrowers must not be subject to a lien, judgement or other item that may or will attach to the Subject Property and became a lien or other “cloud” on title, and (i) all liens and judgements must be paid in full prior to or at closing (proceeds from the Subject Loan may be used to satisfy this requirement), and (ii) other items that may attach to the Subject Property must be paid in full prior to or at closing (proceeds from the Subject Loan may be used to satisfy this requirement).
5.5.4 Collection and Charge-off Accounts
All non-medical collection accounts and charge-offs exceeding $1000, which are not in dispute (except collection accounts and charge offs no longer enforceable due to the applicable state statute of limitations), must be paid in full prior to or at the time of a Loans’ funding by the originating ALTLOAN.
Medical collection and charge-off accounts, collection and charge-off accounts of $1000 or less, and disputed collection and charge-off accounts need not be paid in full if the following requirement is met: in additional to all reserves otherwise required, Borrowers must have additional reserves equal to the amount of all medical and disputed collection and charge-off accounts not paid in full (except collection accounts and charge offs no longer enforceable due to the applicable state statute of limitations); accounts other than medical accounts, account of $1000 or less, and disputed accounts must be paid in full regardless of reserves.
5.6 Required Mortgage and Housing Payment History
For a Loan to be eligible for funding at ALTLOAN under any loan program except NA-M3 Moderate Credit Full Doc, NA-M4 Moderate Credit Bank Statement, SJ-1H Full Doc , SJ-1H Bank Statements, JP-5H Full Doc and JP-5H Bank Statements the maximum delinquency on any Borrower’s mortgage or rental obligations for properties located in the United States is:
1 X 30 X 12;
if the mortgage or rental rating of any Borrower shows delinquency greater than 1 X 30 X 12, then the Loan is ineligible for funding at ALTLOAN.
For a loan to be eligible for funding at ALTLOAN under loan programs NA-M3 Moderate Credit Full Doc and NA-M4 Moderate Credit Bank Statement, the Loan must conform to restrictions for housing late payments set forth on the applicable loan program matrix in Section 2 of these Underwriting Guidelines.
For a loan to be eligible for funding at ALTLOAN under loan programs SJ-1H Full Doc, SJ-1H Bank Statements, JP-5H Full Doc
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and JP-5H Bank Statements , the maximum delinquency on any Borrower’s mortgage or rental obligations for properties located in the United State is:
0 X 30 X 12.
5.7 Written Explanations of Derogatory Credit
A satisfactory written explanation signed by the applicable Borrower and explaining the reason(s) for obligations paid more than sixty days past their due date, and for liens, judgements and charge-offs is required. The explanation must satisfactorily identify the reason(s) for the adverse credit and provide detail demonstrating that the situation causing the delinquency has now been resolved.
5.8 Verification of Obligations Not Appearing on Consumer Credit Report
ALTLOANs must verify Borrower obligations with United States nexus which are not rated on Borrowers’ Credit Report including obligations for rental payments, mortgages and installment debts. Both the balance outstanding and the monthly payment must be verified, and a 12-month payment history must be obtained. Acceptable verification methods include verification of mortgage, verification of rent, verification of installment debt or copies of the front and back of the last 12 months’ checks used to pay an obligation.
5.9 Explanations Regarding Lawsuits and Pending Litigation
If the application, title or Credit Report reveal that a Borrower is presently involved in a lawsuit or pending litigation a statement from the Borrower’s attorney is required. The statement must explain the circumstances of the lawsuit or pending litigation and discuss potential liability and any applicable insurance coverage. A copy of the legal complaint and answer must be included in the Mortgage File. The title company closing the loan must be informed of the lawsuit, and not title exceptions are permitted which stem from the lawsuit or pending litigation. If the lawsuit or litigation is reasonably likely to have a material adverse impact on the borrower’s ability to repay a Loan, or if the lawsuit or pending litigation or the cause of a title exception, then the Loan is ineligible for funding at ALTLOAN.
5.10 Credit Report Identified Inquiries
If a credit report indicates that a Borrower made inquiries about obtaining credit within the 90-day period prior to the date of the credit report, the ALTLOAN must determine whether credit was granted to the Borrower in connection with such inquiry, and must document the method of its determination. If additional credit was granted, such additional credit must be included on the Borrowers’ Final Application and in the calculation of the Borrowers’ obligations.
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5.11 Use of a Fraud Prevention Engine Required
For a loan to be eligible for funding at ALTLOAN, a fraud prevention engine pull must be obtained from either DataVerify, CoreLogic, SAS - or from another fraud prevention engine which ALTLOAN, in its discretion, chooses to accept. Each high-risk alert indicated by the engine pull must be addressed by the ALTLOAN.
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6. Determining and Documenting Income and Employment History
ALTLOAN requires different methods of determining and documenting income and employment history for the various ALTLOAN loan programs. For all loan programs except NA-I5 Investor – Investor DSC, NA-I3 – Investor No Ratio and I6 – Mixed Use, ALTLOANs must determine the income and employment history of the Borrowers. For loan programs I5 – Investor DSC, and I6 – Mixed Use, ALTLOANs must determine the rental income from the Subject Property, but should not determine or document the Borrowers’ income, or verify the Borrowers’ employment history (the Borrowers’ employer information should however be accurately included on the Borrowers’ loan application). For loan program I3 – Investor No Ratio, ALTLOANs need not determine either the Borrowers’ income or the rental income from the Subject Property. ALTLOAN’s specific requirements regarding determining and documenting income, and where applicable employment history, are as follows:
6.1 Loan programs AA-6H Full Doc Full Doc, NA-A3 Residual Income, NA-M3 Moderate Credit Full Doc, SJ-1H Full Doc and JP-5H Full Doc
ALTLOANs submitting Loans to ALTLOAN for funding under loan programs AA-6H Full Doc, NA-A3 Residual Income, NA-M3 Moderate Credit Full Doc, SJ-1H Full Doc and JP-5H Full Doc must determine and document income and employment history in accordance with the manual underwriting requirements of the Fannie Mae Selling Guide.
Notwithstanding the general requirement that Jumbo Prime Loans be underwritten in accordance with the Fannie Guide, the following exceptions to the Fannie Guide are permitted:
For loan programs AA-6H Full Doc , A3 - Residual Income and M3 Moderate Credit Full Doc, SJ-1H Full Doc and JP-5H Full Doc
1) Wage and salary
For programs AA-6H Full Doc , NA-A3 Residual Income and NA-M3
Moderate Credit Full Doc:
Income may be documented by a combination of (1) the Borrowers’ most
recent paystubs, which must show earnings for 30 successive calendar days,
and which must list year-to-date earnings, and (2) a W2 tax form for the
previous calendar year (W2 forms for other than the previous calendar year
are not required if a loan closes prior to January 31 of a given year, then a W2
form for the year prior to the previous calendar year may be substituted for
the W2 form for the previous calendar year).
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For programs SJ-1H Full Doc and JP-5H Full Doc
Income may be documented by a combination of (1) the Borrowers’ most recent paystubs, which must show earnings for 30 successive calendar days, and which must list year-to-date earnings, and (2) a W2 tax form for the previous two calendar year (if a loan closes prior to January 31 of a given year, then a W2 form for the year prior to the previous calendar year may be substituted for the W2 form for the previous calendar year.)
2) Self-employment income may be documented by the Borrowers’ personal tax
return, and (2) if applicable, business tax return(s). Business tax returns are
only required if a Borrower chooses to use income from a “C” corporation
that is not reflected on the Borrower’s personal tax return. If the Date of the
Loan is on or before April 15 of a given year, the tax return(s) used to
document the Borrowers’ income may be either the return(s) for the full
calendar year prior to the calendar year most recently ended, or the
return(s) for the full calendar year most recently ended. If the Date of the
Loan is after April 15 of a given year, then the needed return(s) are the
return(s) for the calendar year most recently ended. A profit and loss
statement is not required except as set forth in the following paragraph.
If required tax return(s) are not unavailable due to a filing extension, then
the tax return(s) for the immediately prior year may be used to document
income. If the immediately prior year tax return(s) are used to document
income, then the Borrowers must submit a signed profit and loss statement
for each of the Borrowers’ businesses used for qualifying (if a borrower
business is not used for qualifying, then a profit and loss statement for that
business is not required). If the signed profit and loss statement shows
lower income than the prior year’s tax return, then the income shown on the
profit and loss statement (instead of the prior year’s tax return) must be used
in calculating the Borrowers’ debt to income ratio, otherwise the income from the prior year’s tax return must be used in calculating the Borrowers’
debt to income ratio.
3) Rental income may be documented through leases (as opposed to tax
returns). In addition, if an investment property which is not the Subject
Property is rented on a short-term basis through a short-term rental
facilitator (such as Airbnb), rental income may be documented through
statements from short-term rental facilitators. Rental income may be included in the Borrowers’ income, in the amount documented with (i)
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leases, or (ii) if the rental income is not derived from the Subject Property,
short-term rental facilitator statements, regardless of how long a property
has been rented. ALTLOANs must verify rental income documented with a
lease by including, in the Mortgage File, Borrower bank statements which
show either (1) three months of rent receipts or (2) for a new lease, receipt
of a security deposit and one month of rent. ALTLOANs must verify rental
income documented with short-term rental facilitator statements by
including, in the Mortgage File, the past twelve months of statements from
the rental facilitator(s). If short-term rental income is included in the
Borrowers’ income, then the income that may be included is the average
short-term rental income over the past twelve months.
4) Verbal verifications of employment are not required for self-employed
borrowers.
Special requirements for Foreign Borrowers for Program AA-6H Full Doc (foreign borrowers not permitted under programs A3 Residual Income, M3 Moderate Credit Full Doc, SJ-1H Full Doc and JP-5H Full Doc Return)
To determine and document the income of foreigners (“Foreign Borrowers”), ALTLOANs must generally adhere to the requirements for documenting income set forth in the Fannie Guide, except that the following are acceptable income and documentation thereof for Foreign Borrowers, and may be included in the Borrowers’ income for qualifying:
Salary and wage income validated by either:
(a) paystubs and tax returns; if the Foreign Borrowers’ resident country
utilizes the equivalent of a W2 form, then the W2 equivalent may be substituted for tax returns. Paystubs, W2s and tax returns must be translated to English if they are in a foreign language; or
(b) a letter from the Foreign Borrowers’ employer which states the Foreign
Borrowers’ year-to-date income for the current year, and the Foreign Borrowers’ income for the previous year, with a break-out of base salary or wages, overtime, bonuses, commissions and other sources of income. Employer letters must be on company letterhead and must include the employer’s address and telephone number. If the letter is in a language other than English, a translation of the letter into English must be provided. If the employer’s letterhead does not include the employers’ website address, the website address must be obtained and included in the Mortgage File.
Self-employment income validated by either:
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(a) Most recent year tax return filed by the Foreign Borrowers in their
resident country; if the tax return is not in English, it must be translated
to English; or
(b) A letter from the Foreign Borrowers’ certified public accountant (or the
equivalent thereof in the Borrowers’ resident country) on the
accountant’s letterhead stating the Foreign Borrowers’ income from self-
employment for the previous calendar year. If the accountant’s letter is
not in English, then a translation into English must be provided. In
addition, if Foreign Borrower self-employment income is verified by a certified public accountant, a copy of the accountant’s license must be
included in the Mortgage File.
Rental income validated by either:
(a) Most recent year of tax return filed by the Foreign Borrowers in their
resident country; if the tax return is not in English, then it must be
translated to English; or
(b) Leases setting forth rental income and three recent bank statements
showing receipt of the rental income into the Foreign Borrowers’ bank
account.
Income from other sources validated as follows:
(a) For types of income that are documentable with statements, copies of
statements for the previous year with an accompanying translation;
examples of income documentable with statements include dividends,
interest, retirement income, income from trusts, and royalty income;
(b) For other types of income, a letter from the Foreign Borrowers’ certified
public accountant, on the accountant’s letterhead, describing the nature
of the income, the amount of income received by the Foreign Borrowers
and whether the income is likely to continue over the next three years; if
the letter is not in English a translation to English is required; in addition,
a copy of the accountant’s license must be obtained and included in the
Mortgage File.
6.2.1 Loan Programs AA-6H Bank Statements, SJ-1H Bank Statements and JP-5H Bank Statements
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Brokers submitting a Loan to ALTLOAN for funding under the AA-6H Bank Statements and SJ-1H Bank Statements programs must document that (i) at least one Borrower must have been continuously self-employed for two years, and (ii) each Borrower whose self-employment income is used to qualify for the Loan must have been continuously self-employed for two years.
ALTLOANs submitting a Loan to ALTLOAN for funding under the JP-5H Bank Statements program must document that (i) at least one Borrower must have been continuously self-employed for three years, and (ii) each Borrower whose self- employment income is used to qualify for the Loan must have been continuously self-employed for three years.
In addition, ALTLOANs must verify the portion of the Borrowers’ business that is owned by the Borrower. Acceptable documentation for the requirements set forth in this paragraph include business licenses, a written statement from a certified public accountant or professional tax preparer, LLC or partnership agreements, incorporation records, assignment of tax ID notices, business certificates (aka fictitious name certificates) filed with a governmental jurisdiction, bank account agreements or other bank records and other similar records.
ALTLOANs submitting loans to ALTLOAN for funding under the AA-6H Bank Statements, SJ-1H Bank Statementsand JP-5H Bank Statements must determine and document income from self-employment based on one of the following two methods:
Business Account Analysis Method (including bank statements from personal accounts used for business)
ALTLOANs may determine and document income from self-employment by calculating the product of (1) the average deposits from Acceptable Sources into the Borrowers’ business bank accounts (or if the Borrowers’ deposit business revenues into personal accounts, then into the Borrowers’ business and personal accounts) over the 12-month period preceding the month of the Borrower’s Initial Application (“Average Acceptable Deposits”), times (2) the Profit Margin (as defined below) for the Borrowers’ business, times (3) the percentage of the Borrowers’ business owned by the Borrowers. For the purposes of these Underwriting Guidelines:
(i) Acceptable sources for deposits are deposits from the ordinary
operations of the Borrowers’ business, and exclude (a) transfers from
another bank or asset account, (b) extraordinary asset sales, (c)
unusual borrowing (provided that borrowings which are common and
customary for the business such as programmatic borrowing under a
secured revolving credit facility or factoring agreement, shall not be
excluded), or (d) tax refunds;
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(ii) The (“Profit Margin”) for the Borrowers’ business is 50%.
Notwithstanding the foregoing, (A) if the Borrowers are in a high
margin business (for example, doctors, architects, consultants,
persons working under personal service type contracts, tutors,
coaches and teachers) then ALTLOANs may choose to use a Profit
Margin higher than 50% provided either: (1) the Borrowers’ business
is a Type 1 or Type 2 business in accordance with the requirements
for Type 1 and Type 2 businesses below; if the Borrowers business is
a
Type 1, then the Profit Margin is 85%; if the Borrowers’ business is a
Type 2, then the Profit Margin is 60%, or (2) the Borrowers’ certified
public accountant supplies a historical profit and loss statement for
the Borrowers’ business for the calendar year preceding the date of
the Borrower’s loan application, provided (x) twelve times the
Average Acceptable Deposits (the annualized Average Acceptable
Deposits) must be equal to or greater than 90% of the revenue set
forth on the profit and loss, and (y) the profit and loss statement must
be signed by the certified public accountant; or (B) if the Borrowers
are in a business that is a High Value Dealer (as defined below) then
the Profit Margin is 20%,
(iii) The percent of the business owned by the Borrowers is the Borrowers
verified ownership interest in the business on a current (as opposed
to fully diluted) basis (preferred securities, convertible securities and
options are not includable in determining the Borrowers’ percent of
the business owned).
ALTLOANs may include income from self-employment calculated in accordance with this subsection (“Business Account Analysis Method”), in the income used to qualify the Borrower for a Loan.
Type 1 and Type 2 Businesses
A Type 1 business must meet each of the following requirements:
1) The business has no employees other than the Borrowers (ALTLOANs must review
the bank statements where business revenues are deposited to ensure there are no
payments to employees);
2) The business is a service business where the service is provided by the Borrowers;
3) The service provided does not include the use of other than nominal consumable
materials (for example a plumber that supplies fixtures or piping is not a type 1
business, but a self-employed piano teacher is a type 1 business);
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4) The service provided does not require the use of heavy equipment or vehicles (the
service may however require the use of the business owner’s own car);
A Type 2 business must meet each of the following requirements:
1) The business has no more than two employees other than the Borrowers (ALTLOANs must
obtain verification that no more than two employees work in the Borrowers’ business);
2) The business is a service business where the service is provided by the Borrowers;
3) The service provided does not include the use of other than nominal consumable
materials;
4) The service provided does not require the use of heavy equipment or vehicles (the
service may however require the use of the business owner’s own car.
High Value Dealers
For the purposes of these Underwriting Guidelines, a business is defined as a High Value Dealer if its primary source of revenue is purchasing and reselling any of (i) real estate, (ii) precious metals or jewelry, (iii) commodities that are not processed or otherwise improved by the business, (iv) autos, trucks, boats, off road vehicles, recreational vehicles, or heavy construction, manufacturing or transportation equipment, or (v) currencies (business which do not purchase and resell but solely act as a broker are not High Value Dealers).
Personal Account Analysis Method
If the Borrowers have both business and personal bank accounts, then ALTLOANs may determine and document income from self-employment by averaging the Borrowers’ deposits into their personal bank accounts, over the 12-month period preceding the month of the Borrower’s Initial Application (the “Analysis Period”), provided such deposits resulted from the Borrowers’ self-employment. For the purposes of these Underwriting Guidelines:
(i) if a deposit is less than the average monthly deposits made into the
Borrowers’ personal accounts over the Analysis Period, and provided
that the Borrower’s personal bank statements do not explicitly show
the deposit results from any of: (a) a transfer from another personal
asset account, (b) loan proceeds from a loan to the Borrowers , (c) an
asset sale (d) another source of Borrowers’ income (for example
deposits due to a spouse’s employment or deposits due to rent
receipts), or (e) a tax refund, then ALTLOANs may presume the
deposit is from the Borrowers’ self-employment (for the purposes of
clarity: transfers from the Borrower’s business bank account to their
personal
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bank account(s) may be presumed to result from self-employment; in
addition, documentation showing a deposit is derived from a
customer of the Borrowers’ business may be accepted as resulting
from the Borrowers’ self-employment.).
(ii) If a deposit is more than the average monthly deposits made into the
Borrowers’ personal accounts over the Analysis Period, then
ALTLOANs must document that the deposit resulted from the
Borrowers’ self-
employment. For the purposes hereof, a transfer from the Borrowers’
business bank account to their personal bank account(s), which is
evidenced by bank statements, may be accepted as resulting from the
Borrowers’ self-employment. In addition, documentation showing a
deposit is derived from a customer of the Borrowers’ business may be
accepted as resulting from the Borrowers’ self-employment.
Notwithstanding the foregoing, if the Borrowers’ business accounts do not indicate the payment of reasonable business expenses given the Borrowers’ occupation and scope of business, then the Borrowers are not eligible for the Personal Analysis Method.
ALTLOANs may include income from self-employment calculated in accordance with this subsection (“Personal Account Analysis Method”), in the income used to qualify the Borrower for a Loan.
Additional Requirements for the SJ-1H Bank Statements and JP-5H Bank Statements In addition to the other requirements set forth in this Section 6.2.1 of these Underwriting Guidelines, for a loan to be eligible for funding at ALTLOAN under the SJ-1H Bank Statements and JP-5H Bank Statements Programs a Profit and Loss statement for the Borrowers’ business, covering either the most recent 12 months or the most recent fiscal year, is required. The Profit and loss statement can be prepared by either the Borrowers or the accounting staff of the Borrowers’ business, or by a CPA or a tax preparer.
Notwithstanding anything to the contrary, the Borrowers’ monthly income from self-employment used to qualify a Loan for delivery under the SJ-1H Bank Statementsand JP-5H Bank Statements Programs, can never exceed one-twelfth (1/12) the income indicated by the profit and loss statement. In every case where Income from Self Employment would otherwise be greater than one- twelfth (1/12) the income indicated by the profit and loss statement, the Income from Self Employment used in qualifying the Borrowers must be reduced to one- twelfth (1/12) the income indicated by the profit and loss statement.
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In addition, for a Loan to be eligible for funding at ALTLOAN under the SJ-1H Bank Statements and JP-5H Bank Statements Programs, the deposits into the bank account of the Borrowers’ business must equal or exceed 90% of the revenue set forth on the profit and loss statement. (In determining deposits into the bank account of the Borrowers’ business equal or exceed 90% of revenue, the most recent 12 months of business bank statements should be used, even if the profit and loss statement is for a fiscal year which does not include each of the previous 12 months).
Additional Sources of Income
For Loans submitted to ALTLOAN for funding under Loan Program AA-6H Bank Statements, SJ-1H Bank Statements and JP-5H Bank Statements, ALTLOANs may include in the income used to qualify Borrowers, income from sources other than the Borrowers’ self-employment (“Income from Other Sources”). Such sources include spouse employment income (provided spouse is a Borrower), and income from social security, pensions, rent, royalties, alimony, child support, dividend, interest, other investments and trusts. Income from other sources should be verified as follows:
Spouse employment income or Borrower additional job employment income
Paystubs covering 30 days and showing year-to-date earnings, and previous year W2; gaps in employment over the previous two years must be satisfactorily explained as required by Fannie Mae;
Social Security Award letter or bank statements showing six months of deposits;
Pensions Award letter or bank statement showing three months of deposits;
Rent Lease and bank statements showing three months of rent receipts (or bank statement showing receipt of security deposit and first month’s rent if newly rented property); or, if the Borrowers receive short-term, rental income from a property other than the Subject Property through facilitators such as Airbnb, statements from rental facilitators (such as Airbnb) showing one year of short-term rental history, if an investment property is rented short-term through a facilitator such as Airbnb, then the Borrowers’ monthly income from the investment property is the average monthly rental determined by dividing annual rental income as shown on the facilitator statement by twelve months;
Royalties Contract and bank statements showing three months of receipts;
Alimony Divorce or separation agreement or court order plus bank statements showing six months receipts;
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Child Support Divorce or separation agreement or court order plus bank statements showing six months receipts;
Dividend and Interest Statements from brokerages and banks showing dividend and interest income earned year-to-date and for the previous calendar year;
Other Investments & Trust Institutional statements, K1 tax forms, statements from certified public accountants or similar documentation which clearly shows income earned year-to-date and over the previous calendar year.
All Other In accordance with Fannie Mae requirements
Qualifying Income for Loan Programs AA-6H Bank Statements, SJ-1H Bank Statements and JP-5H Bank Statements
The income to be used to qualify Borrowers for loan programs AA-6H, SJ-1H and JP-
5H Income per Bank Statements is the sum of Income from Self-Employment plus Income from Other Sources.
Setting forth Qualifying Income on the Final Application
The Borrowers’ Income from Self-employment must be included on the Final
Application in the “Other Income Section” as the Borrowers’ “Self-employment income from bank statement analysis methods.”
The Borrowers’ Income from Other Sources must be included on the Final
Application based on income type, in the manner that is customary for loans eligible for funding at Fannie Mae. For example, wages, overtime, commissions and dividends and interest should be included on the appropriate rows in Section V of the Final Application, while Social Security should be included in the Other Income area of Section V and described as “social security income.”
Use of ALTLOAN Calculator AA-6H, SJ-1H and JP-5H - BSI is Required
ALTLOANs must use ALTLOAN Calculator # AA-6H, SJ-1H and JP-5H - BSI in determining if Borrowers’ have sufficient income for a Loan to be qualified and deliverable to ALTLOAN under the Income per Bank Statements Programs. ALTLOAN Calculator # AA-6H, SJ-1H and JP-5H. ALTLOANs must accurately input the data required by the calculator, and the calculator must indicate that the Borrowers’ income is sufficient for the Borrowers to qualify for the Loan. In qualifying Borrowers, a ALTLOAN should reduce the Borrowers’ income below the income determined by the calculator if the ALTLOAN is aware of any circumstance that would likely reduce the Borrowers’ income. ALTLOANs may not qualify a Loan based on income which is higher than the income determined by the calculator.
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ALTLOANs must print and include the calculator output in the Mortgage File. Loans which do not include a printout of calculator results are ineligible for funding at ALTLOAN under the Income per Bank Statements program.
6.2.2 Loan Program M4 – Moderate Credit Bank Statement
ALTLOANs submitting a Loan to ALTLOAN for funding under the M4 - Moderate Credit Bank Statement program must document that (i) at least one Borrower must have been continuously self-employed for two years, and (ii) each Borrower whose self- employment income is used to qualify for the Loan must have been continuously self-employed for two years. In addition, ALTLOANs must verify the portion of the Borrowers’ business that is owned by the Borrower. Acceptable documentation for the requirements set forth in this paragraph include business licenses, a written statement from a certified public accountant or professional tax preparer, LLC or partnership agreements, incorporation records, assignment of tax ID notices, business certificates (aka fictitious name certificates) filed with a governmental jurisdiction, bank account agreements or other bank records and other similar records.
ALTLOANs submitting loans to ALTLOAN for funding under the M4 - Moderate Credit Bank Statement program must determine and document income from self- employment based on one of the following two methods:
Business Receipts Validated Profit and Loss Method (based on deposits of business receipts either a business or personal bank account)
ALTLOANs may include in the Borrowers’ income from self-employment the product of (X) the average monthly income over the past 24 months set forth on profit and loss statements for the Borrowers’ business, times (Y) the percent of the Borrowers’ business owned by the Borrowers provided (1) the profit and loss statements are certified to be true and correct by the Borrower(s) who own the Borrowers’ business, (2) the business receipts deposited into the Borrowers’ business or personal bank accounts are equal to or greater than 90% of the revenue set forth on the profit and loss statements, and (3) the borrowers’ ownership percentage of the borrowers’ business is documented. Notwithstanding the foregoing, if the Borrowers’ business is a High Value Dealer (as defined below), if average monthly profit earned by the Borrowers’ business exceeds 20% of revenues, than the Borrower’s monthly income from self-employment is limited to the product of (X) 20% of the average monthly revenue over the past 24 months set forth on profit and loss statements for the Borrowers’ business, time (Y) the percent of the Borrowers’ business owned by the Borrowers.
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Deposits of business receipts are deposits from the ordinary operations of the Borrowers’ business, and exclude (a) transfers from another bank or asset account, (b) extraordinary asset sales, (c) borrowing, or (d) tax refunds.
ALTLOANs may include income from self-employment calculated in accordance with this subsection (“Business Receipts Validated Profit and Loss Method”), in the income used to qualify the Borrower for a Loan. High Value Dealers
For the purposes of these Underwriting Guidelines, a business is defined as a High Value Dealer if its primary source of revenue is purchasing and reselling any of (i) real estate, (ii) precious metals or jewelry, (iii) commodities that are not processed or otherwise improved by the business, (iv) autos, trucks, boats, off road vehicles, recreational vehicles, or heavy construction, manufacturing or transportation equipment, or (v) currencies (business which do not purchase and resell but solely act as a broker are not High Value Dealers).
Personal Account Analysis Method
If the Borrowers have both business and personal accounts then ALTLOANs may determine and document income from self-employment by averaging the Borrowers’ deposits into their personal bank accounts, over the 24-month period preceding the month of the Borrower’s Initial Application (the “Analysis Period”), provided such deposits resulted from the Borrowers’ self-employment. For the purposes of these Underwriting Guidelines:
(i) if a deposit is less than the average monthly deposits made into the
Borrowers’ personal accounts over the Analysis Period, and provided
that the Borrower’s personal bank statements do not explicitly show
the deposit results from any of: (a) a transfer from another personal
asset account, (b) loan proceeds from a loan to the Borrowers , (c) an
asset sale (d) another source of Borrowers’ income (for example
deposits due to a spouse’s employment or deposits due to rent
receipts), or (e) a tax refund, then ALTLOANs may presume the
deposit is from the Borrowers’ self-employment (for the purposes of
clarity: transfers from the Borrower’s business bank account to their
personal bank account(s) may be presumed to result from self-
employment; in addition, documentation showing a deposit is derived
from a
customer of the Borrowers’ business may be accepted as resulting
from the Borrowers’ self-employment.).
(ii) If a deposit is more than the average monthly deposits made into the
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Borrowers’ personal accounts over the Analysis Period, then ALTLOANs
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must document that the deposit resulted from the Borrowers’ self-
employment. For the purposes hereof, a transfer from the Borrowers’
business bank account to their personal bank account(s), which is
evidenced by bank statements, may be accepted as resulting from the
Borrowers’ self-employment. In addition, documentation showing a
deposit is derived from a customer of the Borrowers’ business may be
accepted as resulting from the Borrowers’ self-employment.
Notwithstanding the foregoing, if the Borrowers’ business accounts do not indicate the payment of reasonable business expenses given the Borrowers’ occupation and scope of business, then the Borrowers are not eligible for the Personal Analysis Method.
ALTLOANs may include income from self-employment calculated in accordance with this subsection (“Personal Account Analysis Method”), in the income used to qualify the Borrower for a Loan.
Additional Sources of Income
For Loans submitted to ALTLOAN for funding under Loan Program M4 – Moderate Credit Bank Statement, ALTLOANs may include in the income used to qualify Borrowers, income from sources other than the Borrowers’ self-employment (“Income from Other Sources”). Such sources include spouse employment income (provided spouse is a Borrower), and income from social security, pensions, rent, royalties, alimony, child support, dividend, interest, other investments and trusts. Income from other sources should be verified as follows:
Spouse employment income or Borrower additional job employment income
Paystubs covering 30 days and showing year-to-date earnings, and previous year W2; gaps in employment over the previous two years must be satisfactorily explained as required by Fannie Mae;
Social Security Award letter or bank statements showing six months of deposits;
Pensions Award letter or bank statement showing three months of deposits;
Rent Lease and bank statements showing three months of rent receipts (or bank statement showing receipt of security deposit and first month’s rent if newly rented property); or, if the Borrowers receive short-term, rental income from a property other than the Subject Property through facilitators such as Airbnb, statements from rental facilitators (such as Airbnb) showing one year of short-term rental history, if an investment property is rented short-term through a facilitator such as Airbnb, then the Borrowers’ monthly
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income from the investment property is the average monthly rental determined by dividing annual rental income as shown on the facilitator statement by twelve months;
Royalties Contract and bank statements showing three months of receipts;
Alimony Divorce or separation agreement or court order plus bank statements showing six months receipts;
Child Support Divorce or separation agreement or court order plus bank statements showing six months receipts;
Dividend and Interest Statements from brokerages and banks showing dividend and interest income earned year-to-date and for the previous calendar year;
Other Investments & Trust Institutional statements, K1 tax forms, statements from certified public accountants or similar documentation which clearly shows income earned year-to-date and over the previous calendar year.
All Other In accordance with Fannie Mae requirements
Qualifying Income for Loan Program M4 – Moderate Credit Bank Statement
The income to be used to qualify Borrowers for loan program M4 – Moderate Credit Bank Statement is the sum of Income from Self-Employment plus Income from Other Sources.
Setting forth Qualifying Income on the Final Application
The Borrowers’ Income from Self-employment must be included on the Final
Application in the “Other Income Section” as the Borrowers’ “Self-employment income from bank statement analysis methods.”
The Borrowers’ Income from Other Sources must be included on the Final
Application based on income type, in the manner that is customary for loans eligible for funding at Fannie Mae. For example, wages, overtime, commissions and dividends and interest should be included on the appropriate rows in Section V of the Final Application, while Social Security should be included in the Other Income area of Section V and described as “social security income.”
Use of ALTLOAN Calculator #M4 - BSI is Required
ALTLOANs must use ALTLOAN Calculator #M4 - BSI in determining if Borrowers’ have sufficient income for a Loan to be qualified and deliverable to ALTLOAN under the Income per Bank Statements Program. ALTLOAN Calculator
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#M4 – BSI. ALTLOANs must accurately input the data required by the calculator, and the calculator must indicate that the Borrowers’ income is sufficient for the Borrowers to qualify for the Loan. In qualifying Borrowers, a ALTLOAN should reduce the Borrowers’ income below the income determined by the calculator if the ALTLOAN is aware of any circumstance that would likely reduce the Borrowers’ income. ALTLOANs may not qualify a Loan based on income which is higher than the income determined by the calculator.
ALTLOANs must print and include the calculator output in the Mortgage File. Loans which do not include a printout of calculator results are ineligible for funding at ALTLOAN under the Income per Bank Statements program.
6.3 Loan program AA-6H Asset Depletion
ALTLOANs submitting a Loan to ALTLOAN for funding under the Asset Depletion program must document that (i) the Borrower’s Depletable Assets are at least 110% of the original principal balance of the Loan, and (ii) the Borrowers’ Income from Asset Depletion plus the Borrowers’ Income from Other Sources are sufficient so the Borrowers’ debt to income ratio does not exceed 50%.
Determining the Borrowers’ Income from Asset Depletion
Under Loan program A6, ALTLOAN’s may include in the income used to qualify the Borrowers Income from Asset Depletion. To determine monthly Income from Asset Depletion, ALTLOANs must divide (i) Depletable Assets (as calculated in accordance with section 7.3 of these Underwriting Guidelines) by (ii) 60 months.
Under Loan Program AA-6H, ALTLOANs may also include in the income used to qualify the Borrowers, income from sources other than asset depletion (“Income from Other Sources”). Any type of income that may be included in Borrower income under the Fannie Mae Selling Guide may be included in Income from Other Sources used to qualify Borrowers under Program AA-6H except “Employment Related Assets as Qualifying Income” (as described in the Fannie Guide). Examples of acceptable Income from Other Sources include employment income (including self- employment income), and income from social security, pensions, rent, royalties, alimony, child support, dividends and interest. All Income from Other Sources must be validated and documented in accordance with the requirements set forth immediately below.
Determining the Borrowers Income from Other Sources
For Loans submitted to ALTLOAN for funding under Loan Program AA-6H Asset Depletion, ALTLOANs may include in the income used to calculate the Borrowers’ debt to income ratio, income from sources other than Income from Asset Depletion
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(Income Other Sources”). Such sources include income from employment (including
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self-employment), social security, pensions, rent, royalties, alimony, child support, dividend, interest, other investments and trusts. Income from Other Sources should be verified as follows:
Employment income Not self-employed: paystubs covering 30 days and showing year-to-
date earnings, and previous year W2; gaps in employment over the previous two years must be satisfactorily explained as required by Fannie Mae;
Self-employed: one year personal tax return; if a Borrower chooses to include income from a “C” corporation, then in addition to one year of personal tax returns, one year of business tax returns (for the year of the tax return required please refer to section 6.1 hereof);
Social Security Award letter or bank statements showing six months of deposits;
Pensions Award letter or bank statement showing three months of deposits;
Rent Lease and bank statements showing three months of rent receipts (or bank statement showing receipt of security deposit and first month’s rent if newly rented property); or, if the Borrowers receive short-term, rental income from a property other than the Subject Property through facilitators such as Airbnb, statements from rental facilitators (such as Airbnb) showing one year of short-term rental history, if an investment property is rented short-term through a facilitator such as Airbnb, then the Borrowers’ monthly income from the investment property is the average monthly rental determined by dividing annual rental income as shown on the facilitator statement by twelve months;
Royalties Contract and bank statements showing three months of receipts;
Alimony Divorce or separation agreement or court order plus bank statements showing six months receipts;
Child Support Divorce or separation agreement or court order plus bank statements showing six months receipts;
Dividend and Interest Statements from brokerages and banks showing dividend and interest income earned year-to-date and for the previous calendar year;
Other Investments & Trust Institutional statements, K1 tax forms, statements from certified public accountants or similar documentation which clearly shows income earned year-to-date and over the previous calendar year.
All Other In accordance with Fannie Mae requirements
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Setting forth Qualifying Income on the Final Application
The Borrowers’ Income from Asset Depletion must be included on the Final Application in the “Other Income Section” with the description “Income from asset depletion.”
The Borrowers’ Income from Other Sources must be included on the Final Application based on income type, in the manner that is customary. For example, wages, overtime, commissions and dividends and interest should be included on the appropriate rows in Section V of the Final Application, while Social Security should be included in the Other Income area of Section V and described as “social security income.”
Use of ALTLOAN Calculator AA-6H Asset Depletion is Required
ALTLOANs must use ALTLOAN Calculator AA-6H Asset Depletion in determining if Borrowers’ have sufficient income for a Loan to be qualified and deliverable to ALTLOAN under the Income per Bank Statements Program. ALTLOANs must accurately input the data required by the calculator, and the calculator must indicate that the Borrowers’ income is sufficient for the Borrowers to qualify for the Loan. In qualifying Borrowers, a ALTLOAN should reduce the Borrowers’ income below the income determined by the calculator if the ALTLOAN is aware of any circumstance that would likely reduce the Borrowers’ income. ALTLOANs may not qualify a Loan based on income which is higher than the income determined by the calculator.
ALTLOANs must print and include the calculator output in the Mortgage File. Loans which do not include a printout of calculator results are ineligible for funding at ALTLOAN under the Income per Bank Statements program.
6.4 Loan Program I5 – Investor Debt Service Coverage and Loan Program I6 – Mixed Use
ALTLOANs submitting a Loan to ALTLOAN for funding under the Investor Debt Service Coverage program or the Mixed Use program must document that the gross rent from the Subject Property - reduced by real estate taxes, insurance, and as applicable homeowner association dues and ground rents - will carry the mortgage payments on the Loan.
Determining Gross Rental Income
The Subject Property’s gross rental income is the lower of (i) the rental value of the property from a rental addendum prepared by the appraiser that determined the
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market value of the Subject Property, and which is included in the appraisal of the Subject Property (if two appraisals are required, the lower rental value between the two appraisals must be used), and (ii) if the Subject Property will be leased as of the Date of the Loan, the actual rent for which the Subject Property if leased. If the Subject Property will not be leased as of the Date of the Loan, then the gross rental income is simply the rental value of the property set forth on the rental addendum (or if two appraisals are obtained, the lower of the rental values on the rental addendums).
Notwithstanding the foregoing paragraph, if the Subject Property is rented on a short-term basis through a short-term rental facilitator such as Airbnb, then the gross rental income is the lower of (i) the rental value of the property from a rental addendum prepared by the appraiser that determined the market value of the Subject Property, and which is included in the appraisal of the Subject Property (if two appraisals are required, the lower rental value between the two appraisals must be used), and (ii) the average monthly rental income received from short-term rental facilitators over the past 12 months as documented by statements from the short-term rental facilitators (for examples by statements from Airbnb).
Calculating Net Rental Income
To calculate the Subject Property’s net rental income ALTLOAN must subtract from its gross rental income the cost of real estate taxes, insurance, common charges, and ground rents applicable to the Subject Property.
Validating and Documenting Real Estate Taxes, Insurance Costs, Common Charges and Ground Rents
ALTLOANs must validate and document the real estate taxes, insurance costs, common charges and ground rents applicable to the Subject Property. Examples of acceptable documentation include title reports, insurance bills, statements from condominium project homeowner associations and property managers and other similar documentation.
Setting Forth Gross Rental Income and Net Rental Income on the Borrowers’ Final Application
For loan program NA-I5 Investor DSC and loan program MF-1H Multi-Family, ALTLOANs must complete the income section of the Final Application as follows:
For purchases and refinances:
Complete Sections I., and II. of the Final Application,
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If the Borrower is other than a natural person, complete the areas of Section III of the Final Application pertaining to the Borrower’s name, address, phone number and, if the Borrower has a tax identification number, the Borrower’s tax identification number. Complete Section III of the Final Application, in its entirety, for each Borrower who is a natural person and each Guarantor.
Complete Section IV of the Final Application for each Borrower who is a natural person and for each Guarantor.
Leave the income area of Section V on the Final Application blank except for “Other Income.” Enter at Other Income, on the Final Application for the Borrowers only (and not for the Guarantors), the net rental from ALTLOAN Calculator NA-I5. In the proposed Monthly Housing Expense area of Section V, enter the payments on the proposed mortgage, and the verified monthly hazard insurance, real estate taxes, common charges and ground rents. At the description of other income make the following entry “Net Rental Income after taxes, insurance, common charges and ground rents”
Complete Section VI of the Final Application with verified amounts for each Borrower who is a natural person, and for each Guarantor. On the Schedule of Real Estate Owned in Section VI, if the transaction is a refinance, include the Subject Property on the list of real estate owned, but leave gross rental income, insurance and Net Rental Income blank.
Complete Section VII of the Final application on the 1003 applicable to the first Borrower, but not on additional 1003 forms for additional Borrowers and Guarantors.
Complete Section VIII for each Borrower and Guarantor.
Each Borrower and Guarantor must sign the Final Application, on the 1003 applicable to such Borrower or Guarantor.
Use of ALTLOAN Calculator # NA-I5 Investor DSC is Required / MF-1H Multi-Family
ALTLOANs must use ALTLOANCalculator NA-I5– Investor DSC / MF-1H Multi-Family to calculate Net Rental Income. ALTLOANs must accurately input the data required by the calculator, and the calculator must indicate that the Subject Property’s net rental income is to qualify for the Loan.
106 July 8, 2019
ALTLOANs must print and include the calculator output in the Mortgage File. Loans which do not include a printout of calculator results are ineligible for funding at ALTLOAN under the Income per Bank Statements program.
6.5 Income determination and validation not needed for programs NA-I3 Investor No Ratio ALTLOANs submitting loans to ALTLOAN under program I3 should not validate or document rental income, and should leave the income section of the loan application blank.
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7. Calculating and Verifying Borrower Assets for Closing and Reserves
7.1 Calculating and Documenting Assets for Down Payment, Closing Costs and Reserves for all loan programs except AA-6H Asset Depletion
For a Loan to be eligible for funding at ALTLOAN under any Loan programs except AA-6H Asset Depletion, the Borrowers must have sufficient acceptable sources of funds for the down payment and closing costs and sufficient reserves to meet the Loan Program’s reserve requirement. The reserve requirement for each loan program is set forth on the matrices in Section 2 of these Underwriting Guidelines.
(“Down Payment and Closing Funds”) are defined as assets that meet Fannie Mae’s requirements, as modified by the overlays listed below, for sources of funds that may be used for the down payment and closing costs. (“Borrower Reserves”) are defined as assets that meet Fannie Mae’s requirements, as modified by the overlays listed below, for sources of funds that may be included in the Borrowers’ reserves.
The following overlays modify certain of Fannie Mae’s requirements for determining Down Payment and Closing Funds and Borrower Reserves. ALTLOANs must include in the Mortgage File, documentation showing adherence to the requirements of each applicable overlay. If there is a conflict between an overlay and the Fannie Mae Selling Guide, the overlay is applicable and supersedes the Fannie Mae Selling Guide. The overlays are as follows:
1) The Borrowers must have Borrower Reserves equal to or greater than the
required number of months set forth on the ALTLOAN program matrix
applicable to the Borrower’s loan program (as opposed to the number of
months set forth in the Fannie Mae eligibility matrix and the portions of
the Fannie Mae guides related to reserves for multiple financed
properties).
2) Cash-out proceeds available to the Borrowers from a cash-out refinance
transaction may be included in Borrower Reserves (loan proceeds
remitted by the settlement agent to pay off debt including paying off
existing mortgages, tax liens, installment and revolving debt and
collection accounts, are not proceeds available to the Borrowers, and may
not be included in available Borrower Reserves).
3) Interested party contributions are limited to the lower of (i) the
maximum interested party contribution permitted under the Fannie
Guide and (ii) 6% (interested party contributions cannot exceed 6% even
in cases where a contribution greater than 6% is permitted under the
Fannie Guide).
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4) Funds transferred to the Borrowers, from a bank or brokerage account of
a business owned by the Borrowers, may be included in Down Payment
and Closing Cost Funds only if either (i) the ALTLOAN performs a
business cash flow analysis and confirms that the withdrawal of funds
will not have a negative impact on the business (the cash flow analysis
must be prepared in accordance with the Fannie Mae Selling Guide), or
(ii) the
ALTLOAN obtains a statement from a Certified Public Accountant (“CPA”)
or professional tax preparer stating that the withdrawal of funds will not
have a negative impact on the business, except that for loans with Loan to
Value ratios of 90% or less the requirement set forth in this sentence is
waived. If funds transferred from a business or brokerage account are
included in Down Payment and Closing Cost Funds, then ALTLOAN’s must
adhere to Fannie Mae’s requirements for evaluating large deposits into
the Borrowers’ business accounts (as set forth in the Fannie Guide: large
deposits do not need to be evaluated for refinances, and when they are
not needed for Down Payment and Closing Funds or for Borrower
Reserves). ALTLOANs do not need to evaluate business tax returns to
include transfers from business bank or brokerage accounts in Down
Payment and Closing Cost Funds.
Funds transferred to the Borrowers, from a bank or brokerage account of
a business owned by the Borrowers, may be included in the Borrower
Reserves. (ALTLOANs are not required to perform a business cash flow
analysis or obtain a CPA statement if transferred funds will only be used
to meet ALTLOAN’s reserve requirement.) If funds transferred from a
business or brokerage account are included in Borrower Reserves, then
ALTLOAN’s must adhere to Fannie Mae’s requirements for evaluating
large deposits into the Borrowers’ business accounts (as set forth in the
Fannie Guide: large deposits do not need to be evaluated for refinances,
and when they are not needed for either Down Payment and Closing
Funds or Borrower Reserves). ALTLOANs do not need to evaluate
business tax returns to include transfers from business bank or
brokerage accounts in Borrower Reserves.
If funds in a business bank or brokerage account have not been
transferred to the Borrowers’ personal accounts, such funds may not be
included in Down Payment and Closing Funds, however such funds may
be included in Borrower Reserves, provided that the percent of the
business’ funds which may be included in Borrower Reserves may not be
greater than the percent of the business owned by the Borrowers (for
109 July 8, 2019
example, if the Borrowers’ own 25% of a business, only 25% of the
business’ funds may be included in Borrower Reserves). If funds
transferred from a business or brokerage account are included in
Borrower Reserves, then ALTLOAN’s must adhere to Fannie Mae’s
requirements for evaluating large deposits into the Borrowers’ business
accounts (as set forth in the Fannie Guide: large deposits do not need to
be evaluated for refinances, and when they are not needed for either
Down Payment and Closing Funds or Borrower Reserves). ALTLOANs
do not need to evaluate business tax returns to include transfers from
business bank or brokerage accounts in Borrower Reserves.
5) Funds in Individual Development Accounts and funds obtained through
matches from nonprofit or government agencies may not be included in
Down Payment and Closing Funds or Borrower Reserves.
6) Funds in or obtained from Pooled Savings may not be included Down
Payment and Closing Funds or Borrower Reserves.
7) The section of the Fannie Mae Selling Guide pertaining to Verification of
Assets for Non-US Citizen Borrowers is expanded as follows:
a. Funds in foreign bank accounts, and publicly traded stocks and
bonds and government issued bonds held in foreign brokerage
accounts may be used as a source for Down Payment and Closing
Funds or Borrower Reserves.
b. Funds and securities in foreign accounts used for Down Payment
and Closing Funds or Borrower Reserves, must be, transferred,
and in the case of securities, liquidated, and be on deposit in, a
domestic bank account belonging to a Borrower not later than ten
days prior to the Date of the Loan. Notwithstanding the preceding
sentence, required Borrower Reserves which exceed three months
of PITIA may be held in in a foreign bank or brokerage account
provided the account must belong directly to a Borrower (and may
not be an account belonging to the Borrowers’ business).
c. An Automated Clearing House repetitive draft must be established
under which mortgage payments due are deducted directly from
the domestic account holding the Borrower Reserves.
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d. All requirements in the Fannie Mae Selling Guide pertaining to
seasoning, documentation and evaluating large deposits apply to
foreign accounts except as otherwise specified in this section 7.1.
e. Funds transferred from foreign accounts and deposited into
domestic accounts as dollar deposits need not be converted but
are accepted at the US dollar value deposited. Funds and
securities not transferred, which remain in foreign accounts
should be converted to US dollars based on published conversion
rates from the Wall Street Journal or other similar sources; a
record of the conversion rate and its source must be included in
the Mortgage File.
8) If the purpose of a Loan is to acquire the Subject Property and the
transaction entails a gift of equity, then the maximum loan to value ratio
on the Loan is 5% less than the maximum loan to value ratio that would
otherwise be permitted pursuant to the applicable program matrix in
Section 2 of this Sales Guide, and may not exceed a loan to value ratio of
80%.
9) Donations from entities, including but not limited to donations from
churches, municipalities and non-profit organizations may not be used
for Down Payment and Closing Funds or Borrower Reserves (this overlay
does not affect gifts and gifts of equity from relatives as permitted in the
Fannie Mae Selling Guide).
10) Disaster relief grants or loans may not be used for Down Payment and
Closing Funds or Borrower Reserves.
11) Trade equity is subject to the following requirements. Only qualified
exchanges under section 1031 of the Internal Revenue Code are
permitted and no other trade equity may be included in Down Payment
and Closing Funds or Borrower Reserves. In addition, the Borrowers
must acquire the Subject Property in connection with the 1031 exchange,
and must use funds held by a Qualified Intermediary (as such term
pertains to section 1031 exchanges) to pay a portion of the consideration
for the Subject Property (direct exchanges of properties that do not
include funds being held by a Qualified Intermediary are ineligible, as are
exchange transactions where any portion of the consideration to be paid
to the seller of the Subject Property is other than cash). All
documentation pertaining to the 1031 exchange must be included in the
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mortgage file, including documentation that funds were held by a
Qualified Intermediary (a written statement from the Qualified
Intermediary is sufficient for this purpose).
12) Proceeds from the sale or financing of personal property (such as cars,
collections or art), may not be used for Down Payment and Closing Funds
or Borrower Reserves (personal property does not include real estate or
financial assets).
*ALTLOANs must use Fannie Mae’s requirements for its standard programs, requirements for HomeReady and other specialized programs are not applicable and may not be used.
7.2 Calculating and Documenting Assets for Down Payment, Closing Costs and Reserves for loan program AA-6H Asset Depletion
7.3 The Asset Depletion program is designed for Borrowers with substantial liquid assets and relies on the depletion of assets as a means by which the Borrowers will have the ability to service mortgage payments. Consequently, the asset depletion program requires that Borrowers hold in post-closing reserves a minimum of 110% of the loan amount they are borrowing.
For a Loan to be eligible for funding at ALTLOAN under Loan programs AA-6H Asset Depletion, the Borrowers must have sufficient acceptable sources of funds for the down payment and closing costs and sufficient reserves to meet the Loan Program’s reserve requirement. The reserve requirement is set forth on the matrix in Section 2.5 of these Underwriting Guidelines.
(“Down Payment and Closing Funds”) are defined as assets that meet Fannie Mae’s requirements, as modified by the overlays listed below, for sources of funds that may be used for the down payment and closing costs. (“Borrower Reserves”) are defined as assets that meet Fannie Mae’s requirements, as modified by the overlays listed below, for sources of funds that may be included in the Borrowers’ reserves.
The following overlays modify certain of Fannie Mae’s requirements for determining Down Payment and Closing Funds and Borrower Reserves. ALTLOANs must include in the Mortgage File, documentation showing adherence to the requirements of each applicable overlay. If there is a conflict between an overlay and the Fannie Mae Selling Guide, the overlay is applicable and supersedes the Fannie Mae Selling Guide. The overlays are as follows:
1) The Borrowers must have verified Borrower Reserves equal to or greater
than the sum of (i) 110% of the original principal balance of the Loan,
plus (ii) the required number of months set forth on the ALTLOAN
program matrix for loan program A6 in Section 2.5 (as opposed to the
112 July 8, 2019
number of
110 July 8, 2019
months set forth in the Fannie Mae eligibility matrix and the portions of
the Fannie Mae guides related to reserves for multiple financed
properties).
2) Cash-out proceeds may not be included in available Borrower Reserves.
3) Interested party contributions are limited to the lower of (i) the
maximum interested party contribution permitted under the Fannie
Guide and (ii) 6% (interested party contributions cannot exceed 6% even
in cases where a contribution greater than 6% is permitted under the
Fannie Guide).
4) Funds transferred to the Borrowers, from a bank or brokerage account of
a business owned by the Borrowers, may be included in Down Payment
and Closing Cost Funds only if either (i) the ALTLOAN performs a
business cash flow analysis and confirms that the withdrawal of funds
will not have a negative impact on the business (the cash flow analysis
must be prepared in accordance with the Fannie Mae Selling Guide), or
(ii) the
ALTLOAN obtains a statement from a Certified Public Accountant
(“CPA”) stating that the withdrawal of funds will not have a negative
impact on the business. If funds transferred from a business or
brokerage account are included in Down Payment and Closing Cost
Funds, then ALTLOAN’s must adhere to Fannie Mae’s requirements for
evaluating large deposits into the Borrowers’ business accounts (as set
forth in the Fannie Guide: large deposits do not need to be evaluated for
refinances, and when they are not needed for Down Payment and
Closing Funds or for Borrower Reserves). ALTLOANs do not need to
evaluate business tax returns to include transfers from business bank or
brokerage accounts in Down Payment and Closing Cost Funds.
Funds transferred to the Borrowers, from a bank or brokerage account of
a business owned by the Borrowers, may be included in the Borrower
Reserves. (ALTLOANs are not required to perform a business cash flow
analysis or obtain a CPA statement if transferred funds will only be used
to meet ALTLOAN’s reserve requirement.) If funds transferred from a
business or brokerage account are included in Borrower Reserves, then
ALTLOAN’s must adhere to Fannie Mae’s requirements for evaluating
large deposits into the Borrowers’ business accounts (as set forth in the
Fannie Guide: large deposits do not need to be evaluated for refinances,
and when they are not needed for either Down Payment and Closing
Funds or Borrower Reserves). ALTLOANs do not need to evaluate
110 July 8, 2019
business tax
111 July 8, 2019
returns to include transfers from business bank or brokerage accounts in
Borrower Reserves.
If funds in a business bank or brokerage account have not been
transferred to the Borrowers’ personal accounts, such funds may not be
included in Down Payment and Closing Funds, however such funds may
be included in Borrower Reserves, provided that the percent of the
business’ funds which may be included in Borrower Reserves may not be
greater than the percent of the business owned by the Borrowers (for
example, if the Borrowers’ own 25% of a business, only 25% of the
business’ funds may be included in Borrower Reserves). If funds
transferred from a business or brokerage account are included in
Borrower Reserves, then ALTLOAN’s must adhere to Fannie Mae’s
requirements for evaluating large deposits into the Borrowers’ business
accounts (as set forth in the Fannie Guide: large deposits do not need to
be evaluated for refinances, and when they are not needed for either
Down Payment and Closing Funds or Borrower Reserves). ALTLOANs
do not need to evaluate business tax returns to include transfers from
business bank or brokerage accounts in Borrower Reserves.
In addition, funds held in a Borrowers’ business may not account for
more than 40% of the required reserves. For example, if the
required reserves are $400,000, then only $160,000 of the required
reserves may be held in a Borrowers’ business, and the remaining
required reserves must be held by a Borrower directly and
personally.
5) Funds in Individual Development Accounts and funds obtained through
matches from nonprofit or government agencies may not be included in
Down Payment and Closing Funds and Borrower Reserves.
6) Funds in or obtained from Pooled Savings may not be included in Down
Payment and Closing Funds and Borrower Reserves.
7) The section of the Fannie Mae Selling Guide pertaining to Verification of
Assets for Non-US Citizen Borrowers is expanded as follows:
a. Funds in foreign bank accounts, and publicly traded stocks and
bonds and government issued bonds held in foreign brokerage
accounts may be used as a source for Down Payment and Closing
Funds or Borrower Reserves.
112 July 8, 2019
b. Funds and securities in foreign accounts used for Down Payment
and Closing Funds or Borrower Reserves, must be, transferred,
and in the case of securities, liquidated, and be on deposit in, a
domestic bank account belonging to a Borrower not later than ten
days prior to the Date of the Loan. Notwithstanding the preceding
sentence, required Borrower Reserves which exceed six months of
PITIA may be held in a domestic brokerage account or in a foreign
bank, provided accounts in foreign banks must belong directly to a
Borrower (and may not be a business account).
c. An Automated Clearing House repetitive draft must be established
under which mortgage payments due are deducted directly from
the domestic account holding the Borrowers Reserves.
d. All requirements in the Fannie Mae Selling Guide pertaining to
asset seasoning, documentation and evaluating large deposits
apply to foreign accounts except as otherwise specified in these
section 7.2.
e. Funds transferred from foreign accounts and deposited into
domestic accounts as dollar deposits need not be converted but
are accepted at the US dollar value deposited. Funds and
securities not transferred, which remain in foreign accounts
should be converted to US dollars based on published conversion
rates from the Wall Street Journal or other similar sources; a
record of the conversion rate and its source must be included in
the Mortgage File.
8) The Borrowers’ beneficial interest in a trust may be included in Borrower
Reserves as follows:
a. Only the Borrowers beneficial interest in trust bank deposits,
publicly traded stocks and bonds issued by public companies or
government entities may be included in Borrower Reserves
(beneficial interests in non-liquid trust assets such as real estate
may not be included in Borrower Reserves);
b. The Borrowers must either
i. Be entitled, at their discretion, to withdraw their beneficial
interest from the trust; or
113 July 8, 2019
ii. If the Borrowers are not entitled to withdraw their
beneficial interest at their discretion, but receive a periodic,
fixed distribution from the trust, trust assets may be
Borrower Reserves in an amount equal to the lower of 10
times the annual distribution received by the Borrowers
from the trust or (y) the portion of the Borrowers’
beneficial interest represented by bank accounts, publicly
traded stock and bonds issued by a public company or
government entity;
c. The Borrowers’ beneficial interest, the Borrowers’ ability to
withdraw at their discretion and conformance with the other
requirements for using trust assets as verified liquid reserves
must be documented either through a statement from a trusted, or
documentation such as statements and trust agreements.
d. Notwithstanding the requirements in this item 8 regarding assets
held in trust being includable in Borrower Reserves, assets
transferred from a trust to a Borrower’s personal bank, account
prior to the Date of the Loan, may be included in Down Payment
and Closing Funds and Borrower Reserves provided Fannie Mae’s
requirements for using trust assets as a source for Down Payment
and Closing Funds and Borrower Reserves are satisfied.
9) Gifts, other than gifts of equity, are not permitted.
10) If the purpose of a Loan is to acquire the Subject Property and the
transaction entails a gift of equity, then the maximum loan to value ratio
on the Loan is 5% less than the maximum loan to value that would
otherwise be permitted pursuant to the applicable program matrix in
Section 2 of this Sales Guide.
11) Donations from entities, including but not limited to donations from
churches, municipalities and non-profit organizations may not be used
for Down Payment and Closing Funds and Borrower Reserves (this
overlay does not affect gifts and gifts of equity from relatives as permitted
in the Fannie Mae Selling Guide).
12) Disaster relief grants or loans may not be used for Down Payment and
Closing Funds and Borrower Reserves.
114 July 8, 2019
13) Trade equity is subject to the following requirements. Only qualified
exchanges under section 1031 of the Internal Revenue Code are
permitted and no other trade equity may be included in Down Payment
and Closing Funds or Borrower Reserves. In addition, the Borrowers
must acquire the Subject Property in connection with the 1031 exchange,
and must use funds held by a Qualified Intermediary (as such term
pertains to section 1031 exchanges) to pay a portion of the consideration
for the Subject Property (direct exchanges of properties that do not
include funds being held by a Qualified Intermediary are ineligible, as are
exchange transactions where any portion of the consideration to be paid
to the seller of the Subject Property is other than cash). All
documentation pertaining to the 1031 exchange must be included in the
mortgage file, including documentation that funds were held by a
Qualified Intermediary (a written statement from the Qualified
Intermediary is sufficient for this purpose).
14) Proceeds from the sale or financing of personal property (such as cars,
collections or art), may not be used for Down Payment and Closing Funds
or Borrower Reserves (personal property does not include real estate or
financial assets).
*ALTLOANs must use Fannie Mae’s requirements for its standard programs, requirements for HomeReady and other specialized programs are not applicable and may not be used.
7.3 Depletable Assets for Loan Program AA-6H Asset Depletion
Depletable Assets are the assets used to determine Income from Asset Depletion (in accordance with section 6.3 of these Underwriting Guidelines).
Depletable Assets are equal to (i) assets which are included in Borrower Reserves, and (ii) are in one of the following six asset classes:
1) Funds on deposit in domestic bank accounts, including business bank
accounts that are includable as borrower reserves in accordance with
Section 7.2(4) of these guidelines; net of any borrowing secured by such
funds;
2) Funds on deposit at Permitted Foreign Banks (which are listed in Section
7.4 of these Underwriting Guidelines); net of any borrowing secured by
such funds;
3) Stocks, bonds and options which are (i) acceptable sources of funds under
the Fannie Mae Guides and (ii) are either (a) held in a domestic brokerage
115 July 8, 2019
account or (b) held directly by the Borrowers, and are issued by a
domestic corporation or political subdivision of the United States
(including by the US states and territories and their municipalities);
directly held foreign stocks and bonds, and assets in a foreign brokerage
account are not includable in Depletable Assets);
4) A Borrower’s beneficial interest in a trust may be included in Depletable
Assets as follows:
a. Only the Borrowers beneficial interest in trust bank deposits,
publicly traded stocks and bonds issued by public companies or
government entities may be included in Borrower Reserves
(beneficial interests in non-liquid trust assets such as real estate
may not be included in Borrower Reserves);
b. The Borrowers must either
i. Be entitled, at their discretion, to withdraw their beneficial interest from the trust; or
ii. If the Borrowers are not entitled to withdraw their
beneficial interest at their discretion, but receive a periodic,
fixed distribution from the trust, trust assets may be
Borrower Reserves in an amount equal to the lower of 10
times the annual distribution received by the Borrowers
from the trust or (y) the portion of the Borrowers’
beneficial interest represented by bank accounts, publicly
traded stock and bonds issued by a public company or
government entity;
c. The Borrowers’ beneficial interest, the Borrowers’ ability to
withdraw at their discretion and conformance with the other
requirements for using trust assets as verified liquid reserves
must be documented either through a statement from a trusted, or
documentation such as statements and trust agreements.
5) Retirement accounts in accordance with and to the extent permitted by
Fannie Mae as acceptable reserves; and
6) The cash value of life insurance in accordance with and to the extent
permitted by Fannie Mae as an acceptable source of reserves.
The amount of Depletable Assets available to the Borrowers must be calculated after giving effect to the closing of the Loan (amounts needed for the Down Payment and Closing must be excluded from Depletable Assets).
116 July 8, 2019
While the assets from the asset classes listed in this Section 7.3 are the only assets includable in Depletable Assets, Depletable assets may be sourced from any acceptable source for Borrower Reserves as specified in Section 7.2 of these Underwriting Guidelines.
7.4 Permitted Foreign Banks
The Permitted Foreign Banks are as follows:
Agricultural Bank of China Bank of America (foreign branches) Bank of China Bank Leumi Bank of Montreal
Bank of New York Mellon (foreign branches) Barclays BNP Paribas Citigroup (foreign branches) Credit Suisse
Deutsche Bank Discount Bank of Israel Goldman Sachs (foreign branches) Groupe BPCE Group Crédit Agricole
Hapoalim Bank HSBC Industrial and Commercial Bank of China Limited ING Bank JP Morgan Chase (foreign branches)
Macquarie Bank Limited Mitsubishi UFJ FG Mizuho FG Morgan Stanley (foreign branches) Nordea
Royal Bank of Canada Royal Bank of Scotland Santander Société Générale
117 July 8, 2019
Standard Chartered
State Street (foreign branches) Sumitomo Mitsui FG TD Bank UBS Unicredit Group Wells Fargo (foreign branches)
118 July 8, 2019
8. Determining Borrower Occupancy
ALTLOAN requires that the Borrowers declare whether they will occupy the Subject Property as their primary residence or second home, or if they will not occupy, but instead will use the Subject Property as a business purpose investment. ALTLOAN also requires that ALTLOANs conduct diligence to determine if the Borrowers will or will not occupy the Subject Property as declared.
Certain ALTLOAN loan programs permit Borrowers to occupy the Subject Property as the Borrowers’ primary residence, second home or to use the Subject Property as a business purpose investment, while other ALTLOAN programs require the Subject Property to be used as a business purpose investment. Finally, Foreign Borrowers may only occupy the Subject Property as a second home or use the Subject Property as a business purpose investment. The permissible occupancies for ALTLOAN’s loan programs are as follows:
8.1 Primary Residences
If the Borrowers’ obligated on a loan declare they will occupy the Subject Property as their primary residence, the following must be true or the loan is ineligible for funding at ALTLOAN:
a. The Borrowers must have declared that they will occupy the Subject
Property as their primary residence in a written affirmation;
b. If the purpose of the loan is refinancing, the Borrowers’ address on their
pay stubs, bank statements, tax returns, driver’s licenses and insurance
records must predominately be the Subject Property;
c. The Subject Property must not be rented, and if (i) the purpose of the
loan is refinancing, and (ii) the Loan Program is AA-6H Full Doc, NA-A3
Residual Income, NA-M3 Moderate Credit Full Doc, SJ-1H Full Doc or
JP-5H Full Doc, then the Borrowers’ tax returns must not show rental
income from the Subject Property;
d. If the purpose of the loan is to purchase the Subject Property, and the
Borrowers are not selling their current primary residence, the Subject
Property must be a reasonable alternative to their prior residence (i.e. if
the borrowers live in a large house with a big family it is unreasonable
that they are moving into a one-bedroom apartment).
119 July 8, 2019
e. If the Borrowers are employed, their place of employment must be in the
same area as the Subject Property (except that long-distance commuting
is allowed if it is (i) commiserate with a Borrower’s job title and
responsibility, (ii) the Borrower returns home on a regular basis, (iii) the
Borrower’s family lives in the Subject Property while the Borrower is
away, and (iv) the Borrower lives in a hotel or smaller dwelling - such as a
corporate apartment while away at work).
Loans for which the obligated Borrowers’ purported occupancy is questionable are not eligible for funding at ALTLOAN.
8.2 Second Homes
If the Borrowers declare they will occupy the Subject Property as a second home, the following must be true or the loan is ineligible for funding at ALTLOAN:
a. The Borrowers must have declared that they will occupy the Subject
Property as a second home in a written affirmation;
b. The location of the Subject Property must be reasonable for second home
use (for example if the Subject Property is in the same neighborhood as
the Borrowers’ primary residence, or if it is in another neighborhood in
the borrowers’ metropolitan area and such area has no appeal as a
second home destination, it would not be a reasonable second home;
second homes should generally be either (i) if the Borrowers live in or
near a city center, a country home within a three hour drive of the
Borrowers’ primary residence, (ii) in a vacation destination, (iii) in a city
distant from the Borrowers (for example the city where the borrowers
grew up and where their extended family lives, or where their adult
children live, or (iv) if the Borrowers live outside their city center, a pied-
a-terre in their city center.
c. If the purpose of the loan is for a refinance, the Borrowers must not have
rented the Subject Property for more than two weeks with minimal rental
income;
d. The Subject Property must be for the Borrowers’ exclusive usage, for not
less than fifty weeks per year, no time shares are permitted, and the
Subject Property may not be used as the primary residence of a family
member, for example a second home may not be occupied as the residence of the Borrower’s parents or children.
120 July 8, 2019
e. If the purpose of the loan is refinancing, the insurance in force on the
Subject Property must not be renters’ insurance or the equivalent;
f. No Borrower may own more than two second homes other than the
Subject Property (If a Borrower obligated on a Loan owns more than two
second homes not including the Subject Property, the Loan is ineligible
for funding at ALTLOAN);
g. The Subject Property must be suitable for year-round use.
Loans for which the obligated Borrowers’ purported occupancy is questionable are not eligible for funding at ALTLOAN.
8.3 Business Purpose / Investment Properties
If the Borrowers’ obligated on a Loan declare they will use the Subject Property as a business purpose investment, the following must be true or the Loan is ineligible for funding at ALTLOAN:
a. No Borrower and no relative of a Borrower is occupying the Subject
Property, and no Borrower or relative of a Borrower will occupy the
Subject Property;
b. Each Borrower must sign a statement affirming that neither any
Borrower or any parent, child, brother, sister, grandparent, grandchild,
uncle, aunt, niece or nephew of the borrowers, either by blood or by
marriage, will occupy the Subject Property, and that ownership of the
Subject Property is solely for business purposes;
c. Each Borrower must sign a business purpose affidavit in the form set
forth in Exhibit 15.1 of these Underwriting Guidelines;
d. No documentation submitted by the Borrower(s) may indicate that the
Subject Property is the Borrower(s)’s residence (for example, bank
statements and tax filings may not list the Subject Property as a Borrower’s mailing address).
Loans for which the obligated Borrowers’ purported occupancy is questionable are not eligible for funding at ALTLOAN.
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9. Determining Loan Purpose; Requirements Related to Purchases, Rate & Term Refinances and Cash-out Refinances
For a Loan to be eligible for funding at ALTLOAN, the Loan must be for one of three eligible purposes: (i) to finance the purchase of the Subject Property (the Loan is a “Purchase Transaction”), (ii) to refinance eligible existing mortgage(s) encumbering the Subject Property with a new mortgage of the same, or a lesser amount than the existing mortgage(s) (the Loan is a “Rate & Term Refinance Transaction”), or (iii) to refinance eligible existing mortgage(s) encumbering the Subject Property with a new mortgage of a larger amount (the Loan is a “Cash-out Refinance Transaction”).
9.1 Purchase Transactions
For a Loan to be eligible for funding at ALTLOAN as a Purchase Transaction, each of the following must be true:
a. Loan proceeds must be used for the acquisition of the Subject Property; no
proceeds may be paid to the Borrowers other than nominal amounts to
reimburse the Borrowers for the overpayment of fees;
b. None of the Borrowers may have had an ownership interest in the Subject
Property over the past twelve months;
c. If the purchase of the Subject Property is a “non-arms length transaction” as
such term is described in Fannie Guide, then (i) all Fannie Mae requirements
for non-arms length transactions, including that the Subject Property must be
the Borrowers’ primary residence apply, and (ii) two appraisal are required
regardless of loan size;
d. If either (x) the purchase of the Subject Property is a non-arms length
transaction, (y) the purchase transaction includes a gift of equity, or (z) the
Subject Property is being purchased from a family member, then the
ALTLOAN must verify (i) that the Subject Property is not in foreclosure, and
(ii) that the mortgages encumbering the Subject Property are current. If the
Subject Property is in foreclosure or the mortgages encumbering the Subject
Property are not current, then a Loan secured by the Subject Property is
ineligible for funding at ALTLOAN.
e. Installment land contracts are permitted pursuant to Fannie Mae
requirements. Deed transfers under an installment land contract occurring
within 12 months of the date of the contract will be treated as purchase
transactions provided the other requirements set forth in this Section 9.1 are
satisfied.
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9.2 Rate & Term Refinance Transactions
For a Loan to be eligible for funding at ALTLOAN as a Rate & Term Refinance, each of the following must be true:
a. The principal amount of the Loan may not exceed the sum of (i) the amount
needed to pay off eligible mortgage debt plus (ii) the closing costs to settle
and qualify for the Loan, plus (iii) the amount of escrows, impounds and
prepaids required from the Borrowers in connection with settling the Loan,
and (iv) a nominal amount of cash to the Borrowers, not to exceed the lessor
of 2% of Loan principal or $2000. For the purposes hereof, eligible mortgage
debt includes the first lien mortgage encumbering the Subject Property, and
junior lien mortgages that either (x) were originated concurrent with the
acquisition of the Subject Property, of (y) are seasoned. For the purpose
hereof, a closed end mortgage loan is seasoned if it was originated more than
one year prior to the closing of the refinance (one year prior to the Date of
the Loan), while a HELOC is seasoned if it was originated (1) more than one
year prior to the closing of the refinance (one year prior to the Date of the
Loan), and (2) no more than an aggregate of $2000 has been drawn from the
HELOC during the 12-month period preceding the Date of the Loan;
b. At least one of the Borrowers must have been an owner of the Subject Property throughout the three-month period preceding the Date of the Loan;
c. No portion of the principal due on a mortgage loan encumbering the Subject
Property is being forgiven in connection with the refinance;
d. Installment land contracts are permitted pursuant to Fannie Mae
requirements. Deed transfers under an installment land contract occurring
more than 12 months after the date of the contract will be treated as rate &
term refinance transactions provided the other requirements set forth in this
Section 9.2 are satisfied.
e. The Subject Property has not been listed for sale during the three-month
period preceding the Date of the Loan. In addition, unless the Loan terms
includes a two or three-year prepayment penalty, the Subject Property may
not have been listed for sale during the three-month period preceding the
Date of the Loan.
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9.3 Cash-out Refinance Transactions (including delayed financing transactions)
For a Loan to be salable to ALTLOAN as a Cash-out Refinance, if the loan is not a delayed financing transactions, then each of the following must be true:
a. At least one of the Borrowers must have been an owner of the Subject
Property throughout the three-month period preceding the Date of the Loan;
b. No portion of the principal due on a mortgage loan encumbering the Subject
Property is being forgiven in connection with the refinance;
c. If the Loan is a business purpose / investor loan, then the Borrowers must
provide a letter of explanation stating how the loan proceeds will be used;
uses for other than business purposes are not permitted;
d. The Subject Property has not been listed for sale during the three-month
period preceding the Date of the Loan. In addition, unless the Loan terms
includes a two or three-year prepayment penalty, the Subject Property may
not have been listed for sale during the three-month period preceding the
Date of the Loan.
If the loan is a delayed financing, then the loan must conform with the requirements for delayed financings set forth in the Fannie Guides.
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10. Qualifying Calculations - Loan to Value Ratio, Amount and Use of Cash-out, Income Ratios, Assets, Funds to Close and Reserves
For a Loan to be eligible for funding at ALTLOAN, the Loan must pass each of the ratio test requirements, other mathematical requirements and other requirements for the Loan Program under which the Loan is to be funded by ALTLOAN. Many of the ratio test requirements, other mathematical requirements and other requirements for each ALTLOAN loan program are set forth on the applicable loan program matrix in Section 2 of these Underwriting Guidelines, which include requirements for loan to value, debt to income, funds to close, reserves, credit score and maximum and minimum loan amounts. This Section 10 of these Underwriting Guidelines sets forth the methods ALTLOANs must use to compute a Loan’s loan to value ratio, cumulative loan to value ratio, debt to income ratio, debt service coverage ratio, and required funds for Down Payment and Closing Funds and Borrower Reserves.
10.1 Loan to Value Ratio and Cumulative Loan to Value Ratio
For a Loan to be eligible for funding at ALTLOAN, the Loan’s loan to value ratio cannot exceed the maximum loan to value ratio set forth on the matrix for the Loan Program applicable to the Loan (loan program matrices are in Section 2 of these Underwriting Guidelines). In addition, the Loan’s cumulative loan to value ratio cannot exceed the maximum loan to value ratio set forth on the matrix for the Loan Program applicable to the Loan.
Purchase Transactions
To calculate the loan to value for a purchase transaction, the ALTLOAN must divide the loan amount by the lower of the Subject Property’s (i) purchase price or (ii) appraised value as defined in, Section 12.11 of these Underwriting Guidelines. To calculate the cumulative loan to value for a purchase transaction, the ALTLOAN must divide the sum of (x) the loan amount plus (y) the principal amount of purchase money subordinate financing by the lower of the Subject Property’s (i) purchase price or (ii) appraised value as defined in, Section 12.11.
The purchase price is the price set forth on the sales contract under which the Subject Property will be conveyed, less excess seller contributions to closing costs, less any sales concessions, and less unverified down payments.
Seller contributions to closing costs may include payments made by the seller for loan discount points, loan fees, title insurance costs and survey and appraisal costs. The amount of seller contributions to closing costs is limited to 6% of the purchase price of the Subject Property if the loan to value ratio is 80% or less, and is limited to 3% of the purchase price of the Subject Property if the loan to value ratio exceeds 80%, except that if the occupancy of the Subject Property is business purpose / Investment, then the seller contributions to closing costs are limited to 2% of the
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purchase price. If seller contributions exceed the allowed limit, then the difference between the actual contributions paid by the Seller to closing costs less the allowed limit is considered an excessive contribution and must be subtracted from the purchase price of the Subject Property prior to calculating a loan’s loan to value ratio.
Sales concessions are deductions granted to the Borrowers by a seller including credits for early closing and other discounts from the purchase price. Seller concessions must be subtracted from the purchase price of the Subject Property prior to calculating a loan’s loan to value ratio.
Earnest money deposits are amounts paid by property buyers to secure their performance on a purchase contract. Earnest money deposits may be included in the purchase price provided they are verified in accordance with Fannie Mae requirements.
Rate & Term Refinance Transactions
To calculate the loan to value for a rate and term refinance, the ALTLOAN must divide the loan amount by the Subject Property’s appraised value as defined in, Section 12.11 of these Underwriting Guidelines. To calculate the cumulative loan to value for a rate and term refinance, the ALTLOAN must divide the sum of (x) the loan amount plus (y) the principal amount of subordinate financing by the Subject Property’s appraised value as defined in, Section 12.11.
Cash-out Refinance Transactions
To calculate the loan to value for a cash-out refinance, the ALTLOAN must divide the loan amount by the Subject Property’s appraised value as defined in, Section 12.11 of these underwriting guidelines. To calculate the cumulative loan to value for a cash-out refinance, the ALTLOAN must divide the sum of (x) the loan amount plus (y) the principal amount of purchase money subordinate financing by the Subject Property’s appraised value as defined in, Section 12.11. If (i) the Borrowers acquired the Subject Property within the 12-month period preceding the Date of the Loan, and (ii) the appraised value of the property exceeds 115% of the consideration paid by the Borrowers, then the appraisal report or an addendum thereto must describe the reason the Subject Property’s appraised value exceeds the purchase price paid by the Borrowers.
10.2 Calculating Mortgage Payments, Housing Expense and Other Obligations
The qualifying criteria for ALTLOAN’s loan programs includes ratio tests and qualifying calculations that use as factors, the Borrower’s housing expense and other
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obligations and a Loan’s monthly mortgage payment.
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Calculating Proposed Housing Expense
The proposed housing expense is the sum of (x) the Qualifying Monthly Mortgage Payment on the Loan (in accordance with the calculation requirements below) plus (y) the monthly payment on a qualified subordinate financing plus (z) one-twelfth of the sum of (i) the annual real estate taxes on the Subject Property, plus (ii) the aggregate annual cost of mortgage, hazard and flood insurance, plus (iii) the annual fees payable to homeowners’ associations, condominium associations, associations formed to provide common security, road maintenance, or waste disposal, and other similar associations, and plus (iv) annual ground rents. ALTLOANs must document, in the Mortgage File, all amounts included in the proposed housing expense.
Qualifying Monthly Mortgage Payment
The qualifying monthly mortgage payment on the Loan must be calculated as follows:
For ALTLOAN loan programs AA-6H Full Doc , AA-6H Bank Statements, NA-A3 Residual Income, AA-6H Asset Depletion, M3 - Moderate Credit Full Doc, NA-M4 Moderate Credit Bank Statement, SJ-1H Full Doc , SJ-1H Bank Statements, JP-5H Full Doc or JP-5H Bank Statements either
(a) 1. Determine the applicable base interest rate; the applicable base
interest rate is the higher of (a) the note rate and (b) the index plus the
margin (the “Fully Indexed Rate”)
2. For the 5/1 and 7/1 ARM and for 30-year fixed products, determine the
qualifying monthly mortgage payment by calculating the payment using
the applicable base interest rate and an amortization period of 360
months (this is the case regardless of whether a Loan includes an interest
only feature, as all ALTLOAN interest only loans are for a forty year term
with a 30 year repayment period). For the 15-year fixed product,
determine the qualifying monthly payment by calculating the payment
using the applicable base interest rate and an amortization period of 180
months; or
(b) 1. Determine the applicable base interest rate; the applicable base
interest rate is the higher of (a) the note rate and (b) the index plus the
margin (the “Fully Indexed Rate”)
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2. If the loan does not have an interest only feature: determine the
qualifying monthly mortgage payment by calculating the payment using
the applicable base interest rate and the applicable amortization period;
If the loan does have an interest only feature: determine the qualifying
monthly mortgage payment by calculating the payment using the
applicable base interest rate PLUS 0.875% and the applicable
amortization period.
For ALTLOAN loan program NA-I5 Investor DSC and loan program MF-1H Multi-Family
Calculate the initial payment on the loan. If the Loan has an interest only feature, then the initial payment is the interest only payment, if the Loan does not have an interest only feature, then the initial payment is the self-amortizing payment. The initial payment is the Qualifying Monthly Mortgage Payment.
Qualified Subordinate Financing
The payment on Qualified Subordinate Financing is the actual required loan payment for the junior mortgage which will encumber the Subject Property (except that if there is no junior mortgage than this sentence does not apply). This payment must be verified and documented in accordance with the Fannie Guide. (For a Loan to be eligible for funding at ALTLOANthe terms of Subordinate Financing must conform to the Fannie Mae’s requirements.)
Monthly Debt Obligations
Monthly Debt Obligations must be calculated in accordance with the Fannie Mae guide. Generally Monthly Debt Obligations include all payments Borrowers are obligated to make including payments on mortgages on other properties (offset by rents where and as permitted in the Fannie Guide), payments on installment obligations (including auto and student loans), and revolving obligations, alimony, and child support. All Fannie Mae rules regarding Monthly Debt Obligations apply including special handling rules for Borrower obligations being paid by persons other than the Borrowers, certain obligations being paid by self-employed Borrowers’ businesses, deferred student loans, obligations being paid in full prior to the Date of the Loan, and other special circumstances. ALTLOANs must adhere to the Fannie Mae guide in calculating the Borrowers’ Monthly Debt Obligations.
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10.3 Income Tests
Debt to Income Ratio for loan programs AA-6H Full Doc, AA-6H Bank Statements, NA-A3 Residual Income, AA-6H Asset Depletion, NA-M3 Moderate Credit Full Doc, and NA-M4 Moderate Credit Bank Statement, SJ-1H Full Doc and JP-5H Full Doc.
For loan programs AA-6H Full Doc , AA-6H Bank Statements, NA-A3 Residual Income, AA-6H Asset Depletion, NA-M3 Moderate Credit Full Doc, NA-M4 Moderate Credit Bank Statement, SJ-1H Full Doc , SJ-1H Bank Statements, JP-5H Full Doc or JP-5H Bank Statements , for a Loan to be eligible for funding, the Borrowers’ debt to income ratio must not exceed the allowable debt to income ratio set forth in the matrix for the Loan Program applicable to the Loan (the matrix in Section 2 of these Underwriting Guidelines that pertains to the Loan Program).
To calculate the Borrowers’ debt to income ratio, a ALTLOAN must divide the sum of (x) the Proposed Housing Expense, plus (y) the monthly payment on Qualified Subordinate Financing, plus (z) Monthly Debt Obligations, all calculated in accordance with Section 10.2 of this Underwriting Guide; by the Borrowers’ income as determined in accordance with Section 6 of these Underwriting Guidelines.
Residual Income Test for Loan Program NA-A3 Residual Income
For a Loan to fund at ALTLOAN under Loan Program NA-A3 Residual Income, the Borrowers must have residual income equal to or greater than the loan program requirement of 300% of the residual income required pursuant to the Veterans Administration mortgage guaranty program, based on the Borrowers’ family size and the location of the Subject Property. In addition, the Borrowers Debt to Income Ratio may not exceed 59%. Residual income must be calculated in accordance with procedures for residual income determination promulgated by the Veterans Administration.
Debt Service Coverage Ratio for Loan Program NA- I5 Investor DSC
For loan programs NA-I5 Investor DSC, for a Loan to be eligible for funding at ALTLOAN, the Loans’ debt service coverage ratio must exceed 100%.
To calculate the debt service coverage ratio, ALTLOANs must divide the Net Rental Income (as calculated in accordance with Section 6.4 of these Underwriting Guidelines) by the Qualifying Monthly Mortgage Payment (calculated in accordance with Section 10.2 of these Underwriting Guidelines). If the debt service coverage ratio is less than 100%, then the loan is ineligible for funding at ALTLOAN.
Debt Service Coverage Ratio for Program I6 – Mixed Use
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For loan programs I6 – Mixed Use, for a Loan to be eligible for funding at ALTLOAN, the Loans’ debt service coverage ratio must exceed 110%.
To calculate the debt service coverage ratio, ALTLOANs must divide the Net Rental Income (as calculated in accordance with Section 6.4 of these Underwriting Guidelines) by the Qualifying Monthly Mortgage Payment (calculated in accordance with Section 10.2 of these Underwriting Guidelines). If the debt service coverage ratio is less than 110%, then the loan is ineligible for funding at ALTLOAN.
10.4 Testing the Sufficiency of Down Payment and Closing Funds, and of Borrower Reserves
For a Loan to be eligible for funding at ALTLOAN the Borrowers’ Down Payment and Closing Funds, and their Borrower Reserves must satisfy the following requirements:
Purchase Transactions
Down Payment and Closing Cost Funds
The Borrowers must have sufficient Down Payment and Closing Funds to pay the sum of (x) the difference between the Subject Property’s purchase price less the principal amount of the Loan less the principal amount of Qualified Subordinate Financing plus (y) Borrower paid closing costs including discounts, points, mortgage broker fees, title insurance and abstract costs, settlement agent costs and other mortgage related fees, escrows, impounds and prepaids, plus (z) all other amounts due from Borrower to consummate the Loan, including any required pay offs of installment debt, liens, collection accounts or other similar obligations.
Borrower Reserves
The Borrowers must have sufficient Borrower Reserves, to meet the reserve requirement for the Loan Program (reserve requirements for each loan program are set forth on the program matrices).
Refinance Transactions
Down Payment and Closing Cost Funds
Shortfall if Mortgage Debt Being Refinanced Exceeds Loan Proceeds
The Borrowers must have Down Payment and Closing Cost Funds, to pay the sum of (x) any shortfall resulting from the proceeds of the Loan being less than the amount needed to pay off the existing mortgage loans encumbering the Subject Property (as
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adjusted to account for Qualified Subordinate Financing that is being subordinated to the Loan or advanced concurrent with the Loan, but only as otherwise permitted in accordance with these Underwriting Guidelines) plus (y) Borrower paid closing costs including discounts, points, mortgage broker fees, title insurance and abstract costs, settlement agent costs and other mortgage related fees, escrows, impounds and prepaids, plus (z) all other amounts due from Borrower to consummate the Loan, including any required pay offs of installment debt, liens, collection accounts or other similar obligations. Borrower Reserves
The Borrowers must have sufficient Borrower Reserves, to meet the reserve requirement for the Loan Program (reserve requirements for each loan program are set forth on the program matrices in Section 2 of these Underwriting Guidelines). NOTWITHSTANDING THE PRECEDING SENTENCE, if each of the following are true
(i) the Loan Program is not program AA-6H Asset Depletion or program I6
– Mixed Use;
(ii) no Borrower is a foreigner;
(iii) each mortgage that encumbers the Subject Property has been paid
timely over the past two years (mortgage rating of 0 X 30 X 24); and
(iv) each mortgage listed on a Borrower’s credit report that is not secured
by the Subject Property is rated either 0 X 30 X 24, if it was originated
two or more years ago, or is rated 0 X 30 since its origination, if it was
originated less than two year ago;
then the reserve requirement set forth in this paragraph is waived (if a mortgage encumbering the Subject Property was originated less than 24 months ago the reserve requirement in this paragraph is not waived).
10.5 Use of Cash-out Proceeds
For business purpose / investor occupancy loans, cash-out proceeds may not be used for personal, non-business purpose reasons.
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11. Compliance
11.1 Compliance Requirements
For a Loan to be eligible for funding at ALTLOAN, the origination and servicing of the Loan must comply, in all respects, with all applicable federal, state and local laws, ordinances and regulations. Without limiting the foregoing, for a Loan to be eligible for funding at ALTLOAN, it must be in compliance with each of the following except where compliance is not required because the loan is a business purpose / investor occupancy Loan:
a. Dodd Frank;
b. Truth in Lending Act and the Integrated Disclosure Rule;
c. Real Estate Settlement Procedures Act;
d. Fair Credit Reporting Act;
e. Financial Institutions Reform Recovery and Enforcement Act;
f. Financial Services Modernization Act;
g. Home Ownership and Equity Protection Act;
h. Homeowners Protection Act;
i. Mortgage Disclosure Improvement Act;
j. Equal Credit Opportunity Act;
k. US Patriot Act.
11.2 High Cost Loans Ineligible
Loans that are high cost loans under the rules of the Home Ownership and Equity Protection Act are ineligible for funding at ALTLOAN.
11.3 Use of Compliance Engine Required
For a Loan to be eligible for funding at ALTLOAN, the Loan must have passed a compliance engine query that indicates that the loan complies with all applicable federal, state and local laws and regulations.
Mavent and Compliance Ease have been preapproved by ALTLOAN as acceptable compliance engines and may be used by ALTLOANs to satisfy ALTLOAN’s compliance engine requirement (for Mavent or Compliance Ease to be acceptable, the engine testing parameters must be set to include federal, state and local testing). ALTLOAN’s choosing to use a compliance engine other than Mavent or Compliance Ease must receive approval from ALTLOAN prior to their use of such engine.
Loans found by Mavent or Compliance Ease to be out of compliance with an applicable law or regulation are ineligible for funding at ALTLOAN.
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11.4 Texas Cash-out Refinances
Prior to ALTLOAN purchasing a refinance loan secured by a property located in Texas which is subject to section 50(a) (6) of the Texas constitution, the ALTLOAN selling such loan must be specifically authorized to sell loans regulated by the Texas constitution to ALTLOAN. If a Subject Property is it Texas, then all documents evidencing the loan secured by the Subject Property must be prepared by counsel admitted to the Texas bar. Interest only loans are not permitted on Texas refinance transactions.
11.5 Rescission Hardships Not Permitted
ALTLOAN requires, for refinance transactions, that if a loan is to fund with ALTLOAN, a complete rescission period must have passed between closing and funding. Loans for which rescission was abbreviated due to Borrower hardship are not eligible for funding at ALTLOAN.
11.6 TRID
For a Loan to be eligible for funding at ALTLOAN, unless the Loan is a business purpose loan secured by an investment property, the Loan must conform to TILA’s Integrated Disclosure Rules (TRID) as promulgated by the Consumer Financial Protection Bureau. ALTLOAN does not permit Borrowers to wave TRID waiting period requirements. For the avoidance of doubt, ALTLOAN does not require business purpose loans secured by an investment property to conform to TILA or TRID as business purpose loans secured by an investment property are not covered by TILA.
11.7 Business Purpose / Investment Loans
For a business purpose Loan where the Subject Property will be investor occupied, for the Loan to be eligible for funding at ALTLOAN neither a Borrower or any family member of a Borrower may occupy the Subject Property. If a Borrower or family member occupies the Subject Property, then the Loan is ineligible for funding at ALTLOAN.
Cash-out proceeds for business purpose / investment loans may not be used for personal, non-business purpose reasons.
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12. Property and Property Appraisal Requirements
Loans that ALTLOAN funds must be collateralized by properties that constitute eligible collateral.
12.1 Eligible Properties
The following properties are generally eligible collateral provided they are not otherwise ineligible under another part of this Section 12.
a. SFR;
b. Duplex (2 unit);
c. 3 Unit;
d. 4 Unit;
e. Fannie warrantable condos; and
f. Eligible non-warrantable condos
g. Eligible condotels
h. Mixed Use properties that meet the requirements of section 12.12
12.2 Ineligible Properties
Properties of the following types or with any of the following features, are always ineligible collateral:
a. For all loan programs except I6 – Mixed Use, properties with more
than four units, and for loan program I6 properties with more than
six units;
b. For loan programs other than I6 – Mixed Use, properties with any
commercial occupancy, except that owner-occupied offices (such
as Doctor or Dentist offices) which are ancillary to an otherwise
eligible property, and which are permissible under the Fannie
Guide, are eligible collateral;
c. Time shares; d. Kiddie Condos (student based condominiums);
e. Properties of more than fifteen acres;
f. Properties where the value of the property’s improvements as a
percent of the value of the property is extraordinary for the
neighborhood where the property is located;
g. Farms, ranches or other agricultural properties, (properties used
for commercial farms are ineligible collateral, as are properties
with substantial farm activities; limited, recreational use
associated with farms, such as a horse barn where horses are
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maintained for personal use, or a small vegetable garden, do not
render a property ineligible collateral);
h. Leasehold properties except that leasehold properties which meet
the Fannie Mae’s requirements for leaseholds are eligible for all
loan programs other than program I6 – Mixed Use; i. Rooming or boarding houses;
j. Properties with adverse environment conditions;
k. Rectories, Priest Houses and similarly used properties;
l. Properties improved by residences of less than 500 sq. ft. of gross
living area; m. Properties unique or unusual for their neighborhood;
n. Log homes;
o. Earth, berm or basement properties;
p. Vacant land;
q. Properties not accessible by roads;
r. Properties not suitable for year-round occupancy;
s. Properties which are part of a cooperative project;
t. Properties used for “bed and breakfast” lodging;
u. Mobile homes;
v. Manufactured homes (Modular homes with appeal similar to stick
built properties are eligible collateral); w. Properties considered dome or geodesic;
x. Properties located in a lava zone 1 or a lava zone 2;
y. Houseboats or any other “property” that does not include a
permanent improvement on a deeded, mortgageable lot.
12.3 Property Requirements
For a property to be eligible collateral, the property must satisfy each of the following requirements:
a. Conforms to the legal definition of improved real property for the
jurisdiction where it is located; b. Designed and available for year around residential use;
c. Contains kitchen and bathroom facilities;
d. Contains a minimum of 500 square feet of gross living area;
e. Is appraised to be in C1, C2, C3, C4 or C5 condition (properties in C6 condition are not eligible collateral);
f. Represents the “highest and best” use of the subject property;
g. Is free of all health and safety violations; and
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h. Is free of violations of housing codes that adversely affect the
property’s habitability or marketability.
i. For loans exceeding $3 million, does not exceed the high end of the
value of other, similar properties in is neighborhood – “white elephant” properties that exceed the upper end of common valuations in their neighborhoods are ineligible for loans exceeding $3 million.
12.4 As is Condition
For a property to be eligible collateral it must be appraised in “as is condition.” Notwithstanding this requirement, if a property is (i) appraised “subject to completion,” (ii) the cost of completion is less than the lesser of 3% of the appraised value of the property or $10,000, and (iii) the Loan to be secured by the property (and to be funded by ALTLOAN) is for a purchase transaction, then ALTLOANs may originate a Loan secured by the property (provided the property is otherwise eligible collateral, and the Loan otherwise conforms to the requirements of these Underwriting Guidelines); ALTLOAN will not purchase a Loan secured by a property appraised “subject to completion” until (i) all required work specified on the appraisal is completed and (ii) the ALTLOAN obtains and includes in the Mortgage File, a completion certificate prepared by the appraiser who issued the appraisal report, which indicates all work specified on the appraisal has been completed (the completion certificate must be on a form, and prepared in a manner acceptable under the Fannie Guide). ALTLOAN will not purchase if more than ninety days have passed since the Loan was originated.
12.5 Properties Listed for Sale
If a property is listed for sale, or was listed for sale at any time over the past three months, a Loan secured by the property is ineligible for funding at ALTLOAN, notwithstanding the foregoing, if the Loan includes a 2 year or 3 year prepayment penalty, then this restriction against properties recently listed is waived.
12.6 Property Acquired Vacant
If a loan is for a purchase transaction, and the declared occupancy of the Subject Property is other than investor occupied, then the property must be acquired by the Borrowers in vacant condition, and the sales contract under which the property is being acquired must provide that the property will be delivered vacant. Notwithstanding the foregoing, if the Subject Property is a multiunit property, if one of the units is vacant and will be delivered vacant, the property may be conveyed with other units rented.
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12.7 Condominium Project Requirements
Warrantable Condominium Projects
Units in condominium projects that meet Fannie Mae’s condominium project requirements are eligible collateral (provided the unit is not otherwise ineligible under this Section 12).
Non-warrantable Condominium Projects
Units in non-warrantable condominium projects are eligible collateral if they meet each of the requirements in the chart below, and provided that non-warrantable condominium projects require a loan level price adjustment.
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Requirements for Non-warrantable Condominium Projects
Criteria Requirements
Pre-Sale for Projects with 10+ Units:
35% of the units in the project must have been sold or under contract prior to the one-year anniversary of the date in which the units in the project were first marketed. 55% of the units in the project must have been sold or under contract prior to the eighteenth month anniversary of the date in which the units in the project were first marketed. 70% of the units must have been sold or under contact if the project has been marketed for more than eighteen months. For the purpose, hereof the date first marketed shall mean the date the units in the subject phase were first offered for sale, but never later than the date of the first contract to sell a unit in the subject phase.
Cap on ALTLOAN exposure The maximum number of units that ALTLOAN will finance in any condominium project is the greater of one unit or 15% of the total units sold in the project.
Pre-Sale for Projects with less than 10 Units:
• Projects with 1 to 4 units are not eligible • Projects with 5 Units, 4 Units must be sold • Projects with 6 Units, 5 Units must be sold • Projects with 7 Units, 5 Units must be sold • Projects with 8 Units, 6 Units must be sold • Projects with 9 Units, 6 Units must be sold
Ownership Concentration: No single entity (individual, partnership, LLC or corporation) may own more than 15% of total units in the Subject Project (other than the original developer or sponsor).
Investor Occupancy: No more than 50% of total units in the Subject Project may be renter occupied
Insurance: The home owner association must generally maintain all required insurance coverage in accordance with Fannie Mae guidelines, provided that minor deviations from Fannie Mae’s requirements are acceptable at ALTLOAN’s discretion.
Required Subject Property Type
The unit being financed (the Subject Property) must be for one-family, residential occupancy.
Ineligible Property Types: The Subject Project may not include any units with the following characteristics: • Condominium conversions that were not gut rehabilitations, if the
conversion occurred less than 2 years prior to the date of the Loan to be funded by ALTLOAN
• Mobile home units • Manufactured home units except that modular built homes with an
appeal similar to stick built homes are acceptable • Time shares units • Cooperative units • Units that include the option to receive assisted living services • Multi-family units • Common interest or community apartment units (projects where all
units are owners have right to lease individual units) • Houseboat units • Units offering daily, weekly or monthly rentals • Condotels • Units offered through filings with the United States Securities and
Exchange Commission • Units that are subject to fees on transfer that are payable to any person
or entity other than the homeowner association • Units in condominium projects in which the sponsor / developer owns
and leases back to the homeowner association common areas or amenities
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• Units in condominium projects where any unit owner or the homeowner’s association is a party to a revenue sharing agreement with the sponsor or another third-party
• Units in condominium projects that are managed as a hotel or motel • Units in condominium projects whose names include the words “hotel,”
“motel,” “resort,” or “lodge” • Resort type projects
Phase Construction Completion:
Construction must be completed in the subject phase. Construction of all common areas and amenities designated for use by owners of units in the subject phase must be fully completed.
Ownership Interests: Units in the condominium project must be held fee simple
Commercial Percentage: For projects with 50 or more units no more than 50% of total square footage may be used for commercial purpose. For projects that contain less than 50 units, the commercial percentage must conform to Fannie Mae requirements.
Homeowner Association income from sources other than dues:
Budgeted income other than Homeowner Association dues may not make up more than 35% of total Homeowner Association’s budgeted income.
Homeowner Association Delinquency:
No more than 15% of the units within the condominium project may be delinquent more than 60 days on amounts due the homeowner association. No Units owned by the sponsor, developer or affiliates may not be delinquent on amounts due to the homeowner association.
Capital Reserve Requirements: The homeowner association’s current annual budget must include an allowance for capital reserves of not less than 5% of the total expenditures included in such budget. Notwithstanding the foregoing, if the homeowner association has a capital reserve equal to or greater than 50% of the expenditures set forth in its current annual budget, than the required allowance for capital reserves is waived.
Litigation The homeowner association cannot be named as a defendant in litigation unless its potential liability is fully covered by insurance (except that insurance coverage may be subject to a deductible of up to $50,000). The condominium association may not be a plaintiff in litigation that alleges that there are hazardous or unsafe conditions associated with the condominium project.
To verify that a non-warrantable condominium project conforms to the requirements of this section 12.7, ALTLOANs must obtain a completed questionnaire from the condominium project’s managing agent or homeowner association. The questionnaire must either (i) be on the form set forth at Exhibit 15.2, or (ii) contain all of the information set forth on the form at Exhibit 15.2. This form is available at www.ALTLOANmortgage.com/forms.
12.8 Property Appraisal Requirements
For a loan to be eligible for funding at ALTLOAN, the Subject Property securing the loan must be the subject of an appraisal report prepared by an appraiser who is licensed in the state where the Subject Property is located. While an appraiser produces the appraisal, the ALTLOAN remains responsible for ensuring that each loan funded by ALTLOAN conforms to all the requirements set forth in this Section 12, including the appraisal requirements in this Section 12.8.
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If the property being appraised is a single-family residence, the appraisal must be completed on Fannie Mae form 1004, if the property being appraised is a duplex, three-unit property or four-unit property, or mixed use, the appraisal must be completed on Fannie Mae form 1025, if the property being appraised is a condominium the appraisal must be completed on Fannie Mae form 1073, and if the property being appraised is to secure a loan to be funded by ALTLOAN under loan program MF-1H Mult-Family, the appraisal may be completed on Fannie Mae form 1025 or Freddie Mac form 71.
The appraisal must accurately reflect the value and condition of the property and site, and the condition of the marketplace where the property is located, as of the time the appraisal report is issued.
In addition, the appraisal must:
a. Be prepared in accordance with the Uniform Standards of Professional
Appraisal Practices (“the USPAP”);
b. Include a Certification and Statement of Limiting Conditions signed by the appraiser;
c. Include an exterior building sketch of the improvements indicating
dimension; a floor plan sketch is required along with calculations
demonstrating how the estimate for gross living area was determined; for
units in condominium projects, interior perimeter unit dimensions are
required instead of exterior building dimensions;
d. Include a Street map showing the location of the subject property and all
comparable properties used;
e. Include original color photographs or digital color images of the front, street
and rear views of the subject property;
f. Include interior photos of the subject including the kitchen, all bathrooms,
the main living area, any areas with physical deterioration, and any in
progress renovations/improvements;
g. If the property is a duplex, three unit or four unit, include an Operating
Income Statement on Fannie Mae Form 216;
h. Include any other data as an attachment or addendum to the appraisal report
form necessary to provide an adequately supported estimate of market
value;
i. Include an analysis of all agreements of sale, options or listings for the subject property as of the effective date of the appraisal;
j. Include an analysis of all sales of the subject property that occurred within the three (3) years prior to the effective date of the appraisal;
k. Include a completed sales comparison approach, in accordance with the form of appraisal being used;
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l. Clearly describe any unfavorable conditions, such as adverse environmental
or economic factors, and how those conditions impact the market value of
the property, and include comparable sales that are impaired by similar
unfavorable conditions;
m. Include a license certification from the appraiser that completed the
appraisal;
n. Been completed only after a physical inspection of the appraised property
was conducted by the person signing the appraisal as the appraiser (left
portion of the certification);
o. If the appraiser is being appraised within one year of its most recent
transfer, and the appraised value of the property exceeds 120% of the
most recent transfer price for the property, then the appraiser must
comment on why the appraised value exceeds the most recent transfer
price.
Use of Appraisal Management Company Required
For a loan to be eligible for funding at ALTLOAN it must be obtained through a
licensed appraisal management company, and such appraisal management company
must perform testing and quality assurance designed to ensure the accuracy and
completeness of the appraisal. A ALTLOAN may request a waiver to obtain
appraisals through its appraiser panel, rather than through an appraisal
management company if the ALTLOAN is a supervised depository, a subsidy of a
supervised depository or a subsidiary of a bank holding company. Waivers will be
granted at ALTLOAN’s discretion. ALTLOANs must include, in the Mortgage File
pertaining to a Loan, any comments received from the appraisal management
company regarding the value, condition or marketability of a Subject Property. The
ALTLOAN’s engagement of the appraisal management company, and the appraisal
management company’s engagement of the appraiser must be in accordance with
Fannie Mae’s rules and with applicable laws and regulations regarding appraiser
independence.
Acceptable appraisals are either (x) an appraisal obtained from an appraisal
management company by the ALTLOAN, (y) an appraisal obtained from an appraisal
management company by a mortgage broker client of the ALTLOAN, or (z) an
appraisal obtained from an appraisal management company by another ALTLOAN
or mortgage broker which was paid for by the Borrowers and which was transferred
to the ALTLOAN or a mortgage broker client of the ALTLOAN in accordance the
USPAPs Appraisal Independence Requirements. No other appraisals may be used,
and other appraisal reports will not be considered in determining a property’s value,
condition or rental income.
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Prior to the performance of the appraisal obtained by the ALTLOAN or a mortgage
broker client of the ALTLOAN, the ALTLOAN or mortgage broker client must
provide the appraisal management company with (i) for purchase transactions, a
copy of the contract of sale under which the Subject Property will be acquired, and
any additional information the ALTLOAN has regarding the purchase transaction,
including sales concessions given, that may affect the value of the property or an
assessment of its condition or marketability, and (ii) for refinance transactions, any
information the ALTLOAN possesses about the Subject Property that may affect the
value of the property or an assessment of its condition or marketability.
12.9 Additional Appraisal Requirements
Age of Appraisal
The appraisal report(s) must be completed not earlier than 120 days prior to the Date of the Loan, that if the original appraiser issues a recertification of value which is acceptable under the Fannie Guide and prepared in accordance with the USPAP, then (i) the appraisal must not be dated earlier than 180 days prior to the Date of the Loan and (ii) the recertification of value must not be dated earlier than 60 days prior to the Date of the Loan.
Two appraisals required for larger loan amounts
For loan programs M3 – Moderate Credit Full Doc and M4 – Moderate Credit Bank Statement, If the principal amount of a Loan is $1,000,000 or greater, then for the Loan to be eligible for funding at ALTLOAN, the Subject Property must be appraised by two independent appraisers, and must be the subject of two appraisal reports. Each appraisal report must be obtained and completed in accordance with the requirements of Section 12.8 of these underwriting guidelines.
For all loan programs except M3 – Moderate Credit Full Doc and M4 – Moderate Credit Bank Statement, If the principal amount of a Loan is $1,500,000 or greater, then for the Loan to be eligible for funding at ALTLOAN, the Subject Property must be appraised by two independent appraisers, and must be the subject of two appraisal reports. Each appraisal report must be obtained and completed in accordance with the requirements of Section 12.8 of these underwriting guidelines.
Two appraisals required for non-arm’s length transactions
If, under the Fannie Guide, a Loan is non-arm’s length, then for the Loan to be eligible for funding at ALTLOAN, the Subject Property must be appraised by two independent appraisers, and must be the subject of two appraisal reports. Each appraisal report must be obtained and completed in accordance with the requirements of Section 12.8 of these underwriting guidelines.
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Two appraisals required for “flip” transactions
If the purpose of a Loan is to finance a “flip” transaction as set forth in 15 U.S.C, sections 1639(b)(2) and 1026.35(c)(6)(ii)(B), then for the Loan to be eligible for funding at ALTLOAN, two appraisals are required. Two appraisals are required if either:
(a) If the subject property was purchased by the Seller (“Date of the Loan”)
within the last three months, and the purchase price being paid by the buyer exceeds the price paid by the seller by 10% or more; or
(b) If the subject property was purchased by the Seller (“Date of the Loan”) within the last six months, and the purchase price being paid by the buyer exceeds the price paid by the seller by 10% or more.
To calculate the 90-180 days, count the number of days between the day after the acquisition date (i.e. day after the Date of the Loan) up to and including the purchase date (i.e. the purchase agreement date).
12.10 Clear Capital CDA or Pro Teck ARR required
For a Loan to be eligible for funding at ALTLOAN under any loan program other than I6 – Mixed Use, the appraisal of the Subject Property must be reviewed through either a collateral desktop review (“CDA”) from Clear Capital, or an Appraisal Risk Review (“ARR”) from Pro Teck. ALTLOANs must order the review, which must be received by ALTLOAN directly from Clear Capital or Pro Teck, and independent of the ALTLOAN (ALTLOANs ordering reports should specify ALTLOAN as the recipient, upon which Clear Capital and Pro Teck will deliver the reports electronically to ALTLOAN).
If the value on the CDA or ARR is less than 90% but greater than 80% of appraised value of the Subject Property, then the value of the Subject Property used in the Loan to Value calculation must be reduced to the value on the CDA or ARR. If the value on the CDA or ARR is less than 80% of the appraised value, then the Loan is ineligible for funding at ALTLOAN.
If two appraisals were performed on the Subject Property, then the appraisal indicating the lower value for the Subject Property is the appraisal that must be reviewed by Clear Capital or Pro Teck (the appraisal with the higher value does not need to be reviewed).
For Loan Program I6-Mixed Use, a CDA or ARR is not required.
12.11 Appraised Value
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Appraised Value
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The appraised value to be used in calculating the loan to value ratio and cumulative loan to value ratio in accordance with Section 10.1 of these Underwriting Guidelines, is the appraised value from the appraisal report less any downward adjustments made by the ALTLOAN.
Appraised Value if Two Appraisals are Obtained
If two appraisals are required in accordance with section 12.10 of these Underwriting Guidelines, then the appraised value to be used in calculating the loan to value ratio and cumulative loan to value ratio in accordance with Section 10.1 of these Underwriting Guidelines, is the appraised value from the appraisal report that, among the two appraisal reports, indicates a lower value for the Subject Property, less any downward adjustments made by the ALTLOAN.
12.12 Appraisal Quality Control Report
For Loans with loan to value ratios exceeding 85%, ALTLOAN may obtain an appraisal quality control report and may reduce the value of a property for the purposes of calculating the loan to value ratio based on the results of the quality control report.
12.13 Special Property Requirements for Loan Program I6 - Mixed Use
12.13.1 Limitation on Property Stories
The minimum number of stories is 2 and the maximum number of stories is 9.
12.13.2 Limitation on Commercial Usage
For properties with 2 stories above grade, the maximum portion of the property’s above grade square footage that may be commercial use is 50%. For properties of 3 or more stories, the maximum portion of the property’s above grade square footage that may be commercial use is 35%
All commercial use must be on the ground story, and where permitted by zoning and certificate of occupancy on the second story or below grade (commercial usage may not be on the third or higher stories).
12.13.3 Limitation on Units
The maximum number of permitted units is 9 of which no more than 2 may be commercial units.
12.13.4 Reserved
12.13.5 Property Condition; Zoning and Certificates of Occupancy
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Property’s must be in good condition with no significant deferred maintenance. Property’s must be all zoning requirements and must have a certificate of occupancy for their use or intended use.
12.13.6 Cash Rents
Rents paid in cash may not be included in the debt service coverage ratio. Only rent receipts that can be validated by cancelled checks or statements showing electronic funds transfers may be included in the calculation of the debt service coverage ratio.
12.13.7 Vacant Units
The market rental value of vacant units may be included in the debt service coverage ratio calculation except that 1) only 90% of the market value mat be included, and 2) if the market value of vacant units is included in the debt service coverage ratio calculation, then the required reserves must be increased by 3 times the monthly rental value of the vacant unit(s).
For refinance transactions, no more than 35% of the units may be vacant.
12.13.8 Prohibited Uses
Properties that contain one or more commercial establishments in any of the following businesses are prohibited:
Adult activities; Any activity not permitted by law, ordinance or regulation; Day care or child care; Gambling activities; Manufacturing, distribution and warehouse; Marijuana related activities; Medical activities not under the supervision of a licensed doctor, dentist
chiropractor, psychologist, nurse practitioner, or nutritionist; Transient boarding, rooming house or similar; Vehicle repair or vehicle related including garages; Other property uses that are out of character for the neighborhood in which
the property is located, which present higher than ordinary risks for safety, or which are controversial within their community.
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12.14 Project Requirements for Condotels
A loan that is secured by a property in a condotel project is eligible for funding at ALTLOAN under certain loan programs at reduced loan to value ratios as set forth on the applicable program matrices in Chapter 2 of these Underwriting Guidelines. For a loan that is secured by a property in a condotel project to be eligible for funding at ALTLOAN, the condotel project must conform to each of the following requirements:
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Criteria for Condotel Projects Requirements
Pre-Sale for Project with more than 10 unites
90% of the units in the subject project must be sold and closed.
Homeowners Association Control HOA must be under the control of the unit purchasers (and not the sponsor or a sponsor successor)
Cap on ALTLOAN exposure The maximum number of units that ALTLOAN will finance in any condominium project is the greater of one unit or 15% of the total units sold in the project.
Pre-Sale for Projects with less than 10 Units:
• Projects with 1 to 5 units are not eligible • Projects with 6 Units, 5 Units must be sold • Projects with 7 Units, 6 Units must be sold • Projects with 8 Units, 7 Units must be sold • Projects with 9 Units, 8 Units must be sold
Ownership Concentration: No single entity (individual, partnership, LLC or corporation) may own more than 15% of total units in the Subject Phase.
Unit Requirements The size of the Subject Property must not be less than 500 square feet. The unit must contain a full kitchen.
Insurance: The home owner association must maintain all required insurance coverage in accordance with Fannie Mae guidelines including, where applicable, hazard insurance, flood insurance, fidelity and liability insurance.
Required Subject Property Type The unit being financed (the Subject Property) must be for one-family, residential occupancy.
Ineligible Property Types: The following property types are ineligible: The condominium project may not include any units with the following characteristics:
• Projects where control of the HOA has not been turned over to the unit buyers • Mobile home units • Manufactured home units except that modular build homes with an appeal
similar to stick built homes are acceptable • Time shares units • Cooperative units • Units that include the option to receive assisted living services • Multi-family units • Common interest or community apartment units (projects where all units are
owners have right to lease individual units) • Houseboat units • Units offered through filings with the United States Securities and Exchange
Commission • Units that are subject to fees on transfer that are payable to any person or entity
other than the homeowner association • Units in condominium projects in which the sponsor / developer owns and leases
back to the homeowner association common areas or amenities • Condominium conversions that were not gut rehabilitations, if the conversion
occurred less than 2 years prior to the date of the Loan to be funded by ALTLOAN
• Units in condominium projects where any unit owner or the homeowners association is a party to a revenue sharing agreement with the sponsor or another third-party
Phase Construction Completion: Construction must be completed on 100% of units in the Subject Project. Construction of all common areas and amenities designated for use by owners of units in the subject phase must be fully completed.
Ownership Interests: Units in the condominium project must be held fee simple
Commercial Percentage: For projects with 50 or more units no more than 40% of total square footage may be used for commercial purpose. For projects that contain less than 50 units, the commercial percentage must conform to Fannie Mae requirements.
Homeowner Association income from sources other than dues:
Budgeted income other than Homeowner Association dues may not make up more than 35% of total Homeowner Association’s budgeted income.
Homeowner Association Delinquency:
No more than 20% of units within the condominium project may be delinquent more than 30 days, and no more than 15% of the units within the condominium project may be delinquent more than 60 days on amounts due the homeowner association. No Units owned by the sponsor, developer or affiliates may not be delinquent on amounts due to the homeowner association.
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Capital Reserve Requirements: The homeowner association’s current annual budget must include an allowance for capital reserves of not less than 10% of the total expenditures included in such budget. Notwithstanding the foregoing, if the homeowner association has a capital reserve equal to or greater than 150% of the expenditures set forth in its current annual budget, than the required allowance for capital reserves is waived.
Litigation The homeowner association cannot be named as a defendant in litigation related to the safety, structural soundness, habitability, or functional use of the condominium premises. The condominium association may not be named as defendant to any material litigation not fully covered by insurance (other than due to a policy deductible of no more than the lessor of $50,000 or 10% of the HOA’s annual, budgeted operating revenues).
Environmental and Safety and Soundness Hazards
The condominium premises may not suffer from environmental, safety or soundness hazards that have not been successfully remediated.
Established Marketability There must be a reasonable history of resales of units in the condominium project
No foreseen instability: The homeowner association managing agent does not know of any condition that has caused, or with the passage of time, will cause either the condominium project or homeowner association to become unstable.
To verify and document that a condominium project conforms to the requirements set forth in this Section 12.14, ALTLOANs must obtain a completed questionnaire from the condominium project’s managing agent or homeowner association. The questionnaire in the form set forth in Exhibit 12.14. This form is also available at www.ALTLOANmortgage.com/forms.
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13. Insurance Requirements
For a Loan to be eligible for funding at ALTLOAN, the Subject Property must be insured against title defects and against hazards. In addition, if the Subject Property is in a flood zone, the property must be insured against flood damage.
13.1 Title Insurance
For a Loan to be eligible for funding at ALTLOAN, the Subject Property must be covered by a title insurance policy for the benefit of the ALTLOAN and its assignees (MERS cannot be named as the insured in the title policy), and for not less than the full dollar amount of the Loan. The title insurance policy must conform to Fannie Mae’s requirements for title insurance and to each of the following requirements:
a. The title insurer must be qualified to do business in the state where the
subject property is located. b. The premium for the title insurance must have been paid in full on the Date
of the Loan or on the Loan’s funding date;
c. The title insurance must be in force and non-cancelable
d. The title policy must be written on one of the following forms:
i. the 2006 American Land Title Association (ALTA) standard form;
ii. the ALTA short form; or
iii. the ALTA form with amendments required by state law in states in
where the 2006 ALTA forms have not yet been adopted, provided
such ALTA form with amendments is acceptable to Fannie Mae (loans
where the title insurance is not acceptable to Fannie Mae or not
eligible for funding at ALTLOAN).
e. The title report must include a 24-month chain of title which was prepared
not earlier than 90 days prior to the Date of the Loan, and which includes the
transfer date, names of buyers and names of sellers for any conveyances
within the past 24 months;
f. The Borrowers’ names must be indicated on the title commitment and must
be identical as the Borrowers’ names on the note and mortgage without any
variances for spelling, use of a middle name or use of a personal title;
g. If Borrower’s marital status appears to be different than on 1003, the discrepancy must be addressed.
h. The title insurer must provide a closing protection letter covering the closing
settlement agent’s errors, omissions, fraud, theft, and embezzlement (except
that in New York State a closing protection letter is not required).
i. The title insurance must include (Gap Insurance) covering liens and
ownership transfer from the Date of the Loan through to the recording of the
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security instruments establishing the Loan’s first lien collateral interest in
the Subject Property.
j. If the Loan is an adjustable rate mortgage the policy includes an adjustable
rate endorsement in a form acceptable to Fannie Mae.
k. If the property is located in New York, the title agency preparing the title
abstract must provide an E&O Policy with minimum coverage of $500,000
per claim and $1,000,000 in aggregate with a deductible of no more than
$50,000. The title insurer must have an “A” or better rating from A.M Best Company rating service.
If the title being insured is for a condominium unit, the following additional title
policy requirements are applicable:
a. An ALTA 4-06 or 4.1-06 endorsement or equivalent is required to be
attached and incorporated into the text of the policy;
b. If the homeowner’s association owns the common areas or facilities of the
project separately, the title insurance must insure such ownership;
c. The title policy must provide for the following:
i. that the mortgage must be superior to any lien for unpaid common
expense assessments;
ii. that insurance covers against any impairment or loss of title by any
past, present, or future violations of any covenants, conditions, or
restrictions of the master deed for the project;
iii. that the unit does not encroach on another unit or any of the common
areas/facilities;
iv. that the mortgage is secured by a unit in the condo project that has been created in compliance with applicable statutes; and
v. the real estate taxes are assessable only against the condo unit and its
undivided interest in the common elements rather than the project as
a whole.
Acceptable Title Exceptions
The following title exceptions are permissible regarding Loans to be funded by ALTLOAN, provided that they are also permissible in accordance with Fannie Mae’s title insurance requirements:
a. Customary public utility subsurface easements, the location of which are
fixed and can be verified;
b. Above-surface public utility easements that extend along one or more
property lines for distribution purposes or along the rear property line for
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drainage, provided they do not extend more than 12 feet from the subject
property lines and do not interfere with any of the buildings or
improvements, or with the use of the subject property, and further provided
their violation will not result in the forfeiture or reversion of title or a lien of
any kind for damages, or have an adverse effect on the fair market value of
the subject property.
c. Mutual easement agreements that establish joint driveways or party walls
constructed on the subject property and on an adjoining property, provided
all future owners have unlimited and unrestricted use of them. d. Encroachments on one foot or less on adjoining property by eaves or other
overhanging projections or by driveways provided there is at least a ten
(10) foot clearance between the buildings on the subject property and the
property line affected by the encroachments.
e. Encroachments on the subject property by improvements on adjoining
property provided these encroachments extend one foot or less over the
property line of the subject property, have a total area of 50 square feet or
less, do not touch any buildings, and do not interfere with the use of any
improvements on the subject property or the use of the subject property
not occupied by improvements; f. Encroachments on adjoining properties by hedges or removable fences;
g. Liens for real estate or ad valor taxes and assessments not yet due and
payable;
h. Outstanding oil, water, or mineral rights as long as they do not materially
alter the contour of the property or impair its value or usefulness for its
intended purposes.
Survey Requirements
Each Loan funded by ALTLOANmust either (i) include a survey of the property
securing the Loan, or (ii) be the subject of a survey affidavit acceptable, in all
respects, to the title insurance company insuring the Loan such that the title
insurance policy insuring the first mortgage encumbering the Loan is without
exception regarding any matter related to a survey including the location of
improvements on the Subject Property, the location of easements on the Subject
Property, the location of encroachments affecting the Subject Property, or the
Subject Property’s metes and bounds. If a survey is included, the survey must have
been certified, dated, and signed by the licensed civil engineer or registered
surveyor performing the survey. Unimproved land surveys are not acceptable.
Surveys must be reviewed by the ALTLOAN for easements, encroachments, flood zone impacts and possible boundary violations.
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13.2 Hazard Insurance
For a Loan to be eligible for funding at ALTLOAN, the improvements on the property securing the Loan must be covered by a hazard insurance policy for the benefit of the ALTLOAN and its assignees, with policy coverage of not less than the lower of:
1) The full replacement cost of the improvements of the Subject Property; or
2) The amount of the Loan principal, but never less than 80% of the replacement cost of the improvements of the Subject Property.
In addition, the hazard insurance policy must conform to Fannie Mae’s requirements for hazard insurance and to all of the following requirements:
a. Deductibles may not exceed five percent (5%) of the face amount of the
insurance policy;
b. The policy must contain the Borrower’s name, the agent’s name the agent’s
company name and the full address of the subject property and be in effect
at closing;
c. The Mortgage File must document payment of the premium for the hazard
file;
d. For purchases, the premium for one year of coverage, effective from date
the Borrowers acquire the Subject Property, must be paid in full and for
refinances, the policy must be effective for at least 60 days after the Date of
the Loan;
e. The hazard insurance policy must be underwritten by a carrier that meets
the following requirements: i. Carriers rated by A.M. Best Company, Inc. must be rated “B”
or better;
ii. Carriers rated by Demotech, Inc. must have an “A” or better
rating in Demotech’s Hazard Insurance Financial Stability
Ratings;
iii. Carriers rated by Standard and Poor’s must have a “BBB” or
better Insurer Financial Strength Rating in the Standard and
Poor’s Ratings Direct Insurance Service; iv. Carriers not rated by any of A.M Best Company, Inc,
Demotech, Inc. or Standard and Poor’s are ineligible and policies from such carriers may not be used to meet the hazard policy requirements of these Underwriting Guidelines.
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13.3 Flood Insurance
If the Subject Property located within any area designated by the Federal Emergency Management Agency (FEMA) as an Area of Special Flood Hazard, then for the Loan secured by the Subject Property to be eligible for funding at ALTLOAN, the Subject Property must be covered by flood insurance.
To determine whether the Subject Property is in a flood zone, ALTLOANs must obtain a Flood Certificate on the lot of the Subject Property from a nationally recognized Flood Certificate provider.
Required Flood Insurance
If flood insurance is required, then the amount or required insurance is the lessor of (i) full replacement cost coverage for the improvements on the Subject Property, or (ii) the maximum coverage available under the National Flood Insurance Administration program. The flood insurance must conform to the flood insurance requirements of Fannie Mae, and must also conform to all of the following requirements:
a. Deductibles permitted up to the maximum deductible available under the
National
Flood Insurance Program (NFIP);
b. The Borrower name and the Subject Property address must be on the flood
insurance application and binder;
c. The flood insurance policy must contain a mortgagee clause, naming
ALTLOAN and its assignees as the loss payee; d. Evidence of coverage must be provided at closing.
The requirement for flood insurance requirement may be waived if:
a. The subject property improvements are not in the area of Special Flood
Hazard, even though part of the land is in Flood Zone A or V; or
b. The Borrowers obtain a letter from FEMA stating that its maps have been amended
so that the subject property is no longer in an area of Special Flood Hazard.
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