Providing an Alternative to Income Verification for Refi Plus Loans with Payment Changes Less than or Equal to 20%
Currently, for Refi Plus mortgage loans with payment changes (principal and interest) less than or equal to 20%, Fannie Mae requires verification that at least one of the borrowers has a source of income (see B5-5.2- 02, DU Refi Plus and Refi Plus Underwriting Considerations). In lieu of this verification, Fannie Mae will now allow verification of liquid financial reserves equal to at least 12 months of the new mortgage payment (PITIA) on the subject property. These reserves must be documented with at least one recent statement (monthly, quarterly, or annual) and are limited to the following types of liquid assets:
- checking or savings accounts, certificates of deposit, and money market funds;
- investments in stocks, bonds, mutual funds; and
- the amount vested in a retirement savings account.
Lenders are not required to investigate large deposits that appear on the statements. However, Fannie Mae policy requires that certain assets be “discounted” when used for reserves – this policy also applies to Refi Plus mortgage loans. Refer to the applicable asset type in the Selling Guide for additional information.
NOTE: There are no changes to the requirements related to verification of assets for closing. Lenders do not have to verify assets required to close for Refi Plus mortgage loans with payment changes less than or equal to 20%.
Delivery of Income
Income must be reported to Fannie Mae for all Refi Plus and DU Refi Plus mortgage loans at the time of loan delivery even for those Refi Plus transactions where there is no maximum DTI ratio. For Refi Plus mortgage loans with payment changes less than or equal to 20%, the lender must report the stated income on the loan application (if any). If the borrower does not state any income and the lender uses the reserve alternative option (described above) as the income source, the lender must deliver the equivalent of the new monthly payment (PITIA) as the “Monthly Income” data element (Sort ID 291).
Reducing Documentation for Income and Assets
To provide additional flexibility and efficiency for lenders in originating Refi Plus and DU Refi Plus mortgage loans, Fannie Mae is further streamlining the minimum amount of documentation that is required for income and assets. These changes will provide consistency across income and asset types and align Refi Plus and DU Refi Plus requirements.
Effective immediately, the following policies apply to Refi Plus mortgage loans with payment increases (principal and interest) greater than 20% and to all DU Refi Plus mortgage loans:
- All income and assets sources must be eligible sources and verified per the minimum documentation requirements described in the Attachment to this Announcement.
- All income and asset documents must follow Fannie Mae’s standard requirements for age of documents.
- Lenders are not required to verify or assess the borrower’s history of receipt of income or the anticipated continuity of the income.
- Fannie Mae’s standard requirements regarding the Request for Transcript of Tax Return (IRS Form 4506-T) are applicable, including the requirement that each borrower must complete and sign a separate IRS Form 4506-T at or before closing.
- Fannie Mae’s standard requirements for verbal verifications of employment apply.
- Lenders are not required to investigate large deposits that appear on bank or other asset statements.
- Proof of liquidation of assets (e.g., sale of stock) is not required even if those assets are used by the borrower to pay closing costs.
NOTE: For DU Refi Plus loan case files, lenders can follow the documentation requirements in the Attachment and may disregard the messages shown on the DU Underwriting Findings report if they require a deeper level of documentation. See the Attachment for additional information.
Full bulletin below…
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4closureFraud.org
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Selling Guide Announcement SEL-2012-09
Okay, so I am a mortgage broker, licensed in the state of FL. I am fully aware of this program, along with a couple of others that came from Freddie Mac as well. I have to say – I don’t think these programs are good for the economy; nor do I think they will result in nothing more than a delay of the enevitable. Therefore, I don’t do them!! I look at it as a means for the gov’t owned Fannie/Freddie to rid themselves of the malfunctioning mortgages out there that are loaded with fraud by empowering the borrower (who usually does not know there is fraud or a break in title) to make the current mess go away by refinancing. And, let’s feed all of the (liquid and otherwise)assets to these gov’t entities, which was NEVER required outside of the monies needed to close + required reserves, so that when the delinquency occurs they have all of the information necessary to take it all AGAIN. I wish that more people would take the time to understand securitization, CDO’s, credit swaps & to understand the flow of money that created this ‘toxic’ dumpsite.