Underwriting Guideline Overlays Update March 1, 2017

CMS FHA Guideline Overlays

Guideline Updates

Items paid outside closing
(POC) cannot be included in borrowers MRI

Removed overlay.

Allow POC for appraisal and
credit report, only if documented with cancelled check or bank statement to
source borrower’s own funds and not a credit card or seller contributions.

Manufactured homes:

No alterations or additions to
the original home

Removed overlay.

Manufactured homes with
acceptable alterations or additions must have marketability, “like” comparables, gross
living area (GLA) and structural engineer’s certificate required.

Manufactured home with an
additional manufactured home on the property

Removed overlay.

Permitted if the 2nd
manufactured home is being used as a storage building, the kitchen is rendered
inoperable and the utilities are disconnected. Follow HUD requirements.

Mixed use properties require
75% of entire building square footage is for residential use

Removed overlay.

Follow HUD requirements for
residential building use.

Unpermitted addition or conversions greater
than 15% of GLA require permits

Removed overlay.

Appraiser must comment if the
addition or conversion meets all local and county building codes. All
additions/ alterations must be in a workman like manner, market acceptance
and have “like”
comparables.

Ineligible properties with
Cisterns, or privately hauled water

Removed overlay.

Requirement for both home inspection and
203k Consultant

Updated overlay. If Consultants are
state-approved home inspectors or members of accredited State or National
Home Inspection Associations, home inspections will not be required.

Currently CMS requires the bid prior to
Underwriting for 203k.

Removed the overlay for the Underwriter to
use the bid. The bid will be sent directly to the Appraiser and will be
conditioned accordingly. The Underwriter will just use the cost breakdown to
calculate the loan amount, instead of the bid.

CMS VA Guideline Overlays:

Guideline Updates

Max cash out to 90% LTV for FICO 550- 619

Allow up to 100% LTV for FICO
550-619.

Require LOE for purpose of cash
out.

Maximum cash out up to 100% LTV
is $5000

No maximum cash out up to 100%
LTV.

Require LOE for the purpose of
cash out.

Requirement for 100% joint
access letter with a non-borrowing spouse

Removed overlay.

CMS All
Govt Guideline Overlays

Guideline
Updates

Revolving accounts paid off through closing
must be closed at the Underwriters discretion.

Removed requirement to close
accounts.

Credit procedure for
Manufactured home Affidavit of Affixation (AofA)

Current process requires CMS
associate to execute and notarize the AofA, FedEx to title the day before
closing and record with docs.

Procedure revised to send AofA
with closing documents and a limited POA.

Title or Closing Agent will
execute the AofA document and ensure document gets recorded (if required in
that State).