Carrington Wholesale

Carrington Non-QM Program Underwriting Enhancements

May 24, 2021rashtonBulletin

Overview

Carrington Mortgage Services, LLC (CMS) is pleased to announce the following underwriting guideline enhancements for the Non-QM loan programs (Prime Advantage, Flexible Advantage/Advantage Plus and Investor Advantage). All guideline enhancements are effective immediately and may be applied to loans not yet closed.

Please note this is an abbreviated summary of the guideline changes. All updates should be viewed within the context of the full guidelines available on www.carringtonwholesale.com.

Investor Advantage LTV Enhancements

5% expanded LTVs for Investor Advantage shown in the table below with new expanded offering over 80% LTV:

Investor Advantage
Loan Amount FICO Purchase & R/T Cash Out
≤ $1,000,000 720 82.50% 75%
700 80% 75%
680 80% 75%
660 75% 70%
$1,000,001
up to
$1,500,000
720 75% 70%
700 75% 70%
680 70% 65%
660 65% 60%

Guideline Enhancements

The Non-QM loan program guideline enhancements are shown below:

Product Guideline Enhancements
All Products Age of Loan Documentation: Credit report, credit documentation (assets/income), title report, and closing protection letter (CPL) must be dated within 90 days of closing (was 60 days). All other loan documentation must be dated within 120 days of closing.
Determining Loan-to-Value: If the property was purchased ˃ 6 months (was 12 months) and < 12 months from the application date, the current appraised value can be used to determine loan-to-value. Two full appraisals are required and the lower of the two values will determine the loan to value.

If the property was purchased < 6 months (was 12 months) from application date, the lesser of the current appraised value or the previous purchase price plus documented improvements (if any) must be used. The purchase settlement statement and any invoices for materials/labor will be required.

Guideline Enhancements (continued)

Product Guideline Enhancements
Prime Advantage Expanded 50% Debt Ratio: DTI > 43% is now allowed up to 80% LTV with FICO scores greater than or equal to 700 for Primary Residence and Second Homes. Loan reserve requirements as low as 6 months based on the Loan Amount (formerly 12 months reserves were required regardless of loan amount).
Investor Advantage Short Term Rentals: Short term rental properties may not be modified in a way that affects the residential character of the property. For example, parking lots and reception areas are not acceptable. Examples of short term rentals are Air BNB, Vacation Rental By Owner (VRBO), etc.

Short term rentals of less than one month in term will be qualified as an unleased property unless the borrower is able to demonstrate a 12-month history of rents on the subject property. The borrower may provide documentation from their property management service documenting 12 months gross rents.

Determining the Loan-to-Value – Refer to the Additional LTV Limits chart on the Investor Advantage Matrix. Short term rentals allowed to exceed 65% LTV (up to 75%) with certain conditions met.

The Debt-Coverage Ratio (DCR) must be calculated using the lesser of the documented rents from the property management service or the appraiser’s estimate of market rents.

Evidence of Primary Residence: All borrowers must presently own or rent their primary residence. Evidence is required.

Borrowers who own a primary residence and are purchasing a 1-unit Single Family Residence must provide:

  • Proof of ownership of a primary home superior in value and/or appeal to subject Borrowers who rent a primary residence and are purchasing a 1-unit Single Family Residence must provide:
  • Evidence of an active lease in place
  • Primary residence must be supported by one of the following characteristics:
    • Geographically consistent with borrower’s place of employment. If the URLA employment section is blank, the Underwriter must add a condition for the URLA to list the borrower’s Employer name and address; or
    • General appeal and location of primary is superior to subject property

Note: Living rent free is not acceptable. For a married borrower whose primary residence is titled or leased to their spouse’s name only, documentation must be provided to support the borrower occupies the spouse’s residence and the mortgage or rent rating on the primary residence complies with Mortgage and Rental Payment Verification.

Contacts

Please contact your Account Executive or Account Manager with any questions.

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