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Juneteenth National Independence Day Holiday – Lock Desk Hours and Key Compliance Dates

June 14, 2022rashtonBulletin

Overview

The offices of Carrington Mortgage Services, LLC (CMS) including the Lock Desk will be closed on Monday, June 20, 2022 for Juneteenth National Independence Day, which is a Federal Holiday. Normal lock hours will resume on Tuesday, June 21, 2022.

Rate locks that expire on the holiday will automatically roll to the next business day.  In addition there are some important disclosure considerations associated with the holiday:

  • Monday, June 20, 2022 cannot be included in the rescission period for refinance transactions.
  • Monday, June 20, 2022 cannot be included in the seven (7) business day waiting period between the date the initial Loan Estimate (LE) was provided to the borrower and the consummation of the loan.
  • When re-disclosure of the LE is required, Monday, June 20, 2022 cannot be included in the three (3) business day waiting period between the date the revised LE was provided to the borrower and the consummation of the loan.
  • When re-disclosure of the Closing Disclosure (CD) is required, Monday, June 20, 2022 cannot be included in the three (3) business day waiting period between the date the revised CD was provided to the borrower and the consummation of the loan.

Issues related to locks should be sent via email to lockdesk@carringtonms.com.

Contacts

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

Carrington thanks you for your business.

FEMA Disaster Declaration for New Mexico Wildfires and Straight-Line Winds

May 5, 2022rashtonBulletin

Overview

Due to wildfires and straight-line winds in New Mexico, FEMA has declared the following counties a disaster.

Incident Period: April 5, 2022 and continuing

State FEMA Disaster Declaration Counties
New Mexico May 4, 2022 Colfax, Lincoln, Mora, San Miguel and Valencia

Re-Inspection by Product Type

If your loan is … A re-inspection is required … Under these circumstances …
FHA Full Doc Yes If the original appraisal inspection date was prior to the Incident Period End Date – Continuing**.
FHA Streamline No Not applicable
VA Full Doc and IRRRL Yes If the loan was not closed (signed) prior to the Declaration Date of 05/04/22.
USDA Full Doc and Streamline Assist Yes If the original appraisal inspection date was prior to the Incident Period End Date – Continuing**.
Conventional* and Non-Agency Yes If the original appraisal inspection date was prior to the Incident Period End Date – Continuing**.

*If an appraisal was not required due to a property inspection waiver (PIW), an inspection report will still be required.

**In cases where FEMA has not yet issued an Incident End Date and the disaster is “Continuing”, the earliest CMS will permit a re-inspection is a minimum of 14 calendar days from the Incident Period Start Date.

Contacts

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

Carrington thanks you for your business.

Non-QM 1099 and Profit & Loss Product Enhancements

April 18, 2022rashtonBulletin

Overview

Carrington Mortgage Services, LLC (CMS) is pleased to introduce new 1099 and P&L products for the Non-QM (Carrington Prime Advantage and Carrington Flexible Advantage Plus) programs. The underwriting guideline updates are highlighted in red below and please note these are an abbreviated summary of the guideline changes. All updates should be viewed within the context of the full guidelines available on CarringtonWholesale.com.

Non-QM Underwriting Guidelines
Old Requirements Updated Requirements
1-Year Alternative Income Documentation

In lieu of the standard 2-year documentation requirement for wage-earners and self-employed borrowers, the following will be accepted:

  • Wage-Earners: the transcript(s) for most recent year W-2(s) and pay stub(s) covering the most recent 30-day period providing year-to-date earnings at closing
  • Self-Employed Alternative Doc: the most recent year filed federal income tax returns (personal and business; extensions are not allowed) and year-to-date P&L if end of applicable tax year is > 120 days from closing
  • Self-Employed Bank Statements: 12 months complete personal or business bank statements from the same account
1-Year Alternative Income Documentation

In lieu of the standard 2-year documentation requirement for wage-earners and self-employed borrowers, the following will be accepted:

  • Wage-Earners: the transcript(s) for most recent year W-2(s) and pay stub(s) covering the most recent 30-day period providing year-to-date earnings at closing
  • Self-Employed Alternative Doc: the most recent year filed federal income tax returns (personal and business; extensions are not allowed) and year-to-date P&L if end of applicable tax year is > 120 days from closing
  • Self-Employed Bank Statements: 12 months complete personal or business bank statements from the same account
  • Self-Employed 1099: 1 Year IRS Form 1099 Statements
Non-QM Underwriting Guidelines
Old Requirements Updated Requirements
1099 Income Documentation

Self-employed borrowers with earnings on IRS Form 1099, such as independent contractors and gig workers, may submit 1 or 2 years 1099 forms, subject to the following requirements:

  • Borrowers must be self-employed for at least two (2) years verified by two (2) years of business licenses or a CPA letter.
  • Business must be in existence for at least two (2) years.
  • Standard Trade Lines are required.
  • Non-Permanent Resident Aliens and Foreign Nationals are ineligible.  Exceptions are not permitted.
  • IRS form 4506-C must be processed for 1 or 2 years 1099 forms
  • Multiple 1099 forms from the same line of work may be added together, for example a borrower with earnings from Lyft and Uber will be qualified based on combined earnings.  Multiple 1099 forms from different industries will be reviewed independently as separate businesses, for example a borrower with earnings from Uber and IT Consulting must have a two-year history in each line of work to consider earnings from both sources.
  • Evidence of a decline in earnings may result in disqualification
  • Year-to-Date earnings must support the qualifying income calculated per instructions below.  YTD earnings must be documented with one of the following, utilizing the most recent documentation available as of the loan application date:
    • YTD Profit & Loss statement prepared by a licensed or registered CPA or tax preparer.  Net monthly earnings on the P&L must not be more than 10% less than qualifying net income of the previous 1 or 2 years.
    • Earnings Statement with YTD income or Pay Stub with YTD income from the Payer listed on the 1099 forms.  Gross earnings on the YTD Earnings Statements must not be more than 10% less than gross monthly 1099 earnings.
    • Most recent two (2) months bank statements, earnings statements without YTD income, or pay stubs without YTD income.  Earnings statements or pay stubs must come from the Payer listed on the 1099 forms.  Gross deposits or earnings on bank statements, earnings statements, or pay stubs must not be more than 10% less than gross monthly 1099 earnings.
  • Rental Income: Borrowers who receive rental income as a secondary income source may utilize 1099 Income Documentation for calculating self-employment income and the most recent lease agreement(s) for rental properties for calculating rental income. Obtain proof of receipt at the current lease rate using a cancelled check or bank statement. Calculate the qualifying rents by using 75% of the current lease minus the full PITIA.

Borrowers whose primary source of income is derived solely from the ownership of rental properties, including short-term rentals, as declared on personal or business tax returns must be calculated using Full Documentation of Income. See Rental Income.

 

Non-QM Underwriting Guidelines
Old Requirements Updated Requirements
Calculating Qualifying Income

To calculate qualifying income using 1099 Income Documentation, choose one of the options below to account for business expenses:

Option 1: Default Expense Factor

Default Expense Factors will be applied as follows:

  • Service Business = 50% Expense Factor (examples include Consulting, Accounting, Legal, Counseling, Therapy, Financial Services, Insurance, IT, Rideshare, Freelance Workers, Writers)
  • Product Business = 60% Expense Factor (examples include Retail, Food Services, Restaurant, Manufacturing, Contracting, Construction)

Multiply gross 1099 earnings by the default expense factor to determine estimated business expenses.  Subtract the expense estimate from gross earnings and divide the result by 12 months for 1 year 1099 form or by 24 months for 2 years 1099 forms.

Option 2: Third-Party Prepared Expense Statement

If the borrower’s business operates more efficiently, or typically has a materially different expense factor than the default expense factors above, then a reduced expense factor is acceptable subject to the following requirements:

  • Expense Statements must be prepared and signed by a third-party licensed or registered tax preparer. Tax preparers must be a Certified Public Accounts (CPA), Enrolled Agent (EA), hold a state license for tax preparation, or belong to a professional trade organization within their state, such as the California Tax Education Council (CTEC).
  • When a YTD Profit and Loss statement is provided from a licensed or registered CPA or tax preparer per the YTD Income option above, the expense factor will be calculated from the expenses listed on the YTD P&L.
  • Expense Statements must specify business expenses as a percentage of the gross annual self-employment earnings.
  • Expense Statements must not include unacceptable disclaimers or exculpatory language regarding its preparation.
  • Expense Factors may never be lower than:
    • Service Business = 20% Expense Factor Floor
    • Product Business = 35% Expense Factor Floor

Net expenses from the Expense Statement is calculated by multiplying gross 1099 earnings by the expense percentage provided by the CPA or tax preparer.

Net Income = Total Deposits * (1 – Expense Statement Percentage)
                                           12 or 24 months

 

Non-QM Underwriting Guidelines
Old Requirements Updated Requirements
Self-Employed 1099 Miscellaneous Income

Payments to sole proprietors or contract individuals will also be reported on IRS Form 1099 form and included in the borrower’s Schedule C. If a borrower receives 1099 income, federal income tax returns for the most recent 2 years (IRS Form 1040) are required to determine the income and related expenses.

When a borrower is qualified solely on W-2 wages and secondary 1099 income is discovered during the underwriting process, tax returns are not required unless the borrower requests the secondary business income to be considered.

1099 forms covering a full 2-year period are not required when a borrower changes from being paid W-2s to 1099s while working for the same employer in the same position. Documentation from the employer should be obtained to verify the borrower is not responsible for additional expenses.

Self-Employed 1099 Miscellaneous Income

Payments to sole proprietors or contract individuals will also be reported on IRS Form 1099 form and included in the borrower’s Schedule C. Borrowers who receive self-employed 1099 earnings may be qualified under the Sole Proprietorship guidelines by providing IRS Form 1040 tax returns for the most recent 1 or 2 years, or under the 1099 Income Documentation guidelines by providing IRS Form 1099 for the most recent 1 or 2 years.

When a borrower is qualified solely on W-2 wages and secondary 1099 income is discovered during the underwriting process, tax returns are not required unless the borrower requests the secondary business income to be considered.

1099 forms covering a full 2-year period are not required when a borrower changes from being paid W-2s to 1099s while working for the same employer in the same position. Documentation from the employer should be obtained to verify the borrower is not responsible for additional expenses.

Profit & Loss Income Documentation

Self-employed borrowers may submit Profit and Loss (P&L) statements covering 12 or 24 months, subject to the following requirements.

Documenting Business Ownership

  • Borrowers must be self-employed for at least two (2) years verified by two (2) years of business licenses or a CPA letter.
  • Business must be in existence for at least two (2) years.
  • Non-Permanent Resident Aliens and Foreign Nationals are ineligible.  Exceptions are not permitted.
  • Documentation must be provided to show the borrower’s percentage of business ownership.  Qualifying income will be multiplied by the percentage of profits that the borrower is entitled to. Examples of acceptable documentation include:
    • Articles of Incorporation with stock ownership breakdown
    • Business’s Operating Agreement,
    • Corporate Resolution, or
    • Letter from the tax preparer.

 

Non-QM Underwriting Guidelines
Old Requirements Updated Requirements
Requirements for P&L Documentation

  • Standard Trade Lines are required.
  • IRS form 4506-C is not required for income documented with profit and loss statements.
  • The borrower or tax preparer must provide a signed letter of explanation describing the nature of the business, how income is generated, and how long the business has been in existence.
  • Profit and Loss statements must be provided for the most recent 12 or 24 months, and:
    • P&L statements must be prepared and signed by a third-party licensed or registered tax preparer. Tax preparers must be a Certified Public Account (CPA), Enrolled Agent (EA), hold a state license for tax preparation, or belong to a professional trade organization within their state, such as the California Tax Education Council (CTEC).  Evidence of licensing or professional organization membership must be documented.
    • The borrower must sign all P&L statements.
    • P&L statements must not include unacceptable disclaimers or exculpatory language regarding their preparation.
    • P&L statements may be provided for the 12- or 24-month period immediately predating the loan application, or for the prior 12- or 24-month calendar or fiscal year period.  If more than 120 days have passed since the end of the most recent calendar or fiscal year, a Year-to-Date P&L statement must be provided.  The YTD P&L must be prepared by the same licensed party that prepared the 12- or 24-month P&L.
    • Business expenses must be fully itemized and must be reasonable and reflect all expenses expected for the type of business. Underwriting may request additional documentation if necessary.
  • Multiple businesses are permitted, P&L statements must be supplied for each business and each business must have been in existence for at least two (2) years.
  • Evidence of a decline in earnings will require additional evaluation by the underwriter and may result in disqualification
  • Rental Income: Borrowers who receive rental income as a secondary income source may utilize Profit and Loss Income Documentation for calculating self-employment income and the most recent lease agreement(s) for rental properties for calculating rental income. Obtain proof of receipt at the current lease rate using a cancelled check or bank statement. Calculate the qualifying rents by using 75% of the current lease minus the full PITIA.

Borrowers whose primary source of income is derived solely from the ownership of rental properties, including short-term rentals, as declared on personal or business tax returns must be calculated using Full Documentation of Income. See Rental Income.

 

Non-QM Underwriting Guidelines
Old Requirements Updated Requirements
Calculating Qualifying Income

To calculate qualifying income using Profit and Loss Income Documentation:

  • If necessary, adjust net income on the P&L to account for the following minimum expense thresholds.  Total business expenses as a proportion of total business earnings may never be lower than:
    • Service Business = 20% Expense Floor (examples include Consulting, Accounting, Legal, Counseling, Therapy, Financial Services, Insurance, IT, Rideshare, Freelance Workers, Writers)
    • Product Business = 35% Expense Floor (examples include Retail, Food Services, Restaurant, Manufacturing, Contracting, Construction)
  • Divide the P&L net income by 12 or 24 months, as applicable, to determine qualifying income.
  • When a YTD P&L is provided, compare monthly YTD earnings to confirm qualifying income is supported within a 10% tolerance.

Contacts

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

Carrington thanks you for your business.

Updated First Time Investor LTV Requirements – CMS Non-QM Investor Advantage Program

April 18, 2022rashtonBulletin

Overview

Effective April 18, 2022, Carrington Mortgage Services, LLC (CMS) is pleased to announce an Investor Advantage program enhancement to increase the maximum LTV to 75% for First Time Investors with higher FICO scores. The maximum LTV requirements for First Time Investors are outlined below:

  • Maximum LTV = 75% with FICO ≥ 680 and DSCR ≥ 1.00, or
  • Maximum LTV = 65% with FICO < 680 or DSCR < 1.00

Please Note: This change is effective for all new loan submissions and loans in the pipeline.

Contacts

Please contact CorrespondentRM@carringtonms.com with any questions.

Lock Desk Hours in Observance of Good Friday

April 11, 2022rashtonBulletin

Overview

In observance of Good Friday, the Carrington Mortgage Services, LLC (CMS) Lock Desk will be closed Friday, April 15, 2022. Normal Lock Desk hours will resume on Monday, April 18, 2022.

As a reminder, pursuant to the Lock Policy all lock extensions must be requested prior to expiration. If a lock expires on Friday, April 15th, 2022 it will need to be extended no later than Thursday, April 14th, 2022.

Carrington Investor Advantage Program Enhancements

March 20, 2022rashtonBulletin

Overview

Effective March 21, 2022, Carrington Mortgage Services, LLC (CMS) is pleased to announce the following enhancements for the Investor Advantage loan program:

  • Increased Maximum LTV from 82.50% to 85% for the 700 FICO band with loan amounts up to $1,000,000.
  • Increased the permitted interested party Seller Contributions from 2% to 4% toward closing.
  • Gift Funds are now acceptable for down payment provided minimum borrower investment requirements are met. Must be from relative and a signed Gift Letter is required.  Sources of funds used for the minimum required investment and reserves must be owned by the borrower.
  • Reduced the required Borrower Contribution to 5% of borrower’s own funds.

Resources

Refer to the Carrington Investor Advantage Program Guidelines and Matrix available on CarringtonWholesale.com for additional information.

Contacts

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

Carrington thanks you for your business.

Presidents Day Holiday – Lock Desk Hours and Key Compliance Dates

February 7, 2022rashtonBulletin

Overview

The offices of Carrington Mortgage Services, LLC (CMS) including the Lock Desk will be closed on Monday, February 21, 2022 for Presidents Day, which is a Federal Holiday. Normal lock hours will resume on Tuesday, February 22, 2022.

Rate Locks that expire on the holiday will automatically roll to the next business day.  In addition there are some important disclosure considerations associated with the holiday:

  • Monday February 21, 2022 cannot be included in the rescission period for refinance transactions.
  • Monday February 21, 2022 cannot be included in the seven (7) business day waiting period between the between the date the initial Loan Estimate (LE) was provided to the borrower and the consummation of the loan.
  • When re-disclosure of the LE is required, Monday February 21, 2022 cannot be included in the three (3) day business waiting period between the date the revised LE was provided to the borrower and the consummation of the loan.
  • When re-disclosure of the CD is required, Monday February 21, 2022 cannot be included in the three (3) business day waiting period between the date the revised CD was provided to the borrower and the consummation of the loan.

Issues related to locks should be sent via email to lockdesk@carringtonms.com.

Contacts

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

Carrington thanks you for your business.

VA Cash-Out Refinance 100% LTV Option

January 28, 2022rashtonBulletin

Overview

Carrington Mortgage Services, LLC (CMS) is pleased to announce a new VA Cash-Out Refinance option up to 100% LTV. The increased VA Cash-Out LTV option is subject to the following requirements:

  • Effective for new submissions or Change of Circumstance (COC) requests on existing submissions beginning January 31, 2022,
  • Maximum 100% LTV/CLTV, inclusive of any financed VA funding fee,
  • Minimum 641 FICO,
  • Fixed Rate 30 Year Term only,
  • Conforming Loan Amounts only (No High Balance programs),
  • Available with AUS Accept findings or as a manual underwrite,
  • Loan Level Pricing Adjustment (LLPA) for LTVs over 90% up to 100% of 200-basis points (2%)

As a reminder, when calculating the LTV for a VA Cash-Out Refinance Transaction, divide the total loan amount (including VA funding fee, if applicable) by the reasonable value on the Notice of Value of the property determined by the appraiser.  VA Cash-Out Refinance transactions with LTVs of 90% and less remain unchanged.

Starting Monday, January 31, 2022, CMS will update our pricing to add the 200-basis point LLPA for VA cash-out refinance transactions as described above. Please refer to the CMS Rate Sheets for additional pricing information.

Please note: The LLPA is in ADDITION to any other price adjustments that are otherwise applicable. For loans that are already locked, the pricing will remain unchanged and any rate changes requested will use the rate sheet pricing in effect at the time of lock.

Contacts

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

Carrington thanks you for your business.

FEMA Disaster Declaration for Tennessee Severe Storms, Straight-line Winds, and Tornadoes

January 18, 2022rashtonBulletin

Overview

Due to severe storms, straight-line winds, and tornadoes in Tennessee, FEMA has declared the following counties a disaster.

Incident Period: December 10, 2021 – December 11, 2021

State FEMA Disaster Declaration Counties
Tennessee January 14, 2022 Cheatham, Davidson, Dickson, Gibson, Henderson, Henry, Lake, Obion, Stewart,
Sumner, Weakley and Wilson

Re-Inspection by Product Type

If your loan is … A re-inspection is required … Under these circumstances …
FHA Full Doc Yes If the original appraisal inspection date was prior to the Incident Period End Date – 12/11/21.
FHA Streamline No Not applicable
VA Full Doc and IRRRL Yes If the loan was not closed (signed) prior to the Declaration Date of 01/14/22.
USDA Full Doc and Streamline Assist Yes If the original appraisal inspection date was prior to the Incident Period End Date – 12/11/21.
Conventional* and Non-Agency Yes If the original appraisal inspection date was prior to the Incident Period End Date – 12/11/21.

*If an appraisal was not required due to a property inspection waiver (PIW), an inspection report will still be required.

Contacts

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

Carrington thanks you for your business.

Loan Level Pricing Adjustments for Conventional High Balance Loans and Second Homes

January 14, 2022jordanreedBulletin

Overview

The Federal Housing Finance Agency (FHFA) recently announced targeted increases to Fannie Mae and Freddie Mac’s Loan Level Pricing Adjustments (LLPA/upfront fees) for certain high balance/super-conforming loans and second home loans. The updated LLPAs are effective for all whole loans purchased on or after April 1, 2022 and for loans delivered into MBS pools with issue dates on or after April 1, 2022. These pricing adjustments for high balance/super-conforming loans will increase between 0.25 percent and 0.75 percent, tiered by loan-to-value ratio. For second home loans, upfront fees will increase between 1.125 percent and 3.375 percent, tiered by loan-to-value ratio.

Carrington Mortgage Services, LLC (CMS) will transition to the new LLPA’s effective January 18, 2022 for conventional high balance/super-conforming and second home loans. Any existing loans in the pipeline locked with the “old” LLPA’s must close and fund by March 1, 2022.  Please view our CMS Rate Sheets for full details.

Contacts

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

Carrington thanks you for your business.