Updated CMS Lock Policy

Overview

Effective May 27, 2020 Carrington Mortgage Services, LLC (CMS) will offer a 60-day lock to brokers prior to loan submission when the loan has been registered in BrokerIQ.

Lock Extensions:

• Maximum of up to two extensions
• Maximum extension period of 15 days in the aggregate
• Current extension fee charges remain in place (see rate sheet)
• Free 3 day remains in place (existing policy applies)
• No additional concessions will be considered for extension fees charged

Contacts

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

Carrington thanks you for your business.

Updated Lock Policy

Overview

Effective May 27, 2020, the Wholesale lock policy will allow a 60-day lock as soon as the broker or seller have registered the loan in BrokerIQ or CorrIQ. Refer to the updated Minimum Lock Term table below.

Revised Lock Policy

Encompass and Optimal Blue will enforce these requirements.

Lock Extension Policy

Extensions:

• Maximum of up to two extensions
• Maximum extension period of 15 days in the aggregate
• Current extension fee charges remain in place (see rate sheet)
• Free 3 day remains in place (existing policy applies)
• No additional concessions will be considered for extension fees charged

Resources

Refer to the CMS Wholesale Rate Lock Policy for additional information.

Agency Verbal Verification of Employment Requirements

Overview

Carrington Mortgage Services, LLC (CMS) is actively monitoring the spread of COVID-19 (coronavirus) throughout the United States and we understand there may be concerns about its potential impact to our borrowers and loan originations. Our ability to continue to serve our customers is a top priority. This bulletin has updated effective dates. Updates are shown in red.

Conventional VVOE Requirements:

Effective Date: These temporary employment and income verification flexibilities are effective immediately for all Conventional product only loans in process and remain in place for loan applications until further notice. Note that the Guidelines/ Matrices and AUS messages will not be updated to reflect these temporary policies.

Verbal Verification of Employment

In cases where there is difficulty in obtaining the verbal verification of employment (VVOE) due to disruption to operations of the borrower’s employer, the following temporary process applies:

• Written VOE: Obtain an email directly from the employer’s work email address that identifies the name and title of the verifier and the borrower’s name and current employment date within 5 business days of the note date.
• The Work Number: We will continue to accept automated verifications such as those from The Work Number, although the last date of employment verified must be within 5 business days of the note date. In situations where the automatic database upload has not been refreshed within the last 5 business days, we will have to wait for the next refresh period.
• Paystub: Provide a year-to-date paystub dated within 5 business days of the note date.
• Bank statements: Provide a bank statement evidencing the automatic payroll deposit reflecting the employer’s name within 5 business days of the note date. (The 5 business days is calculated from the date of the payroll deposit, not the bank statement date.)
• Self-Employment: Verification of self-employment will follow existing guidance, but must be dated within 5 business days of the note date.

Continuity of Income

It is important to remind our Associates of ensuring sustainable homeownership for our borrowers in light of recent events.

Given the current economic climate associated with the COVID-19 pandemic and its impact on employment and income, our Underwriting team will practice additional due diligence to verify the most recent information is obtained. This will ensure any disruption to borrowers’ employment (or self-employment) and/or income due to the COVID-19 pandemic is not expected to negatively impact their ability to repay the loan.

Borrowers on Furlough

If a company verifies the borrower is still employee but is on furlough, we won’t be able to close the loan. If they are not receiving income, we can’t meet continuity of income requirements.

Verification of Self-Employment

Effective Dates: Lenders are encouraged to apply these updates to existing loans in process; however, they must be applied to loans with application dates on or after Apr. 14, 2020 and until further notice.

Currently, when a Borrower is using self-employment income to qualify, the Lender must verify the existence of the Borrower’s business no more than 120 days prior to the Note Date. Due to the impact the COVID-19 pandemic and the various social distancing measures implemented by different jurisdictions are having on many businesses across the country, Lenders must take additional steps to confirm that the borrower’s business is open and operating. The Lender must confirm this within 5 business days of the note date (or after closing but prior to delivery).

Below are examples of methods the Lender may use to confirm the borrower’s business is currently operating:

• Evidence of current work (executed contracts or signed invoices that indicate the business is operating on the day the lender verifies self-employment);
• Evidence of current business receipts within 5 business days of the note date (payment for services performed);
• Lender certification the business is open and operating (lender confirmed through a phone call or other means); or
• Business website demonstrating activity supporting current business operations (timely appointments for estimates or service can be scheduled).

FNMA Age of Documentation

Effective Dates: Lenders are encouraged to apply these updates to existing loans in process; however, they must be applied to loans with application dates on or after Apr. 14, 2020 and until further notice.

In order to ensure that the most up-to-date information is being considered to support the borrower’s ability to repay, FNMA is updating their age of documentation requirements for all loans (existing and new construction) as follows:

• FNMA is modifying age of document requirements from four months (120 days) to two months (60 days) for most income and asset documentation. If an asset account is reported on a quarterly basis, the lender must obtain the most recently issued quarterly statement.
• When the Lender receives employment and income verification directly from a third-party employment verification vendor, FNMA is are now requiring that the information in the vendor’s database be no more than 60 days old as of the note date.
• There are no changes to the age of documentation requirements for military income documented using a Leave and Earnings Statement, Social Security, retirement income, long-term disability, mortgage credit certificates, public assistance, foster care, or royalty payments, and the Lender can continue to apply standard age of document requirements as stated in the Selling Guide.
• Due to the federal income tax filing extension granted through Jul. 15, 2020, FNMA is eliminating the following documentation requirements. These normally apply for income types that require copies of federal income tax returns when the mortgage has an application or disbursement date between Apr. 15th and Jul. 15th:

o   A copy of the IRS Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Tax Return), and

o   IRS Form 4506-T (Request for Transcript of Tax Return) transcript confirming “No Transcript Available” for the 2019 tax year.

All other requirements contained in FNMA Seller Guide B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns, continue to apply.

FHLMC Age of Documentation

FHLMC is implementing the following temporary requirements for age of income and assets documentation.

All income and asset documentation must be dated no more than 60 days prior to the Note Date, except as follows:

• If an asset account is reported on a quarterly basis, the Lender must obtain the most recently issued quarterly statement
• For electronic income verifications obtained from third-party verification service providers, the information from the electronic data base reflected on the third-party verification must now be dated no more than 60 days prior to the Note Date
• The FHLMC standard Guide requirements for age of documentation continue to apply to the following income types:

o   Military income documented on Leave and Earnings Statements

o   Retirement income

o   Survivor and dependent benefit income

o   Long-term disability income

o   Social Security Supplemental Security Income (SSI)

o   Public assistance income

o   Homeownership Voucher Program payments

o   Foster-care income

o   Trust income (fixed)

o   Royalty payments

o   Mortgage Credit Certificates (MCC)

FNMA Market-Based Assets

Effective Dates: Lenders are encouraged to apply these updates to existing loans in process; however, they must be applied to loans with application dates on or after Apr. 14, 2020 and until further notice.

Stocks, Stock Options, and Mutual Funds

In light of current market volatility, FNMA is making the following updates when the borrower is using stocks, stock options, or mutual funds for assets:

• When used for down payment or closing costs, evidence of the borrower’s actual receipt of funds realized from the sale or liquidation must be documented in all cases.
• When used for reserves, only 70% of the value of the asset must be considered, and liquidation is not required.

See FNMA Seller Guide B3-4.3-01, Stocks, Stock Options, Bonds and Mutual Funds for existing FNMA requirements.

FHLMC Market-Based Assets

Stocks, Stock Options and Mutual Funds

Due to the continuing market volatility of certain asset types, FHLMC is implementing the following temporary requirements applicable to accounts with stocks, stock options and mutual funds:

• Evidence of liquidation, including Borrower receipt of funds, is required when using any funds from these accounts for Down Payment and/or Closing Cost
• The Lender must use no more than 70% of the balance in the accounts in order to meet the reserves requirements in Seller Guide Section 5501.2

FHA VVOE Requirements

Effective Date: The re-verification of employment guidance in Mortgagee Letter 2020-05 is effective immediately for all cases closed until further notice. Please note: the Policy updates outlined in the Mortgagee Letter are temporary and will not be incorporated into the HUD Single-Family Housing Policy Handbook 4000.1.

Verification of Employment

FHA will allow flexibilities related to the Lender’s process of completing re-verification of employment, which includes verbal verification of employment. This is applicable for all FHA programs, where re-verification of employment is required.

CMS will follow the Conventional VVOE requirements described above to document and verify the borrower’s employment and annual and repayment income.

Please note: CMS requires VVOEs for Streamline loan refinance transactions; however, CMS to CMS Streamline loan refinances are exempt.

VA VVOE Requirements

The VA Guidance for Borrowers affected by the COVID-19 pandemic is as follows:

Effective Date. The policy outlined is effective for all loans closed on, or after, 3/27/2020 and until further notice or the rescission of VA Circular 26-20-10.

VA may only guarantee a loan when it is possible to determine that the Veteran is a satisfactory credit risk and has present or verified anticipated income that bears a proper relation to the anticipated terms of repayment as outlined in the VA Pamphlet 26-7, Chapter 4 Credit Underwriting.

Verification of Employment

Lenders should continue to use good judgment and flexibility when verifying stable and reliable income. Lenders should make every effort to satisfy VA’s longstanding requirements concerning verification of employment as outlined in the VA Pamphlet 26-7, Chapter 4 Credit Underwriting.

CMS will follow the same guidance for VVOE’s, pay stubs and bank statement payrolldeposits within 5 business days of the note date, as described above in the Conventional VVOE requirements.

If the verification method is impacted due to temporary business closures, the lender should use the guidelines listed below

(1) The lender may utilize employment and income verification third-party services. Additional fees associated with these services cannot be charged to the Veteran, as stated in VA Pamphlet 26-7, Chapter 8, Section 2 Fees and Charges the Veteran-Borrower Can Pay.

(2) If the lender is not able to utilize a third-party service to verify employment and income, a VOE can be met with evidence of direct deposit from a bank statement and paystubs covering at least one full month of employment within 5 business days of the note date. Lenders should reconcile payment amounts between the paystubs and direct deposit listed on the bank statement.

In the event lenders utilize option (2) as verification, they must document in box 47 of the remarks section on VA Form 26-6393, Loan Analysis, the option they selected and the supporting documentation.

Underwriting Loans

For income analysis purposes, as outlined in VA Pamphlet 26-7, Chapter 4 Credit Underwriting, VA guidelines generally require income to be stable and reliable for 2 years.

1. If the applicant was impacted by COVID-19 (i.e. furlough, curtailment of income, etc.),that period should not be considered a break in employment or income provided they have returned, or are anticipated to return, to work in the same capacity and income levels. In addition to standard verification documentation, applicants should provide furlough letters where applicable.
2. VA continues to encourage lenders to take proactive measures in documenting and uploading evidence of their analysis and justifications for all borrowers, especially for “borderline” cases. This may proactively address questions that VA may otherwise ask and prevent a loan level audit of that loan.

USDA VVOE Requirements

The USDA Single Family Housing Guaranteed Loan Program (SFHGLP) temporary exceptions to VVOE in relation to COVID-19 Pandemic are as follows:

Effective immediately, the following temporary exceptions to HB-1-3555 are in effect for a period of 60-days.

Verification of Employment

Lenders must document and verify the borrower’s annual and repayment income in accordance with Agency regulations. Lenders should use due diligence in obtaining the most recent income documentation to re-verify the borrowers repayment ability prior to closing. When the lender is unable to obtain a VVOE within 5 business days of loan closing due to a temporary closure of the borrower’s employment, alternatives should be explored. In the case of a reduction of income, the borrower’s reduced income must be sufficient to support the new loan payment and other non-housing obligations. Borrowers with no income at the time of closing are not eligible for SFHGLP loans regardless of available cash reserves.

CMS will follow the Conventional VVOE requirements described above to document and verify the borrower’s employment and annual and repayment income.

Expiration of Temporary Exceptions

These temporary exceptions will expire 60 days from the date of this notice.

Agency Appraisal Requirements – Updated

Overview

Carrington Mortgage Services, LLC (CMS) is actively monitoring the spread of COVID-19 (coronavirus) throughout the United States and its potential impact to our borrowers and loan originations. Our ability to continue to serve our customers is a top priority and this bulletin will be updated as additional Agency guidance is received. This bulletin has updated effective dates. Updates are shown in red.

Please note: CMS should always attempt to obtain a traditional appraisal first before utilizing the Agency flexibilities described in this announcement.

FNMA Temporary Appraisal Requirement Flexibilities – Updated 5/14/20

These temporary flexibilities are effective immediately for all Mortgages in process and remain in place for all Mortgage applications until further notice.

Effective immediately, Fannie Mae is allowing temporary flexibilities to their appraisal inspection and reporting requirements. As described below, FNMA will accept an alternative to the traditional appraisal required under Selling Guide Chapter B4-1, Appraisal Requirements, when an interior inspection is not feasible because of COVID-19 concerns. FNMA will allow either a desktop appraisal or an exterior-only inspection appraisal in lieu of the interior and exterior inspection appraisal (i.e., traditional appraisal).

If a traditional appraisal is not obtained and there is insufficient information about the property for an appraiser to be able to complete an appraisal assignment with a desktop or exterior-only inspection appraisal, the loan will not be eligible for delivery to FNMA.

*Excludes new construction and construction-to-permanent loans.

NOTE: For all loans with LTV ratios greater than 80%, FNMA requires mortgage insurance in accordance with their standard Selling Guide policy. Lenders must consult with their mortgage insurance companies to confirm coverage for mortgages using one of the temporary appraisal flexibilities.

Use of Lender Variances and Temporary Appraisal Flexibilities

The appraisal flexibilities may be combined with existing lender variances unless Fannie Mae notifies the lender that it may not combine negotiated terms with these flexibilities.

Regardless of specific lender variances, only Fannie Mae-owned, limited cash-out refinance transactions being sold to Fannie Mae and purchase transactions are eligible for the appraisal flexibility shown in the following table:

*Per guidance above, new construction loans are not eligible for exterior-only appraisals.

A traditional appraisal with an interior and exterior inspections are required for all of the following:

• second home purchase transactions with LTV ratios > 85%,
• limited cash-out refinance transactions when the loan being refinanced is not owned by us, and
• cash-out refinance transactions

All other requirements for the use of temporary flexibilities included in this lender letter apply.

Virtual Inspections for Appraisals

Appraisers may use virtual inspection methods to augment the data and imagery that is used for either a desktop appraisal or an exterior-only appraisal. All traditional appraisals require the appraiser to perform a complete onsite interior and exterior inspection of the property. A virtual inspection cannot be used as a substitute for the onsite interior and exterior inspection for a traditional appraisal.

Desktop appraisals

For purchase money transactions when an interior and exterior appraisal is not available, lenders are encouraged to obtain a desktop appraisal rather than an exterior-only appraisal.

The minimum scope of work for a desktop appraisal does not include an inspection of the subject property or comparable sales. The appraiser relies on public records, multiple listing service (MLS) information, and other third-party data sources to identify the property characteristics.

When a desktop appraisal is performed, reported on Form 1004 or Form 1073, and submitted to FNMA through the Uniform Collateral Data Portal® (UCDP®), the appraisal will be scored by Collateral Underwriter® (CU®). All loans with a CU risk score of 2.5 or less will receive value representation and warranty relief under Day 1 Certainty. With desktop appraisals, lenders will have the added risk management and efficiency benefit of being able to use CU to aid in the appraisal review process.

The table below provides the appraisal report form that must be used to complete the desktop appraisal for each property type.

Exhibits for Desktop Appraisals

Each desktop appraisal report must include the following exhibits:

• a location map indicating the location of the subject and comparables, and
• photographs of the subject property. FNMA recognizes that it may be challenging in some instances to obtain photographs; however, it is expected that the appraiser utilize available means to obtain relevant pictures of the subject property.
  

Exterior-only Inspection Appraisals

An exterior-only inspection appraisal may be obtained in lieu of an interior and exterior inspection appraisal for the following transactions:

• Purchase money loans
• Limited cash-out refinances where the loan being refinanced is owned by Fannie Mae

Lenders will not receive value representation and warranty relief under Day 1 Certainty® for loans with exterior-only appraisals.

The table below shows the appraisal report form that must be used to complete an exterior-only inspection appraisal for each property type. Because there are not appropriate exterior-only appraisal report forms available for two-four unit properties and manufactured homes, FNMA will accept an exterior appraisal scope of work completed using the applicable forms listed below.

Exhibits for Exterior-only Inspection Appraisals

Lenders are reminded that the following exhibits to the appraisal report are required for an exterior-only inspection appraisal:

• a street map that shows the location of the subject property and of all comparable sales that the appraiser used;
• clear, descriptive photographs (either in black and white or color) that show the front of the subject property, and that are appropriately identified (photographs must be originals that are produced either by photography or electronic imaging); and
• any other data−as an attachment or addendum to the appraisal report form−that are necessary to provide an adequately supported opinion of market value.

Identifying Fannie Mae-Owned Loans

Lenders can determine whether the existing loan is owned by Fannie Mae through DU Findings or the FNMA Loan Lookup tool.  If one of these options is not available to document in the loan file, servicing records documenting the Fannie Mae Loan Number must be provided.

FNMA Temporary Flexibilities for New Construction Loans – Updated 4/15/20

For new construction properties where the appraisal is “subject to completion per plans and specifications,” and also when the property is 100% complete but an interior and exterior inspection appraisal cannot be completed, FNMA will permit a desktop appraisal on the forms identified in the following table. Lenders must adhere to the LTV ratio requirements inTemporary appraisal requirement flexibilities, including the requirement that second homes with LTV ratios above 85% require a traditional appraisal. These requirements apply to purchase transactions only and exclude all construction-to-permanent loans.

To accommodate the desktop appraisal on the existing Fannie Mae forms, the revised scope of work, statement of assumptions and limiting conditions, and certifications must accompany the form. Additionally, as noted below, the appraiser must identify a desktop appraisal was performed by populating the Map Reference field on the appraisal with “desktop.”

Documentation Requirements for New Construction Loans

If construction of the property has not yet begun or is partially complete, and the appraisal report will be completed “subject to completion per plans and specifications,” the Lender must provide the appraiser with, or ensure that the builder has provided the appraiser with the following:

• Plans and specifications
• Survey and/or plot plan
• Current photos of the subject property

o    If construction has not yet begun, a photograph of the site and down the street inboth directions

o    If construction is partially complete, a photograph is required of the following:

• A front view of the subject property
• A rear view of the subject property
• A street scene (i.e., a photograph down the street in both directions)
• The following interior photos are required when construction is at a stage inwhich they are available

o    The kitchen of the subject property

o    All bathrooms of the subject property

o    The main living area of the subject property

o    Basement, including all finished rooms

• A copy of the complete, ratified sales contract, and all addenda

If construction of the property is 100% complete, and the appraisal report will be completed “as is,” the Lender must provide the appraiser with, or ensure that the builder has provided the appraiser with the following:

• Plans and specifications
• Survey and/or plot plan
• Current photos of the subject property

o    A front view of the subject property

o    A rear view of the subject property

o    A street scene (i.e., a photograph down the street in both  directions)

o    The kitchen of the subject property

o    All bathrooms of the subject property

o    The main living area of the subject property

o    Basement, including all finished rooms

• A copy of the complete, ratified sales contract, and all addenda

Builder Certification

The Lender must obtain a signed  Builder Certification attesting that the information provided is true and correct. This certification must be included in the loan file.

Completion Reports for New Construction Properties

For new construction properties where the appraisal report was completed “subject to completion per plans and specifications,” if the Lender is unable to obtain a completed Appraisal Update and/or Completion Report (Form 1004D) as a result of COVID-19 related issues, FNMA will accept the Completion of Construction Certification.

FNMA Temporary Flexibilities for Condominium Project Reviews – Updated 4/15/20

Waiver of Project Review

Fannie Mae is extending project review waiver flexibilities for loans with LTV ratios greater than 80% and up to 90%. This flexibility applies to Fannie Mae-owned, limited cash-out refinance transactions for owner-occupied condo units only. Second homes and investment transactions are excluded. When applying this flexibility, lenders must confirm the project meets the following, existing requirements:

• the litigation requirements described in Selling Guide B4-2.1-03, Ineligible Projects, and
• all policies in Selling Guide B4-2.1-02, Waiver of Project Review, for all loans with LTV ratios greater than 80% using the waiver of review for Fannie Mae-owned limited cash-out refinance transactions.

Lenders must provide Project Type Code V in the loan delivery data file for these transactions. The use of other Project Type Codes may result in fatal edits at loan delivery.

Project Documents used in Project Reviews

Lenders have reported some HOAs are experiencing a delay in ratifying their 2020 budgets. When a budget review is required on an established project, Fannie Mae will accept the budget from the 2019 fiscal year if the current year’s budget has not yet been ratified due to issues related to COVID-19. To utilize this flexibility, the lender must confirm the project currently meets the HOA dues delinquency requirements in Selling Guide B4-2.2-02, Full Review Process. All other project standards requirements in Selling Guide B4-2, Project Standards, continue to apply.

NOTE: New projects are excluded from this flexibility.

Due to the impact of the COVID-19 pandemic on many businesses, Fannie Mae understands that lenders are having increased difficulties in obtaining project documents from some HOAs and property managers. Lenders may use other sources of condo project data to complete their project reviews including, but not limited to, appraisals, MLS records, plat map and site surveys, public records, state laws or local ordinances, and tax searches. Additionally, there are various vendor products available that provide project documents or information regarding project eligibility.

Some information and documents, such as the project’s current budget, may only be available from the HOA or property manager. Fannie Mae recognizes the lender may be unable to obtain this information immediately while the operations are closed for extended periods. Fannie Mae is reminding our lenders that if they previously completed a project review for an established condo project, that project review may be used for additional condo unit loans in the same condo project for up to one year (measured to the note date of the subsequent loans). For new condo projects, the timeframe is 180 days prior to the note date. Additionally, some lenders have found it helpful to use Fannie Mae’s Condo Project Manager™ (CPM™) to help track and communicate project review status and review dates within their organizations.

NOTE: Lenders are responsible for obtaining mortgage insurance for all loans using these flexibilities when the loan’s LTV ratio is above 80%.

FHLMC Temporary Appraisal Requirement Flexibilities – Updated 5/14/20

These temporary flexibilities are effective immediately for all Mortgages in process and remain in place for all Mortgage applications until further notice.

Freddie Mac understands that due to the COVID-19 pandemic there may be instances where a Lender is unable to obtain an interior inspection of the subject property. As a result, Freddie Mac is allowing temporary exceptions to their property eligibility and appraisal requirements.

Freddie Mac is revising its appraisal inspection and reporting requirements. As described in detail below, for certain Mortgages, when a Lender cannot obtain an appraisal with an interior inspection as a result of the COVID-19 pandemic, Freddie Mac will accept either an appraisal with an exterior-only inspection or a desktop appraisal (as described below) in lieu of the interior and exterior inspection appraisal required under Section 5601.5(a).

There may be instances where there is insufficient information about the property for an appraiser to complete an appraisal assignment with a desktop appraisal or an appraisal with an exterior-only inspection. In these instances, the Mortgage will not be eligible for sale to Freddie Mac until the appraiser has sufficient information to complete the desktop appraisal or an appraisal with an exterior-only inspection, or an appraisal with an interior and exterior inspection is obtained.

The following table provides appraisal requirements based on Mortgage purpose, loan-to-value (LTV) ratio, occupancy type and Mortgage ownership.

*These flexibilities are not permitted for Construction Conversion, Renovation or new construction properties.

Note: For all Mortgages with LTV ratios greater than 80%, FHLMC will require mortgage insurance in accordance with Guide requirements. Lenders must consult with their mortgage insurance companies to confirm coverage for Mortgages using one of the temporary appraisal flexibilities.

Appraisals with Exterior-only Inspections

The table below provides the appraisal report form that must be used to complete an appraisal with an exterior-only inspection for each property type. Because there are not appropriate exterior-only appraisal report forms available for 2- to 4-unit properties and Manufactured Homes, FHLMC will accept an exterior-only appraisal scope of work completed using the applicable forms listed below.

Mortgages with appraisals with exterior-only inspections will not receive the appraised value representation and warranty relief described in Section 5601.9(b).

Exhibits for Exterior-only Inspection Appraisals

Lenders are reminded that the following are required in connection with an appraisal with an exterior-only inspection:

• A street map that shows the location of the subject property and of all comparablesthat the appraiser used
• Clear, descriptive photographs (either in black and white or color) that show the front of the subject property, and that are appropriately identified. (Photographs must be originals that are produced either by photography or electronic imaging); and
• Any other data (as an attachment or addendum to the appraisal report form) that are necessary to provide an adequately supported opinion of market value

Identifying Freddie Mac-Owned Loans

Lenders can determine whether the existing loan is owned by Freddie Mac through LPA Findings or the Freddie Mac Loan Lookup tool.  If one of these options is not available to document in the loan file, servicing records documenting the Freddie Mac Loan Number must be provided.

Negotiated Provisions Related to Appraisal Flexibilities

The appraisal flexibilities may be used in conjunction with negotiated provisions in the Seller’s Purchase Documents unless the Seller is otherwise notified by Freddie Mac. For refinance Mortgages, only “no cash-out” refinances of Freddie Mac-owned Mortgages being sold to Freddie Mac are eligible for the appraisal flexibility shown below:

* Permissible appraisals for new construction properties are limited to desktop appraisals

** Sellers are reminded to determine whether the existing Mortgage is owned by Freddie Mac by referencing its own Servicing records or by accessing the Freddie Mac Loan Look-Up Tool, provided the Borrower has authorized the Seller to obtain this information on its behalf.

Interior and exterior inspection appraisals are required for:

• Second home purchase transactions with LTV ratios > 85%
• “No cash-out” refinances when the Mortgage being refinanced is not owned by Freddie Mac
• Cash-out refinances

All other requirements for the use of temporary flexibilities apply.

Virtual Inspections for Appraisals

Appraisers may use virtual inspection methods to augment the data and imagery that is used for either a desktop appraisal or an exterior-only inspection appraisal. All interior and exterior inspection appraisals require the appraiser to perform a complete onsite interior and exterior inspection of the property. A virtual inspection is not a substitute for an on- site interior and exterior inspection.

For Purchase Transaction Desktop Appraisals

Lenders are encouraged to obtain a desktop appraisal in lieu of an appraisal with an exterior-only inspection when an interior and exterior inspection is not available.

The minimum scope of work for a desktop appraisal does not include an inspection of the subject property or comparable sales. The appraiser relies on public records, multiple listing service (MLS) information or other third party data sources to identify the property characteristics.

When a desktop appraisal is obtained using Form 70, Uniform Residential Appraisal Report, or Form 465, Individual Condominium Unit Appraisal Report, and submitted to the Uniform Collateral Data Portal® (UCDP®), the appraisal will be assessed for valuation representation and warranty relief in Loan Collateral Advisor®. All appraisals with a risk score of 2.5 or less that meet the requirements in Section 5601.9(b) will receive valuation representation and warranty relief and Lenders will have the added risk management and efficiency benefit of being able to use Loan Collateral Advisor to aid in the appraisal review process

The table below provides the appraisal report form that must be used to complete the desktop appraisal for each property type.

Exhibits for Desktop Appraisals

Each desktop appraisal must include the following exhibits:

• Photographs of the subject property. Freddie Mac recognizes it may be challenging in some instances to obtain photographs; however, it is expected that the appraiser utilize available means to obtain relevant pictures of the subject property.
• A location map indicating the location of the subject and comparables.

FHLMC Temporary Appraisal Flexibilities for New Construction Properties (Purchase Transactions) – Updated 5/14/20

These temporary flexibilities are effective immediately for all Mortgages in process and remain in place for Mortgage applications until further notice.

For new construction properties, where the appraisal was completed “subject to completion per plans and specifications,” including properties that were fully completed after the effective date of the appraisal, and an interior and exterior inspection appraisal cannot be completed,Freddie Mac will permit a desktop appraisal on the forms identified in the following table.Lenders must adhere to the LTV ratio requirements in the Permissible Appraisal Requirements eligibility chart apply to the appraisal flexibilities for new construction properties including the requirement that second homes with LTV ratios above 85% require a traditional appraisal (interior and exterior inspection).

To accommodate the desktop appraisal using the existing Freddie Mac forms, the revised scope of work, statements of assumptions and limiting conditions provided as Attachment Ato Bulletin 2020-5 must accompany the form. Additionally, as stated in Bulletin 2020-5, the appraiser must identify that a desktop appraisal was performed by populating the Map Reference field on the appraisal with “desktop.”

Documentation requirements

If construction of the property has not yet begun or is partially completed, and as a result the appraisal report will be completed “subject to completion per plans and specifications,” the Lender must provide the appraiser with, or ensure that the builder has provided the appraiser with the following:

• Plans and specifications
• Survey and/or plot plan
• Current photos of the subject property

• • If construction has not yet begun a photograph of the site and street scene (i.e., a photograph of the street view in both directions) are required
  • If construction is partially complete, the Lender must provide, or ensure that the builder has provided, the appraiser with all of the following photographs:

• A front view of the subject property
• A rear view of the subject property
• A street scene (i.e., a photograph of the street view in both directions)
• The following interior photos are required when construction is at a stage in which they are available
• The kitchen of the subject property
• All bathrooms of the subject property
• The main living area of the subject property
• Basement, including all finished rooms

• Fully executed sales contract, including any addenda

If the property is fully completed, and as a result the appraisal report will be completed “as is,” the Lender must provide the appraiser with, or ensure that the builder has provided the appraiser with the following:

• Plans and specifications
• Survey and/or plot plan
• Current photos of the subject property, including:

• • A front view of the subject property
  • A rear view of the subject property
  • A street scene (i.e., a photograph of the street view in both directions)
  • The kitchen of the subject property
  • All bathrooms of the subject property
  • The main living area of the subject property
  • Basement, including all finished rooms

• Fully executed sales contract including any addenda

Builder certification

The Lender must obtain a builder signed certification, Attachment A, Builder/Contractor Certification, attesting that the information provided is true and correct. This certification must be included in the Mortgage file.

Completion reports for new construction properties

For new construction properties where the appraisal report was completed “subject to completion per plans and specifications,” if the Lender is unable to obtain a completion report on Form 442, Appraisal Update and/or Completion Report, as a result of COVID-19 related issues, Freddie Mac will accept the warranty of completion form, which is provided asAttachment B, Completion of Construction Certification.

FHLMC Temporary Flexibilities for Condominium Project Reviews – Updated 4/15/20

Freddie Mac is offering temporary flexibilities and guidance to assist Sellers in Condominium Project reviews during the COVID-19 pandemic

Exempt From Review: LTV/TLTV/HTLTV Ratios

Freddie Mac is temporarily extending Exempt from Review eligibility for maximum loan-to-value (LTV)/total LTV (TLTV)/Home Equity Line of Credit (HELOC)TLTV (HTLTV) ratios from 80% to a maximum ratio of 90% for Freddie Mac owned “no cash-out” refinance Condominium Unit Mortgages secured by Primary Residences only. When using this new flexibility, Sellers must ensure that the Condominium Project meets the exempt from review requirements in Section 5701.7 and the project in litigation requirements in Section 5701.3(i)(now applicable to higher LTV ratios). Second Homes and Investment Properties are ineligible.

For each Condominium Unit Mortgage, Sellers must deliver ULDD Data Point, Project Classification Identifier (Sort ID 42) as “Exempt From Review.”

Project Documents used in Condominium Project Reviews

Sellers have reported that some Homeowners Associations are experiencing a delay in ratifying their 2020 budgets because they are unable to meet in person to vote on a new budget. When an Established Condominium Project review is used, Freddie Mac will accept the budget from the 2019 fiscal year when the current year’s budget has not yet been ratified due to issues related to COVID-19. This flexibility may not be used for New Condominium Project reviews. Sellers are reminded that all other applicable requirements must be met, including requirements relating to delinquent Homeowners Association assessments.

Due to the impact of the COVID-19 pandemic on many businesses, Freddie Mac understands that Sellers are having increased difficulties in obtaining Project Documents from Homeowners Associations and property managers. Sellers may use other sources of Condominium Project data to complete project reviews including, but not limited to, appraisals, MLS records, plat map/site surveys, public records, State laws or local ordinances, and tax searches. Additionally, there are various vendor products available that provide Project Documents and/or information regarding Condominium Project eligibility.

Some information and/or documents, such as the Condominium Project’s current budget, may be available only from the Homeowners Association or property manager so Seller may be unable to obtain them if these operations are closed for extended periods. Sellers are reminded that, if they completed a project review for an Established Condominium Project during the one year period prior to the Note Date of the particular Mortgage, that project review may be used for multiple Condominium Unit Mortgages in the same Condominium Project for up to one year prior to the Note Date of the particular Mortgages. For New Condominium Projects, the time frame is 180 days prior to the Note Date.

Note that:

• For all Mortgages with LTV ratios greater than 80%, Freddie Mac requires mortgage insurance in accordance with Guide requirements
• Freddie Mac is not updating the Guide to reflect these temporary flexibilities
  

FHA Guidance for Property inspections – Updated 05/14/20

Effective Date

The FHA Appraisal guidance in Mortgagee Letter 2020-05 is effective immediately for appraisal inspections until further notice.

Please note: The policy changes in the Mortgagee Letter are temporary and will not be incorporated into the HUD Single-Family Housing Policy Handbook 4000.1.

HUD Single Family Housing Appraisal Policy

When applicable, as described below, the appraiser may amend the scope of work to perform an Exterior-Only (viewing from the street) or Desktop-Only. The Appraiser may rely on supplemental information from other reliable sources such as Multiple Listing Service (MLS), and Tax Assessor’s Property Record to prepare an appraisal report. The Appraiser may rely on information from an interested party to the transaction (borrower, real estate agent, property contact, etc.) with clear appraisal report disclosure when additional verification is not feasible. The appraisal report must contain adequate information to enable the intended users to understand the extent of the inspection that was performed.

The Exterior-Only and Desktop-Only Appraisal options must continue to be reported on the current FHA approved appraisal forms with amended certifications and scope of work disclosures.

Appraisal Forms and Amended Certifications

The optional Exterior-Only and Desktop-Only appraisals must be reported on the existing Acceptable Appraisal Reporting Forms by Property and Assignment Type. These forms will require amended certifications and clear scope of work disclosures. Lenders are reminded that Exterior Appraisal forms Fannie Mae 2055 and Fannie Mae 1075 are not FHA approved forms and are not compatible with FHA’s Electronic Appraisal Delivery (EAD) portal.

The appraisal report must include a signed certification indicating whether the Appraiser did or did not personally inspect the subject property and the extent of the inspection. FHA has provided model certifications for the Exterior-Only and Desktop-Only scope of work.

Exterior-Only Option

The required protocols and exhibits under the Exterior-Only Option are:

• Appraiser will observe the Property and Improvements from the street.
• The Appraisal will be completed “AS IS” unless Minimum Property Requirements (MPR) related deficiencies are observed from the street or otherwise known.
• The Appraiser may utilize extraordinary assumptions when necessary.
• No sketch, interior photos or rear exterior photographs are required.
  

Desktop-Only Option

The required protocols and exhibits under the Desktop-Only Option are:

• Appraiser will not physically observe the Property and Improvements.
• The Appraisal will be completed “AS IS” unless MPR related deficiencies are known.
• The Appraiser may utilize extraordinary assumptions when necessary.
• No sketch, interior photos, exterior photographs are required.
• No comparable viewing nor photos are required.

FHA Purchase Transactions

FHA will accept appraisals for Purchase transactions with an optional Exterior-Only or Desktop-Only scope of work by the Appraiser. These flexibilities are not permitted on New Construction, Construction to Permanent, and 203(k) purchases.

FHA Refinance

FHA will accept appraisals for Rate and Term Refinance and Simple Refinance with an optional Exterior-Only scope of work by the Appraiser. These flexibilities are not permitted on Cash out Refinances and 203(k) refinances.

Form 1004D Part B Completion Report

When an Appraisal Update and/or Completion Report (Form 1004D) Part B is required to evidence the completion of required repairs, FHA will permit a letter signed by the borrower affirming that the work was completed with further evidence of completion, which may include photographs of the completed work, paid invoices indicating completion, occupancy permits, or other substantially similar documentation. All completion documentation must be retained in the case binder. These flexibilities are not permitted on New Construction, Construction to Permanent, and 203(k) transactions.

VA Guidance for Property inspections – Updated 05/14/20

Effective Date

The VA policy outlined below is effective for all loans closed on or after March 13, 2020 and until further notice or the rescission of the VA 20-26-13 Circular.

Valuations may come in a form of an Exterior-Only appraisal with enhanced assignment conditions or in limited instances, a Desktop appraisal.

On page 1 of the Uniform Residential Appraisal Report (URAR), Subject section, “Map Reference” appraisers are to state “Exterior-Only” or “Desktop.” These procedures are temporary in nature and VA will return to normal operations after the national emergency

The report will be completed “AS IS” unless there are MPR requirements the appraiser observed in the review of the property. Without an interior review of the property, the appraiser can make an Extraordinary Assumption (EA) concerning MPRs with the information available.

The appraiser will continue to gain access to view the interior property for a Purchase Transaction (vacant property). The interior inspection is allowed, when the appraiser poses no harm to themselves or others.

Exterior-Only Appraisal

This report option with enhanced assignment conditions will be completed on the FNMA 2055/1075 URAR form. For manufactured homes and multi-unit (2- to-4 unit) properties, appraisers will use the 1004C or 1025 form. Appraisers must boldly and inconspicuously state “Per Department of Veterans Affairs, no interior inspection was provided due to COVID-19.”  Exterior-Only Appraisal with enhanced assignment conditions will be limited to one and a half times the maximum 2020 Freddie Mac Conforming Loan Limit for a one-unit limit for the county or county-equivalent area. The lender should not request an Exterior-Only appraisal if the financed loan amount (i.e. unpaid principal loan amount) will be more than one and a half times the maximum 2020 CCL limit. The appraiser is in control of the Scope of Work and they type of report will be used based upon safety.  2020 CCL limits (PDF)

Purchase or Refinance transactions

The appraiser is to provide an Exterior Only appraisal with enhanced assignment conditions when the appraiser’s assigned geographic jurisdiction does not have restrictions imposed by authorities prohibiting individuals leaving their domicile, such as mandatory quarantine. Appraisers should refer to their state or local authorities to determine if they are deemed an essential part of the financial transaction for mortgage lending. The appraiser must make every effort to complete the enhanced assignment conditions listed below or document in the narrative why one or more conditions could not be met:

(1) The appraiser will review the full exterior of the property and provide photos of all sides of the property with detailed notes of the exterior and any visible MPRs. In instances of obstructed or restricted view and access is unable to be granted or allowed, Multiple Listing Service (MLS) photos of these areas may be utilized. If MLS photos are utilized, it must be explained in the appraisal report.

(2) A measurement of the footprint of the home should be provided if accessible. This is not to determine the gross living area (GLA) but for the appraiser to reconcile with public records.

(3) The appraiser will conduct a detailed interview over the phone with the occupant, Veteran, or real estate professional regarding the property. It is the appraiser’s responsibility to obtain sufficient information to provide a creditable report. Interview questions should be noted and kept in the appraisers work file. Key items that may impact market value should be noted in the appraisal report with details about what was provided and by whom.

(4) The appraiser may utilize any and all photos available from MLS, provided by the occupant, Veteran, or real estate professional. Comparables will still be viewed and photos provided when possible.

Desktop Appraisal Valuations

This report option will be completed on the FNMA 1004, 1073, 1004C, 2025 and the appraiser will be required to attach a copy of the provided Scope of Work (SOW) Exhibit A, certifications, and assumptions in all reports. Appraisers must boldly and inconspicuously state “Per Department of Veterans Affairs, no interior inspection was provided due to COVID-19”.

1. Desktop valuations will be limited to the maximum 2020 Freddie Mac Conforming Loan Limit for a one-unit limit for the county or county-equivalent area. The lender should not request a Desktop Appraisal if the financed loan amount (i.e. unpaid principal loan amount) will be more than the maximum 2020 CCL limit.
2. Desktop appraisals will be conducted when the appraiser’s assigned geographic jurisdiction has restrictions imposed by authorities prohibiting individuals leaving their domicile, such as mandatory quarantine or not deemed an essential part of the financial transaction for mortgage lending. Lenders must state in both in “public” notes in WebLGY and by e-mail to the appraiser if they will accept a Desktop appraisal. If the lender will not accept a Desktop appraisal, the appraiser will advise the Regional Loan Center (RLC) to place the assignment on hold for 30 days and then subsequently cancel, if the status has not changed. The appraiser will annotate “public” notes in WebLGY updates on all communication between parties.

Purchase transactions: The appraiser defines the scope of the work and will annotate in the appraisal report concerning the source of information provided.

Cash-Out Refinance Transactions: The appraiser will prioritize assignments based on purchase transactions first and determine if sufficient information is publicly available and verifiable. Appraisers are not required to proceed on the assignment if information is not available to provide a credible report. In the event the appraiser is not able to complete the assignment, the lender may choose to cancel the request or have the VA Regional Loan Center (RLC)  suspend the assignment until the national emergency is lifted and a more detailed report can be produced.

Additional Notes

VA understands that there may be insufficient data available to produce a creditable report. Appraisers are not required to accept a Desktop valuation order. In addition, the use of Assisted Appraisal Processing Program (AAPP) is not authorized for Desktop appraisals. When an appraiser believes the scope of work required to develop a credible report is not capable in a Desktop appraisal, the appraiser must contact the RLC to place the assignment on hold.

Reconsideration of Value

In times of uncertainty, the housing market strengths may be less predictable to report. Appraisers will have comparable sales that took place prior to the President declaring a national emergency and active and pending sales can be less predictable. During this time, it is important to ensure that Veterans continue to be able to purchase a home. VA, the lender, and the appraiser will work together during this time to assist in the best possible outcome for the Veteran.

Purchase Transactions: Reconsideration of Values (ROV) for purchase transactions will be restricted to no greater than 7 percent from the appraiser’s opinion of value or $10,000 whichever is greater. An ROV may be requested when the value requested is greater than stated but the ROV amount must fall within the range of adjusted values in the sales grid of the appraisal or overwhelming evidence of appraisal error that impacts value.  The same criteria is required as outlined in VA Pamphlet 26-7, Chapter 10 Appraisal Process (NEW), Section 22. In addition, a field review by RLC staff will not be a completed in conjunction with the ROV request.

Cash-Out Refinance Transactions: VA will suspend ROV requests for cash-out refinance loans until further notice.

Memorandum of Values

In extreme cases when an appraiser is not available to complete an appraisal assignment for a purchase, VA has the authority and ability to issue a Memorandum of Value (MOV). This will be completed on a case-by-case basis.

Repair Inspections

Due to the lack of verification of completion by the appraiser or inspector that repair items have been completed, lenders have one of the two following options to supply to VA. This section applies to any and all loans regardless of the loan application date.

Lenders have the authority and are encouraged to certify repairs, especially repairs performed by licensed personnel, instead of an appraiser certification as outlined in the VA Pamphlet 26-7, Chapter 10 Appraisal Process (NEW), Section 23, Topic b. Repair certifications which may involve lead-based paint must still be completed by a fee appraiser; however, the lender can escrow for future inspection and costs with a third-party. Lenders may hold funds in escrow for repairs to be completed after closing.

All repairs must be completed and escrowed funds distributed before the loan may be guaranteed by VA as outlined in the VA Pamphlet 26-7, Chapter 12 Minimum Property Requirements (NEW), Section 44, Topic e. In addition, there must be adequate assurance that the work will be completed timely and satisfactorily (up to 180 days).

When a purchase transaction appraisal has found repairs, the lender has the option to close the loan when the Veteran accepts responsibility to complete the repairs within 180 days of the closing of the loan. This time may be extended if warranted. The home must be habitable by conventional standards. Re-inspection will be required at that time at the posted fees.

Water System Acceptability

Well water testing for refinance transactions where the home is already encumbered by a VA loan will be waived.

Termite Inspections

VA Pamphlet 26-7, Chapter 12 Minimum Property Requirements (NEW), Section 33, Topic b, requires a wood inspection report if the property is located in an area on the Termite Infestation Probability Map where the probability of termite infestation is “very heavy” or “moderate to heavy”.

Purchase Transactions: If there is no known or visible evidence of termite infestation present, the seller and realtor must provide a certification to that fact and the Veteran must acknowledge that no inspection was completed. VA recommends the Veteran to complete an inspection once the national emergency has ended. If there is known or visible evidence of termite infestation, a clear termite report must be provided within one year of close of escrow.

Cash-Out Refinance Transactions: The Veteran can provide a certificate of fact if there is no known or visible evidence of termite infestation present. If there is known or visible evidence of termite infestation, a clear termite report must be provided within one year of close of escrow.

Any Additional NOV Conditions

Any additional items that need to be met on the Notice of Value (NOV) to comply with VA requirements will have to be met in 180 days from the date of the NOV issuance. All conditions must be completed before the loan will be guaranteed by VA. Any clear and obvious minimum property requirement (MPR) related issues that would render the home uninhabitable will not be able to be issued a guaranty till all repairs are completed. The Veteran must acknowledge and accept any and all conditions not met prior to closing

Appraisers should continue to conduct business as outlined in Chapter 10 of the Lender’s Handbook.

Appraisers should contact the RLC of jurisdiction if they have been impacted by COVID-19 and are unable to complete an appraisal assignment. The email addresses for each of the RLCs are available at: https://www.benefits.va.gov/HOMELOANS/contact_rlc_info.asp.

USDA Guidance for Property inspections – Updated 03/30/20

The USDA Single Family Housing Guaranteed Loan Program (SFHGLP) temporary exceptions pertaining to appraisals and repair inspections in relation to COVID-19 Pandemic are as follows:

Effective immediately, the following exceptions to HB-1-3555 are in effect for a period of 60-days.

Residential Appraisal Reports of Existing Dwellings

For purchase and non-streamlined refinance transactions, when an appraiser is unable to complete an interior inspection of an existing dwelling due to concerns associated with the COVID-19 pandemic, an Exterior-Only Inspection Residential Appraisal Report (FHLMC 2055/FNMA 2055) will be accepted. In such cases, appraisers are not required to certify that the property meets HUD HB 4000.1 standards. The appraisal must be completed in accordance with the Uniform Standards of Professional Practice (USPAP) and the Uniform Appraisal Dataset (UAD).

This exception is not applicable to new construction properties or construction to permanent loans. As a reminder, appraisals are not required for streamlined and streamlined-assist refinance transactions.

Repair Inspections of Existing Dwellings

Loans for which a completion certification is not available due to issues related to the COVID-19 pandemic, a letter signed by the borrower confirming that the work was completed is permitted. Lenders must also provide further evidence of completion, which may include photographs of the completed work, paid invoices indicating completion, occupancy permits, or other substantially similar documentation. All completion documentation must be retained in the loan file.

Agency Power of Attorney Requirements

Overview

Carrington Mortgage Services, LLC (CMS) is actively monitoring the spread of COVID-19 (coronavirus) throughout the United States and its potential impact to our borrowers and loan originations. Our ability to continue to serve our customers is a top priority and this bulletin will be updated as additional Agency guidance related to powers of attorney is received. This bulletin has updated effective dates. The changes are shown in red.

FNMA Temporary Flexibilities for Powers of Attorney

Effective: Unless otherwise noted in this section below, these flexibilities are effective immediately for all loans in process and remain in place for all loan applications until further notice.

Selling Guide, B8-5-05, Requirements for Use of a Power of Attorney, contains FNMA requirements for powers of attorney. For all loan applications until further notice, the following additional requirements for using a power of attorney apply:

• All powers of attorney must include the address of the mortgaged property.
• The existing FNMA Selling Guide conditions allowing persons “connected to the transaction” to serve as an attorney-in-fact or agent in refinance transactions will also now apply to purchase transactions as well as limited cash-out refinances. This includes all the related current requirements applicable to limited cash-out refinance transactions involving these persons in the FNMA Selling Guide (that is, excluding lender employees, limiting by loan amount and property location, requiring a recorded Internet session after the borrower has received proposed loan documents, and mandating retention of the recording).
• Unless a recorded Internet session described in the paragraph above is required, a power of attorney may only be used in a purchase transaction with a note date on or after Apr. 7, 2020, if, after the Closing Disclosure or other closing statement, as applicable, has been delivered to the borrower before closing, an employee of the lender or settlement agent explains the terms of the loan to the borrower(s) to confirm that each borrower understands them. This discussion must take place in person, telephonically, or using a video conference system, and must be memorialized by an acknowledgment by the borrowers of his or her understanding of the terms of the loan. The acknowledgment may be in writing or in a recording of the telephonic or video discussion.
• Notwithstanding anything to the contrary in the Selling Guide or Lender Letter (LL-2020-03), for purchase transactions the attorney-in-fact or agent may not be the property seller, any relative of the property seller, or any direct or indirect employee or agent of the property seller, unless in any such instance such person is also a relative of the borrower.
• Whenever an attorney-in-fact or agent is an employee of the insuring title insurer or is an employee of the policy-issuing agent of the insuring title insurer, such title insurer must have issued a closing protection letter (or similar contractual protection) for the transaction for such policy issuing agent.
• Whenever a power of attorney is used at closing, whether authorized under the Selling Guide or under the standards in Lender Letter (LL-2020-03), the provisions of B1-1-01,Application Package Documentation requiring the borrower’s personal signature of the initial Form 1003 continue to apply if the initial Form 1003 can be signed personally (including through the United States Postal Service or commercial delivery service). , or signed electronically as permitted by the Selling Guide. If the initial Form 1003 cannot be timely signed by the borrower in these ways, then it must be signed by the holder of such power of attorney.
• Provided the power of attorney is not required to be notarized under applicable law (for example, the law governing the creation of the power of attorney, or the law of the location of the mortgaged property), the power of attorney is not required to be notarized if the transaction is a limited cash-out refinance unless

o   the attorney-in-fact or agent named in the power of attorney is employed by, or otherwise represents or is affiliated with, the title insurance company that will issue the lender’s title insurance policy, and

o   such title insurance company is affiliated with the lender.

• The limitations in B8-5-05 requiring at least one borrower signature of the note and security instrument are suspended.

The following existing policies remain in effect for loans using powers of attorney authorized by the Selling Guide as revised by Lender Letter (LL-2020-03):

• Lenders may not deliver loans to FNMA that have unacceptable title impediments. Accordingly, the lender must confirm that the title insurance policy does not take exception to the power of attorney, its manner of creation, the effectiveness of its notarization (if any) or to its use in relation to the transaction in accordance with B7-2-05, Title Exceptions and Impediments.
• Lenders must comply with all federal, state and local laws in accordance with A3-2-01,Compliance with Laws. In addition, for Texas Section 50(a)(6) loans, lenders may only use a power of attorney to execute the note or security instrument if the power of attorney is signed at a location at which a Texas Section 50(a)(6) loan may be closed and in conformity with applicable requirements.
• The current and revised provisions of B8-5-05 are always subject to the lender’s determination that applicable law requires the acceptance of a power of attorney in particular circumstances. This remains in place, as does the requirement that the lender document its determination in the loan file

FHLMC Temporary Flexibilities for Powers of Attorney

Effective immediately for Applications Received Until Further Notice

Section 6301.4 currently permits use of a power of attorney (POA) to execute the Initial Loan Documents and Closing Documents on the Borrower’s behalf when there is a hardship or emergency. With this Bulletin Freddie Mac confirms that the COVID-19 pandemic constitutes an emergency for purposes of Section 6301.4.

Lenders may allow use of a POA to close a Mortgage, except for cash-out refinance Mortgages and Texas Equity Section 50(a)(6) Mortgages, in accordance with the temporary flexibilities listed in the following chart:

Please Note: These temporary requirements do not apply to cash-out refinance Mortgages and Texas Equity Section 50(a)(6) Mortgages.

FHA Powers of Attorney – Updated 4/20/20

FHA permits a borrower to designate an attorney-in-fact to use a POA to sign documents on their behalf at closing, including:

• page 4 of the final Form HUD-92900-A,
• HUD/VA Addendum to Uniform Residential Loan Application (URLA), and
• final Fannie Mae Form 1003/Freddie Mac Form 65, URLA.

Detailed requirements on the use of a POA to execute closing documents can be found in theSF Handbook, Section II.A.6.a(xiii). Included in this section are specific requirements for use of a POA, which has a connection to the transaction.

VA Powers of Attorney

No guidance issued as of 3/31/20

USDA Powers of Attorney

No guidance issued as of 3/31/20

New CMS Loan Attestation Form

Overview

In an effort to continue responsible lending during the COVID-19 pandemic, effective Monday May 11, 2020, Carrington Mortgage Services, LLC (CMS) will implement a new Loan Applicant Attestation form that will generate with the closing package for all loans.

To execute the form, the Closing Agent will present the 1003 Loan Application(s) and orally review each of the Income and Debt Attestation statements listed on the form with the borrower(s) at closing. The Closing Agent will advise the borrower(s) that the statements should take into account any changes due to the COVID-19 pandemic as well as any other changes in circumstance since the time of their loan application.

Each borrower must complete the Income and Debt Attestation selections listed on the form. The Borrowers may select “N/A” (not applicable) beside any statement that does not apply (for example: their employment income was not used to qualify for the loan).

If any borrower disagrees with any statement on the form, the Closing Agent must stop the closing and have the borrower contact their Loan Officer for next steps.

Carrington Government Loan Program Underwriting Guideline Updates

Conventional Cash-Out Refinance Transactions Discontinued

Overview

Due to recent Fannie Mae/Freddie Mac guidance related to cash-out refinances where borrowers request forbearance assistance, effective immediately and until further notice, Carrington Mortgage Services, LLC (CMS) will no longer offer cash-out refinance transactions under the conventional loan program.  As CMS cannot foresee when a borrower will request forbearance assistance for this loan program, there is substantial risk of not being able to sell the loan at a profitable price to Fannie Mae/Freddie Mac at this time.

CMS will not accept any new loan submissions for conventional cash-out refinance transactions. All loan submissions in the pipeline that are not currently locked will be withdrawn from the pipeline. All loans currently locked must close prior to the lock expiration date. No lock extensions will be granted.

Contacts

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

Carrington thanks you for your business.

IRS 4506T Services Temporarily Suspended

Overview

The IRS has announced a temporary suspension of their Income Verification Express Service (IVES) due to their COVID-19 procedures.  IVES is used by mortgage vendors to obtain IRS transcripts.  It appears that orders placed on and prior to March 26, 2020 will continue to be processed by the IRS, albeit with significant delays, and it is unclear when orders placed on and after March 27, 2020 will be processed.

During this time, CMS will follow our Government shutdown policy for all loan products with the exception of USDA, Chase Jumbo and Non-Agency. Please note: This bulletin has been updated with additional FHA guidance. The changes are show in red font.

Internal Revenue Service (IRS)

In the event a shutdown impacts the IRS issuing tax return transcripts the following guidance is applicable:

• The Underwriter must condition for the processed 4506T tax transcripts in order to close the loan
• All loans with income discrepancies must be resolves prior to delivery
• Completed and 4506T forms are required at closing

Refer to the product specific underwriting guidelines for detailed requirements.

Operational Requirements:

• If product specific guidelines require processed 4506T tax transcripts or upon Underwriter discretion, condition as PTP.
• USDA, Chase Jumbo and Non-Agency will require processed 4506T tax transcripts PTD.
• Account Managers and Loan Processors will continue to order the transcripts when the condition is placed on the approval.

As a reminder, CMS has the following policies related to IRS transcripts:

USDA – Updated 04/03/2020

USDA requires the lender to independently obtain two years of transcripts for all adult household members prior to loan closing.

However, in the event transcripts are not available from the IRS, USDA will permit the loan to proceed to closing when the lender documents their correspondence to and from the IRS in the loan file.  CMS will permit USDA loans to proceed to closing with the following documentation:

• Proof transcripts were ordered for all adult household members, such as a screenshot of the IRS transcript vendor’s order page or confirmation,
• A processor’s certification that the transcripts were not received by loan closing, and
• Documentation supporting the IRS’s inability to provide the lender’s vendor with tax return transcripts as requested.

All supporting documentation must be contained in the loan file.

As a reminder, transcript results received with a “no record of return” or similar message are not acceptable if tax returns were required based on income type.  The underwriter must review deposits on bank statements for all adult household members to verify all sources of income are considered in the annual income analysis.

Non-Agency

As a reminder, CMS is not currently accepting new submissions or locks of non-agency loans.

For existing locked loans, the following products require verification of all full doc and 1-year alt doc income types using IRS transcripts:

• Carrington Flexible Advantage
• Carrington Flexible Advantage Plus
• Carrington Prime Advantage

IRS transcripts are not required for Carrington Investor Advantage and borrowers qualified using 12- or 24-months bank statements.

FHA, VA, Fannie Mae, & Freddie Mac

CMS does not require IRS transcripts to validate income for FHA, VA, Fannie Mae, or Freddie Mac loans.

Underwriters may request IRS transcripts under circumstances such verifying recently-filed tax returns used for qualifying, the filing of amended tax returns, or when inconsistencies are revealed with income documentation during the underwriting process.  The following may be used as alternatives:

To evidence 2019 returns are filed:

• Attempt obtaining a refund status printout from https://sa.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp for borrowers receiving an income tax refund
• Obtain alternate proof of filing (such as an e-file receipt, stamped return, letter from CPA, etc.) along with proof of payment of taxes or updated installment agreement for borrowers with tax liability
• Have the borrower provide transcripts using the IRS information and links below

To verify amended returns:

• Obtain a stamped 1040X and verify payment of additional taxes owed, if any
• Have the borrower provide transcripts using the IRS information and links below
• As a reminder, tax returns may not be amended for qualifying purposes

When inconsistencies are revealed during the underwriting process, Underwriting Supervisors and Managers will continue to use the “Request Suspicious Activity Review” function in Encompass so that QC may review on a case-by-case basis.

FHA – Updated 4/20/20

FHA does not require tax transcripts directly from the IRS.

Lenders must obtain the borrower’s signature on the appropriate IRS form to obtain tax returns directly from the IRS for all credit-qualifying mortgages at the time the final Uniform Residential Loan Application (URLA) is executed.

If FHA requires tax returns as required documentation for any type of effective income, in lieu of signed individual or business tax returns from the borrower, the Lender may obtain a signed IRS Form 4506, Request for Copy of Tax Return, IRS Form 4506-T, Request for Transcript of Tax Return, or IRS Form 8821, Tax Information Authorization, and tax transcripts directly from the IRS.

Resources

The following resources and FAQ provided by the IRS may be helpful for borrowers when borrower-provided transcripts are requested to verify current tax return and amended tax return filings: https://www.irs.gov/individuals/get-transcript-faqs

Q9. How long must I wait before a transcript is available for my current year tax return?

If you filed your tax return electronically, IRS’s return processing takes from 2 to 4 weeks before a transcript becomes available. If you mailed your tax return, it takes about 6 weeks. If you didn’t pay all the tax you owe, your transcript may not be available until mid-May or a week after you pay the full amount owed. Refer to transcript availability for more information. 

Once your transcript is available, you may use Get Transcript Online, you may order a tax return transcript and/or a tax account transcript using Get Transcript by Mail or call 800-908-9946. Please allow 5 to 10 calendar days for delivery. You may also request any transcript type listed below by faxing/mailing Form 4506-T, Request for Transcript of Tax Return as instructed on the form. The time frame for delivery is the same for all available tax years.