Louisville Kentucky VA FIXED PROGRAM GUIDELINES

Louisville Kentucky VA FIXED PROGRAM GUIDELINES  

PROGRAM TERMS

·         ELIGIBLE STATES  Kentucky,

Originators must be properly licensed, if required, to originate loans in the state where the subject property is located.   ACCEPTABLE AUS FINDINGS  DU Approve/Eligible.

DU Refer is eligible for manual underwriting.   AUS REDUCED DOCUMENTATION  Platinum Mortgage will accept reduced documentation as specifically addressed by properly submitted DU Findings.       MAXIMUM LOAN AMOUNT  ·         $417,000 (including Funding Fee)

·         For Total loan amounts (Base + VA funding fee) that exceed $417,000 please see VA Jumbo requirements.

·      ESCROWS  ·         Repair escrows not permitted.

·         Tax and Insurance escrows required, escrow waivers not permitted.

·

(INDEX)   FORECLOSURE BAILOUT / NON-ARMS LENGTH TRANSACTIONS  ·         Non-arms length transactions require a 12-month payment history from the seller to ensure the subject transaction is not a foreclosure bailout.

·         Transactions where the buyer and seller are swapping properties (or buying each other properties) Platinum Mortgage requires proof of the value in the form of a full interior and exterior appraisal no more than 6 months old for both transactions to ensure that one or the other properties are not being overpaid for, which would be the same as a cash inducement. The following documentation is required:

1.      Sales Contract

2.      A full walk-in appraisal

3.      Fully Executed HUD-1   BORROWER ELIGIBILITY

(INDEX)   ELIGIBLE BORROWERS  ·         Veteran, or eligible widow(er), with sufficient entitlement

·         Veteran with sufficient entitlement and spouse

·         2 or more veterans with sufficient entitlement (subject to prior approval by VA)   INELIGIBLE BORROWERS  ·         Veteran or eligible widow (er), without sufficient entitlement.

·         Non-veterans

·         Ineligible widow(er)

·         Inter-vivo revocable trust. (Must be quitclaimed to individual borrowers prior to closing to be eligible)   FIRST-TIME HOMEBUYERS  Permitted.   HOMEBUYER EDUCATION  Not required.   MILITARY PERSONNEL  Are considered owner-occupants if a member’s spouse will occupy the subject property as a primary residence, even if the individual serving in the military is stationed elsewhere.   CO-SIGNERS AND NON-OCCUPANT CO-BORROWERS  Not permitted.   POWER OF ATTORNEY  ·         Must be pre-approved by Platinum Mortgage underwriter prior to closing.

·         The Attorney-In-Fact may not have any financial interest in the transaction (broker, realtor, etc.)

·         The Power of Attorney must be revocable in writing or give a specific expiration date which extends beyond the closing date.

·         Closing agent must approve Power of Attorney to make sure it is recordable, meets all State specific requirements, and must ensure the lien position without exception to the Power of Attorney.

·         Borrower must sign the initial application, all disclosure documents, and if applicable, the sales contract or additional POA requirements apply.  Power of Attorney must include:

o     Stated purpose (purchase, refinance)

o     Property address and legal description

o     Notary acknowledgment

o     State specific witness requirements

o     Local jurisdictional recordation requirements (margins, etc.)

o     If Veteran did not sign contract or application and disclosures, the following is also required to be reflected on the

o   POA:

§ The veteran’s intention to occupy the subject property as a primary residence.

§ Sales price (if applicable) and other relevant terms of the transaction

§ Clearly state the veteran’s intention to use all, or a portion, of his/her entitlement.

·         Attorney-In-Fact must sign all documents using the following format:

o     (borrower name) by (person signing), HIS/HER ATTORNEY-IN-FACT   MULTIPLE VA LOANS  The VA does not limit the number of VA guaranteed loans a veteran may have, however the VA does limit the amount of guarantee a veteran is entitled to.  The veteran must have sufficient guarantee or combination of guarantee and equity in the subject property to equal a minimum of 25% of the value of the property.   VA SCREENING  Borrowers must pass screening through federal CAIVRS, LDP, and GSA lists.

·         CAIVRS – In order to access CAIVRS, you must have an FHA Connection login.  To access the FHA Connection, go to https://entp.hud.gov/clas/index.cfm

·         LDP – To access the HUD Limited Denial of Participation list, go to https://www5.hud.gov/ecpcis/main/ECPCIS_List.jsp

·         GSA – To access the GSA Excluded Parties list, go to https://www.epls.gov/

All sellers, listing and selling realtors, appraisers, and loan originators must also pass screening through the HUD Limited Denial of Participation list and the GSA Excluded Parties list.   SOCIAL SECURITY NUMBER VERIFICATION  ·         Individual Taxpayer Identification Numbers (ITIN) are not permitted in lieu of a Social Security Number.

·         Acceptable documentation:

o     Social Security Card

o     SSN Award Letter

o     Current paystub with borrower name and SSN (computer generated)

o     W2 (computer generated)

o     1099 (computer generated)

o     Driver’s license with SSN

o     Service provider with direct access to Social Security Administration (Currently, Rapid Reporting, IncoCheck, National Verification Services & Sysdome)   EMPLOYMENT AND INCOME

(INDEX)   LENGTH OF EMPLOYMENT  ·         Regardless of AUS Findings, all borrowers with qualifying income must have an acceptable and stable employment history, minimum of 2 years, to be considered effective income for qualifying purposes.  Letter of Explanation is required on all gaps of employment exceeding 30 days.

·         For employment of <12 months with the current employer, satisfactory documented compensating factors are required.  Satisfactory compensating factors include, but are not limited to:

o     Recently discharged from active duty and in a similar or related line of work.

o     Applicant has sufficient training or job skills to substantiate the likelihood of continued employment.

o     Change of employment is to the betterment of the applicant; such as career advancement or increased earnings (must be in same line of work).   ACTIVE DUTY MILITARY PAY  ·         Borrower must provide LES no more than 120 days old at time of closing

·         If borrower is within 12 months of separation from military service:

o     Evidence service member has reenlisted, or has extended his/her period of active duty, to a date greater than 12 months from the date of closing.

o     Verification of a valid offer of local civilian employment following release from active duty at the same, or greater, rate of compensation.

o     Statement from service member that he/she intends to reenlist, or extend his/her period of active duty, to a date greater than 12 months plus a statement from the service members commanding officer confirming eligibility to reenlist or extend period of active duty as indicated and that the commanding officer has no reason to believe that such reenlistment, or extension of active duty, will not be granted.

·         Analysis of Military Pay:

o     Military Quarters Allowance and any additional variable housing allowance may be included.

o     Subsistence Allowance may be included.

o     Clothing Allowance may be included.  Clothing Allowance is an annual amount and must be converted to monthly.

o     Other Military Allowances such as Propay, flight, hazard, overseas, and combat pay are not typically allowed to be included.   WAGE EARNER  ·         May not have more than 25% ownership interest in business

·         Commission, overtime, bonus and tip income is acceptable with a verified two-year history of receiving that type of income.  Income from these sources must be averaged over the previous 2 years unless the income is declining and then the lower of the previous 2 year average or average based on YTD will be used.

·         Verifiable employer phone number and address must be obtained from an independent source. Example: Phone number cannot be a cell phone as that number cannot be verified.

·         A Verbal VOE is required on all borrowers and must be completed the day of closing.

·         For school teachers pay, a full written VOE is required to clarify whether pay stubs are for 9 month or 12 month pay schedule   SELF-EMPLOYED  ·         Self-employed borrowers, with >25% ownership interest, are required to have a minimum 2 years of consecutive self-employment.

·         Income must be averaged over the previous 2 years unless the income is declining and then the lower of the previous 2 year average or average based on YTD will be used.  Fannie Mae’s Self-employed Income Analysis Form 1084A or 1084B should be used to calculate net monthly income.

·         Business phone number and address must be obtained from an independent source.

·         Significant declining self-employment income is not eligible.   4506-T REQUIREMENTS  ·         All submissions must continue to include a SIGNED 4506-T form, dated within 45 days of application date, for each and every borrower on the loan application. Be sure to include separate 4506-T forms and be sure that the name, address and SSN match exactly as filed.

·         Typical time frame for return of 4506-T transcripts is 24-48 hours.

·         If the borrower’s most recent tax returns have not been filed and they have a valid extension (Form 4868), then provide a copy of the tax returns along with the signed, filed extension form.

·         We will continue to require 2 years W-2’s, paystubs and other complete income documentation as required per AUS Findings / Platinum Guidelines   IRS TAX TRANSCRIPTS REQUIREMENTS  2010 IRS Tax Transcripts are now required for all loan types, with the exception of VA IRRRL’s and FHA Streamline’s. The tax filing deadline was Monday, April 18, 2011. With this deadline passed, all files will be required to have 2010 tax transcripts available prior to closing. Generally the transcripts are available from the IRS as follows:

·         Paper filing: Typically 6-8 weeks form receipt by the IRS

·         E-filing: Typically 15 days from receipt by the IRS

For loans underwritten or submitted for underwriting prior to June 15th, 2011, if the borrower has filed the 2010 tax returns and the tax transcripts are not yet available, the tax transcript request will be returned from the IRS and reflect “No record found” and the following must be provided.

2010 tax transcript showing “No record of return filed”, and, Copy of the 2010 tax return, and, For salaried borrowers: o        If AUS requires 1 year documentation, obtain 2009 tax transcript, current paystub and 2010 W-2.

o        If AUS requires 2 years documentation, obtain 2008 and 2009 tax transcripts, current paystub and 2009 and 2010 W-2s

o        If AUS requires a current paystub, obtain the 2009 tax transcript, current paystub, the 2010 W-2 may be required based on the overall loan when determined by underwriting

For Self-Employed Borrowers: o        If AUS requires 1 year documentation, obtain 2009 tax return and tax transcript.

o        If AUS requires 2 years documentation, obtain 2009 tax return and 2008 and 2009  tax transcripts

For a salaried borrower that has filed an extension for 2010: o        Evidence that the extension was filed and evidence of tax payment; and,

o        A 2010 Tax Transcript showing “No record or return filed”.

o        If AUS requires 1 year documentation, obtain 2009 tax transcript, current paystub and 2010 W-2.

o        If AUS requires 2 years documentation, obtain 2008 and 2009 tax transcripts, current paystub and 2009 and 2010 W-2s.

o        If AUS requires a current paystub, obtain the 2009 tax transcript, current paystub, the 2010 W-2 may be required based on the overall loan when determined by underwriting.

For a self employed borrower that has filed an extension for 2010: o        Evidence that the extension was filed and evidence of tax payment; and,

o        A 2010 Tax Transcript showing “No record or return filed”; and,

o        If AUS requires 1 year documentation, obtain 2009 tax return and tax transcript.

o        If AUS requires 2 years documentation, obtain 2009 tax return and 2008 and 2009 tax transcripts.

For loans underwritten or submitted for underwriting on or after June 15, 2011, the 2010 Tax Return Transcripts must be provided.

If a borrower has filed an extension, the following must be provided: Evidence that the extension was filed and evidence of tax payment; and, A 2010 Tax Transcript showing “No record or return filed”; AND, For salaried borrowers: If AUS requires 1 year documentation, obtain 2009 tax transcript, current paystub and 2010 W-2. If AUS requires 2 years documentation, obtain 2008 and 2009 tax transcripts, current paystub and 2009 and 2010 W-2s. If AUS requires a current paystub, obtain the 2009 tax transcript, current paystub, the 2010 W-2 may be required based on the overall loan when determined by underwriting.   For Self-Employed Borrowers: o        If AUS requires 1 year documentation, obtain 2009 tax return and tax transcript.

o        If AUS requires 2 years documentation, obtain 2009 tax return and 2008 and 2009 tax transcripts. A 2010 P&L is also required.

FIXED INCOME  ·         Fixed income sources must document a history or regular receipt and the probability of continuance for a minimum of 3 years.

·         Non-taxable income may be “grossed-up” by the lesser of the borrower’s tax rate or 25%.  Non-taxable income may not be “grossed-up” for the Residual Income calculation.

·         Alimony, Child Support and Separate Maintenance Income must be documented by a copy of the divorce decree or court order and satisfactory evidence of 12 months receipt of income and 3 years continuance.

·         Worker’s Compensation and Permanent Disability must be documented by an award letter and 3 years continuance.

·         Pension and Social Security Income may be documented by tax returns, award letter, or 2 months bank statements.   RENTAL INCOME  ·         For properties owned during a previous tax year, rental income will be calculated from the borrowers 2 most recent years 1040 tax returns Schedule E. All pages and schedules to tax returns are required.

·         For properties not owned during a previous tax year, cash flow must be based on 75% of the lesser of actual rents or market rents.

·         Rental income may be used to offset the property obligation ONLY.  Positive net rental income may not be used as effective income.(See Conversion of Primary Residence also if applicable)

·         Cash reserves totaling at least 3 months PITI per investment property owned. If rental income is from the conversion of the veteran’s current primary residence, see requirements under conversion or primary residence below.   CONVERSION OF PRIMARY RESIDENCE  INVESTMENT CONVERSION:

If the veteran is converting a current principal residence to an investment property upon purchase of a new principal residence, the following requirements apply:

·         both the current and proposed monthly housing expenses must be used to qualify

·         rental income may not be used to offset the mortgage payment

·         evidence of cash reserves totaling 6 months PITI for both properties must be provided

The following exceptions allow the veteran to qualify using 75% of the gross rental income to offset the mortgage payment and the reserve requirement is waived:

·         The veteran is relocating with a new employer, or is transferred by the current employer to an area not within a reasonable and locally recognized commuting distance, or

·         The veteran has documented equity of at least 30% in the existing property. (Full appraisal required, does not have to be ordered through AMC)

SECOND HOME CONVERSION:

If the veteran is converting a current principal residence to a second home upon purchase of a new principal residence:

·         Both the current and proposed principal, interest, taxes and insurance (PITI) must be used to qualify the borrower for the new loan;

and

·          Minimum reserves of six months PITI for both properties are required. However, only reserves of two months PITI are required for both properties if 30% equity in the existing principal residence is documented. A full appraisal required. (does not have to be ordered through AMC)

PENDING SALE:

In instances where the veteran intends to sell the property but it will not close before the purchase of a new principal residence occurs:

The principal, interest, taxes and insurance (PITI) on both the pending sale and the subject new property must be included in qualifying the borrower AND the following documentation must be obtained:

·         Cash reserves totaling at least six months PITI for both properties

OR

·         Cash reserves totaling at least two months PITI for both properties if able to document equity of at least 30% in the existing property. Acceptable documentation for determining the equity position is a full appraisal, it does not have to be ordered through AMC.   BOARDER INCOME  Boarder income may be considered on a case-by-case basis only if reflected on borrower’s tax returns.   PART-TIME/SECOND JOB  ·         Borrower must have a 2 year history of receiving income from both a primary and a part-time or second job to be considered.

·         The lesser of the previous 2 year average or current YTD average should be used to qualify.   TRAILING SPOUSE INCOME  May be used as a compensating factor only.   ALIMONY, CHILD SUPPORT, OR SEPARATE MAINTENANCE  Court ordered payments should be documented by a copy of the court order, satisfactory proof of receipt for the previous 12 months, and evidence of continuance for 3 years after closing.   RESIDUAL INCOME  VA requires each applicant to have sufficient residual income to cover family living expenses after the deduction of debts and obligations and monthly shelter expenses.  Residual income requirements are dependent upon “family size” to include a spouse not joining in title or on the note and any other individuals who depend on the applicant for support.  Only family members fully supported from a source of verified income (such as foster care or child support income) which, for whatever reason, is not included in effective income in the loan analysis may be omitted from the residual income calculation.

Tables and instructions for the determination of the borrower’s minimum residual income may be found in the VA Lender’s Handbook, Chapter 4.  Only the base amount of any “grossed up” income may be used in the residual income calculation.   OTHER INCOME  May be considered on a case-by-case basis only.   UNACCEPTABLE SOURCES OF INCOME  ·         Income of less than 12 months in duration.

·         Education benefits (including payments from the VA for this purpose).

·         Per Diem income.

·         Car allowance or mileage reimbursement (unless claimed on the borrower’s tax returns)

·         Military hazardous duty pay.

·         Any source of income that cannot be verified.

·         Foreign employers.

·         Any unstable sources of income (e.g. significant year-to-year decreases in income for self-employed borrowers).

·         Illegal activities.

·         Gambling income   ASSETS AND FUNDS FOR CLOSING

(INDEX)   CASH ON HAND  Not an acceptable source of funds.   CHECKING/SAVINGS  ·         2 months bank statements (include all pages) or VOD.

·         Large deposits must be explained and documented from an acceptable source.   STOCKS, BONDS & MUTUAL FUNDS  ·         Most recent brokerage statement; or

·         Photocopy of stock certificate and newspaper stock list dated as of or near the date of application.   RETIREMENT ACCOUNTS (IRA/SEP/401(K))  ·         60% of vested funds should be included in assets

·         If borrower has a loan against retirement account, loan balance may be subtracted from vested funds prior to 60% factor and loan payment may be omitted from debt ratios.

·         Most recent brokerage statement.   GIFT FUNDS  ·         Must be documented by Gift Letter, evidence of donor ability, evidence of the transfer of funds and evidence of receipt in the borrowers account.

·         May not be provided, directly or indirectly, by a person or entity with an interest in the transaction, such as realtor, seller, or builder.

·         Donor may borrow gift funds from an acceptable source (not a party to the transaction) provided mortgage borrower is not an obligor on any Note to secure the borrowed funds.  Documentation required.

·         Only family members are permitted to provide gift funds.   GIFT OF EQUITY  ·         Must be documented by Gift Letter.  Source of funds is “Equity in Subject Property”.

·         Must be disclosed in purchase contract and addressed by appraiser.

·         Acceptable only if donor is a relative.   PROCEEDS FROM SALE OF PROPERTY  ·         For qualification purposes the sales price – all liens = Estimated Proceeds.

·         Prior to closing, a Final HUD-1 from the sale of the property must be submitted if funds from the proceeds are required to close the subject transaction.   BORROWED FUNDS  Allowed under certain circumstances—refer to VA Handbook Pamphlet 26-7 for more details.  The veteran may not be placed in a substantially worse position than if the entire amount borrowed had been guaranteed by the VA.   EARNEST MONEY DEPOSIT  Verification source of funds came from borrower and a copy of the cancelled check, or certified check, and copy of bank statement reflecting cleared funds.   SELLER CONCESSIONS  Seller may pay all of the veteran’s customary closing costs.  In addition, the seller may also pay the veteran’s Funding Fee, discount points, and prepaids not to exceed 4%.   SELLER FUNDED DOWN PAYMENT ASSISTANCE  Not permitted.   SUBORDINATE FINANCING  Allowed under certain circumstances—refer to VA Handbook Pamphlet 26-7 for more details.  The veteran may not be placed in a substantially worse position than if the entire amount borrowed had been guaranteed by the VA.   INELIGIBLE FUNDS  ·         Foreign Assets.

·         Unsecured borrowed funds.

·         Seller funded down payment assistance.

·         Sweat equity.

·         Undocumented funds.

·         Cash on hand.

·         Illegally obtained funds.   MINIMUM RESERVES  ·         VA does not require any specified amount of reserves in general.  However, the VA does require a minimum Residual Income.  See Residual Income requirements.

·         VA does require reserves for each rental property owned in the amount of 3 months PITI per investment property owned (not for current residence being converted to rental. See conversion of primary).   VA NON-ALLOWABLE FEES  The veteran may pay any or all of the following fees and charges in amounts that are reasonable and customary:

·         Appraisal Fee

·         Recording Fees

·         Credit Report

·         Prepaids (i.e., Hazard Insurance and Property Taxes)

·         Flood Zone Determination

·         Survey

·         Title Exam and Title Insurance.

·         Special Mailing Fees for Refinancing Loans

·         VA Funding Fee

·         MERS Fee

·         Other Fees Authorized by VA.

In addition to the “itemized fees and charges”, the lender may charge the veteran a flat charge not to exceed 1% of the total loan amount including any financed VA Funding Fee.  The lenders 1% flat charge is intended to cover all of the lender’s costs and services which are not reimbursable as “itemized fees and charges.”  The following list provides examples of items that cannot be charged to the veteran:

·         Interest Rate lock-in fees

·         Postage and other mailing charges, stationery, telephone calls, and other overhead

·         Amortization schedules, pass books, and membership or entrance fees

·         Escrow fees or charges

·         Notary fees

·         Loan Application or Processing Fees

·         Fees for preparation of Truth-In-Lending disclosure statement   CREDIT

All borrowers must meet the minimum credit score requirements shown in the LTV table.

Representative Credit Score:  The representative credit score is based on the lowest scoring borrower.

(INDEX)   CREDIT REPORT   REQUIREMENTS  ·         Regardless of DU findings, each credit report must contain 2 acceptable tradelines with at least a 12 month history and last active within the last 24 months.

Acceptable Tradelines must meet all of the following criteria:

·         For government loans, tradelines must be or have been previously open for at least 12 months and must have been paid as agreed during the most recent 12-month active period.  Also, each qualifying tradeline must have been last active during the most recent 24-month period from the credit report date.

·         Cannot be a charge-off, collection, settlement, short payoff, lien, judgment, account that was included in a bankruptcy filing, or a deferred account.

·         Cannot be an authorized user account.

·         Cannot be an account which is verified does not belong to borrower.

·         If the credit report contains a bankruptcy or foreclosure, the tradelines must have been active and paid as agreed for at least 12 months following the bankruptcy discharge or foreclosure sale.

·         Note that any AUS-approved government loan (FHA or VA) that does not meet these tradeline requirements above will be automatically considered for manual approval by the Underwriter.  However, this does not mean that the loan will be automatically approved.  If the loan is approved (or possibly in order to make a decision), the Underwriter will condition for satisfactory VOR/VOM, credit explanations, alternative credit for thin credit files, etc.  Also, note that it is very critical that all 1003’s indicate all borrowers’ current monthly rent/mortgage expense in the current housing payment section of the 1003, since payment shock is an important consideration in manually decisioning a loan. If the loan is downgraded to a manual underwrite, it must meet VA guideline maximum debt ratio of 41%.

·         Credit report must match DU findings.

·         Must not be older than 120 days on the date of closing for existing properties and 180 days for new construction.

·         Must contain complete information provided by all three repositories.

·         The credit report must show the following three required FICO scoring models for the report to be valid with Platinum Mortgage, Inc.:

1.    Equifax Beacon 5.0

2.    Transunion FICO Risk Score, Classic 04

3.    Experian/Fair Isaac Risk Model V2.

·         Must reflect a minimum of 1 score per borrower.

·         Manual underwrite are as determined acceptable by the underwriter.   CREDIT SCORE  ·         If more than one score is supplied by the same repository, the lesser of the scores will be used.

·         Determining Qualifying Credit Score:

o   Middle of 3

o   Lower of 2

o   If only one score is provided, that score is the qualifying credit score for that borrower.

·         620 minimum credit score is required for purchase and full doc refinances.

·         640 minimum credit score is required for any loan with a 15 year term.

·         660 minimum required for IRRRL’s.   INQUIRIES  Borrower must provide Letter of Explanation for all credit inquiries reflected on the credit report, disclosing any new credit obtained.  New credit must be documented and included in debt ratios.   LIABILITIES & CREDIT HISTORY

(INDEX)   HOUSING HISTORY  ·         A 24-month history of residence is required on all files.

·         Additionally, a 12-month verification of rent or mortgage with a payment rating is also required on all manually underwritten loans, or if required by DU.  If private party landlord, verification of rental payment requires 12 months cancelled checks.

·         No more than 0x30 in the previous 12 months is allowed on manually underwritten loans.

·         Borrower must provide satisfactory letter of explanation for the disposition of any primary residence converted to a second home or investment property (non-owner occupied).   OPEN CHARGE ACCOUNTS  If no monthly payment is reflected on the credit report, the greater of $10 or 5% of the outstanding balance should be used for qualification purposes.   LEASE PAYMENTS  All lease payments are required to be included in debt ratios regardless of months remaining on lease.   ALIMONY, CHILD SUPPORT, OR SEPARATE MAINTENANCE  ·         Court-ordered payments should be documented by a copy of the court order.

·         Borrower(s) must have an acceptable existing repayment plan for any arrearages and proof of 12 months on time payments, and/or be required to pay account in full prior to, or at closing.

·         See Collections/Chargeoffs for additional requirements if there are arrearages.   CONTINGENT LIABILITIES  ·         If the borrower is a co-signer on an account paid by another party, the liability may only be excluded from the borrower debt ratios if evidence the primary obligor has been making the payments on time on the debt for a minimum of 12 months can be obtained.

·         Court-ordered assignment of debt should be documented by a copy of the court order.   DEFERRED INSTALLMENT DEBT  ·         May be excluded from the borrower’s total monthly obligations with evidence of a minimum of 12 months deferment from date of closing.

·         If there is no monthly payment reflected on the credit report, a copy of the borrower’s payment letter or promissory note should be used to determine what payment amount to use.   NON-REIMBURSED EMPLOYEE EXPENSES  If the borrower claims any non-reimbursed employee expenses (IRS Form 2106 or 1040 Schedule A), the borrowers monthly income should be reduced by the annualized monthly average. If the most recent year’s tax return shows a substantial increase in the amount of expenses claimed over the previous year’s expenses then a 12 month average (worst case) would be used for the most recent year to establish the amount to reduce the income by. Ex. 2009 shows $15,000 2008 – shows $5,000. We will use $15,000/12 in lieu of using a 24 month average.   BUSINESS DEBT IN BORROWER’S NAME  When the account in question does not have a history of delinquency, the debt may be excluded with satisfactory evidence the obligation was paid out of company funds (such as 12 months cancelled company checks).  If the account in question has a history of delinquency, the full debt obligation must be included in the borrower’s debt ratio.   FINANCED PROPERTIES  VA does not limit the number of financed properties the borrower may have, whether VA guaranteed or not.  However, the VA does limit the amount of VA guarantee the borrower is entitled to.  The borrower may have more than one VA loan so long as there is sufficient VA guarantee, or combination of VA guarantee and equity in the subject property, to meet underwriting guidelines.   DEBTS WITH <10 REMAINING PAYMENTS  ·         All debts with 10 or more remaining payments must be included in the borrower’s debt ratios (unless otherwise excluded).

·         Installment debts with less than 10 payments must also be counted if the amount of the debt exceeds 2% of the borrower’s gross income, otherwise it may be omitted.   “PAYING DOWN” ACCOUNTS  Not permitted.  Settlement offers will not be considered as proof of balance   SETTLEMENT OFFERS  Are acceptable on accounts that will be paid in full at closing as long as the offer is in writing from the creditor reporting on the credit report.   PAST DUE ACCOUNTS (NOT A COLLECTION OR CHARGEOFF)  Consumer Credit Accounts:  Recent derogatory credit within the previous 12 months is generally not permitted on manually underwritten loans.  When the borrower has any currently past due accounts, they must be brought current prior to, or at, closing.  A letter of explanation is required for all derogatory credit.   COLLECTIONS/ CHARGEOFFS  Any unpaid Collections or Chargeoffs will require a letter of explanation from the borrower.

AUS Approved:

·         Medical Collections/Chargeoffs are not required to be paid.

·         Other Collections/Chargeoffs, if >24 months, not required to be paid, otherwise accounts must be paid in full prior to, or at, closing.

Manual Underwrite:

·         Medical Collections/Chargeoffs are not required to be paid.

·         Other Collections/Chargeoffs must be paid in full prior to, or at closing.   OUTSTANDING FEDERALLY INSURED OR GUARANTEED DEBT  All delinquent Federal debt must be brought current at closing.  All defaulted Federal debt must be paid in full at closing.   JUDGMENTS/LIENS  Must be paid at, or prior to, closing.   CHAPTER 7/11 BANKRUPTCY  2 years seasoning required from Discharge or Dismissal date.   CHAPTER 13 BANKRUPTCY  Borrower must have completed at least 12 months of on-time payments per the plan approved by the Bankruptcy court.  In addition, borrower must receive Bankruptcy court approval to enter into the new mortgage loan transaction.   CONSUMER CREDIT COUNSELLING  Manually underwritten loans will treat CCC as a Chapter 13 Bankruptcy.   MULTIPLE BANKRUPTCY FILINGS  All bankruptcies must meet seasoning requirements and will be reviewed on a case-by-case basis.  Borrower’s with multiple bankruptcies are generally not acceptable on manually underwritten loans.   FORECLOSURE  ·         2 years seasoning is required.

·         Borrower must have a clear CAIVRS.

·         If the foreclosure involved a VA guaranteed loan, the borrower may not have full entitlement available for the new loan.   DEED-IN-LIEU OF FORECLOSURE  ·         2 years seasoning is required.

·         Borrower must have a clear CAIVRS.   SHORT SALES  No seasoning required.   COMMUNITY PROPERTY STATES  Debts of the non-borrowing spouse must be included in debt ratios.

Community Property States served by Platinum Mortgage:

·         Louisiana   NONTRADITIONAL CREDIT  Nontraditional credit references should not be necessary, however, if the borrower has marginal credit, nontraditional credit references may be used to “strengthen” the loan file.   COMPENSATING FACTORS  Some compensating factors include, but are not limited to:

·         Conservative use of credit

·         Minimal increase in borrower’s housing expense

·         Substantial cash reserves after closing

·         Credit score >660

·         Low total debt ratio (does not compensate for high housing ratio)   MULTIPLE RISK LAYERING  Caution is advised with multiple risk layering on manually underwritten loans:

·         Payment Shock (>100%)

·         Ratio’s exceeding guidelines

·         Serious adverse credit

·         Short Duration of Employment (less than 12 months employment with current employer)

·         Proposed loan is an ARM   MAXIMUM DEBT RATIO  Regardless of DU findings the following max total debt ratios may not be exceeded.

Credit Score  Max Debt Ratio   620-639  45%   640-659  50%   660+  53%

If manually underwritten, maximum total debt to income ratio of 41% applies. No exceptions allowed.   PROPERTY

(INDEX)   UNEXPIRED REDEMPTION RIGHTS  ·         Minimum qualifying credit score of 660.

·         Transferred appraisals are not allowed for Conventional loans.

·         Clear title is required; meaning that the title commitment must clearly state that it insures Platinum Mortgage against loss in the event the redemption is exercised.  In some cases, title companies may require redemption bonds, at additional costs, in order to issue clear title commitments and add the required redemption language to the title commitment to indicate that Platinum Mortgage is insured against loss by exercise of redemption rights.

·         Due to limited Secondary Market acceptability, a pricing adjustment hit of 0.375% applies for loans with properties subject to outstanding rights of redemption.   The most recent lock/revision confirmation must reflect that the loan was priced with this adjustment.  The online ez-lock portal has been modified to allow the user to indicate at the time of initial lock-in if the subject property is subject t o redemption rights.  Additionally, the rate lock revision form has been modified online to accommodate requests to modify lock-ins when it is determined that redemption rights apply after the time of initial lock.  You must use this form to indicate a lock revision where the redemption rights apply.   TITLE COMMITMENT  ·         Amount of policy may not be less than the original principal balance of the mortgage.

·         Named Insured must be Platinum Mortgage, Inc., and/or MERS, Inc., solely as nominee for lender, ISAOA/ATIMA.

·         ICL/CPL must be loan specific and include the subject property address and borrower name.

·         Final Title Policy Requirements:

o   ALTA standard (1990 ALTA policies are not permitted) or ALTA Expanded Coverage Residential Policy is acceptable in all states.  The modified ALTA Short Form Residential loan policy approved by the State of Florida is acceptable on Florida properties only.

o   ALTA Endorsement 4 (condominium) – required on all condominium properties.

o   ALTA Endorsement 5 (PUD’s) – required on all PUD properties.

o   ALTA Endorsement 6 (ARM’s) – required on all ARM transactions.

o   ALTA Endorsement 8.1 (environmental hazards) – required on all properties.

o   ALTA Endorsement 9 (restrictions, encroachments, minerals) – required on all properties.

·         Title policy must include, as an informational note, (a) the recorded plat number(s), if any, and (b) the property parcel number(s), or tax identifying number(s), as applicable, if available.

·         Any Survey Exception must be deleted.

·         The legal description on the policy must conform to the legal description contained in the Security Instrument.   CONTRACT FOR DEED/LAND CONTRACT  ·         Allowed as a purchase or rate/term refinance, as long as borrower receives no cash at closing.

o   If land contract has been recorded less than 12 months, treat as a purchase.

o   If land contract has been recorded over 12 months, treat as a refinance (12 months canceled checks are required).

·         LTV will be based on the lesser of:

o   The appraised value plus allowable closing costs, or;

o   The original purchase price plus any documented costs for repairs, renovation, or weatherization plus reasonable closing costs.   HAZARD INSURANCE  ·         Required on all properties.

·         Coverage must be at least:

o  The estimated cost to reconstruct the property,

o  The estimated cost new as reflected on the appraisal, or,

o  The outstanding principal balance of the loan (no less than 80% of the estimated cost to reconstruct the property).

·         Maximum deductible may not exceed 5% of the dwelling coverage.

·         Hazard Insurance escrow may not be waived if Flood Insurance is required.   FLOOD INSURANCE  ·         Required on all properties located within a FEMA Flood Zone.

·         Coverage must be at least:

o  The estimated cost to reconstruct the property,

o  The estimated cost new as reflected on the appraisal, or,

o   The maximum limit of coverage under the National Flood Insurance Act ($250,000), or;

o   The outstanding principal balance of the loan (no less than 80% fo the estimated cost to reconstruct the property).

·         Maximum deductible may not exceed $5,000.

·         Flood Insurance escrow may not be waived.   OCCUPANCY TYPES

(INDEX)   PRIMARY RESIDENCE  Must be occupied as the borrowers primary residence.   SECOND HOME  Not eligible.   NON-OWNER OCCUPIED  Not eligible.   PROPERTY EVALUATION

(INDEX)   ELIGIBLE PROPERTIES  ·         Single Family (attached, detached, PUD)

·         Condominium (except Florida)

·         2 – 4 Units   INELIGIBLE PROPERTIES  ·         Condominiums located in Florida.

·         Cooperatives

·         “Kiddie” Condos

·         Leaseholds

·         Manufactured Homes

·         Mixed-use Properties

·         New Construction located within a flood zone

·         Non-owner occupied properties

·         Non-warrantable Condominiums

·         Properties located in the following Florida Counties: Broward, Miami-Dade and Monroe.

·         Properties listed for sale in the previous 180 days.

·         Properties requiring repair escrows.

·         Properties with Environmental Hazards

·         Second Homes.

·         Unimproved land

·         Unusual architectural designs (geodesic domes, subterranean homes)

·         Properties larger than 10 acres

·         Properties in below average condition.

·         Properties with incomplete renovations.

·         Properties held in a Life Estate are not eligible for financing.

·         Properties subject to unexpired right of redemption periods. (May be allowed if specific criteria are met as stated in Wholesale Announcement 11-05, See announcement for complete details.)

APPRAISAL REQUIREMENTS  ·         Full Appraisals, by an VA approved appraiser, are required on all properties (as selected by TAS):

o     1004 Interior/Exterior – 1 Unit properties

o     1025 Interior/Exterior – 2-4 Unit properties

o     1073 – Condominium properties

·         2055 Exterior Only Appraisals are not permitted.

·         Appraisals may not be older than 180 days on the date of closing for existing properties and new construction.

·         Site value >30% of the appraised value will be reviewed on a case-by-case basis.

·         All “Subject To” conditions and/or repairs must be completed prior to closing.  Prior to Funding conditions and repair escrows of any kind are not permitted.

·         Appraisal’s completed by trainee appraisers are not acceptable.   ACCESS TO PROPERTY  ·         There must be vehicular access via an all-weather public or private street.

·         If access is via a private street, there must be a permanent easement and provisions for permanent maintenance of the street.

·         Each property must have access to the back yard.   PEST INSPECTIONS  ·         Termite Inspections are required for all existing construction transactions unless transaction is an Interest Rate Reduction Refinance (IRRRL).

·         Treatment is required for any current infestations and structural inspections are required if damage is notated on the appraisal or the termite inspection.

·         All new construction (proposed, under construction, or <1 year old) is required to provide evidence of satisfactory pest treatment (see New Construction).   COMMUNITY WELL & SEPTIC SYSTEMS  Community well and/or septic systems must be owned, operated, and maintained by a private corporation or a non-profit property owners association.  See HUD 4075.12 Rev for additional information.

Properties located within a reasonable distance from public water or sewer systems may be required to connect to public utilities if the cost to connect is less than 3% of the value used to determine LTV.   SHARED WELLS  ·         The well must be capable of providing continuing water supply of safe and potable water to each property simultaneously.

·         There must be a permanent easement which allows access for maintenance and repair.

·         There must be a well-sharing agreement which:

o    Makes reasonable and fair provisions for the maintenance and repair of the system and the sharing of those costs

o    Is binding on the signatory parties and their successors in title, and

o    Is recorded in local deed records.

Properties located within a reasonable distance from public water or sewer systems may be required to connect to public utilities if the cost to connect is less than 3% of the value used to determine LTV.   PRIVATE SEPTIC SYSTEM  Waste water systems must be determined to be free of observable evidence of system failure. Certification can be provided by the local health department, a septic system professional, a qualified home inspector, or can be evidenced on the appraisal if completed by a VA Approved appraiser.  A septic system test is only required when:

·         Evidence of system failure is present,

·         If mandated by local or state jurisdiction,

·         If customary to area, or;

·         If required by lender.

All new systems must be accompanied by a permit and local health department approval.

Properties located within a reasonable distance from public, or community, water or sewer systems may be required to connect to public utilities if the cost to connect is less than 3% of the value used to determine LTV.   PRIVATE WELL  Water Quality

Water quality for an individual water supply must meet the requirements of the health authority having jurisdiction. If the local authority does not have specific requirements, the maximum contaminant levels established by the Environmental Protection Agency (EPA) will apply.

If the health authority is unable to perform the water quality analysis in a timely manner, a commercial testing laboratory or a licensed sanitary engineer acceptable to the health authority may take and test the water sample.   NON-VENTED FIREPLACE  If the dwelling will have a permanently installed, nonelectric, non-vented fireplace or other non-vented space heater, the following is required:

·         The veteran purchaser’s written acknowledgment that the dwelling contains an non-vented fireplace or space heater which has not been inspected by VA, and

·         A written heating/air conditioning contractor, that identifies the property and states that the non-vented appliance is equipped with an approved Oxygen Depletion Sensor, and  meets local building authority requirements, or is installed according to the manufacturer’s recommendations if there are no local requirements.    FEMA DISASTER AREAS  A Post Disaster Inspection is required prior to closing for any properties located within a designated FEMA Disaster Area when the effective date of the appraisal is prior to the disaster declaration date.   CONDOMINIUMS

(INDEX)   QUALIFICATION  ·         All condominium projects must be approved by the VA. VA will no longer accept FHA condo approvals.

·         Spot loan approvals are not permitted.

·         VA Approved condominium projects may be verified through the VA Veterans Information Portal at www.vip.vba.va.gov   NEW CONSTRUCTION

(INDEX)   REQUIRED DOCUMENTS  The following documentation is required on all new construction (proposed, under construction, or <1 year old):

·         HUD Form 92544/VA Form 26-1859, Warranty of Completion of Construction.

·         HUD Form 92541, Builder’s Certification of Plans, Specs & Site.

·         HUD Form NPCA-99a, Subterranean Termite Treatment Builder’s Certification.

·         HUD Form NPCA-99b, Soil Treatment Guarantee.

·         Septic Approval from County Health Department (if not on public sewer).

·         In addition to the above documentation, proposed construction also requires additional documentation found in the VA Lender’s Handbook, Chapter 7.  One of the following requirements must also be met if the appraisal is completed prior to substantial completion of construction:

o    Building Permit & Certificate of Occupancy from local building authority.

o    10 Year Warranty from an approved HUD warranty provider.

o    Or property must be inspected during construction by a VA or HUD approved inspector:

§  An Initial Inspection is required when either excavation is complete and is ready for footings and foundations (in areas when it is advisable to have bearing soil inspected prior to construction) or when foundation walls are complete and ready for backfill (in areas where soil conditions are uniform and free from faults likely to cause foundation problems).

§  A Framing Inspection required when the building is enclosed with framing, plumbing, heating, electrical, and insulation is complete and visible.

§  And a Third and Final Inspection when the property is completed and ready for occupancy.

If any portion of the subject property is located within a FEMA Flood Zone, the property is not eligible for financing unless one of the following requirements are met:

·         A Letter Of Map Amendment (LOMA) or a Letter Of Map Revision (LOMR) must be obtained to show proof that the subject property has been removed from the FEMA Flood Zone.

·         A FEMA National Flood Insurance Program Elevation Certificate documenting that the lowest floor (including any basement) is at, or above, the 100 year flood elevation in compliance with the National Flood Insurance Program.

If subject property has a private well or septic system, Approval and Permits from the state or local health department are required.   DECLINING MARKETS

(INDEX)   DETERMINATION  Properties with appraisals indicating the subject property is located within a declining market will require:

·         Detailed explanation by the appraiser on the effect of the declining market on the subject neighborhood values and how the appraiser determined the property to be in a declining market.

·         May require additional comps on a case-by-case basis.   REFINANCE TRANSACTIONS

(INDEX)   RATE/TERM REFINANCE  ·         Anything being paid off other than a first mortgage lien is considered cash out.

·         Buyout of spouse’s equity per divorce decree.

·         Borrower may not receive more than $500.00 cash at closing.

·         Total loan amount is limited to 90% LTV plus Funding Fee.

·         No refinances are allowed within 6 months of the property being listed for sale.

·         0x30 payment history required over the previous 12 months.

·         For limited cash out or rate/term refinances, any non‐mortgage debts, collections, judgments or liens that are to be paid off must be paid prior to closing in order for the transaction to be considered as a limited cash out or rate/term refinance. Platinum Mortgage will require evidence the debt was paid and proper documentation for the source of funds used to pay the debt. This is required regardless of the amount of funds that borrower may be bringing to close. Any transactions where any of the above items are to be paid at close will be considered as cash out refinances and the loan will have to meet cash out refinance guidelines.   INTEREST RATE REDUCTION REFINANCE LOAN (IRRRL)  ·         Primary Residence refinances only; Non-owner occupied and second homes are not eligible.

·                 Must be refinancing a current VA insured mortgage.

·                 All borrowers on previous Note must be on new Note.

·                 Maximum term is term of the original loan plus up to 10 years not to exceed 30 years.

·                 Subordinate financing may remain at max 125% CLTV.  Subordinate lender must agree to re-subordination.

·                 A credit report and 660 minimum credit score is required but sections V, VI and a-k of VIII of the application are not required to be completed.

·                 As of December 1, 2010, employment information for the borrower(s) is now required to be completed on the loan application (Section IV). No income amount or income information is required. Only a Verbal VOE will be completed.

Minimum 2055 conventional appraisal is required. (DO NOT ORDER THROUGH VA) Appraisal be ordered through an acceptable Platinum Mortgage AMC and must meet HVCC requirements. (See Announcement 10-39). Appraisal report must meet generally accepted conventional guidelines, lender review and including but not limited to USPAP requirements. Any repairs that impact safety, livability, or habitability must be completed. The property condition must be rated “average” or better. Ratings of “fair” or less are not acceptable.

The total loan amount (base loan amount + VA funding fee = Total loan amount) must be supported by the value of the property. Appraised value must be equal to or greater than the total loan amount. Max LTV/CLTV is 100%.

·         Employment and Income documentation is not required.

·         Borrower may not receive more than $500.00 cash at closing.

·         No refinances are allowed within 6 months of the property being listed for sale.

·         0x30 payment history required over the previous 12 months.

·         Borrower must have made a minimum of 6 payments on current mortgage with 0x30 pay history to be eligible for VA IRRRL.

·         Borrower must credit qualify if:

o    New P&I increases more than 20% over previous Note P&I when the mortgage term is reduced or when refinancing from an ARM to a Fixed rate.

o    New P&I increases more than 20% over previous Note P&I on a primary residence or when a borrower is removed from the Note.   CASH OUT REFINANCE  ·         Total loan amount is limited to 90% LTV plus Funding.

·         No refinances are allowed within 6 months of the property being listed for sale.

·         LTV is based on the lesser of the appraised value or acquisition cost on properties with less than 6 months ownership seasoning.

·         0x30 payment history required over the previous 12 months.

·         Not eligible if property is owned free-and-clear.   NET TANGIBLE BENEFIT TEST

(INDEX)   ELIGIBILITY  Every refinance loan submitted to Platinum Mortgage will be checked to ensure a valid Net Tangible Benefit to the borrower.

The following are valid Net Tangible Benefits for the purpose of this policy:

·         Reduction in monthly payment and/or cash out at closing must be sufficient to recoup the borrower’s closing cost and discount points within 84 months.  Cash out at closing would include any consumer debts paid from loan funds at closing.  Prepaids are not included as a cost of refinancing.

·         Refinance transactions from an Adjustable Rate Mortgage or a Balloon Mortgage to a Fixed Rate.

·         Reduction in loan term based on remaining term of current loan.

·         Court-ordered refinances; i.e. divorce.   MORTGAGE INSURANCE COVERAGE

(INDEX)   VA GUARANTEE  All loans must have a minimum of 25% guaranty (cash down payment plus veteran’s entitlement).

·         The entitlement for loan amounts less than $144,000 is $36,000 less any prior usage shown on the Certificate of Eligibility (COE).

·         The entitlement for loan amounts greater than $144,000 is $104,250 less any prior usage shown on the Certificate of Eligibility (COE).   VA FUNDING FEE  Funding Fee may be waived for disabled veterans.

Purchase Loans   Type of  Veteran  Down Payment  Percentage for 1st time use  Percentage for subsequent use   Regular  Military  <5%

>5% but <10%

10% or more  2.15%

1.50%

1.25%  3.30%

1.50%

1.25%   Reserves/

National

Guard  <5%

>5% but <10%

10% or more  2.40%

1.75%

1.50%  3.30%

1.75%

1.50%   Rate/Term and Cash-Out Refinancing Loans   Type of Veteran  Percentage

For 1st time use  Percentage for subsequent use   Regular Military  2.15%  3.30%   Reserves/National Guard  2.40%  3.30%       Interest Rate Reduction Refinance Loan (IRRRL)   Type of Loan  Percentage for either type of Veteran whether 1st time or subsequent use   IRRRL  .50%

VA JUMBO PROGRAM

(INDEX)   PROGRAM CODE  Rate lock confirmation must be locked under these codes to receive correct pricing.

·         VF30J – 25 or 30 year Jumbo Program

·         VF15J – 10 or 15 year Jumbo Program   VA JUMBO PROGRAM  ·         The VA Jumbo Program is for total loan amounts that exceed $417,000. Total loan amount is the base loan amount + VA funding fee. To be eligible, borrowers must meet all VA and Platinum guidelines as well as the guidelines below.   MAX LOAN AMOUNT  Max total loan amount allowed is $650,000.   MAX LTV  ·         Purchases up to 100%/100% LTV on loan amounts up to $650,000 (Including financed VA funding fee) are allowed as long as the VA Guaranty plus the veteran’s down payment and/or equity equal 25% of the lesser of the sales or notice of value (NOV).

·         Rate/Term and Cash-out refinance transactions are limited to 90%/90% LTV/CLTV of the property value shown on the CRV or NOV as long as equity plus VA Guaranty equals at least 25% of the NOV.   MINIMUM CREDIT SCORE  Minimum FICO score = 620   HOUSING HISTORY  No housing payments 30 days or more past due in the last 12  months.   DEBT RATIO  41% – May be exceeded up to 45% max with AUS approval             RESERVES  ·         Minimum 6 months PITI reserves are required.

·         Cash out received from transaction cannot be used to meet the minimum reserve requirements.   VA GUARANTY  Regardless of loan amount, the VA Guaranty plus cash/equity must be equal to a minimum 25% of the purchase price or value, whichever is less on purchases and non-IRRRL refinances.   ELIGIBLE PROPERTY TYPES  ·         Primary Residence only.

·         Single family residence, PUD or VA approved condominiums only.   APPRAISAL REQUIREMENTS  VA required appraisal only.   SECOND REVIEW  All VA Jumbo loans are subject to second level management review prior to loan being cleared to close.

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