Underwriting Presentation

U.S. Bank Home Mortgage

MRBP Division
Master Servicer
2007

9/06
 Fannie Mae: Conventional Products

• MyCommunityMortgage Suite of Products

– Community Solutions/HomeChoice
– MCM 97
– MCM 100

• Community Lending Suite of Products

– Fannie Mae Community Homebuyers
– Fannie 97
– Fannie 3/2

• Standard 80% LTV loan

• Standard 95% LTV loan
• Community Land Trust Mortgage Loans

No “Split Loan” Products allowed.

i.e. 80/20, 90/10, 80/15/5
Freddie Mac: Conventional Products
“Home Possible”
– Home Possible 97
– Home Possible 100
– Home Possible Neighborhood Solutions 97
– Home Possible Neighborhood Solutions 100

Standard Conventional 5/10/15/20% down - 30 year fixed rate

No “Split Loan” Products allowed.

i.e. 80/20, 90/10, 80/15/5
Fannie Mae References
– Fannie Mae Selling Guide, Chapter X Section 304 –
Community Lending
– Fannie Mae Guide to Desktop Underwriting
– Fannie Mae website www.efanniemae.com
FHA References
– Guide – 4155.1 rev 5
– FHA website www.hud.gov
Other References
Allregs www.allregs.com
– VA www.homeloans.va.gov
– USDA-RD www.rurdev.usda.gov
Freddie Mac References
– Seller Servicer Guide, Chapter A34 (HP only)
– Learning Center: www.FreddieMac.com/learn
– Website: www.FreddieMac.com
– Seller Servicer Guide, Chapter 37:
“Underwriting the Borrower”
 Credit Underwriting is the responsibility of
the originating lender.
U.S. Bank Home Mortgage (Master Servicer) does not
re-underwrite your loans.
 All loans are subject to internal and agency audits.
 Underwriters should make sound credit decisions,
assure data integrity, and include all necessary
documents in support of the underwriting
decision.
 All loans should be underwritten in compliance
with the most current underwriting guidelines for
FHA, VA, Rural Housing, Fannie Mae. and
Freddie Mac.

 The loan file must comply with the Bond program

guidelines for income limits, sales price limits,
property types, locations and program parameters.
 The following automated systems are approved for use in the bond programs.

 Conventional Loan Types

-Fannie Mae loans (DU)
-Freddie Mac (LP)

 Government Loan Types

-FHA & VA loans (DU or LP)

 If manual underwriting is necessary, full documentation is required

Other lender customized automated underwriting systems

are not acceptable for loan approval
• Full appraisal reports are required if a manual
underwrite has been performed.

• Correspondent Lenders, sponsored by the Master

Servicer, are required to submit full appraisals.

• Form 2055/2075 is permitted with a DU

Approve/Eligible recommendation
(Appraisals MUST have a Property Value listed on them)
• Full appraisal report required for Freddie
Mac Home Possible loans evaluated by LP
Government Loans
 Manufactured Homes are permitted in the program. The loan must
follow FHA, VA, Rural Housing and Program Guidelines.

 Manufactured homes must meet specific size and structural

requirements, remain permanently affixed to a foundation, and be
taxed as real estate.

Conventional Loans:
 Manufactured homes are not currently eligible for
Fannie Mae or Freddie Mac financing with the
Bond program (due to LLPA)
Down Payment Assistance Programs
(DPA)
 The funding source for the DPA program must be
stated in the source of funds section of the 1003, and
stated on the HUD-1
 DPA programs must meet FHA and Fannie Mae
requirements
 Write the loan product, down payment source, and
amount on the 1008 (loan transmittal), or mortgage
credit analysis worksheet (MCAW)
Condo Requirements
Follow Fannie Mae, FHA and VA Condo Underwriting Guidelines
US Bank Home Mortgage does not provide Condo Guidelines

 All Fannie Mae loans must follow the Condominium Project

Acceptance guideline as outlined in the Fannie Mae
Announcement 05-03 and 06-12 and Seller/Servicer guide

 Underwriters must indicate on the 1008 the Project Acceptance

Review Type Codes
 Lenders having access to Fannie Mae’s Condo Project Manager
(CPM), have the ability to verify if the Condo project is already
Fannie Mae, FHA or VA approved
 Lenders having access to CPM have the ability to enter information
on the Condo Project into CPM to see if it will get approved
 Lenders who do not have access to CPM can contact their Fannie
Mae Representative to work at gaining access to this function
Condo Requirements – FREDDIE MAC

• Follow the most recent Freddie Mac Condo Underwriting

Guidelines – next slide
• Underwriters must indicate on the 1077 the Project
Classification Codes
• Lenders may use Fannie Mae’s “Condo Project Manager”
to assess Condo eligibility
(Freddie Mac does not have a specific assessment tool)
• Reference Seller Servicer Guide Chapter
Freddie Mac Standard & HP Products

www.freddiemac.com
Under Indiana Housings program, “Cash Back” is not
permitted.

However, reimbursement of payments such as:

prepaids and earnest monies are allowable to the
extent the borrower has met any minimum
contribution requirements and the
reimbursement is acceptable to the Agency
(FHA, VA, Fannie Mae, Freddie Mac).

Files must be documented.

 Updates
and
Enhancements
For one-unit properties:
• $0 contribution needed from borrower’s own funds!
• Qualifying Community Seconds® on MCM loans in
DU may be treated as a gift rather than a subordinate
lien
• FannieNeighbors® definition for MCM loans extended
to many hurricane-impacted areas

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 MCM: Eligibility Parameters
Loan Purpose Purchase

Product Types • 30-year fixed rate

Eligible Properties • One unit owner-occupied only (condos and PUD’s are allowed )

Home Buyer Education • Required by Indiana Housing Community Development Authority

Underwriting • Eligible for Manual Underwriting

• For DU, Approve/Eligible, EA-I/Eligible, and EA-II/Eligible
• Nontraditional credit accepted, but for DU, at least one borrower must
have a traditional credit history as determined by DU
• Credit and income-source flexibilities available, including boarder
income from non-relatives

20
• Community Seconds on MCM loans in DU may be treated
as a gift rather than a subordinate lien
• The Community Seconds must
– meet Fannie Mae eligibility per the Selling Guide, and
– provide for a deferred payment structure that extends for
no less than five years (with no repayment required from
the borrower)

21
 Delivery Requirements

• Underwriters are required to reflect the CLTV on the Fannie Mae

Transmittal Summary (1008) (cannot be more then 105%)
• Enter Special Feature Code 118 at delivery
(Does not show on DU but must be entered)
• MCM loan file must be documented with all information relating to the
Community Seconds transaction

22
• Borrowers may use cash-on-hand for the down
payment and closing costs, subject to specific criteria.
– Limited to one-unit, principal residences
• Cash-on-hand funds will not be used to calculate
reserves (if reserves are required).
• DU will use the “Cash-on-Hand” amount to calculate
the available funds to close.

23
• The lender must verify/document the following:
– Borrower customarily uses cash for expenses; usage is
consistent with previous payment practices.
– Borrower's credit report indicates limited (or no) use of
credit, and no depository relationship.
– Borrower must provide signed statement disclosing the
source of funds (and that they were not borrowed).
• The borrower must deposit with a financial institution at
the time of application, or no less than 30 days before
closing, funds sufficient for the down payment and closing
costs.

24
 Fannie Mae Collections Policy
for MCM
• No payoff required for collection items of $5,000
or less.
• Collections MUST be paid off only if the
aggregate of the collections exceed $5,000
• Must be submitted through DU –
manually underwritten loans are ineligible

25
• MCM permitted for Approve-Eligible along with EA
Levels I and II only

• Standard Loan Level Price Adjustments (LLPAs) for

EA Levels I and II do not apply for MCM.

26
Benefits of using DU with MCM:

• Quicker approval,
• Standard limited waiver of reps and warrants
• Possible reduced documentation
• Greater flexibility in permitting higher qualifying ratios
or lower credit scores with DU vs. manual underwriting

Please Note: Lenders should refer to the Guide to

Underwriting with Desktop Underwriter and subsequent
DU Release Notes for more details about
submitting MCM loans through DU

27
Community Solutions is a borrower option for teachers and
other educational employees, police officers, firefighters, and
health care workers.
Eligible borrowers include full-time employees in the
following positions:
– Employees of public or private schools, including
kindergarten through post-secondary
levels
– Employees of a state or local law enforcement agency, fire
department, or other sworn law enforcement or firefighting
function
– Certified, accredited, or licensed health care workers such
as nurses, medical residents, pharmacists,
technicians, or technologists 28
Extra flexibilities include:
• Acceptance of part-time and overtime income with
a 12 month history
• Higher qualifying ratios (for manual underwriting;
otherwise, determined by DU):
• 45 percent single qualifying ratio (one month’s
reserves required)
• 50 percent with maximum 97 percent LTV,
two months’ reserves (may be gifted), and
strong compensating factors

29
 Community HomeChoice
(continued)
Extra flexibilities include:

– Permits non-occupying co-borrowers

– Higher single qualifying ratios permitted:
• 45 percent (one month’s reserves may be gifted)
• 43 percent with temporary interest rate buy down
• 50 percent with maximum 97 percent LTV,
two months’ reserves (may be gifted), and
budget-based worksheet (manual underwriting)

30
The next few slides will show you how to enter
MCM information into Desktop Underwriter and
how DU provides the loan recommendation.

31
 1) Select correct
county or MSA
2) Select
MyCommunity
Mortgage
3) Answer Yes or No
as appropriate for
FannieNeighbors
and Community
Seconds
4) Select HUD
Median Income or
use Income
Adjustment Factor
(115% for non-
metropolitan areas)
5) Submit Loan

Q: How do I determine if a property is in a FannieNeighbors area?

A: As noted earlier, use the Property GeoCoder to determine if the
property is eligible for FannieNeighbors.
After submitting the case file information, an
underwriting recommendation is displayed.
Lower Mortgage Insurance Coverage

LTV Minimum
Coverage

97.01%-100% 20%
95.01%-97% 18%
90.01%-95% 16%
85.01%-90% 12%
80.01%-85% 6%
 DU recommendations must be documented in the loan file

 Remember to follow the Bond Program guidelines

 Fannie Mae DU loans are evaluated through the

Community Lending Modular (free submission)

 Always enter the appropriate Special Feature Code for

Fannie Mae loans on the Fannie Mae Transmittal
Summary - 1008 (processors and underwriters to verify)
and on the USBHM Loan Submission Delivery checklist
(closers /shippers to verify)
 •Fannie Mae Community Homebuyers 95% 061
•Fannie 97 121
•Fannie 3/2 074
Section 8 445

•Community Land Trust Mortgages

054
•Community Second Mortgages 118
•Bond Loans (Does not Show, make sure to add it) 088

* Special Feature Codes must be listed on the Fannie Mae 1008 and
the USBHM Loan Submission Delivery Checklist
•MCM 97 – Loans with LTVs of 97% and below 460

•MCM100 – Loan with LTVs above 97%, up to 100% 480

•MCM Community Solutions (Manual Underwrite) 481

Teachers,Firefighters, Policemen and HealthCare workers

•MCM Community HomeChoice Option ( DU Approval) 325

Borrower with a disability or a family member with a disability

•MCM Community HomeChoiceOption(ManualUnderwrite) 222

* Special Feature Codes must be listed on the Fannie Mae1008 and

USBHM Loan Submission Delivery Checklist
 Lenders may originate loans for borrowers who have
obtained a Section 8 Homeownership Voucher.

 Please follow the most recent FHA and Fannie Mae

guidelines as it relates to income credit for the subsidy.

 The Lender must show the Section 8 Voucher Assistance

Program on the 1008 and the Mortgage Credit Analysis
Worksheet.
 Contact: Sheryl Krocek – Production Coordinator
(216) 475-7719 sheryl.krocek@usbank.com
 Homebuyer Counseling Certificate must be included in the file
(Note: Everyone who signs the note is required to attend counseling)

 Training must take place in the following forums:

→ Face-to-face home-buyer education ***
→ Classroom or workshop sessions
→ Telephone Education/Internet training currently not permitted per IHCDA
• Early Delinquency Counseling is provided by U S Bank Home Mortgage & acknowledged
by the borrowers in the Authorization for Counseling notice.

 Borrowers must Sign and lender must include in the Mortgage File
the “Fannie Mae’s Borrower’s Authorization for Counseling”
form located in the Fannie Selling Guide or at
efanniemae.com
Home Possible Mortgages™
(“HP”)

Product Training for

Housing Finance Agency
Lenders
Home Possible Product Features
• $0 contribution needed from the borrower!
• Loan Prospector® first
(all HP loans must be run through LP first)
• Area Median Income qualifications assessed
automatically via Loan Prospector
• Already licensed LP users have immediate
access to originate Home Possible loans!
 Home Possible Headlines
- Flexibilities
• Four simple products, available with no special
contracts, designed to meet your borrowers’ needs
• Flexible credit terms, including expanded ratios
and options for borrowers with less-than-perfect
credit
• Secondary Financing including Affordable
Seconds®
• Low Mortgage Insurance coverage levels
• Maximum financing with up to 100 percent LTV
and up to 105% TLTV
 Home Possible
Headlines - Flexibilities
• Can use HP on all risk classes
• Cash-on-Hand can be acceptable
• Qualify with rental income from a non-relative
• Co-borrower with no credit can now be
submitted to LP
Teachers/Teachers’ Aides

Healthcare workers
$0 borrower contribution for
Professional and
1-unit properties volunteer firefighters
Law enforcement officers
1 month’s reserves
required – may be a gift
 1-unit properties for Neighborhood Solution 100
 1- to 2-unit properties for Neighborhood Solution 97
•Home Possible 97 G00
•Home Possible Neighborhood Solution 97 G01
•Home Possible 100 G02
•Home Possible Neighborhood Solution 100 G03
•Affordable Housing Initiative Mortgage 071
•MRB Loans (ALL) (Does not show, need to add) 545
•Transfer of Servicing – restricted (ALL) 510
•Affordable Housing Initiative Mortgage 535
w/TLTV greater than 100%
•Mortgage with Affordable Seconds 583
*Other SCC’s may apply as noted on LP Findings
Mortgage Insurance

LTVs
80.01 - 85%: 6%
85.01 - 90%: 12%
90.01 - 95%: 16%
95.01 - 97%: 18%
Greater than 97%: 20%
Homebuyer Counseling Certificate must be included in the file
Freddie Mac
− Only one borrower required for Home Possible
− All borrowers preferred

• Training must take place in one of the following forums:

– Face-to-face home-buyer education
– Classroom or workshop sessions
– Telephone education/counseling program by an approved mortgage
insurer sponsored by the lender
– Internet training: permitted by Fannie Mae and Freddie Mac through
Recognized MI companies

• Freddie Mac also offers online homebuyer education at their website:

www.FreddieMac.com/hrc
 “Home Possible”
Details for Underwriters
http://www.freddiemac.com/singlefamily/pdf/pub579.pdf
 • For questions related to Underwriting
Underwriters only contact

Lynda Davis, Underwriter 216-475-8246

Lynda.davis@usbank.com
Judy Pudelski, Underwriter 216-475-8317
Judith.pudelski@usbank.com

Rita M. Connelly, Underwriting Manager

Rita.connelly@usbank.com