Announcement 2021- 092 - VA Overlay Revisions, Removals, and Underwriting Updates

VA Transactions Overlay Removals and Guideline Updates

Topic

Current Guideline

New Guideline

Interest Rate Reduction Refinance Loan Transactions

Interest Rate Reduction Refinance Loans (IRRRL) Loan Amount, Credit Score, LTV/CLTV, DTI

Portfolio

·    Primary Residence

o  Credit score per VA

o  LTV/CLTV per VA

o  DTI 55%¹ when credit qualified

·    Non-owner Occupied

o  Credit score per VA

o  LTV/CLTV 100%

o  DTI 55%¹ when credit qualified

Non-Portfolio

·    Primary Residence

o  Credit score 600

o  LTV/CLTV per VA

o  DTI 55%¹ when credit qualified

·    Non-owner Occupied

o  Credit score 620

o  LTV/CLTV 100%

o  DTI 55%¹ when credit qualified

¹DTI

·    Credit Qualified: DTI up to 55% when residual income exceeds 120% or significant documented compensating factors exist

·    Non Portfolio Credit Qualified: Loan amounts > $1,000,000 with a DTI > 45% requires 250% residual income

·    Maximum 105/125 LTV/CLTV

·    Primary residence and non-owner occupied properties

Portfolio Non-Credit Qualifying

·    No credit score required

·    $2,500,000

Non-Portfolio Non-Credit Qualifying

·    720 to $2,500,000

·    700 to $2,000,000

·    680 to $1,500,000

·    600 to $1,000,000

·    580 to $625,000

Non-Portfolio Credit Qualifying

·    720 to $2,500,000, 45% DTI

·    700 to $2,000,000, 45% DTI¹

·    680 to $1,500,000, 45% DTI¹

·    600 to $1,000,000, 55% DTI²

·    580 to $625,000, 50% DTI

¹ DTI 55% requires 250% residual income

² DTI >60% requires:

·    720 credit score

·    0x30x12 DTI

·    250% residual income

Interest Rate Reduction Refinance Loans (IRRRL)
Manufactured Housing LTV/CLTV

Per VA

105/125 LTV/CLTV

Interest Rate Reduction Refinance Loans (IRRRL) Appraisals

Silent

LTV/CLTV will be based off of the current loan balance or one (1) of the following:

·    Exterior only appraisal (Form 2055)

·    AVM from one of the following:

o  Corelogic (FSD ≤ 15)

o  Collateral Analytics- Black Knight (FSD ≤ 15)

o  Freddie HVE (confidence level High)

o  MBS Highway (≥ 3 stars)

o  Clear Capital (≥ 80)

VA Approved/Vee Fee Panel appraiser must not be used if an appraisal is obtained

Purchase and Cash-out Refinance Transactions

Purchase
Loan Amount, Credit Score, DTI
(excludes manufactured homes)

Purchase

·    700 to $1,500,000 to 100% LTV/CLTV, DTI per AUS¹

·    600 to $1,000,000 to 100% LTV/CLTV, DTI per AUS

·    580 to $548,250 to 100% LTV/CLTV, 50% DTI

¹ DTI >45% up to 55% requires 250% residual income

Purchase

·    720 to $2,500,000 to 95% LTV/CLTV, 45% DTI

·    700 to $2,000,000 to 100% LTV/CLTV, 45%¹ DTI

·    680 to $1,500,000 to 100% LTV/CLTV, 45%¹ DTI

·    600 to $1,000,000 to 100% LTV/CLTV, 60%² DTI

·    580 to $625,000 to 100% LTV/CLTV, 50% DTI

¹ DTI 55% DTI requires 250% residual income

² DTI >60% requires the following:

·    720 credit score

·    0x30x12 DTI

·    250% Residual Income

Cash-out Refinance
Loan Amount, Credit Score, LTV/CLTV, DTI
(excludes manufactured homes)

Cash-out Refinance

·    700 to $1,500,000, DTI per AUS¹

·    600 to $1,000,000, DTI per AUS

·    90% LTV/CLTV

¹ DTI >45% and 55% requires 250% residual income

Cash-out Refinance

·    720 to $2,500,000 to 95% LTV/CLTV, 45% DTI

·    700 to $2,000,000 to 100% LTV/CLTV, 45%¹ DTI

·    680 to $1,500,000 to 100% LTV/CLTV 45%¹ DTI

·    640 to $1,000,000 to 100% LTV/CLTV, 55%² DTI

·    600 to $1,000,000 to 90% LTV/CLTV, 55%² DTI

·    580 to $625,000 to 90% LTV/CLTV, 50% DTI

¹ DTI 55% requires 250% residual income

² DTI >60% requires the following:

·    720 credit score

·    0x30x12 DTI

·    250% Residual Income

Loan terms 16-to 30-year fixed rate for LTV > 90%

Manual Underwriting

Refer and Manual Underwrite

Not permitted

Permitted

Refer and Manual Underwrite
Loan Amount, Credit Score, DTI

Not permitted

Purchase

·    600 to $625,000 to 100% LTV/CLTV, 55%¹ DTI

Cash-out Refinance

·    640 to $625,000 to 100% LTV/CLTV, 55%¹ DTI

·    600 to $625,000 to 90% LTV/CLTV, 55%¹ DTI

¹ DTI >41% when residual income exceeds 120% or significant documented compensating factors exist

Loan terms 16-to 30-year fixed rate for LTV> 90%

Manual Underwrite
Purchase and Cash-out Refinance

Not permitted

The following require a manual underwrite:

·    A manual downgrade from an AUS Accept is required if additional information is not considered by the AUS that affects the overall insurability or eligibility of the mortgage

·    AUS Refer

Manual underwriting is not permitted for manufactured housing

Manual Downgrade Housing Payment History
Purchase and Cash-out Refinance

Not permitted

A manual downgrade is required due to any of the following:

·    Any mortgage with more than 1x30x12

·    Any mortgage past due and last updated ≥ 90 days

A written explanation is required

Rental Payment History

Silent

AUS Refer and Manual Underwrite

·    24-month rental history required

Guideline Updates

Housing Payment History

Per VA

Regardless of AUS

·    Type 1 Cash out Refi: 1x30x12

·    Type 2 Cash out Refi:  0x30x12

Reserves

Silent

·    Three (3) months reserves if borrower owns other real estate and is using rental income to qualify

·    Reserves are based on PITI of REO property

Housing Choice Voucher Homeownership Program (Section 8)

Not permitted

Permitted

Lava Flood Zones

Properties located in Lava Zones 1 and 2 are not permitted.

Properties located in Lava Zones 1 and 2 are not permitted with following exception:

·    In Hawaii, Lava Zones are acceptable. A Lava Insurance Policy, with coverage for at least the amount of the loan, is required for all properties located within Lava Zone 1 and Lava Zone 2.

Cryptocurrency

Not permitted

Cryptocurrency is not an acceptable source of funds; however proceeds from the liquidation of cryptocurrency and deposit of a U.S. account may be eligible for down payment, closing costs and reserves.

Payoff Revolving Debt for Qualification

Account must be closed and may only be paid off if the following are met:

·    680 credit score; or

·    Less than 680 score and DTI less than or equal to 50%.

The borrower’s history of credit use should be a factor in determining whether the appropriate approach is to include or exclude debt for qualification.

·    For purchase transactions, the account must be paid in full (paying down to zero balance) prior to closing.

·    For cash-out refinance transactions, paying off revolving debt prior to or at closing is permitted. The CD must reflect payoff of the outstanding balance, when paid off at closing.

·    Document that the funds came from an acceptable source and no new debt was incurred.

·    The account does not have to be closed.